New choice of foreign governing law in a contract with Vietnamese counterparty

From 1 January 2017, the Civil Code 2015 introduces a new set of rules regarding choice of governing law in a civil contract signed with a Vietnamese counterparty. In particular, parties to a contract in which there is at least one party is foreign individual or foreign “legal person” may agree to choose foreign governing law in the contract except in the following cases, among other things:

  • The consequence of application of foreign governing law is contrary to fundamental principles of Vietnamese law. The Civil Code 2015 also introduces some fundamental principles of Vietnam Civil Code which presumably will form parts of the fundamental principles of Vietnamese law;
  • The content of the foreign law cannot be determined although all necessary measures under civil procedures code (or other proceeding rules) have been applied. It is not clear if this provision is limited to finding the sources of foreign law or also applies to interpreting the relevant foreign law. The Civil Code 2015 also provides that interpretation of foreign law should follow interpretation of a competent authority of the relevant foreign country. It is not clear if this requirement could mean that evidence given by a qualified foreign lawyer regarding interpretation of foreign law may not be accepted in Vietnam;
  • Contracts involving transfer of ownership or other rights attached to real properties, lease of real properties or mortgage of real properties must be governed by Vietnamese law if the real properties are located in Vietnam;
  • Employment contracts or consumer contracts  must be subject to Vietnamese law to the extent the relevant foreign governing law “affect” on the minimum rights of the employees or consumers as provided in Vietnamese law; and
  • Parties to a contract with Vietnamese governing law cannot agree to change to foreign governing law if the change will affect rights of a “third party beneficiary” unless the relevant third party agrees. There is no definition of third party beneficiary under the Civil Code 2015. So it is not clear if the third party beneficiary can be any person or must be specified in the relevant contract.

In addition, the Civil Code 2015 also introduces the concept of the most relevant legal system which will apply to a contract with Vietnamese counterparty in case the parties do not agree to a specific governing law.