-
 Contract
enforcement in Vietnam has been a problem for a number of
reasons.
First, currently there are three bodies of contract law: the
Civil Code which governs "civil" contracts; the Ordinance on
Economic Contracts, which governs "economic" contracts; and the
Commercial Law which governs "commercial" contracts. It is not
always easy to determine the difference between a "civil" and an
"economic" contract. In a contractual dispute, the parties may
spend a significant amount of time disputing these issues alone,
and since the law is unclear, judges are often in no better
position to determine whether disputes are "civil" or
"economic."
Second, because the practice in Vietnam is to keep contracts as
simple as possible, partly due to the assumption that the law
will resolve unspecified issues and also because the parties to
the contracts may not even be aware of the various bodies of
contract law, most contracts are often poorly drafted. The
results are that the relevant parties have to rely on the
judges' interpretations of the law, and that the terms of
contracts cannot be relied on to resolve the matter. Thus,
enforcement can become a problem.
Third, even if the parties try to prepare comprehensive
contracts to deal with the "gray areas" of the law, in many
cases, the law requires that contracts be notarized by a Notary
Public. Often, the Notary Public may require the parties to
amend their contracts by deleting provisions they have already
agreed upon; this can happen because the contract laws do not
clearly provide for these "gray areas" and therefore the
relevant provisions may be against the law.
Fourth, in Vietnam, there is great uncertainty and
unpredictability surrounding the results of any dispute resolved
via the court system or arbitration because of the limited
qualifications and quality of the judges or arbitrators
involved.
Ms. Dao Nguyen, Partner,
Johnson Stokes & Master Vietnam &
Chair of the Vietnam Business Forum Working Group on Land Issues
-
 There
are some shortcomings in both the legal framework and practices
that prevent effective contract enforcement. Vietnam's
regulations that deal with contracts are very vague and do not
comply with international laws and best practices. At present,
general provisions on contracts are centrally located in the
Civil Code. Removing additional provisions on contracts from the
new Commercial Law fails to provide a supporting domestic legal
framework for business-to-business commercial contracts,
especially those involving foreign partners. This complicates
the effort of judges, arbitrators and lawyers to interpret
Vietnamese laws and resolve disputes. Also, commercial
arbitrators have a tendency to apply foreign or global laws and
practices, especially in international trade cases.
The Western proverb "a poor agreement is still better than a
good court award" suggests that the best way to settle disputes
is through negotiation. Using arbitrators or courts to handle
disputes is more costly in terms of both money and time. With
several dozens of new cases filed everyday, Vietnamese courts
are overloaded.
There have been some efforts to improve our judicial systems.
The Civil Procedural Code of 2004 delegates additional
accountability to the district-level courts; for example, it
allows them to handle a number of economic cases in order to
remove some burden from the provincial courts. The Code also
specifies time limits for courts to respond to plaintiffs (five
days after courts receive a claim), conduct trial preparation
(two to four months) and hold a trial (one to two months after
the date the court agree to consider the case). Vietnam is
considering the introduction of summary proceedings to simplify
procedures at court even further. However, such reforms can be
effective only if they occur in parallel with the capacity
building of judges. Moreover, new technology and information
systems can also directly impact court efficiency by reducing
unnecessary delays and costs.
Firms should be aware of arbitration, a form of alternative
dispute resolution that is faster and more efficient than going
to court. Arbitrators are familiar with the technical and social
settings of disputes, which is particularly important in those
involving international trade. Arbitration's advantages also
include privacy (during the arbitration hearing as well as the
settlement), and its result is final, legally binding and
enforceable in court.
Mr. Pham Liem Chinh,
Attorney at Law, Chinh & Associates
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Recently, contract law in Vietnam has been significantly
improved. The general principles on contracts have been removed
from the Trade Law of 2005. The Ordinance on Economic Contracts
of 1989 will be abolished as of 1 January 2006. The general
provisions on contracts that are being included in the amended
Civil Code of 2005 will make it easier for businesses to
identify the appropriate laws governing their transactions. In
the new Civil Code, there have been a number of important
improvements in contract-related provisions, such as: i) the
contract format is no longer a legal requirement for a contract
to be valid (except for some specific contract types); ii)
substantial terms are for guidance only and cannot be used to
invalidate a contract; iii) violation of legal requirements in
contents and purposes of the contract can invalidate a contract;
iv) foreign laws and practices can be applied; v) mortgage and
collateral, the two important means of securing the fulfillment
of contractual obligations, are now defined in terms of their
risk level rather than the portability of the property; and vi)
future-receivable assets can be used as mortgages.
I hope that those improvements will help create an effective and
functional legal framework that expands the freedom to contract
and promotes business-to-business commercial contracts among
firms in Vietnam.
Mr. Nguyen Am Hieu,
Deputy Head of Economic and Civil Legal Department, Ministry of
Justice
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Currently some firms handle contractual disputes in their own
way. In many cases, especially those involving collection of
debts, they call on the police! Other firms may seek mediation
services from reputable experts; for example, VCCI's Legal
Department has mediated many contractual disputes. Official
recognition of mediation as an alternative form of dispute
settlement may be beneficial for firms.
Ms. Pham Chi Lan,
Prime Minister's Research Commission
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Despite some efforts to reform the judicial process, Vietnamese
courts are not yet efficient enough when it comes to settling
disputes. There are a number of reasons for this. First, many
court procedures are manual, which creates a lot of delays.
Second, judges with a "centrally-commanded economy" mindset may
try to protect the public interest to the detriment of business
freedoms and interests. Third, firms do not respect court
decisions, since judges often lack experience in dealing with
sophisticated commercial cases (especially those involving
intellectual property and international trade). Fourth, local
lawyers play very limited roles in court because they are not
trusted by judges and they have little experience in handling
sophisticated cases; moreover, since foreign lawyers are not yet
allowed to practice in Vietnamese courts, local judges and
lawyers do not have the chance to learn from international
experience. Finally, a low level of financial transparency makes
it difficult to monitor and seize the assets of debtors, even if
a judgment calls for this. As a result, the process of enforcing
judgments is extremely slow and inefficient.
It would be advisable for the government to conduct a
comprehensive review of the current capacity of courts at
different levels and of commercial arbitrators. Such a study
could serve as an important input for policymakers and reformers
seeking to initiate and develop capacity building programs for
judges and arbitrators in Vietnam.
Mr. Ngo Cuong, Deputy Director,
Institute for Judicial Science, The Supreme People's Court
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