Under the Commercial Law, the parties to a commercial transaction with a “foreign element” may agree to apply foreign law if such foreign law is not contrary “to the fundamental principles of the law of Vietnam”. The Civil Code defines a civil relation involving “foreign elements” to be a civil relation in which a least one of the participating parties is a foreign body, organisation or individual, or a Vietnamese residing overseas, or the civil relation is between participating parties being Vietnamese citizens or organizations but the basis for the establishment, alteration or termination of such relation was the law of a foreign country, or such basis arose in a foreign country, or the assets involved in the relation are located in a foreign country.

There are however two further qualifications to the ability of the parties to a commercial transaction to select foreign governing law:

• There is no clarification as to what constitutes the fundamental principles of the law of Vietnam. As such, a Vietnamese court may decide, in its discretion, whether the application of foreign law to any contract would be contrary to the fundamental principles of Vietnamese law; and

• Under the Civil Code, (1) contracts entered into and performed entirely in Vietnam or (2) contracts relating to immovable assets in Vietnam must “comply with” (tuân theo) the law of Vietnam. Vietnamese law does not make clear what contracts are considered as related to immovable assets in Vietnam. For example, while a house sale and purchase contract can arguably be considered as being related to immoveable assets in Vietnam, it is not clear if a construction contract to build a house can also be considered as such.

In addition, if the words “comply with” are interpreted to mean “governed by” (áp dụng) then Vietnamese law may still govern contracts entered into and performed entirely in Vietnam even if the parties to the contract agree to select a foreign governing law.

Vietnam Business Law