Author: TNTP LAW

Procedure for the first-instance trial of business and commercial cases

Written by TNTP LAW on 22 July, 2024. Posted in Dispute Settlement, Legal newsletter.

When business and commercial disputes arise, the parties prioritize resolution through negotiation and mediation. If negotiation and mediation fail, the parties may resolve the dispute in court, possibly undergoing two levels of trial: first-instance and appellate. In this article, TNTP will outline the fundamental aspects of the procedure for the first-instance trial in business and commercial cases according to normal procedures.

1. Step 1: Prepare and submit the lawsuit dossier to the Court

To exercise their right to file a lawsuit, the plaintiff must prepare and submit a lawsuit dossier to the competent people’s court. The lawsuit dossier includes a petition, documents, and evidence proving that the plaintiff’s legitimate rights and interests have been infringed. The plaintiff may submit the lawsuit dossier directly to the court, via postal service, or online through the court’s electronic information portal. The plaintiff should submit the dossier directly at the court or via postal service.

2. Step 2: The Court receives and processes the lawsuit dossier

The Court’s Chief Justice assigns a judge to review the lawsuit petition within 3 working days from receipt. After being assigned, the judge reviews the petition within 5 working days and issues one of the following decisions:

(i) Requesting amendments or supplements to the petition;

(ii) Accepting the case for normal or simplified procedures if the case meets the conditions for the simplified procedures;

(iii) Transferring the petition to the competent court and notifying the plaintiff if the case falls under another court’s jurisdiction;

(iv) Returning the petition to the plaintiff if the case is not within the court’s jurisdiction.

3. Step 3: Pay the advance court fee

Upon receiving the lawsuit dossier, if the court determines the case falls within its jurisdiction, the judge must immediately notify the plaintiff of the advance court fee to be paid (if any). The plaintiff must pay the advance court fee within 7 days of receiving the court’s notification and subsequently submit the receipt of the advance court fee payment to the court. The judge only accepts the case when the plaintiff submits the receipt of payment confirmation. If the plaintiff is exempt or not required to pay the advance court fee, the judge must accept the case upon receiving the lawsuit dossier.

4. Step 4: The Court accepts the case

Within 3 working days of accepting the case, the judge must provide written notification of the case acceptance to the plaintiff, defendant, relevant agencies, organizations, individuals, and the same-level procuracy about the acceptance of the case.

5. Step 5: Prepare for trial

During the trial preparation stage, the dossier will be assigned to the judge handling the case for research and trial preparation. The judge may require the parties to:

(i) Provide additional necessary documents and evidence related to the case;

(ii) Summon the parties to the court for testimony or confrontation;

(iii) Summon the parties to the court for meetings to check the handover of, access to, and disclosure of evidence and mediating. If the case is resolved under simplified procedure or cannot be mediated or must not be mediated, the judge conducts a meeting to check the handover of, access to, and disclosure of evidence without mediation.

If the parties settle, the court will make a reconciliation record and issue a decision recognizing the parties’ agreement. This decision is legally effective immediately upon issuance and is not subject to appeal or protest by appellate procedure. It can only be protested by cassation procedure if there is a basis to believe the agreement was made under mistake, fraud, threat, coercion, or violates laws or social ethics.

If mediation fails, the judge makes a record of the failed mediation and may issue a decision to bring the case to trial.

6. Step 6: Prepare and attend the First-instance trial

According to the Civil Procedure Code of 2015, within a maximum of 8 months from the date of accepting the case, inclusive of any adjournments and suspensions, the court must open the trial. The first-instance trial shall proceed in this order: opening the trial, litigation (questioning and debating), deliberation, and judgment pronouncement.

If no party appeals the judgment and the procuracy does not protest its judgment, it becomes effective after 01 month from the date the first-instance Court pronounces the judgment.

If any party disagrees with part or all of the first-instance judgment, they have the right to file an appeal of the first-instance judgment (appealing the disagreed content) to the first-instance court and the appellate court within 15 days from the date the first-instance court pronounces the judgment. The parties then continue to participate in the appellate trial.

Above is the article “Procedure for the first-instance trial of business and commercial cases” Hopefully, this article provides value to individuals and organizations in their business and commercial activities.

Best regards,

Matters to be noted when drafting arbitration clauses in commercial contracts

Written by TNTP LAW on 19 July, 2024. Posted in Contract Law.

Commercial contracts play a crucial role in regulating economic relationships between enterprises in the modern day. However, the performance of the contract does not always go in their favor. Commercial disputes can arise at any time due to differences in the interpretation and performance of contract terms. Therefore, anticipating dispute resolution methods, especially drafting arbitration clauses, becomes extremely important. Through this article, TNTP will highlight the matters to be noted when drafting arbitration clauses in commercial contracts.

1. Choosing an arbitration center

• The first and most important consideration when drafting an arbitration clause in a commercial contract is selecting an arbitration center. Enterprises should choose an arbitration center based on criteria such as reputation, experience in the relevant field, transparent dispute resolution processes, and service fees. According to Article 43, Clause 5 of the Law on Commercial Arbitration 2010, if the parties have an arbitration agreement but do not specify a particular arbitration center, they must deal again with the choice of the arbitration center. If an agreement cannot be reached, it will be chosen at the request of the Plaintiff.

• Thus, choosing the right arbitration center in the contract will save time and avoid unnecessary disputes. Some common arbitration centers include: Vietnam International Arbitration Center (VIAC), Singapore International Arbitration Centre (SIAC), International Chamber of Commerce (ICC), Hong Kong International Arbitration Centre (HKIAC), and many other international arbitration centers.

2. Arbitration Rules

• Each arbitration center typically has its own set of rules governing the dispute resolution process. For example, VIAC has its own Arbitration Rules, similar to SIAC and HKIAC.

• Usually, once an arbitration center is chosen, the parties will apply the procedural rules of that center. However, in practice, there could be possibilities where the parties, having chosen a particular arbitration center, wish to use the procedural rules of a different center. Nonetheless, agreeing to apply the procedural rules of another arbitration center can risk invalidating the arbitration agreement. Specifically, according to Article 4 of Resolution 01/2014/NQ-HĐTP, one reason an arbitration agreement may be unenforceable is if the parties agree to resolve disputes at a specific arbitration center but choose to apply the procedural rules of another center, despite the chosen center’s regulations not permitting this.

• When a dispute arises, it is often very difficult for the parties to sit down together and amend their agreement. The inability to reach an agreement will render the arbitration agreement unenforceable, leading to the dispute being resolved by the court. This contradicts the initial intention of choosing arbitration for dispute resolution, despite its many advantages, particularly the quick resolution time.

3. Arbitration Venue

Choosing the arbitration venue or dispute resolution location is also very important, especially in international arbitration. Typically, the law of the country and local legal regulations at the arbitration venue will apply to govern arbitration procedures. When selecting an arbitration venue, the parties should consider the following factors:

• Neutrality: The arbitration venue should be neutral and not disadvantage any party.
• Cost: Travel, accommodation, and arbitration session costs at that venue.
• Convenience: The arbitration venue should be convenient for the parties to travel and participate in.

Specifying the arbitration venue helps ensure an efficient and fair arbitration process. This also enhances the feasibility and enforceability of the arbitration award, as a suitable venue minimizes legal risks and supports the enforcement process after the dispute is resolved.

4. Arbitration costs

When drafting the arbitration cost clause in a commercial contract, it is essential to ensure that all related costs are clearly defined and payment responsibilities are allocated fairly and transparently between the parties. The detailed factors to consider include:

• Arbitration center fees: Fees payable to the arbitration center for managing and conducting the arbitration process. The arbitration fee schedule applies according to the regulations of the arbitration center.

• Other costs: Lawyer and expert fees; Costs of hiring lawyers or other expert consultants for the arbitration process; Evidence and translation costs, including costs for collecting and presenting evidence, and translation if the parties use different languages from the arbitration language specified in the contract or language under the decision of the arbitration tribunal.

During arbitration proceedings, the parties may agree on which party will bear the arbitration and other costs. However, to avoid unnecessary disputes during the resolution process, the parties should clearly and explicitly outline the allocation of arbitration costs within the commercial contract. This ensures transparency and fairness and prevents unnecessary disputes over costs. Typically, in commercial contracts, the parties agree that the losing party will bear all the above-mentioned costs.

5. Arbitration language

The language used in the arbitration process is an important factor that should be clearly defined in the arbitration clause. For disputes in Vietnam, according to the 2010 Law on Commercial Arbitration, if the dispute does not involve foreign elements, the language used will be Vietnamese. For disputes involving foreign elements, the language will be agreed upon by the parties. If there is no such agreement, the Arbitration Tribunal will decide the language used in the proceedings. Factors to consider when choosing the arbitration language include:

• Contract language: Generally, the contract language will be chosen as the arbitration language to ensure consistency.

• Language both parties are fluent in: If the contract is bilingual or in a different language, the parties may agree to choose a language both parties are fluent in to avoid misunderstandings and difficulties during arbitration.

Choosing the right language helps ensure the arbitration process runs smoothly, avoiding misunderstandings and reducing time and costs for translation.

6. Validity and binding nature of arbitration awards

Finally, the arbitration clause should clearly stipulate the validity and binding nature of arbitration awards. Key factors to consider include:

• Binding nature: Arbitration awards must be binding on the parties. The parties should commit to complying with and implementing the arbitration awards seriously.

• Enforceability: Arbitration awards need to be enforceable in countries where the parties have assets or business operations. The parties should ensure that the arbitration award will be recognized and enforced according to the provisions of international arbitration agreements, such as the 1958 New York Convention.

Clearly stipulating the validity and binding nature of arbitration awards ensures that the parties will comply with the award, and the dispute will be definitively resolved.

Drafting arbitration clauses in commercial contracts is an important step to ensure that disputes can be resolved effectively and fairly. Businesses should pay attention to the above factors to ensure that the arbitration clause is drafted thoroughly and clearly, protecting the interests of both parties in the contract. Should readers require additional support in drafting arbitration clauses or any other legal issues, please do not hesitate to contact TNTP. TNTP is always ready to assist you with all legal matters.

This concludes the article “Matters to be noted when drafting arbitration clauses in commercial contracts” that TNTP presents to our readers. We hope this article is helpful to you.

Best regards,

Key considerations for international sale of goods contracts

Written by TNTP LAW on 17 July, 2024. Posted in Contract Law, Legal newsletter.

With the globalisation of the economy and the establishment of bilateral and multilateral legal frameworks on trade, commercial activities between individuals and organisations have transcended national geographic boundaries to become international activities. The fundamental legal means for individuals and organisations to conduct commercial activities internationally is through international commercial contracts, which include contracts for the international sale of goods.

1. Concept of international sale of goods contracts

An international sale of goods contract is a contract for the sale of goods that has an international nature or foreign element, whereby one party (the seller) is obligated to deliver goods, related documents, and the ownership of the goods to the other party (the buyer), who is obligated to pay for and receive the goods.

2. Parties to the international sale of goods contracts

In international sale of goods contracts, the parties usually have commercial establishments in different countries and/or hold different nationalities. This means that the seller and the buyer do not have their commercial establishments in the same country. In cases where a party has multiple commercial establishments, the address of the party will be identified as the commercial establishment most closely related to the contract and its performance. If a party does not have a commercial establishment, the address of the party will be determined based on their regular place of residence.

3. Object of contracts

Goods in an international sale of goods contract can be transported across borders from the seller’s country to the buyer’s country or a third country, especially when the contract is signed between parties with commercial establishments in different countries. In some cases, goods may be transported from a country other than the seller’s to the buyer’s country. For example, the buyer is based in India, the seller is based in China, and the seller outsources the manufacturing of the goods in Vietnam; once the goods are produced, they will be delivered directly from Vietnam to India without passing through China, the seller’s country.

4. Currency for payment

The currency used for payment between the seller and the buyer may be foreign currency for one or both parties. In international sale of goods contracts, the parties are free to choose the currency for payment, which can be the currency of the seller’s country, the buyer’s country, or a third country. However, in cases where businesses within the European Union sign contracts, the Euro will be the common currency used by both parties and will not be considered foreign currency for either party.

5. Dispute resolution authority

The authority to resolve disputes arising from or related to international sale of goods contracts can be a foreign court or arbitration, depending on the agreement between the parties. Additionally, the international nature of these contracts may lead to jurisdictional disputes between dispute resolution authorities, especially if the parties do not have a clear, detailed agreement on the dispute resolution authority.

6. Governing law of contracts

The law applicable to international sale of goods contracts can be the law of the seller’s country, the buyer’s country, or another country. The sources of law governing the international sale of goods contracts are diverse and complex, including not only foreign laws applicable to one or both parties but also international trade agreements, international trade practices, and case law.

7. Form of contracts

According to Articles 11 and 12 of the Vienna Convention 1980, a sale contract does not need to be concluded in writing or comply with any other formality requirements. The contract can be evidenced in any way, including through witness testimony. However, if one of the parties to the contract has its commercial establishment in a country that is a member of the Convention and that country has declared a reservation on the form of the contract, the parties may not be able to apply the form requirements of the Vienna Convention 1980. The parties will apply the law of the place where the contract is concluded or the law of the place of residence of the party to determine the form of the contract. Generally, the form of the contract is determined by the law applicable to the contract itself, in other words, the law governing the legal issues of the contract. In other cases, the form of the contract is still considered legal if it complies with the law of the place where the contract is signed. For contracts related to real estate, the form of the contract must comply with the law of the country where the real estate is located.

The above article, “Key considerations for international sale of goods contracts” is brought to you by TNTP. If you have any issues that need discussion, please contact TNTP for timely support.

Sincerely,

Conditions for initiating civil lawsuits when disputes arise about copyright and related rights

Written by TNTP LAW on 15 July, 2024. Posted in Dispute Settlement, Legal newsletter.

When detecting acts of infringement of copyright and related rights, subjects have the right to initiate civil lawsuits at competent People’s Courts to protect their legitimate rights and interests. So, what conditions should be met when you want to initiate a civil lawsuit on copyright and related rights? Let’s find out with TNTP through the article below.

I. Right to initiate civil lawsuits on copyright and related rights

Pursuant to Article 56 of Decree 22/2018/ND-CP Decree 17/2023/ND-CP detailing a number of articles and measures to implement the Law on Intellectual Property on copyright and related rights (hereinafter referred to as “Decree 17/2023”) stipulating the protection of copyright and related rights as follows: Copyright owners, owners of related rights directly or may authorize collective representative organizations of copyrights, related rights or other organizations or individuals to exercise and protect their copyrights and related rights. The authorized party shall have to provide public information for organizations and individuals to exploit and use works, performances, sound recordings, video recordings and broadcasts to contact and agree on the exploitation and use.

This is also affirmed in Section II.1 of Joint Circular 02/2008/TTLT-TANDTC-VKSNDTC-BVHTT&DL-BKH&CN-BTP stipulating the right to initiate civil lawsuits on copyright and related rights. Accordingly, the following entities have the right to sue:

First: Author; owners of copyrights, related rights; legal heirs of the author or of the owner of copyright or related rights; individuals and organizations to which the rights of copyright owners or related rights are transferred; individuals and organizations using works under contracts; performers; producer of sound recordings, video recording; organization of broadcasting;

Second: The collective representative organization of copyright, related rights or other organizations or individuals authorized by the copyright owner or related rights owner.

Third: State agencies and related organizations shall, within the ambit of their tasks and powers, have the right to initiate civil lawsuits to protect public interests and interests of the State in the field of copyright and related rights.

II. Conditions for initiating civil cases on copyright and related rights

Conditions for initiating civil lawsuits on copyright and related rights are specified in Section III.1 of Joint Circular 02/2008/TTLT-TANDTC-VKSNDTC-BVHTT&DL-BKH&CN-BTP. Accordingly, in order to initiate a civil lawsuit on copyright, related rights need to meet the following two conditions:

2.1 First, copyright and related rights have arisen

• Clauses 1 and 2, Article 6 of the Law on Intellectual Property 2005 amended and supplemented in 2009 and 2019 (“IP Law”) stipulate the grounds for arising and establishing copyright and related rights as follows:

– Copyright arises from the time the work is created and is expressed in a certain material form, regardless of content, quality, form, medium, language, published or unpublished, registered or unregistered.

– The relevant right arises since the performance, sound recording, video recording, broadcast, satellite signal carrying the encrypted program is shaped or performed without prejudice to the copyright.

• Authors, copyright owners and related rights owners have the right to apply for the issuance of copyright registration certificates and related rights registration certificates in accordance with Article 49 of the IP Law. However, this is not a mandatory procedure to enjoy copyright or related rights.

• When there is a dispute over copyright or related rights that the litigants initiate a lawsuit asking the Court to protect their legitimate rights and interests, the Court must consider without distinction whether they have a copyright registration certificate or a relevant rights registration certificate, whether or not they have filed an application for registration of copyright or related rights.

2.2 Secondly, the duration of copyright protection and related rights remains in accordance with the law on intellectual property

The duration of copyright protection and related rights is specified in Articles 27 and 34 of the IP Law. Accordingly, depending on the type of work, the duration of copyright protection and related rights will vary.

Because, authors, copyright owners and related rights owners are only allowed to exercise their moral rights and property rights within the scope and time limit prescribed by the law on intellectual property. If the protection period expires, the rights of authors, copyright owners and related rights owners are no longer protected by the State and law. Therefore, the Court will only hear a petition for settlement if such rights are still within the protection period, unless the law does not provide for a period of copyright protection.

Thus, in order to be able to initiate a civil lawsuit on copyright and related rights, it is necessary to satisfy the conditions on the subject of the lawsuit and the copyright and related rights are still within the protection period or in other words, there is still a statute of limitations for initiating lawsuits. Without either of the above conditions, organizations and individuals cannot exercise the right to initiate lawsuits to request the Court to protect their legitimate rights and interests.

Above is the content of the article “Conditions for initiating civil lawsuits when disputes arise about copyright and related rights” of TNTP. Hope the information shared above is useful for readers.

Best regards.

Legal regulations on the procedure for realizing mortgaged assets

Written by TNTP LAW on 12 July, 2024. Posted in Legal newsletter.

The procedures for realizing secured assets in general and mortgaged assets in particular are stipulated in the 2015 Civil Code and Decree 21/2021/ND-CP, which regulates the implementation of the Civil Code on securing the performance of obligations. Accordingly, in this article, TNTP will present the specific steps to realize mortgaged assets.

1. Step 1: Notice of realizing mortgaged assets to fulfill obligations

Article 300 of 2015 Civil Code stipulates the notice regarding the realizing of secured assets. Before realizing the mortgaged asset, the mortgagee must notify the mortgagor and other co-mortgagees in writing within a reasonable period. The law does not currently provide guidelines about a reasonable period; thus, the parties should specify the notice period for realizing the mortgaged assets in the mortgage contract.

The main content of the notice regarding the realizing of mortgaged assets is stipulated in Article 51.1 of Decree 21/2021/ND-CP, including the reason for realizing the secured asset, the realized asset, the time and place for realizing the secured asset.

2. Step 2: Delivery of the mortgaged asset for realizing

According to Article 301 of 2015 Civil Code, the person holding the mortgaged asset is obliged to deliver the mortgaged asset to the mortgagee for realizing when one of the cases of realizing the mortgaged asset occurs. In case the person holding the mortgaged asset does not deliver the asset, the mortgagee has the right to request the court to resolve the matter.

Therefore, the delivery of the mortgaged asset mainly depends on the goodwill of the mortgagor/ person holding the mortgaged asset. In case the mortgagor/ person holding the mortgaged asset is uncooperative in delivering the mortgaged asset, the mortgagee has the right to file a lawsuit requesting the court to resolve the matter according to procedural rules.

3. Step 3: Payment to secure obligations

The proceeds from realizing the mortgaged asset, after deducting the costs of preserving, seizing, and realizing the mortgaged asset, will be paid in the priority order specified in Article 308 of 2015 Civil Code.

i) In case the proceeds from realizing the mortgaged asset, after deducting the costs, exceed the value of the secured obligation, the surplus will be returned to the mortgagor.

ii) In case the proceeds are less than the value of the secured obligation, the unpaid portion of the obligation is considered an unsecured obligation, unless the parties agree to supplement the secured asset. The mortgagee has the right to request the obligor to perform the unpaid portion of the obligation.

Mortgage take effect against third parties from the time of registration. When a mortgaged asset is used to secure multiple obligations, the priority order of payment among the mortgagees is determined as follows:

i) In case all mortgagees have registered the mortgage in accordance with the law, the order of payment is determined by the order of registration;

ii) In case some mortgagees have registered the mortgage in accordance with the law and others have not, or do not have registered in accordance with the law, the mortgagees who have registered in accordance with the law will be given priority;

iii) In case none of the mortgagees have registered the mortgage in accordance with the law, the order of payment is determined by the order of establishment of the mortgage.

The above-mentioned priority order of payment can be changed as agreed by the mortgagees. The subrogating party of the right to priority of payment shall only be given priority within the secured extent of the subrogated party.

4. Step 4: Transfer of ownership of the asset

After completing the transfer of the mortgaged asset to another party (that can be the mortgagee or a third party), the asset owner and the party entitled to realize the asset must follow the legal procedures to transfer ownership of the asset to the purchaser.

The above is TNTP’s article on “Legal regulations on the procedure for realizing mortgaged assets”. We hope this article is useful to readers.

Best regards,

What need to do when choosing to suit by Commercial Arbitration

Written by TNTP LAW on 10 July, 2024. Posted in Dispute settlement.

Commercial arbitration is one of the most popular dispute settlement methods thanks to its flexibility in procedures and confidentiality in the dispute settlement process. If a party submits a dispute to Commercial Arbitration, the litigating party will have to comply with the provisions of the Law on Commercial Arbitration. Therefore, to clearly understand as well as to help parties who intend to take action at the Commercial Arbitration Center carry out the work in accordance with regulations, in this article, TNTP will clarify when choosing Commercial Arbitration, what the parties need to do.

1. What is commercial arbitration? Scope of settlement of Commercial Arbitration

• Commercial arbitration is a method of dispute settlement agreed upon by the parties and conducted under the provisions of the Law on Commercial Arbitration 2010 (“Law on CA”).

• Scope of settlement of Commercial Arbitration (Article 2 of the Law on CA):

(i) Disputes among parties that arise from commercial activities.
(ii) Disputes among parties at least one of whom conducts commercial activities.
(iii) Other disputes among parties which are stipulated by law to be settled by arbitration.

2. What do enterprises need to prepare when filing a lawsuit to Commercial Arbitration?

Before filing a lawsuit at the Commercial Arbitration Center, the Plaintiff needs to check the legal regulations on the following issues:

• Agreement to settle disputes by commercial arbitration:

To settle a dispute by Commercial Arbitration, the parties must have a written agreement or have a clause in the Contract or documents incarnate that the parties agree to choose to settle the dispute by Commercial Arbitration. A flexible point of Commercial Arbitration is that the Arbitration Agreement can be made before or after a dispute arises (Clause 1, Article 5 of the Law on CA).

Therefore, in cases where there is no arbitration agreement in the contract between the parties, but the parties wish to settle the dispute at commercial arbitration, or the arbitration agreement in the contract is unclear, the parties can negotiate to supplement or adjust the terms of the commercial arbitration agreement in the contract or establish a written arbitration agreement before or after a dispute arises.

• Statute of limitations for initiating a lawsuit:

According to Article 33 of the Law on CA, unless otherwise provided by discrete laws, the statute of limitations with arbitral procedures is 2 years from the time the claimant acknowledges the infringement of their lawful rights and interests.

• Prepare the Petition and enclosed documents:

 According to the provisions of the Law on CA, when a dispute is settled at an arbitration center, the plaintiff shall file a petition with the arbitration center. When a dispute is settled by ad hoc arbitration, the plaintiff shall make a petition and send it to the defendant.

 The petition must fully contain the following contents:

 Date of its making;
 Names and addresses of the parties; names and addresses of witnesses, if any;
 Summary of the circumstances of the dispute;
 Grounds and evidence for initiating the lawsuit, if any;
 Specific requirements of the plaintiff and the value of the dispute;
 Name and address of the person whom the plaintiff selects as arbitrator or requests to be designated as arbitrator.

 Enclosed with the petition shall be the arbitration agreement and the originals or copies of relevant documents.

Practice shows that commercial arbitration will help legal entities save time and costs, simplify procedures, ensure business secrets, etc. However, up to now, many legal entities, due to inadequate preparation before filing a lawsuit, face many obstacles when settling at the Commercial Arbitration Center such as supplementing documents and evidence and adjusting procedural documents many times, causing a waste of time and money. Therefore, we hope that through this article, we can give readers a comprehensive perspective to consider the factors that help prepare for lawsuits at the Commercial Arbitration Center fully to ensure the benefits of enterprises.

Above is an article by TNTP lawyer on the topic: “What need to do when choosing to suit by Commercial Arbitration“. Hopefully this article brings value to readers.

Sincerely,

Some disputes arise from “Fake contracts”

Written by TNTP LAW on 8 July, 2024. Posted in Dispute Settlement, Legal newsletter.

“Fake Contracts” is a common practice in the modern day, especially in complex economic transactions. However, the nature of Fake Contracts itself carries many legal risks and potential disputes between the parties. In this article, TNTP will analyze some common disputes arising from Fake Contracts.

1. What is a fake contract?

• Current law does not provide a specific concept or definition of Fake Contracts. However, a fictitious contract (hereinafter referred to as “fake contract”) can be understood as a type of contract intentionally created by the parties to conceal another actual transaction. The purpose of this is often to evade legal obligations, minimize tax costs, or achieve other unlawful objectives. Fake Contracts may cover, transfer, gift, or involve other transactions but are represented in a different form.

• The current law does not have detailed regulations on handling Fake Contracts. However, according to Article 124 of the Civil Code 2015, when parties create a fake civil transaction to conceal another civil transaction, the fake transaction is invalid, while the concealed transaction remains valid unless it is also invalid under the law.

Using Fake Contracts may bring short-term benefits to the parties involved but carries many legal risks. The ambiguity in these transactions not only affects transparency but also causes significant loss to the involved parties when disputes arise.

2. Common types of fake contract

• Fake Sales and Transfers: It is used to conceal the actual value of asset transfers to evade financial obligations. For example, during land use rights transfer to avoid financial obligations to the state, parties often create two sales contracts. The fake contracts record a lower transfer value than the actual one to reduce payable taxes and fees.

• Fake Loan Contracts: Fake loan contracts are often used to cover up usurious loans or tax evasion. In such cases, a large loan may be disguised as a loan contract with conditions different from the actual ones. For instance, a person might sign a loan contract to hide a real estate purchase transaction to evade taxes or other legal regulations. Here, the loan contract is merely a facade, while the true purpose is the real estate transaction.
• Fake Lease Contracts: Fake lease contracts might aim to conceal asset transfers or achieve other unlawful objectives. For example, a company might simulate leasing assets to avoid legal regulations on asset transfers.

3. Disputes arising from fake contracts and associated risks

• Disputes on the validity: One of the most common disputes is determining the validity of the contract. When a contract is found to be fake, disputes often revolve around identifying which contract is legal and effective. For example, after concluding a fake contract to conceal a land use rights transfer, one party discovers the land’s value has significantly increased. This party might sue to have the previous contract declared invalid to reclaim the land use rights

• Rights and obligations disputes: When a fake contract is discovered and declared invalid, one of the parties is usually affected, leading to disputes over the parties’ rights and obligations.

• Compensation: In many cases, one party might suffer damages due to the invalidation of a fake contract. When a contract is declared invalid, the aggrieved party often seeks compensation, leading to complex disputes over damage assessment and compensation responsibility.

• Asset misappropriation: Numerous cases involve parties using transfer contracts to conceal loans, with the transferee then misappropriating the mortgaged assets.

The use of Fake Contracts creates significant challenges in dispute resolution. In reality, cases involving Fake Contracts are very difficult to handle, often because the actual purpose agreed upon by the parties is well concealed.

4. Solutions to minimize disputes

• Professional legal advice: Before signing any contract, parties should seek advice from lawyers or legal experts to ensure the contract’s legality and understand potential legal risks. Lawyers can help evaluate contracts, identify inconsistencies, and propose suitable legal solutions.

• Compliance with legal regulations: Adhering to current legal regulations is a prerequisite to avoiding disputes related to Fake Contracts. Parties need to understand and correctly implement regulations on taxes, asset transfers, and other legal obligations.
• Transparent and legal transactions: Transactions between parties should be conducted transparently, clearly, and honestly. This not only helps avoid misunderstandings and future disputes but also builds long-term trust and cooperation between parties.

Fake Contracts are a complex phenomenon with many legal risks. Understanding the nature of these contracts and the potential disputes can help parties in transactions prevent and resolve disputes effectively. Always seek legal expert advice to ensure your rights in every transaction.

This is the article “Some disputes arise from “Fake contracts”” that TNTP sends to our readers. TNTP hopes this article is helpful to you.

Common business capital contribution contract disputes and dispute settlement solutions

Written by TNTP LAW on 5 July, 2024. Posted in Dispute Settlement, Legal newsletter.

In a time of ever-growing economic activities, capital contribution contracts are very common and popular between individuals and enterprises. The purpose of a capital contribution contract is usually to establish an enterprise, business cooperation, or investment. Therefore, the number of capital contribution contracts is increasing, leading to potential legal risks and disputes. In this article, TNTP will present common capital contribution contract disputes to help readers clearly understand and have urgent solutions to protect their legal rights in the event of an actual dispute.

1. What is a business capital contribution contract?

• According to Clause 18, Article 4 of the Enterprise Law 2020 on Definitions prescribes “capital contribution” means the contribution of capital as charter capital to establish a new company or contribution of additional capital to an existing company.”

• According to Article 385 of the Civil Code 2015 on Definition of civil contract prescribes “Civil contract means an agreement between parties to establish, modify or terminate civil rights and obligations.”

• Current law does not have specific regulations on Business Capital Contribution Contracts or Capital Contribution Contracts (collectively referred to as “Contribution Contracts”), but we can understand that Contribution Contracts are agreements between two or more parties, in which the parties will contribute capital and assets to perform certain works together, benefit from common works and take responsibility according to the regulations in the Contribution Contracts.

2. Common disputes of the Contribution Contract

In reality, it can be seen that the causes of dispute in the Contribution Contracts often revolve around the following issues:

• Dispute about the parties’ failure to fulfill their capital contribution obligations:

According to the regulations in the Contribution Contracts, each party will contribute capital according to the agreed amount, assets, the capital contribution period, and the purpose of capital contribution. Capital contribution assets can be Vietnamese Dong, freely convertible foreign currencies, gold, land use rights, intellectual property rights, technology, technical secrets, and other assets that can be valued in Vietnamese Dong. Only individuals and organizations that are the legal owners or have legal use rights to the above assets have the right to use those assets to contribute capital according to the provisions of the law (Article 34 of the Enterprise Law 2020).

Thus, before signing the contract, the parties must carefully check the origin, value of the asset, legal ownership or legal use rights to that asset; stricter regulations on penalties for breach of contract and compensation for damages when a party failed to contribute capital on time, or when the contributed assets do not belong to the legal use or ownership of the capital contributor, the assets are in dispute, or distrained to ensure the enforcement of judgment.

• Dispute about profit sharing and risk-bearing obligations corresponding to capital contribution:

Normally, when entering into a Contribution Contract, the parties agree to contribute capital and must contribute assets according to regulations to perform the work and share the profits accordingly between the parties. In case there is a risk in the business and the business is at a loss, the parties must be responsible according to the respective capital contributed according to the agreement.

Therefore, if the Contribution Contract does not stipulate the profit-sharing ratio, distribution method, and risk responsibility corresponding to each party’s capital contribution ratio, disputes will easily arise between the parties.

• Dispute about unilateral contract termination:

Similar to other types of contracts, in case one party unilaterally terminates the contract without notifying the remaining parties according to the agreed time limit and/or method of notification, the remaining parties may suffer damages. This leads to conflicts and conflicts between the parties when determining the level of compensation and payment of compensation to the injured party.

3. Solutions for resolving disputes in the Contribution Contracts

a) Settle disputes by Commercial Arbitration

• Commercial Arbitration is a dispute settlement method with high confidentiality and quick procedures. This is also an advantage of this method when the parties do not want to have their information about the deal made public (such as procedures in Court) that will affect the reputation of the business during its operations.
• In addition, according to the principles of Commercial Arbitration, the parties can agree to choose the appropriate Arbitration Center, Arbitrator, language, and applicable law for dispute resolution, etc. according to their wishes.

• Besides, parties should also note that when choosing Commercial Arbitration, arbitration fees are often higher than court proceedings. In addition, the parties can request to cancel the arbitration award in Court if there are grounds to prove that the proceedings are not under the law and the content of the award is contrary to the law.

b) Settle disputes by Court

• This is the method by which a trial, on behalf of the state, the People’s Court has the authority to carry out trials according to the strict and strict order and procedures prescribed in the Civil Procedure Code.

• Unlike settling by Commercial Arbitration, the parties will not be able to choose the Judge or decide on the composition of the Trial Panel to settle their dispute.

• The Court’s Judgment/Decision is valid for enforcement. When settling by this method, the parties must be required to comply with the content of the legally effective Judgment/Decision.

• However, except for the cases specified in Clause 2, Article 15 of the Civil Procedure Code 2015, disputes will normally be heard publicly by the Court. Therefore, confidentiality and business reputation may not be guaranteed, and enterprises need to consider when choosing this solution.

• At the same time, because of the strict nature of the proceedings, the settlement method at the Court will take a long time and will be inflexible.

• In addition, the Judgment can be appealed or protested against if the conditions for appeal or protest are met according to the provisions of the law.

Above is an article by TNTP lawyer on the topic: “Common business capital contribution contract disputes and dispute settlement solutions”. Hopefully, this article brings value to readers.

Sincerely,

Disputes over condotel apartments

Written by TNTP LAW on 3 July, 2024. Posted in Dispute Settlement, Legal newsletter.

In recent years, hotel apartments, also known as “condotel,” have become an attractive real estate investment trend in Vietnam. Combining the features of an apartment and a hotel, condotels promise high returns from rental income. However, many investors have encountered complex legal disputes surrounding this type of property. We will analyze common legal issues and ways to resolve disputes related to condotels below.

1. Overview of condotel

• A hotel apartment, or “condotel” is a type of real estate that is the combination of a condominium and a hotel. Condotels are usually built in tourist areas, resorts, or major cities with the primary purpose of short-term rental like a hotel, but they can also be owned and used like a condominium.

• Condotel was and is a popular type of real estate in the world. In Vietnam, this type of real estate is still relatively new but has quickly attracted the interest of investors due to its appealing profit potential and unique combination of apartment and high-end hotel services.

Due to their novelty and great appeal, many condotel projects are being developed. However, this boom has also led to an increase in related disputes.

2. Disputes related to “condotel” hotel apartments

According to the current Law on Real Estate Business 2014 and related legal documents, there are no specific regulations on the purchase and transfer of condotels, especially the conditions and guarantees in the purchase and transfer of contracts for future-formed condotels. The lack of control and binding of the parties is one of the causes of disputes in the purchase, transfer, and use of condotels. Some common disputes include:

• Non-compliance with promised profits: Investors often promise high returns, from 8-15% per year, to attract investors. However, when the market faces difficulties or due to poor management capabilities, investors cannot fulfill their promises, causing financial losses to investors. This leads to disputes demanding compensation and contract amendments.

• Delays in apartment handover: Many condotel projects are delayed in construction and handover, preventing customers from using the apartments on time. This could stem from legal policies or financial reasons. When delays occur, customers demand refunds, but investors do not comply, leading to legal disputes.

• Ownership rights: Vietnamese law does not yet clearly regulate the issuance of ownership certificates for condotels. This leads to many disputes over ownership rights, as owners cannot establish long-term ownership of their apartments. Investors need to understand the legal regulations and seek legal advice to avoid this risk. The inability to establish ownership and use rights over the condotel also causes disputes over the transfer of ownership and use rights with the investor.

• Management and operation: The condotel management unit is responsible for operating and providing services to customers. However, if the service quality does not meet the requirements or there are conflicts over management and maintenance fees, investors may demand a change of management unit or sue the investor. This dispute usually involves the management unit not fulfilling its commitments or lack of transparency in costs.

• Maintenance and repair cost disputes: Maintenance and repair cost of condotels is a frequent reason for disputes. Investors and owners may conflict over cost sharing, especially when there are incidents or major repairs needed. This dispute often relates to unclear contract terms or discrepancies in cost assessment.

• Transfer and management: The transfer and management of condotels face many difficulties due to the lack of legal basis. This leads to conflicts between investors and apartment owners, especially when there is a need to transfer or change the management unit.

3. Notes to minimize disputes

• Thorough contract review: Before signing the contract, carefully read and understand all terms in the condotel purchase or investment contract. Ensure that commitments regarding profits, handover time, and terms are accurately stated and protect the parties’ interests.

• Legal research: Study the legal regulations related to condotels, especially land use rights, ownership rights, and management and operation terms.

• Choose a reputable management unit: Ensure that the condotel management unit has credibility and experience in this field. Professional management helps minimize conflicts and disputes over service quality and management costs.

• Monitor progress and fulfill commitments: Always monitor the construction and handover progress of the condotel project to react timely to any delays. Ensure that commitments are fulfilled according to the contract.

• Choose appropriate dispute resolution methods: To resolve disputes regarding condotel hotel apartments, consider negotiation, mediation, arbitration, or court resolution, depending on the nature and complexity of the dispute. Each method has its advantages and disadvantages. Therefore, choosing the appropriate method is crucial.

To apply these notes effectively, readers can seek support from legal experts and experienced lawyers. These experts not only provide in-depth knowledge of the law related to condotel hotel apartments but also offer clear guidance on legal regulations and effective dispute resolution methods. Legal support helps minimize the risk of disputes and protect your rights during the investment and management of condotel apartments.

Above is the article “Disputes over condotel apartments” sent to you by TNTP. If you have any issues to discuss, please contact TNTP for support.

Best regards.

Author: TNTP LAW

Matters to be noted when drafting arbitration clauses in commercial contracts

1. Choosing an arbitration center

2. Arbitration Rules

3. Arbitration Venue

4. Arbitration costs

5. Arbitration language

6. Validity and binding nature of arbitration awards

What need to do when choosing to suit by Commercial Arbitration

1. What is commercial arbitration? Scope of settlement of Commercial Arbitration

2. What do enterprises need to prepare when filing a lawsuit to Commercial Arbitration?

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