Improving the effectiveness of settlement of business and commercial disputes involving foreign elements at Vietnamese courts[1]
Vietnam is in the process of integrating deeply into the world and intensifying economic and trade cooperation with foreign organizations and individuals. Business and commercial disputes involving foreign elements, therefore, have incrementally increased and become more and more complicated. This situation gives rise to a need for solutions to improve the effectiveness of the settlement of such disputes so as to meet the requirements of international integration.
THAI VAN DOAN
Senior Procurator, Supreme People’s Procuracy
Against the backdrop of globalization, quick development of the Fourth Industrial Revolution and e-commerce, and implementation of the Party and State’s consistent policy on promoting international integration and foreign investment cooperation, Vietnam has deeply integrated into the world economy and become a member of many international trade organizations. However, along with the integration process, business and trade disputes involving foreign elements have become more and more complicated in terms of nature and scale. Meanwhile, the application of law to settle disputes involving foreign elements is not the same as that to settle disputes between domestic parties but requires reference to, and application of, vast and diverse international laws and practices.
For the time being, there remain not a few disparities between Vietnam’s law and international law. International law contains complicated, diverse, new, and difficult-to-understand-and-apply regulations. Meanwhile, professional capacity and qualifications of judicial officers remain limited. As a result, many court judgments and rulings on business and commercial cases involving foreign elements, when being submitted to cassation or re-trial courts, must be quashed or modified. There have appeared international investment lawsuits in which the defendant is not a domestic organization or individual but the Vietnamese State.
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| Vinfast electric cars are ready to be loaded to ships for export to the US__Photo: Duong Giang/VNA |
| Vinfast electric cars are ready to be loaded to ships for export to the US__Photo: Duong Giang/VNA |
Identifying particularities of business and commercial disputes involving foreign elements
First of all, it can be said that business and commercial disputes involving foreign elements have the characteristics of ordinary business and commercial disputes as they all arise from for-profit business and commercial activities specified in Article 30 of the 2015 Civil Procedure Code. But as they also have their own particularity - “foreign elements”, and therefore fall into the group of civil relations, including also business and commercial cases, specified in Article 464.2 of the 2015 Civil Procedure Code or Article 663.2 of the 2015 Civil Code, they have the following features:
Regarding subjects: At least one of the involved parties is a foreign individual, i.e., “a person holding a paper identifying his/her foreign citizenship” or a foreign institution, i.e., “an institution established in a foreign country under the law of such foreign country” as defined respectively in Articles 4.2 and 4.4 of the 2020 Law on Enterprises.
Regarding legal events: All involved parties are Vietnamese citizens or Vietnamese legal persons but their business or commercial relation is established, altered, implemented or terminated overseas. For example, enterprise A and enterprise B are both headquartered in Vietnam and involved in a dispute over a seafood import-export service contract signed and performed in the Republic of Korea.
Regarding disputed objects and property: All involved parties are Vietnamese citizens or Vietnamese legal persons, but the object of their business or commercial relation is located overseas. For example, the head offices of both enterprise C and enterprise D are located in Vietnam but they are disputing over a real estate in the United States.
According to the above-mentioned identification criteria, from July 1, 2016, to November 30, 2021, people’s courts at all levels in Vietnam accepted 3,093 business and commercial cases involving foreign elements, accounting for 12.7 percent of the total number of business and commercial cases, of which 2,235 cases were handled according to first-instance procedures, 766 cases gone through appellate procedures and 92 cases were subject to cessation procedures[2].
When settling business and commercial disputes involving foreign elements, the following issues should be taken into consideration:
Firstly, it should be noted that unlike ordinary business and commercial disputes which are usually settled by district-level people’s courts according to first-instance procedures, under Article 35.3 of the 2015 Civil Procedure Code, the jurisdiction to settle business and commercial disputes involving foreign elements which involves overseas parties or assets or requires judicial mandate according to first-instance procedures rests with provincial-level people’s courts.[3]
However, not any business and commercial disputes involving foreign elements satisfy the provisions of Article 464 of the 2015 Civil Procedure Code. In fact, as “foreign elements” are quite confusing, in not a few cases, disputes involving foreign-invested enterprises are mistaken for those involving foreign elements. For example, in case a foreign investor in Vietnam establishes a wholly foreign-owned enterprise or joins a Vietnamese organization or individual in forming a joint venture, whenever the wholly foreign-owned enterprise or joint venture is involved in a dispute, it is often mistaken that such dispute is a dispute involving foreign elements and will be settled by the provincial-level people’s court. In fact, though having foreign investment, the enterprise is established in Vietnam and therefore is not a foreign enterprise as specified in the 2020 Law on Enterprises. As a result, in this case the jurisdiction to settle the dispute according to first-instance procedures rests with the district-level people’s court.
It should also be noted that according to Article 472.1.b of the 2015 Civil Procedure Code, Vietnamese courts may not adjudicate business and commercial disputes falling under the exclusive jurisdiction of foreign courts[4] but have to return lawsuit petitions or request or cease the settlement of cases falling under the common jurisdiction of Vietnamese courts but not under the exclusive jurisdiction of the Vietnamese courts[5] and cases falling under the exclusive jurisdiction of relevant foreign courts.
Secondly, for disputes involving foreign elements, case files often have many foreign-language documents and evidences that must be legalized by consular offices and translated into Vietnamese in order to be legally valid. That’s why involved parties should note types of documents exempt from consular certification and legalization under treaties to which Vietnam and related foreign countries are contracting parties or the principle of reciprocity.[6]
Since foreign individuals and organizations often use network applications and social networks, such as email, Facebook, Viber, Zalo, Twister and Telegram, in creating files, documents, transactions, digital signatures and electronic data messages, etc., and evidences of these activities are difficult to collect and can easily be forged and modified, such evidences must be collected according to the law-prescribed order and procedures and weighed in relation to other evidences. When necessary or requested by involved parties, courts have to solicit expert assessment.
Settlement of business and commercial disputes involving foreign elements
Application of procedural law
In addition to complying with the general provisions on the settlement of civil cases and matters, the application of procedural law to settle disputes involving foreign elements is also subject to relevant specific provisions of Part VIII of the 2015 Civil Procedure Code: Procedures for settling civil cases and matters involving foreign elements which are quite different from those applicable to ordinary business and commercial disputes regarding common jurisdiction and exclusive jurisdiction of Vietnamese courts (Articles 469 and 470), modes of service or notification of courts’ procedural documents (Article 474) time limit for opening a conciliation meeting or court hearing (Article 476) and time limit for filing an appeal (Article 479). Worthy of note, compared to ordinary disputes, the time for courts to settle disputes involving foreign elements is often prolonged due the process of collecting and verifying documents and evidences abroad or serving courts’ procedural documents and summoning overseas involved parties.
Application of substantive law
Regarding substantive law, the 2015 Civil Code devotes a separate part - Part V to specifying the application of law to civil relations involving foreign elements. This Part, consisting of three chapters from Article 663 to Article 687, provides the principles of application of law and reference to domestic and international laws in the application of law to civil relations involving foreign elements, covering the following basic matters:
The relevant provisions of the 2015 Civil Code, which serves as a “base law” or “mother law”, and specialized domestic laws, such as the Maritime Code, Commercial Law, Enterprise Law, Law on Credit Institutions, Law on Real Estate Business, and Law on Electronic Transactions, will be applied to settle civil disputes involving foreign elements at the time these disputes arise. Besides, on a case-by-case basis, international law may be applied, such as the 1980 Vienna Convention on the International Sale and Purchase of Goods, Incoterms rules, and Hague Convention. The determination of applicable law, treaties and international practices and those to be referred to are guided in Articles 664 thru 669 of the 2015 Civil Code.
However, under Article 670 of the 2015 Civil Code, foreign laws may not be applied if consequences of the application of foreign laws are contrary to the fundamental principles of Vietnamese law or provisions of foreign laws are unidentifiable though necessary measures have been applied in accordance with the procedural law. In these cases, Vietnam’s law will apply.
When a conflict arises between the domestic law and international law concerning the same matter, it is suggested to adhere to the principle of prioritizing the application of treaty (except the Constitution) under Article 6.1 of the 2016 Law on Treaties[7] (this provision is similar to that of Article 156.5 of the 2015 Law on Promulgation of Legal Documents, as revised in 2020).
In reality, there are not a few cases of improper application of international law and practices in the settlement of international disputes. It is noteworthy that when settling a dispute of this kind, competent bodies are required to carefully study the relevant provisions of international law, then compare them with the domestic regulations on dispute settlement in order to ensure the proper application of law.
Apart from violations involving foreign elements, there are breaches in the settlement of normal business and commercial cases. Some of these breaches include failure to bring all proceeding participants to the court, failure to consider and appraise collateral, failure to deal with consequences of the judgment execution, or improper determination of joint payment liability, etc. For instance, upon settling disputes relating to mortgaged assets, the court is required to consider on-site appraisal of such assets in order to determine who has the rights to such assets or who is actually managing and using them for use as a basis for comprehensive and thorough settlement of the case.
The practical settlement of business and commercial disputes involving foreign elements has revealed numerous shortcomings that are attributable to the following causes:
Vietnam’s legal system, though having been developed significantly to meet international integration requirements, still contains not a few provisions that are incompatible with international law. So far, Vietnam has not yet enacted a Law on International Justice. The provisions on international justice can be found in different legal documents, e.g., the 2015 Civil Code, the 2015 Civil Procedure Code, the Law on Mutual Legal Assistance, and the Commercial Law, and even appear in a duplicative manner. For example, the identification of civil cases involving foreign elements is regulated in Article 464 of the 2015 Civil Procedure Code and also in Article 663 of the 2015 Civil Code, but with a slight difference in the condition on the subject involved in a civil case. Specifically, it is defined in Article 464 of the 2015 Civil Procedure Code that a civil case involving foreign elements means a civil case that involves at least one of the participants being a foreign individual, agency or organization. Meanwhile, as per Article 663 of the 2015 Civil Code[8], a civil case with foreign elements is defined as a civil case that involves at least one of the participants being a foreign individual or entity. Moreover, the settlement of conflicts between Vietnam’s law and international law is regulated by Article 6 of the 2016 Law on Treaties and also by Article 156 of the 2015 Law on Promulgation of Legal Documents, as revised in 2020.
Regarding court precedents, at present there is only one court precedent regulating this type of dispute (namely court precedent No. 13/2017/AL), while numerous problems arise in reality and there remain different interpretations of the provisions of Vietnam’s law and international law, thus causing difficulties in law application.
Moreover, every country’s legal system has its own characteristics, covers numerous issues, and is complicated, for instance the legal system of the mainland Europe (civil law) and the Anglo-American law (common law). The application of such laws in the dispute settlement is therefore in the face of obstacles or even inaccurate. Many overseas-based litigants provide unclear addresses or deliberately confusing addresses. Many countries have not yet signed mutual legal assistance agreements with Vietnam. So, it takes much time to serve court documents to involved parties. Even in some cases, it is impossible to deliver court documents to litigants, thus affecting the collection of documents and proofs. In other cases, the litigants did not appear at court hearings, delaying the settlement of dispute cases.
Meanwhile, the training in legal knowledge, international trade and specialized foreign-language knowledge for judicial officers still shows limitations and inadequacies, making the settlement of cases extremely difficult, the application of law perplexed, and the period of dispute settlement prolonged while the quality of dispute settlement remains not as high as expected. Some judges still show biased attitude in the dispute settlement, tending to protect their “relatives” involved in disputes with foreign litigants, or have the habit of improperly applying Vietnam’s law to settle international disputes, leading to the incorrect application of legal grounds and showing lack of fairness and objectivity.
Furthermore, due attention has not been paid to the management, direction and administration of the settlement of disputes of this kind, along with the insufficient number of specialized and full-time officers as well as experts in this field, thus failing to meet the task requirements in the current situation.
Solutions and recommendations
In order to overcome the above difficulties and shortcomings while adhering to the principle of maintaining national sovereignty and ensuring the supremacy of the Constitution and the respect for international law, a number of solutions below should be taken into account.
Firstly, it is necessary to amend and supplement a number of relevant laws to ensure their compatibility with international law, such as the 2005 Commercial Law, which appears to have many inadequate and incompatible provisions as compared to other relevant laws, including the 2015 Civil Code, the 2020 Law on Enterprises, and the 2020 Law on Investment. It is also a must to review current agreements on mutual legal assistance in civil matters and sign more ones with foreign countries, particularly those having trade relations with Vietnam, e.g., the Republic of Korea, in order to enhance mutual support in the dispute settlement. It is suggested to issue as soon as possible guiding documents on the jurisdiction of courts to settle disputes involving foreign elements with a view to avoiding confusion in the determination of jurisdiction.
Secondly, responsible authorities should, in the immediate future, develop more court precedents to facilitate the settlement of similar dispute cases until adequate legal texts guiding the settlement of disputes of this kind are provided.
Thirdly, the capacity and qualificationsof judges and procurators need to be improved through organizing intensive training courses on settlement of business and commercial disputes involving foreign elements as well as training courses on specialized foreign-language skills. At the same time, it is necessary to increase exchanges and share experiences with foreign experts in this field. Attention should be paid to building a pool of experienced judges and procurators who can become experts for settlement of disputes of this kind.
Fourthly, it should be kept in mind that biased attitude or discrimination must be avoided during the settlement of disputes for domestic enterprises and foreign enterprises. Competent authorities should give up the habit of applying domestic law to settle disputes involving foreign elements while they should have applied international law. It is also necessary to strengthen the role of procuracies to strictly supervise the law observance, promptly detect and remediate violations and shortcomings, thereby ensuring fairness, objectivity and proper application of law in court judgments and rulings.
Fifthly, virtual hearings should be organized more frequently in the spirit of National Assembly Resolution 33/2021/QH15 dated November 12, 2021, in order to connect the physical courtrooms and virtual courtrooms at home and abroad, thus helping litigants, particularly foreign litigants, fully take part in court hearings, ensuring quality and shortening the time of settlement of cases.
Last but not least, courts and procuracies at all levels should draw experience from quashed or modified judgments and rulings on settlement of business and commercial disputes involving foreign elements so as to raise the quality of dispute settlement.-
[1] The Vietnamese version of this article was published on March 7, 2023, at tapchicongsan.org.vn[2] According to statistics released by the Supreme People’s Court in the 2022 Scientific Theme: “Supervising the settlement of business and commercial cases involving foreign elements – Situation and solution”. [3] Article 35.3 of the 2015 Civil Procedure Code stipulates: “Disputes and petitions specified in Clauses 1 and 2 of this Article, which involve parties or properties in foreign countries or which must be judicially assigned to overseas representative missions of the Socialist Republic of Vietnam or to foreign courts/competent authorities for settlement, do not fall under the jurisdiction of district-level people’s courts, except the cases specified in Clause 4 of this Article”.[4] Under some foreign countries’ laws, only courts of such countries have jurisdiction to adjudicate certain cases, particularly those related to public security, social order, public interests or personal interests of citizens.[5] These cases are specified in Article 470 of the Civil Procedure Code.[6] Article 9 of Government Decree 111 deted December 5, 2011, on consular certification and legalization.[7] Article 6.1 of the 2016 Law on Treaties stipulates: “If a legal document, except the Constitution, and a treaty to which the Socialist Republic of Vietnam is a contracting party have different provisions on the same matter, the treaty shall prevail.”[8] Vo Hung Dat, LL.M., “Determination of foreign elements under laws of some foreign countries and experience drawn for Vietnam”, State and Law Journal, December 2021 issue.
