With the expansion of international business activities, the choice of governing law for contracts between these foreign-owned companies has become a topic of interest and importance.

1. Determining the applicable law

By default, Vietnamese law governs contracts between foreign-owned companies and other companies in Vietnam. However, there are arguments and mechanisms that allow parties to choose a foreign governing law, such as English law, for these contracts. This becomes important when foreign-owned companies plan to secure financing from foreign lenders based on the cash-flow generated from such contracts, like a power purchase agreement with Vietnam Electricity.

2. Governing law for contracts in Vietnam may pose certain challenges

It is worth noting that choosing a foreign governing law for contracts in Vietnam may pose certain challenges.
Firstly, there may be differences in legal systems, language, and cultural norms between Vietnam and the chosen foreign jurisdiction. This can result in potential difficulties in interpreting and applying the chosen governing law. Moreover, enforcement of contractual obligations in foreign jurisdictions may also present challenges, particularly if there are differences in legal procedures or if language barriers exist.
Additionally, it is important for foreign-owned companies to carefully consider the choice of governing law in light of the specific circumstances and the nature of the contract. When making this decision, you should take into account factors such as the location of the parties, the intended market for the goods or services, and the nature of the transaction. Seeking input from legal experts can provide valuable insights and guidance in the decision-making process.

3. Conclusion

In conclusion, the choice of foreign governing law for contracts between foreign-owned companies in Vietnam is a crucial consideration that can have far-reaching implications for the parties involved. While Vietnam’s default position is to apply Vietnamese law, foreign-owned companies have the option to choose a foreign governing law for their contracts, subject to certain conditions.
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Harley Miller Law Firm “HMLF”
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