Further guidance on “fundamental” principles of Vietnamese law

“Fundamental” (or basic) principles of Vietnamese law are an important concept. For example, while certain contracts with Vietnamese counterparties could be governed by foreign law, the choice of foreign law must not be contrary to fundamental principles of Vietnamese law. Vietnamese courts may refuse recognition of foreign arbitration awards if such awards are contrary to fundamental principles of Vietnamese law. Until recently, there is no clear guidance about what fundamental principles of Vietnamese law are. In March 2014, under Resolution 1/2014 implementing the Law on Commercial Arbitration, the Supreme Court seems to be for the first time has given some limited guidance on fundamental principles of Vietnamese law. In particular,

• The court considers a fundamental principle of Vietnamese law to be a fundamental principle of conduct which applies broadly (hiệu lực bao trùm) to the drafting and implementing of Vietnamese law; and

•  The courts refer to certain principles contained in the Civil Code, the Commercial Law and the Law on Commercial Arbitration as example of fundamental principles of Vietnamese law.  

Law of agency in Vietnam

Under the Civil Code 2005, in an agency relationship where a person (the authorised representative) acts on behalf of another person (the principal),

• an authorised representative may only perform civil transactions within his or her scope of representation;
  

• an authorised representative must inform third parties in civil transactions of the scope of his or her representation;
  

• an authorised representative may not establish or perform civil transactions with him-self or herself, or with a third party for whom the representative also acts, unless the law provides otherwise;
  

• an agency relationship may terminate if the legal representative of the legal entity rescinds the authorisation or the authorised person renounces the authorisation;
  

• an agency relationship can be established through an unilateral power of attorney given by the principal in favour of the agent  or a contract of authorisation between the principal or the agent;
  

• a contract of authorisation has a default term of one year unless otherwise agreed by the parties or provided by law.  It is not clear if this rule also applies to an authorisation given by way of an unilateral power of attorney;
  

• in the context of a contract of authorisation, sub-authorisation is permitted if the principal agrees so.  It is not clear if sub-authorisation is permitted in the context of an unilateral power of attorney; and
  

• there is no apparent authority doctrine in Vietnamese agency law. Under common law system, apparent authority refers to a situation where a reasonable person would understand that an agent had authority to act. This means a principal is bound by the agent's actions, even though the agent had no actual authority, whether express or implied. However, in Vietnam, a transaction established by an authorised representative which is outside of the scope of authorisation may not bind the principal.