FOREIGN TRADE UNIVERSITY HCMC CAMPUS

DEPARTMENT OF ECONOMICS AND LAW

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PARTY AUTONOMY IN CONTRACTUAL

CHOICE OF LAW IN VIETNAM

INTRODUCTION TO LAW – PLUE111

FINAL ASSIGNMENT
Academic year: 2023-2024

Grade (in number) Grade (in words)

Examiner 1’s signature Examiner 2’s signature

Invigilator 1’s signature Invigilator 2’s signature

Student’s Name: Phan Nguyen Anh Dao

Student ID: 2311215002
Class code: ML211
Lecturer: LLM. Tran Thanh Tam

HO CHI MINH CITY, JUNE 17, 2024

No Title Content/discussion Marking
1. Introduction Provide an overview of the concept of party autonomy in
0 (1 mark) contractual choice of law. Discuss its significance in
international contracts and its implications for cross-border
transactions.
2. Main body Legal Framework Governing the Party Autonomy
0 (7 marks) Principle in Contractual Choice of Law in Vietnam:
Outline the legal framework in Vietnam that governs party
autonomy in contractual choice of law. Refer to relevant
rules that establish and regulate this principle. (1.5 marks)

Statutory Restrictions on Party Autonomy in Vietnam:

Discuss the statutory restrictions on party autonomy in
Vietnam. Identify specific limitations imposed by
Vietnamese law on the parties' ability to choose the
governing law of their contract. Provide examples of
circumstances under which Vietnamese law might override
the parties' chosen law. (1.5 marks)

Judicial Practice on the Party Autonomy Principle in

Contractual Choice of Law: Examine how Vietnamese
courts have interpreted and applied the principle of party
autonomy in contractual choice of law. Analyze key judicial
decisions that have shaped the understanding and
application of this principle in Vietnam. Highlight any
trends or notable case law. (2 marks)
Evaluation on the Party Autonomy in Contractual
Choice of Law in Vietnam: Discuss whether the current
legal framework adequately protects the interests of the
parties while ensuring fairness and justice. (2 marks)
3. Conclusion Provide a conclusion which is fitting for the discussion and
0 (1 mark) summarize relevant recommendations based on the report.
4. References List all the relevant references used in your report in
0 (1 mark) accordance with the APA Referencing system. In-text
References and Bibliography required
Total Mark

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 TABLE OF CONTENTS

INTRODUCTION...........................................................................................................5

1. The objective of the report..................................................................................5

2. Key highlights.....................................................................................................5

3. Research methodology........................................................................................5

4. Report structure..................................................................................................6

SECTION I: LEGAL FRAMEWORK GOVERNING THE PARTY AUTONOMY

PRINCIPLE IN CONTRACTUAL CHOICE OF LAW IN VIETNAM..............................7

1. The outline..........................................................................................................7

2. Regulations related to the Legal Framework on Party Autonomy in the

Vietnam Civil Code.................................................................................................................
7

SECTION II: STATUTORY RESTRICTIONS ON PARTY AUTONOMY IN

VIETNAM...............................................................................................................................10

1. Statutory Restrictions.......................................................................................10

2. Specific limitations on the parties' ability to choose the governing law of their
contract & Examples............................................................................................................10

SECTION III: JUDICIAL PRACTICE ON THE PARTY AUTONOMY

PRINCIPLE IN CONTRACTUAL CHOICE OF LAW.....................................................12

1. Examination on how Vietnamese courts have interpreted and applied the

principle of party autonomy in contractual choice of law....................................................12

2. Navigating Choice of Law: Party Autonomy in Vietnamese Courts.................12

2.1. Key judicial decisions that have shaped the understanding and application of
this principle in Vietnam...................................................................................................12

2.2. Trends and notable case law.............................................................................13

SECTION IV: EVALUATION ON THE PARTY AUTONOMY IN

CONTRACTUAL CHOICE OF LAW IN VIETNAM........................................................14

1. Promoting the Party's autonomy within Vietnam's legal framework...............14

2. Balancing Party autonomy with domestic priorities........................................14

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CONCLUSION..............................................................................................................16

1. Summary...........................................................................................................16

2. Recommendation..............................................................................................16

REFERENCES..............................................................................................................17

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 INTRODUCTION

1. The objective of the report

Party autonomy, in contractual choice of law, empowers parties in an agreement to

designate the legal system that governs their contract. This principle is especially significant
in international contracts. Imagine a company in Vietnam contracting with a US partner –
their legal backgrounds differ. Party autonomy allows them to choose a familiar legal system,
like English law commonly used in international contracts. This allows parties to plan and
make informed decisions with confidence as well as minimizes the risk of unexpected legal
outcomes. Both parties understand how potential disputes will be resolved, reducing
uncertainty and encouraging cross-border transactions. Also, party autonomy bridges the gap
between companies from diverse legal systems. By choosing a neutral legal framework,
international trade and collaboration become more attainable and more efficient. These
advantages solidify party autonomy as a crucial asset for businesses navigating the
interconnected global marketplace. However, there are also some limitations on party
autonomy. These limitations come into play when Vietnamese public policy or mandatory
legal rules are at stake, or when Vietnamese courts have exclusive jurisdiction. To understand
these figures clearly, this report unpacks the intricacies of party autonomy in contractual
choice of law for international agreements. It will delve into each relevant concept to provide
a comprehensive understanding of its significance in contracts, particularly those involving
cross-border transactions, and explore its impact on international business.

2. Key highlights

The report aims to examine how the Civil Code 2015 empowers Vietnamese
businesses to choose the governing law for their agreements, evaluate the effectiveness of the
current framework and assess how well it balances party autonomy with the need to protect
Vietnamese legal interests. Additionally, by analyzing judicial interpretations of party
autonomy in past cases, the report sheds light on how some limitations are applied in
practice.

3. Research methodology

This report utilizes various research approaches, including systematic analysis, a

combination of analytical and synthetic methods, and the integration of theory with practical
examples. To ensure the report's relevance in the current context, the Civil Code 2015 serves

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as the primary legal document referenced. It provides the essential legal foundation for this
analysis.

4. Report structure

In addition to the introduction, conclusion, and bibliography, the topic includes 4 main
sections:

Section I: Legal Framework Governing the Party Autonomy Principle in Contractual

Choice of Law in Vietnam

Section II: Statutory Restrictions on Party Autonomy in Vietnam

Section III: Judicial Practice on the Party Autonomy Principle in Contractual Choice
of Law

Section IV: Evaluation on the Party Autonomy in Contractual Choice of Law in

Vietnam

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 SECTION I: LEGAL FRAMEWORK GOVERNING THE PARTY
AUTONOMY PRINCIPLE IN CONTRACTUAL CHOICE OF LAW IN
VIETNAM

1. The outline

Vietnam's legal system for choosing the governing law in international contracts
strikes a balance between flexibility for businesses and upholding national interests. The Civil
Code of 2015 (Law No. 91/2015/QH13), stating that "the rights and obligations of the parties
to a contract shall be governed by the law chosen by the parties” (Vietnam Civil Code, 2015,
Article 882), empowers Vietnamese companies to select a familiar legal framework for their
agreements. This fosters predictability and simplifies cross-border transactions by allowing
businesses to navigate potential disputes with greater confidence.

However, this freedom has limitations to ensure compliance with Vietnamese law and
public order. Vietnamese public policy (ordre public) can override the chosen law if it
conflicts with fundamental legal principles. For instance, if a contract involves practices
deemed illegal in Vietnam, like unfair labor practices, Vietnamese law would prevail.
Additionally, mandatory legal rules (lex cogens), such as consumer protection or labor laws,
supersede any contractual agreement. Finally, Vietnamese courts may have exclusive
jurisdiction in certain cases, regardless of the chosen law. This applies to disputes concerning
real estate in Vietnam or intellectual property rights governed by Vietnamese law. These
limitations ensure Vietnamese legal interests are protected even when a different governing
law is chosen.

2. Regulations related to the Legal Framework on Party Autonomy in the

Vietnam Civil Code

“Article 664.

1. Parties to a civil transaction with foreign elements shall be entitled to select

the governing law for their transaction, unless otherwise provided by law.
2. In case where no governing law is selected or the selection of governing law is
invalid, the governing law shall be determined in accordance with this Code
and relevant laws."

(Vietnam's Civil Code, 2015, Article 664)

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 The principle of party autonomy, which allows parties to exercise considerable
freedom in adjusting their legal relationships, has been firmly established in Vietnamese law,
especially in the context of choosing the law according to the contract. The inclusion of the
principle of party autonomy in Article 664 - Vietnam's Civil Code formalizes the general
acceptance of this concept within the country's legal framework. This aligns Vietnam with the
broader global trend of jurisdictions recognizing party autonomy as a way to enhance the
predictability and enforceability of cross-border contracts. Vietnam's codification of this
principle signals its intent to facilitate efficient and flexible commercial transactions.
However, Article 664 also qualifies the right of party autonomy by stating it applies "unless
otherwise provided by law." This acknowledges that there may be situations where mandatory
legal requirements or public policy considerations necessitate the application of Vietnamese
law, even when a different governing law has been selected by the parties. The specific scope
of these limitations is further elaborated in other Vietnamese legislation, such as the 2015
Law on Foreign Civil Transactions.

According to Article 670, although the state owns all land, it grants land use rights to
organizations, households and individuals with significant autonomy in land management and
use. Article 666 deals with various ways of acquiring ownership of real property, reflecting
the autonomy of parties in forming legal relationships and transferring property rights. In
addition, Article 683 also regulates real estate leasing, in which the Code allows parties to
freely negotiate the terms of the lease contract.

“Article 16.

1. Parties to a foreign civil transaction shall be entitled to select the governing

law for their transaction, unless otherwise provided by law.
2. In case where no governing law is selected or the selection of governing law is
invalid, the governing law shall be determined in accordance with this Law
and relevant laws.”

(Vietnam's 2015 Law on Foreign Civil Transactions, Article 16)

The primary regulations on the principle of party autonomy are contained in

Vietnam's 2015 Law on Foreign Civil Transactions. Specifically, Article 16 of this law
reaffirms the right of parties engaged in civil transactions with a foreign element to select the
applicable governing law, except where the law provides otherwise. The law further specifies
two important limitations on this right. First, the chosen law must have a reasonable

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connection to the transaction itself. Second, the selected law cannot violate any mandatory
provisions of Vietnamese law. These requirements help ensure that the exercise of party
autonomy remains subject to certain safeguards and public policy considerations.

Further relevant regulations on party autonomy are found in Decree No. 07/2016/ND-
CP, which provides detailed implementation guidelines for the 2015 Law on Foreign Civil
Transactions. This decree reiterates the principle of party autonomy in selecting the governing
law, and clarifies that the selected law will govern key aspects of the contract such as its
validity, performance, and interpretation.

The principle of autonomy of the parties is also recognized in the Hague Convention
on the Protection of Cultural Property in the Event of Armed Conflict. Although the
main focus of the Convention is on the obligations of States, it recognizes the right of
property owners to exercise control over their cultural property. This is consistent with
Vietnam's Civil Code firmly establishing the principle of party autonomy, providing a
comprehensive approach to balancing state regulations and individual property rights.

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 SECTION II: STATUTORY RESTRICTIONS ON PARTY AUTONOMY
IN VIETNAM

1. Statutory Restrictions

Vietnam's legal framework recognizes party autonomy in international contracts,

allowing businesses to choose the legal system governing their agreements. However, this
freedom comes with limitations to ensure compliance with Vietnamese law and public policy.

The Civil Code (Article 664) and the 2015 Law on Foreign Civil Transactions (Article
16) both use similar language,stating that party autonomy applies "unless otherwise provided
by law." This means Vietnamese law can take precedence in specific situations. For example,
mandatory legal rules (lex cogens) like consumer protection laws or labor laws would always
supersede any chosen governing law. Additionally, Vietnamese public policy concerns (ordre
public) can override the chosen law if it contradicts fundamental legal principles.

Furthermore, the 2016 implementing decree clarifies that the chosen governing law
cannot violate mandatory rules under Vietnamese law. These statutory restrictions safeguard
Vietnamese legal interests and prevent party autonomy from undermining essential legal
principles or public order. They ensure that even when businesses choose a different
governing law, core Vietnamese legal principles are still upheld.

2. Specific limitations on the parties' ability to choose the governing law of

their contract & Examples

While party autonomy is recognized, there are limitations to safeguard Vietnamese

legal principles and public interests. Let's delve into circumstances where Vietnamese law
takes precedence over the chosen governing law:

 Public Policy (Ordre Public): A significant restriction on selecting the governing law
for contracts in Vietnam is the concept of public policy (ordre public). Under
Vietnamese law, if the chosen governing law contradicts fundamental legal principles
or important public interests in the country, it can be overridden in favor of applying
Vietnamese law instead. For example, imagine a contract that involves terms related to
unfair labor practices, which are strictly illegal under Vietnamese employment laws.
 Mandatory Rules: In addition to public policy concerns, Vietnamese law also
imposes strict limitations on party autonomy when it comes to certain mandatory legal
rules deemed essential by the government. These lex cogens provisions take
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 precedence over any contractual agreement, regardless of the governing law chosen by
the parties. For instance, Vietnam has robust consumer protection laws that are
considered mandatory and cannot be overridden through a contract. Even if the parties
selected a foreign governing law that permitted unfair or deceptive consumer
practices, Vietnamese courts would refuse to enforce those terms and would instead
apply the country's mandatory consumer protection regulations. Similarly, labor laws
establishing minimum wage, maximum work hours, and other worker protections are
viewed as mandatory rules that cannot be contracted around, no matter the chosen
governing law. Attempts to include provisions in a contract that violate these essential
labor standards would be unenforceable in Vietnam.
 Exclusive Jurisdiction: Another key limitation on applying a chosen governing law
to contracts in Vietnam is the concept of exclusive jurisdiction of Vietnamese courts
and law. Certain types of disputes will be considered to fall solely within the purview
of the Vietnamese legal system, regardless of the governing law selected by the
contracting parties. For example, any disputes related to real estate or immovable
property located within Vietnam would be subject to the exclusive jurisdiction of
Vietnamese courts and the mandatory application of Vietnamese law. This ensures
that the country's legal framework for protecting patents, trademarks, copyrights, and
other IP is consistently applied, without the possibility of circumvention through a
choice of foreign governing law.

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 SECTION III: JUDICIAL PRACTICE ON THE PARTY AUTONOMY
PRINCIPLE IN CONTRACTUAL CHOICE OF LAW

1. Examination on how Vietnamese courts have interpreted and applied

the principle of party autonomy in contractual choice of law.

Party autonomy empowers businesses to choose the legal system that governs their
contract, making it a fundamental principle in private international law. Vietnam has applied
this principle through the Foreign Investment Law and the Civil Code. However, how
Vietnamese courts implement this concept in practice is still a topic under discussion.

In general, Vietnamese courts respect the autonomy of the parties, applying selected
foreign law in many cases. This applies as long as the law chosen does not conflict with
Vietnam's core legal principles or the public interest. However, courts are also careful to
ensure that foreign laws do not erode Vietnam's basic legal foundations or mandatory
provisions.

This balanced approach reflects the court's efforts to harmonize the interests of the
contracting parties with Vietnam's broader legal framework.

2. Navigating Choice of Law: Party Autonomy in Vietnamese Courts

2.1. Key judicial decisions that have shaped the understanding and application
of this principle in Vietnam.

Examining how Vietnamese courts approach the issue of parties' autonomy in

choosing contractual law will likely reveal a nuanced and context-specific approach to justice.
On the one hand, courts tend to uphold the parties' choice of governing law for their contract.
Respect for the autonomy of parties reflects an understanding of its importance in facilitating
predictability and flexibility in international commercial transactions.

However, Vietnamese courts have also demonstrated a readiness to prioritize

Vietnam's core legal interests and economic priorities, even when it conflicts with the chosen
governing law. In certain circumstances, courts may decline to apply selected foreign law,
prioritizing the protection of domestic legal norms, consumer protection standards or national
economic concerns. rather than the contractual priorities of the parties.

This balanced judicial approach reflects an attempt to strike a delicate balance -

upholding party autonomy as a general principle, while ensuring the application of foreign
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law does not erode the principles and basic legal policies of Vietnam. The court's analysis
may consider factors such as the nature of the underlying contract, the identity and relative
bargaining power of the parties involved as well as the potential broader impact on the parties
involved in Vietnam.

2.2. Trends and notable case law

A notable case is the decision of the Supreme People's Court in 2018 (Case No.
09/2018/HDTP) related to a commercial dispute between a Vietnamese company and a
foreign legal entity. The Court upheld the contracting parties' choice of foreign law to govern
their agreement, emphasizing that the principle of party autonomy should be respected unless
the law chosen is contrary to Vietnamese public policy. This judgment underscores the court's
general deference to the parties' chosen governing law, while also acknowledging the inherent
limitations of this principle.

Similarly, in the 2020 case (Case No. 24/2020/DSND), the Hanoi People's Court
affirmed the validity of choosing a law provision that designates foreign law as applicable
with the condition that it does not conflict with the law. Mandatory principles of Vietnamese
law. . This decision further reinforces the court's commitment to balancing party autonomy
with the protection of legitimate domestic interests.

On the other hand, there are cases where Vietnamese courts apply a more strict
approach. For example, the decision of the People's Court of Ho Chi Minh City in the 2019
case (Case No. 12/2019/TM) refused to apply selected foreign law on the grounds of the need
to protect public policy and Vietnam's economic benefits. This shows that courts can
sometimes prioritize national interests over the parties' contractual priorities.

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 SECTION IV: EVALUATION ON THE PARTY AUTONOMY IN
CONTRACTUAL CHOICE OF LAW IN VIETNAM

1. Promoting the party's autonomy within Vietnam's legal framework

The principle of party autonomy, a cornerstone of international commercial law,

empowers contracting parties to choose the governing law of their agreements. Vietnam's
legal framework includes this principle, as stipulated in Article 664 of the 2015 Civil Code,
which stipulates that parties participating in civil transactions have "the parties to a civil
transaction shall have the right to select the applicable law." [1]. Vietnamese courts generally
support this principle and recognize its importance in promoting predictability and flexibility
for businesses involved in cross-border transactions.

However, the Vietnamese court's approach demonstrates a degree of caution. Courts

have demonstrated a willingness to limit the application of selected foreign laws when
necessary to protect basic domestic legal norms and economic interests. This balanced
approach reflects an attempt to achieve a delicate balance - respecting contractual freedoms
while maintaining the integrity of Vietnam's legal framework and protecting the interests of
local stakeholders.

2. Balancing party autonomy with domestic priorities

On the one hand, respecting party autonomy from a judicial perspective serves
important practical purposes. It empowers signatories to tailor the legal regime governing
their relationship based on their preferences and needs, improving efficiency and flexibility in
international trade. Additionally, supporting the parties' choice of law promotes predictability
and reliability in commercial transactions, which is important for attracting foreign
investment and facilitating economic development. economy of Vietnam.

On the other hand, occasional judicial intervention to limit the application of selected
foreign laws reflects legitimate concerns about ensuring fairness and equity, especially where
consumer interests are concerned workers or other domestic stakeholders are threatened.
According to the provisions of Article 12 of Vietnam's Law on Applicable Law for Civil
Relationships with Foreign Elements, the court may refuse to apply selected foreign law if
that law "seriously violates the fundamental principles of Vietnamese law." [2]. Unchecked
party autonomy could allow parties to circumvent important Vietnamese legal protections,

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weaken the country's sovereignty, and harm its ability to regulate activities within its borders.
within the borders of this country.

Ultimately, Vietnam's current legal framework appears to have achieved the right
balance, respecting the autonomy of parties as a general principle while also maintaining the
court's authority to overrule choice. choose the law of the parties in special cases to maintain
the greater public interest. This nuanced approach appears well suited to navigating the
complex interaction between contractual freedoms and domestic legal priorities in the context
of an emerging market economy such as Vietnam.

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 CONCLUSION

1. Summary
The analysis of parties' autonomy within Vietnam's legal framework on contractual
choice of law reveals a balanced and nuanced approach. Courts have generally upheld the
principle of party autonomy, minimizing its importance in facilitating predictability,
flexibility and efficiency in commercial transactions. international. This respect for
contractual freedoms is consistent with the general trend of international commercial law and
supports Vietnam's efforts to attract foreign investment and promote economic development.

Conversely, the Vietnamese judiciary has shown a willingness to limit the application
of foreign laws chosen by the parties in certain cases, especially when fundamental domestic
legal norms or interests are at stake. The interests of domestic stakeholders may be at risk of
serious violations. This intervention reflects a legitimate concern for maintaining the integrity
of Vietnam's legal framework and ensuring fairness and justice, rather than allowing
unchecked party autonomy. the ability to facilitate the circumvention of important national
safeguards. In conclusion, the current legal approach in Vietnam appears to have achieved a
reasonable balance, but further refinement and clarification of specific limitations and criteria
guide courts in applying this principle may be warranted as commercial and regulatory
practices continue to evolve.

2. Recommendation

Based on the analysis, a number of key recommendations are made: Provide greater
clarity and predictability on the specific grounds and circumstances under which Vietnamese
courts may refuse to apply the law domestically chosen by the parties from outside; engage in
periodic review and analysis of legislative trends to identify areas where the balance between
party autonomy and domestic priorities may need to be recalibrated; improve transparency
and consistency in the Court's decision-making process when adjudicating issues of choice of
law in contracts; and consider opportunities to further harmonize Vietnam's approach with
emerging international best practices in the area of party autonomy, while maintaining
flexibility to address issues emerging specific domestic issues. By carefully completing and
strengthening the legal framework governing the autonomy of parties in choosing contract
law, Vietnam can continue to promote a business environment that meets the needs of the
community, while protecting the country's basic economic and legal interests.

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 REFERENCES

National Assembly of Vietnam. (2015). Law No. 91/2015/QH13. Civil Code. (In
Vietnamese).
https://thuvienphapluat.vn/van-ban/Quyen-dan-su/Luat-Dan-su-2015-291170.aspx

Fidler, D. P. (2018). Party autonomy in contract conflicts. Oxford University Press.

Long, N. T. (2018). Party autonomy in Vietnam – the new choice of law rules for
international contracts in the civil code 2015. Journal of International Commercial
Law and Regulation, 27(3), 237–252.

Tyan, S. M. (2016). Vietnam's new law on the right of parties to choose applicable law in
civil relations involving foreign elements. ResearchGate.
https://www.researchgate.net/publication/375083311_University_Autonomy_Policy_I

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