Critical Changes to Vietnam Court Proceedings

With the promulgation of the 2015 Civil Proceedings Code, the 2015 Civil Code and many other important laws, Vietnam has recently gone through many developments in its litigation system.  In this legal insight, we would like to outline some critical developments as follows:

Consumer and employee protection

Consumer protection

Normally, to claim for damages, the plaintiff must prove 04 elements which are (i) there is a violation of the law; (ii) there is damage; (iii) there is a causal relationship between the violation and the damage and (iv) the defendant is at fault. For consumer, when filing a lawsuit, he/she will not be required to prove the (iv) element (i.e. only need to prove the first 03 element).  The business (i.e. the defendant in a consumer lawsuit) will be automatically deemed as having fault, unless they can prove otherwise.  This will make it significantly easier for a consumer to claim damages from a business. Furthermore, when receiving a lawsuit from the consumer, the court will publicly post the information of such lawsuit at the courthouse.  This may attract public attention and affect the reputation of the business as a result.

Employee protection

The protection for employee may be considered even stronger than for the consumer.  In the lawsuit regarding illegal termination of employment or illegal discipline, the burden of proof will fall on the employer (i.e. the defendant) instead of the employee (i.e. the plaintiff).  This means that the employee usually only needs to prove that there is a termination of employment or discipline, which is quite easy to do.  The employer, on the other hand, needs to prove that everything (from the ground for the termination/discipline to the taken procedures) are completely in compliance with the law, which is extremely difficult. Thus, before terminating the employment with or disciplining the employee, the employer should take sufficient preparation (e.g. duly preparing evidence to prove the legality of the action, consulting with a lawyer, etc.).  Otherwise, the possibility of losing in the later lawsuit filed by the employee is very high.

Limiting the time for the defendant to file the courter-claim

Previously, the defendant had the right to counter-claim until when the court issues a decision on opening the trial. Under the 2015 Civil Proceedings Code, the defendant only has the right to counter-claim until the opening of the reconciliation meeting.  This meeting is usually opened shortly after the court notifies the defendant of the lawsuit and the defendant submits the defending statement.  This means that the defendant should submit the counter-claim together or shortly after the defending statement; otherwise, it may face the risk of losing the right to counter-claim and have to file a separate law suit.  This may seriously affect the defendant because: Filing a separate lawsuit will significantly cost more time and expenses than filing a counter-claim; and Filing a separate lawsuit may be very risky for the defendant in the later judgment enforcement. For example, Company A files a lawsuit against Company B for the payment of US$400,000 under the construction contract between the parties.  Company B does not want to make such payment because the construction taken by Company A has many defects, which has cost Company B around US$380,000 to rectify.  The most suitable option for Company B would be filing a counter-claim of US$380,000 to offset against the claim of US$400,000 from Company A.  However, for some reasons, Company B fails to timely make the counter-claim and as a result, has to file a separate lawsuit.  The lawsuit filed by Company A results in favor of Company A and Company B pays US$400,000 accordingly.  Several months after that, the lawsuit filed by Company B also ends in favor of Company B; however, Company A cannot pay US$380,000 in accordance with the judgment because Company A has no money at that time (the US$400,000 received earlier from Company B has been used for paying debts).  Company B, despite being the winner in the judgment, loses money in practice because the judgment cannot be enforced. If Company B could file a counter-claim, Company B would have been able to offset its claim of US$380,000 against the US$400,000 claimed by Company A and as a result, would have paid Company A only US$20,000.

Limiting the time for submitting evidence

Previously, there was no time-limit for submitting evidence at the court and it was possible to submit new evidence at the trial. Under the 2015 Civil Proceedings Code, the judge now can apply a time-limit for submitting evidence.  Failing to comply with such time-limit may result in losing the right to submit evidence.  Since a lawsuit is basically a fight of evidence, losing the right to submit evidence could be equal to losing the lawsuit itself. Therefore, it is extremely important to work closely with the court during the litigation proceedings and timely submit the evidence where required.

Providing documents and evidence for other parties

Previously, during the court proceedings, all documents and evidence would be provided solely to the court and all parties had to work with the court to photocopy or take pictures of the documents and evidence.  This process was very time-consuming for both the court and the parties in the lawsuit. Therefore, with the changes under the 2015 Civil Proceedings Code, when a party submits documents, evidence to the court, that party shall also send copies of such documents, evidence to the other parties.  The court is no longer responsible for distributing copies of documents and evidence (except for the ones made or collected by the court itself).

Application of statute of limitations

Statute of limitations now can only be applied if requested by a party in the dispute.  This means that if the defendant does not raise any request for application of statute of limitations, the court will not dismiss the claim of the plaintiff under such ground. Therefore, in a lawsuit, the defendant needs to check carefully the statute of limitations of each claim filed by the plaintiff.  If there is any claim whose statute of limitations has expired, the defendant needs to raise the objection quickly; otherwise, the defendant may lose such right and as a result, may lose the lawsuit unnecessarily.

Application of precedents

The Supreme Court can now issue binding precedents.  This system is still under its early development and currently, there are only about 10 precedents. Nevertheless, the precedents will increase over time and become important grounds for the court to make the judgment.  As such, businesses should have their legal departments keep track of the precedents as they may be very useful in the future dispute.

Voiding contract due to violation of formality requirements

A contract violating the formality requirements under the law (e.g. not being notarized, certified by the authorities where required) can be void unless 2/3 of the obligations in such contract has been performed in practice. Thus, it is quite easy for a contract to become void due to violation of formality requirements.  Businesses in Vietnam should carefully check the relating formality requirements under the law before entering into any contract; otherwise, no matter how well-drafted the content of the contract is, it will be easily declared null and void by the court in case of dispute.

Should you have any questions regarding the commercial litigation or Vietnamese court proceedings, you may contact our chief commercial litigator, Mr. Stephen Le Hoang Chuong ( , who has over a decade of experience in commercial disputes.