Which commercial disputes must be resolved by vietnamese court?
In the context of international integration, cross-border commercial activities have developed rapidly, leading to a significant increase in commercial disputes involving foreign elements. These disputes arise from commercial relationships in which at least one foreign element exists as defined under Vietnamese law.
Pursuant to Clause 2 Article 663 of the Civil Code 2015 of Vietnam (“the Civil Code”), a civil relationship involving foreign elements is a relationship in which at least one of the participating parties is a foreign individual or foreign legal entity; or where all participating parties are Vietnamese individuals or Vietnamese legal entities, but the establishment, modification, performance, or termination of such relationship occurs in a foreign country; or where all participating parties are Vietnamese individuals or Vietnamese legal entities, but the subject of the civil relationship is located abroad. Based on this definition, commercial disputes arising from such relationships are identified as commercial disputes involving foreign elements (hereinafter referred to as “disputes”).
In principle, Vietnamese law respects the autonomy of the parties in agreeing on the forum for dispute resolution. However, the Civil Procedure Code 2015 of Vietnam (“the Civil Procedure Code”) provides that for certain specific cases, only Vietnamese courts have the authority to resolve the disputes. This authority is referred to as the exclusive jurisdiction of Vietnamese courts. This article focuses on clarifying the scope and implications of the exclusive jurisdiction of Vietnamese courts in resolving commercial disputes in accordance with current Vietnamese law.
1.Overview of the exclusive jurisdiction of the Vietnamese Courts
Under the Vietnamese civil procedural law, disputes that fall within the exclusive jurisdiction of Vietnamese courts must be examined and resolved by Vietnamese courts in order for the judgments or decisions to be recognized and enforceable in Vietnam. In cases where a dispute falls under the exclusive jurisdiction of Vietnamese courts but is nevertheless resolved by a foreign court, Clause 4 Article 439 and Clause 1 Article 440 of the Civil Procedure Code provide that the judgment or decision rendered by the foreign court shall not be recognized or enforced in Vietnam.
Exclusive jurisdiction must be clearly distinguished from the general jurisdiction of Vietnamese courts. With respect to disputes falling under general jurisdiction, the parties are free to choose between Vietnamese courts and foreign dispute resolution authorities, including foreign courts. When a dispute arises, the parties initiate proceedings before the agreed forum, provided that the agreement on jurisdiction and the dispute resolution process comply with the laws of the country where the selected forum is established.
2.Commercial disputes are subjected to the exclusive jurisdiction of the Vietnamese Courts
Article 470 of the Civil Code determines the exclusive jurisdiction of Vietnamese courts based on territorial factors, the nationality of the parties, and the agreement between the disputing parties. Specifically, for commercial disputes, pursuant to Points a and c Clause 1 Article 470 of the Civil Code, Vietnamese courts have exclusive jurisdiction in the following cases: (i) the dispute relates to rights over immovable property located within the territory of Vietnam; and (ii) the parties to the dispute agree to select Vietnamese courts as the forum for dispute resolution.
Firstly, Vietnamese courts have exclusive jurisdiction over commercial disputes involving rights over real estate located within the territory of Vietnam. Accordingly, any dispute arising from a commercial or relationship that involves land use rights or other rights related to real estate situated in Vietnam must be resolved solely by Vietnamese courts. Under Vietnamese law, real estate includes land, houses, constructions attached to land, and other assets inseparable from land. In practice, foreign-related commercial disputes involving real estate in Vietnam may include disputes arising from capital contribution using land use rights; disputes over capital transfer where the contributed capital is associated with immovable property; disputes related to the lease, sublease, or assignment of land use rights; and disputes arising from investment or cooperation contracts involving real estate development projects in Vietnam. For example, in a case where a Vietnamese enterprise and a foreign enterprise enter into a contract for the sublease of land use rights in an industrial zone located in Vietnam, any dispute arising from such contract must be resolved exclusively by Vietnamese courts. Even if the parties attempt to bring the dispute before a foreign court, any judgment rendered by that foreign court would not be recognized or enforced in Vietnam.
Secondly, Vietnamese courts shall have exclusive jurisdiction over business and commercial disputes where the parties have chosen Vietnamese court for resolution in accordance with Vietnamese law or international treaties to which Vietnam is a party. In this case, the parties’ agreement serves as the legal basis for establishing the exclusive jurisdiction of Vietnamese courts, while simultaneously excluding the jurisdiction of foreign courts. For example, in an international sale of goods contract between a Vietnamese enterprise and a foreign enterprise, the parties may agree on a dispute resolution clause designating Vietnamese courts. When a dispute arises, the parties may only initiate legal proceedings before Vietnamese courts in accordance with such agreement; if one party unilaterally files a lawsuit before a foreign court, the judgment rendered by that foreign court shall not be recognized or enforced in Vietnam.
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