Vietnam Law & Legal Forum Magazine is your gateway to the law of Vietnam

Official Gazette

Sunday, September 20, 2020

On civil relations involving foreign elements in draft (amended) Civil Code

Updated: 10:02’ - 31/03/2005

Nguyen Trung Tin, L.L.D.        
State and Law Institute of Vietnam

At its 7th session in May 2005, the National Assembly is expected to consider substantial and comprehensive amendments to the Civil Code of Vietnam. The revision of the Code will directly affect all of society and every citizen as well. For this reason, the Standing Committee of the National Assembly has decided to gather comments from the public, on the draft Code.

Civil relations involving foreign elements are provided for in Part Seven of the Code, which has 13 articles in the 1995 Code and 22 articles in the draft (amended) Civil Code, with one article kept unchanged, 12 articles amended, and 9 articles newly added.

The draft (amended) Civil Code will more fully address a number of issues involving civil relations with foreign elements, including the selection of law applicable to the identification of persons who have no or have lost their capacity or have their capacity for civil acts restricted; the declaration of a person to be missing or dead; the application of legal capacity restrictions; and relations regarding contracts, inheritance, and statutes of limitations, all with a view to fully formalizing civil relations involving foreign elements to meet practical requirements and international economic integration.

Specific provisions in Part Seven of the draft, however, merit further discussion.

On the application of Vietnamese civil legislation, international treaties, international practices and foreign laws, the amended Article 771 of the draft provides:

“1. The provisions of civil legislation of the Socialist Republic of Vietnam shall apply to civil relations involving foreign elements, except in cases where this Code otherwise provides.

2. In cases where the international treaties to which the Socialist Republic of Vietnam is a party contain provisions different from the provisions of this Code, the provisions of such international treaties shall apply.

3. In cases where the application of foreign laws is provided for by this Code and other legal documents of the Socialist Republic of Vietnam, or is referred to by the international treaties to which the Socialist Republic of Vietnam is a party, the foreign laws shall apply to civil relations involving foreign elements; if such foreign laws refer back to the law of the Socialist Republic of Vietnam, then the law of the Socialist Republic of Vietnam shall apply.

Foreign laws shall also apply in cases where the parties have so agreed upon in contracts, provided that such agreement is not contrary to the provisions of this Code and other legal documents of the Socialist Republic of Vietnam.

4. In cases where the civil relations involving foreign elements are not governed by this Code and other legal documents of the Socialist Republic of Vietnam, the international treaties to which the Socialist Republic of Vietnam is a party or civil contracts between parties, international practice shall apply, provided that such application or its consequences; are not contrary to basic principles of the law of the Socialist Republic of Vietnam.”

Whether Vietnamese civil legislation, international treaties, international practice and/or foreign laws are applied to civil relations involving foreign elements depends on the reference to the rules on conflict of law as prescribed in this Part.

 However, Clause 3 of Article 771 states: “Foreign laws shall also apply in cases where the parties have so agreed upon in contracts, provided that such agreement is not contrary to the provisions of this Code and other legal documents of the Socialist Republic of Vietnam”. This poses a conundrum because the parties are not allowed to agree on the selection of laws for application to any contents of the contracts. Whether they are allowed to select laws in their contracts is prescribed by law. According to Article 783 of the draft, if the parties agree on the selection of laws not on the basis of Article 783, such agreement is unlawful. Such provision is impractical and contradictory to Clauses 1 and 2 of Article 783.

In addition, Clause 3 of Article 771 of the draft also provides for reference back to Vietnamese laws. Yet, reference back to Vietnamese laws and reference to the law of a third country constitute a question of international law and the public poling of nations. Another choice-of-law issue in civil relations involving foreign elements, namely reference to the law of a third country, is not provided for in Part Seven of the draft. What happens if the Vietnamese law refers to a foreign law, which, however, refers neither to itself nor to Vietnamese law but to the law of a third country? This will cause difficulties not only in the application of law but also in the identification by the parties of their acts. In many cases where civil relations involve foreign elements, the parties should identify their lawful acts right at the time of preparing for establishment of such relations (for instance, the contractual relations, the marital relations, etc.) and not only at the time when disputes arise. This provision is necessary for the parties to decide whether to establish relations or not (for instance, the conclusion of contracts). In some countries, the provision on back reference or reference to the law of a third country can be realized in three different ways: first, not to fully accept the back reference and the reference to the law of a third country; second, to fully accept the back reference and the reference to the law of a third country; third, to accept both the back reference and the reference to the law of a third country, except for some special cases (for example, upon permitting parties to select laws). Moreover, some countries only accept the back reference but not the reference to the law of a third country. However, such must be clearly provided for by law (1). For these reasons, the draft amended Civil Code should contain provisions on back reference and reference to the law of a third country.

Regarding the principle for application of foreign laws and international practices, Article 772 (amended and supplemented) of the draft code states:

 “In the cases prescribed in Clause 3 and Clause 4 of Article 771 of this Code, foreign laws and international practices shall only apply so long as such application or its consequences are not contrary to basic principles of the law of the Socialist Republic of Vietnam.”

This is the provision on reservation of public order in international law. In international law as it applies to choice of law, the reservation of public order is provided for in such a way that foreign laws cannot apply if the consequence of their application is contrary to public order (which is usually understood as the basic principles of the law of a country). Meanwhile, the draft amended Code applies this principle not only to foreign laws but also to international practices.

In principle, the application of foreign laws will always have consequences, different from the application of domestic law, consequences which may be contrary to the public order (basic principles of law). Choice of law in international law in civilized countries shows that the countries’ concern is the consequence of the application but not the application itself(2). The task of law makers is to formulate normative regulations in a way that the consequence of application thereof is desirable to them.

Therefore, Article 722 should provide: “Foreign laws shall not apply though the rules on conflict of law refer to the application thereof, if the consequence of such application is contradictory to basic principles of Vietnamese law.”

Regarding amended Article 774 on “Civil legal capacity of foreigners” of the draft, which provides:

“1. The civil legal capacity of foreigners shall be determined pursuant to the laws of countries of which such persons bear the nationality;

2. Foreigners shall have civil legal capacity within Vietnam like Vietnamese citizens except in cases where it is otherwise provided for by this Code and other legal documents of the Socialist Republic of Vietnam.”

Such provisions are inappropriate because:

First, the civil legal capacity of a person is his/her capacity to enjoy civil rights prescribed by law. In principle, everyone has the same civil legal capacity, except for some exceptional cases applicable to foreigners whose legal status in host countries is usually different from that of the locals. Such difference is the foreigners’ enjoyment of the most favored nation and reciprocity regimes in the host countries. Foreigners here mean all those who do not bear the nationality of host countries regardless of where they are present, whether they have any nationality or not or whether they have residence places in any countries or not. For example, in a civil case in a Vietnamese court involving one party being Vietnamese and the other party being non-Vietnamese. Such a person may commit acts in various countries (possibly a country of which the foreigner is a national, or a country of which he/she is not a national but where he/she has place of residence, or another foreign country). In that case, such acts can only be considered lawful from the civil legal capacity angle under the law of the country where such acts were committed, but not under the law of the country of which such person is a national. When Vietnamese citizens travel abroad and perform acts, they must always think in terms of what rights they are entitled to as foreigners under the laws of those foreign countries. When handling cases, judges should base themselves on the conflict-of-law rules, stating that the civil legal capacity of foreigners is determined in accordance with the laws of the countries where their acts are performed, not of the countries of which they bear the nationality. Only by handling cases according to such a principle can the parties’ legitimate interests be protected.

Second, when handling cases or matters or participating in civil relations involving foreign elements, competent bodies of Vietnam must determine the civil legal capacity not only of foreigners but also of Vietnamese citizens. Some people maintain that the civil legal capacity of Vietnamese citizens must naturally comply with Vietnamese laws. That is not true when it is not so prescribed by law. In cases where Vietnamese citizens perform their acts overseas, their civil legal capacity must be determined under the law of the countries where their acts are performed, not under Vietnamese law. Thus, Vietnamese citizens should determine the civil rights they shall enjoy under the law of the countries where they perform their acts.

Third, Clause 1 contradicts Clause 2: Under Clause 1, the civil legal capacity of foreigners are determined in accordance with laws of the countries of which they bear nationality; yet, according to Clause 2, foreigners have civil legal capacity of Vietnamese citizens.

For all these reasons, Article 774 should stipulate as follows: “Civil legal capacity of individuals shall be determined in accordance with the laws of localities where acts are performed”.

Such a provision will be more consistent, reducing conflicts and bringing about equality and objectivism for civil subjects regardless of whether they are Vietnamese citizens or foreigners. This is an important condition for promoting civil relations involving foreign elements.

Regarding amended Article 775 on the civil act capacity of foreigners, which states:

“1. The civil act capacity of foreigners shall be determined in accordance with the laws of the countries of which they are citizens, except in cases where it is otherwise provided for by laws of the Socialist Republic of Vietnam.

2. Where foreigners establish and perform civil transactions in Vietnam, their civil act capacity shall be determined in accordance with the law of the Socialist Republic of Vietnam”.

This Article prescribes the civil act capacity of foreigners only, but not of Vietnamese citizens. Moreover, this provision is inconsistent in selection of laws even if it is consistent with customs and tradition. The application of law of the country of citizenship or the law of the person’s domicile to determine the civil act capacity of individuals is very common in the world(3). This stems from the consideration of the nature of the association between individuals and such legal systems. Therefore, determining the civil act capacity of individuals on the principle of citizenship helps protect their legitimate interests and boost the civil relations involving foreign elements.

Consequently, Article 775 should be amended as follows: The civil act capacity of an individual shall be determined in accordance with laws of the country of which he bears the nationality, except in cases where it is otherwise provided for by this Code or other legal documents of Vietnam.”

Regarding the civil legal capacity of foreign legal persons, amended Article 778 of the draft provides:

“1. The civil legal capacity of foreign legal persons shall be determined in accordance with laws of the countries where such foreign legal persons are established, except the cases provided for in Clause 2 of this Article.

2. In cases where foreign legal persons establish, perform, change and/or terminate their civil transactions in Vietnam, the civil legal capacity of such foreign legal persons shall be determined in accordance with the law of the Socialist Republic of Vietnam.”

To clarify this matter, we should distinguish the legal status of foreign legal persons from their civil legal capacity; the legal capacity of foreign legal persons from their exclusive statutes; the citizenship of foreign legal persons from their civil legal capacity and exclusive statutes.

The legal status of foreign legal persons is different from their civil legal capacity. The legal status of foreign legal persons is the combination of rights and obligations which they enjoy and perform in host countries. In current international relations, the legal status of foreign legal persons shall be determined on the principle of preferential national treatment and the principle of most favored nation (which are acknowledged mainly in international treaties among the concerned countries). Meanwhile, the civil legal capacity of foreign legal persons shall always be determined on the basis of laws of the countries of which the legal persons bear the citizenship. The civil legal capacity of the legal persons is their capacity to enjoy civil rights and shoulder civil obligations. This capacity is stated in the legal persons’ charters and laws of such countries, depending on each type of legal person. Each legal person has its own charter compatible with the law of the country of which the legal person bears the citizenship. So, in reality, the civil legal capacity of one legal person is different from the civil legal capacity of other legal person. This is totally different from the question of civil legal capacity of individuals. Usually, individuals being citizens of the same country shall have the same civil legal capacity, except otherwise provided for by law.

The civil legal capacity of foreign legal persons is typically one element in the statute governing their establishment. Statutes generally cover such matters as civil legal capacity, order of establishment and dissolution, lawful representatives, and liquidation of the assets of a legal person. So, civil legal capacity of foreign legal persons is only one of the above-mentioned four matters. As a result, if we merely provide for the civil legal capacity of foreign legal persons, we will leave a number of important matters related to their status unsettled.

The nationality of legal persons means the special relationship between a country and its legal persons. The determination of nationality of legal persons in many countries is often based on signs of places of registration of establishment (Britain, the United States), places of their headquarters (European countries), or places of principal operation (Syria, Egypt). The determination of nationality of legal persons aims to distinguish the legal persons of host countries from foreign legal persons. The identification of citizenship of legal persons is significant for the determination not only of civil legal capacity but also of diplomatic protection rights of a country for its legal persons and the legal regimes enjoyed by legal persons.

Article 778 only provides for foreign legal persons. So, the question remains: which laws shall serve as basis for handling of similar issues for Vietnamese legal persons? Vietnamese law makers must find the answer to this question not only for Vietnamese competent bodies but also for Vietnamese and foreign individuals and legal persons as well. If no answer can be found in Vietnamese laws, this could be only construed in two ways: First, Vietnamese law always applies; second, it cannot be determined. Article 778 should refer to the status of Vietnamese legal persons as well as foreign legal persons in civil relations involving foreign elements. This will serve as a basis for individuals and legal persons, Vietnamese and foreign, to correctly identify their own lawful acts and those of their partners. This provision not only conforms to current reality and common practice in the world but also constitutes the legal transparency inevitably required by the market economy under circumstance of international integration.

Clause 2 of Article 778 is improper as the legal capacity of foreign legal persons will never be determined under Vietnamese law, even in cases where their civil transactions are performed in Vietnam. If foreign legal persons perform their civil transactions in Vietnam, their civil relations must be based not only on their legal capacity but also on their legal status in Vietnam. So, there will be no grounds to worry that foreign legal persons may act without heeding the laws of the localities where they perform civil transactions. In addition, in cases of disputes over civil transactions, which may be handled by foreign courts, such courts can declare the transactions null and void if legal capacity is determined in accordance with Clause 2 of Article 778. It is, therefore, not accidental that many other countries have not so provided. For example, the law of the Federal Republic of Russia only provides that in cases where foreign legal persons perform civil transactions in the Federal Republic of Russia, they are not allowed to refer to the provisions on their jurisdiction if such is alien to the law of the Federal Republic of Russia (Clause 2, Article 161: Bases of civil legislation of the Federal Republic of Russia in 1991).

Regarding property ownership rights, amended Article 780 of the draft provides:

“1. The establishment, exercise, change and termination of property ownership rights and the contents of property ownership rights shall be determined pursuant to the law of the country where such property is located, except for the cases prescribed in Clauses 2 and 4 of this Article.

2. The ownership rights to movable property on way of transportation shall be determined pursuant to the law of the country to which such movable property is transported, unless otherwise agreed upon by the parties.

3. The differentiation between movable property and immovable property shall be determined pursuant to the law of the country where such property is located.

The determination of ownership rights to civil aircraft and sea-going vessels in Vietnam must comply with the civil aviation law and maritime law of the Socialist Republic of Vietnam.”

These provisions are inadequate as Clause 2 fails to fully mention exceptional cases where the principle of the law of the country where objects are located shall not apply.

The non-application of the law of the country from which property is being on international transportation involves ownership rights potentially affecting many countries. This stems from the reality that commodities under international transportation (e.g., on the high sea cannot be subject to the laws of the country where the objects are located (the high seas are not a country, so no law on ownership rights applies). Here, it should be clearly distinguished that “the way of international transportation” does not refer to the territory of any country as opposed to the case of transportation within the territory of any specific country (for instance, the territory of Vietnam), when the location of objects should be the controlling principle.

Also, according to Clause 2, how can we handle cases where the parties fail to reach agreement while commodities are destined for two countries? Such cases should be provided for as follows: “For the ownership rights to movable property being on way of international transportation, beyond the territory of any single country, the law of the country agreed upon by the parties shall apply; in case of failure to reach agreement, the law of the country to which the commodities are destined shall apply; if such countries cannot be identified, the law of the country of which the ships carrying the commodities bear nationality shall apply.”

There still exist in practical international relations many exceptional cases where the principle of the law of the country where the objects are located shall not apply as seen in provisions on bases for establishment and termination of ownership rights such as inheritance, liquidation of property of legal persons and ownership rights to intangible movables(4). The question of inheritance in many countries is handled according to the principles for settling the conflicts of law on inheritance. The question of liquidation of property of legal persons is based on the law of the country of which the legal persons bear nationality. To intangible movables, the principle of the law of the country where objects are located cannot be applied simply because how can we identify their destination when the objects are intangible. For such reasons, these provisions should be added to Article 780 of the draft.

Regarding at-law inheritance involving foreign elements, the newly added Article 781 of the draft provides:

“1- Inheritance at law shall be determined in accordance with the law of the country of which the property bequeathers bear the nationality before their deceases.

2. The time to open the inheritance must comply with the law of the country of which the property bequeathers bear the nationality at the time of their deceases.

3. The right to inherit immovable property must comply with the law of the country where such property is located.

4. Estates without heirs, which are immovable property, shall belong to the State of the country where such immovable property is located.

5. Estates without heirs, which are movable property, shall belong to the State of the country of which the property bequeathers bear the nationality before their deceases.”

This Article should provide the inheritance at law only. The provision in the above Clause 1 on inheritance at law is adequate because the property here can be construed as both immovable and movable property. Such provision is suitable to Vietnamese conditions (with many citizens living overseas); thereby when foreign laws refer back to Vietnamese law on estates of Vietnamese citizens, the Vietnamese law can apply (including cases where countries apply policy of back reference and reference to a third country).

The provisions on estates without heirs should be arranged in a separate article following the article on inheritance at law with contents stating that: “Estates without heirs shall belong to the State of the country of which the bequeather bears the nationality,” which is suitable to the Vietnamese circumstance in current international relations with many Vietnamese citizens living overseas. Under the draft, the Vietnamese State will not be entitled to receive the heirless estates of Vietnamese citizens overseas even in cases where foreign laws provide that the State of the country of which the above citizens bear the nationality is entitled to receive such estates (if the foreign laws mention the application of the policy of reciprocity or the back reference or reference to a third country).

Regarding testamentary inheritance, the newly added Article 782 of the draft code provides:

“1. The capacity to make, change and cancel testaments must comply with the law of the country of which the testator is a citizen at the time of making the testament.

2. Forms of testament must comply with the law of the country where the testament is made”.

This article still lacks a provision on the selection of law governing the contents of testament. In handling inheritance involving foreign elements, the selection of law governing the contents of testament should always be provided for.

Regarding civil contracts, the amended and supplemented Article 783 of the draft provides:

“1. The rights and obligations of contractual parties shall be determined pursuant to the law of the country where the contract is performed, unless otherwise agreed upon.

Contracts concluded in Vietnam and fully performed in Vietnam must comply with the law of the Socialist Republic of Vietnam.

In cases where contracts are not inscribed with places of contractual performance, the determination of places of contractual performance must comply with the law of the Socialist Republic of Vietnam.

2. Contracts related to immovable property in Vietnam must comply with the law of the Socialist Republic of Vietnam”.

To us, the phrase “rights and obligations of the contractual parties” should be replaced by “contractual contents” as the latter contain many issues besides the rights and obligations of the parties (for example, the contractual objects). Besides, this article should provide the individuals’ capacity for acts of concluding contracts to be determined on the principle of nationality.-

________________________

Notes:

(1) See N.I, Maryusev, private international law, INFA.M Publishing House, Moscow- 2000, in Russian, pages 75-77.

(2) See M.M Baguslavski, teaching text on private international law, LAW Publishing House, Moscow- 1994, in Russian, p.468.

(3) See O.N. Sadikov and N.I. Maryusev, teaching text on private international law, LAW Publishing House, Moscow, 1984.

(4) See L.A Lunx, private internal law (general provisions), “Legal Publication” Publishing House, Moscow, 1973, p.233-237.

VNL_KH1 

Send Us Your Comments:

See also:

Video

Vietnam Law & Legal Forum