Settlement of disputes about foreign investment in Vietnam

Foreign investors in the process of conducting their business investment activities in Vietnam, investors will inevitably have conflicts and disagreements about the rights and interests of investors or with other subject. In this article, TNTP would like to introduce the most basic issues about international investment disputes and settlement of international investment disputes in Vietnam.

1. What is an International Business Investment?

Business investment activities mean the investment by investors to carry out business activities through the establishment of economic organizations; investment, capital contribution, purchase of shares and contributed capital of economic organizations; investment in the form of a contract or implementation of an investment project. In the current period of globalization, foreign direct investment (FDI) into our country is a particularly important capital flow for growth and international economic integration, contributing to supplementing capital, technology, and energy, management capacity, business ability, ability to organize and participate in the global supply chain.

According to the 2005 Investment Law stipulates: “International investment is the act of foreign investors bringing into Vietnam capital in cash and other lawful assets to conduct investment activities.”

Along with that, international investment disputes are disputes related to investment activities of an international nature, arising from conflicts or disagreements over rights and obligations between parties in investment relations, international investment, arising from agreements related to international investment, investment protection agreements or investment contracts and agreements.. These disputes are expressed in a variety of ways. It can be a dispute between an investor and an administrative agency of the receiving country, or a dispute between a government and a government , or a dispute between investors.

2. Mechanisms for settlement of international business investment disputes in Vietnam

Vietnamese law is relatively open to the settlement of disputes in international business investment. Pursuant to Clause 1, Article 14 of the Investment Law 2020: “Disputes over business investment activities in Vietnam shall be settled through negotiation and conciliation. If the negotiation or conciliation fails, the dispute shall be settled by an arbitration body or by a court in accordance with Clauses 2, 3, and 4 of this Article”

It can be seen that when a dispute arises in international business investment, if it cannot be resolved by negotiation or conciliation, investors can choose the two most popular forms of dispute resolution today: Arbitration or Court. These are all Dispute Settlement Agencies that meet the conditions and needs of each investor in different disputes.

According to Clauses 2, 3, 4, Article 14 of the Investment Law 2020 stipulates:

“2. Every dispute between a Vietnamese investor and a foreign-invested business organization, or between a domestic investor or a foreign-invested business organization and a regulatory agency over business investment activities within Vietnam’s territory shall be settled by a Vietnam’s arbitration body or Vietnam’s court, except for the cases in Clause 3 of this Article.

Every dispute between investors, one of which is a foreign investor or a business organization defined in Points a, b and c Clause 1 Article 23 of this Law, shall be settled by one of the following agencies/organizations:
a) Vietnam’s court;
b) Vietnam’s arbitration body;
c) Foreign arbitration body;
d) An arbitral tribunal established by the parties in dispute.
Every dispute between a foreign investor and a regulatory agency over business investment activities within Vietnam’s territory shall be settled by Vietnam’s arbitral tribunal or Vietnam’s court, unless otherwise agreed under a contract or prescribed by an international treaty to which the Socialist Republic of Vietnam is a signatory.”

The first case:

If the parties to the dispute are both domestic investors or foreign-invested economic organizations (not in the case specified at Points a, b and c, Clause 1, Article 23 of the Law on Investment 2020) or competent state agency related to business investment activities in the territory of Vietnam, investors will be able to choose a dispute settlement agency which is the Vietnamese Arbitration or the Vietnamese Court.

Clause 1, Article 23 of the Investment Law 2020 regarding the implementation of investment activities of foreign-invested economic organizations:

“1. When establishing a business organization, when making investment by contributing capital, purchasing shares or purchasing stakes of a business organization or when making investment under a business cooperation contract in one of the following cases, the foreign investor must satisfy the conditions and follow investment procedures applied to foreign investors:

a) Over 50% of its charter capital or more is held by a foreign investor(s) or the majority of the general partners are foreigners if the business organization is a partnership;
b) Over 50% of its charter capital or more is held by a business organization(s) mentioned in Point a of this Clause;
c) Over 50% of its charter capital or more is held by a foreign investor(s) and a business organization(s) mentioned in Point a of this Clause.”

The second case:

If a party to the dispute is a foreign investor or a foreign-invested economic organization in one of the cases specified at Points a, b and c, Clause 1, Article 23 of the Law on Investment 2020 and the other party is not a competent Vietnamese state agency, the parties may choose one of the following jurisdictions: Arbitration or Vietnamese Court, Arbitration or Foreign Court, or may be an arbitration established by the parties to the dispute.

The third case:

If the parties to the dispute are foreign investors and competent state agencies related to investment in Vietnam, the parties can settle at arbitration or Vietnamese courts, except for the following cases: unless otherwise agreed by the parties in the contract or in accordance with the provisions of an international treaty.

It can be seen that the dispute settlement mechanism in foreign investment and business activities in Vietnam is quite open, always showing respect for the Vietnamese State’s right to choose and resolve for investors. Even with disputes where Vietnamese state agencies and foreign investors are parties to the dispute, foreign investors are not forced to choose Vietnamese jurisdictions. This is also an advantage that makes many foreign investors choose Vietnam for business investment.

Above are our basic sharing about international business investment activities and international business investment dispute settlement mechanism in Vietnam. Hope this article is useful to you.

Best regard,