Corporate litigation is an unavoidable challenge for businesses operating in Vietnam. Whether it’s a contractual dispute, a disagreement between shareholders, or a regulatory issue, these conflicts can disrupt business operations and lead to significant financial loss. Vietnam’s evolving legal landscape and increasing international trade complexity mean that companies must be well-prepared to address legal disputes efficiently and strategically.

This article provides a comprehensive guide to managing corporate litigation in Vietnam, outlining common types of disputes, proactive steps to minimize litigation risk, and key legal remedies available to protect your company.

What is Corporate Litigation?

Corporate litigation refers to any legal action involving a business dispute that may be resolved through the court system. It encompasses a wide range of cases, from breaches of contract to disputes over intellectual property rights. In Vietnam, litigation can be particularly complex due to varying regulatory requirements, business customs, and international trade laws.

Common Types of Corporate Disputes in Vietnam

• Contractual Disputes: Breach of contract remains one of the most common triggers of corporate litigation in Vietnam. These breaches can arise from non-performance, delayed delivery, or disagreements over payment terms. You can read more about breach of contract here.
• Shareholder Disputes: Conflict between shareholders often arises when there’s a lack of clarity in shareholder agreements or when one party feels their rights are being infringed. Minority shareholder protection is a growing concern in Vietnamese corporate law.
• Intellectual Property (IP) Disputes: As Vietnam integrates deeper into global markets, IP protection is critical. Disputes over patents, trademarks, or trade secrets can hinder business operations if not handled properly.
• Employment and Labor Disputes: Conflicts related to employee rights, wrongful dismissal, or wage disputes frequently escalate into litigation. Businesses must ensure that they comply with Vietnam’s labor laws to avoid costly litigation. Explore allowable methods of employment termination for a better understanding of compliance.

How Can Businesses Mitigate Litigation Risks?

While some disputes are inevitable, businesses can take several proactive steps to mitigate litigation risks. These measures not only reduce the likelihood of disputes but also help companies prepare a strong defense should litigation arise.

Drafting Clear and Comprehensive Contracts

Contracts are the foundation of any business transaction. A well-drafted contract must clearly define each party’s obligations, expectations, and remedies in case of non-performance. In Vietnam, contracts should also account for local regulatory requirements, especially in areas like employment law, real estate, and trade. Ensuring that all terms are legally enforceable under Vietnamese law is essential.

Key Tip: Include dispute resolution clauses in contracts. These should outline whether disputes will be resolved through litigation, arbitration, or mediation.

Regular Compliance Audits and Legal Reviews

Regular internal audits help ensure that your business complies with both Vietnamese and international legal standards. In sectors such as finance, manufacturing, and technology, regulatory frameworks change frequently. Conducting periodic legal reviews, particularly in areas like tax compliance, labor laws, and environmental regulations, can prevent potential disputes before they arise.

Implementing Strong Corporate Governance

Corporate governance plays a crucial role in preventing shareholder and director disputes. By establishing clear rules about decision-making processes, profit distribution, and shareholder rights, companies can avoid many common corporate litigation issues. Regular communication and transparency between the board and shareholders also mitigate risks.

Legal Remedies for Corporate Litigation in Vietnam

When disputes cannot be resolved internally, companies must pursue legal remedies. Vietnamese law provides several avenues for dispute resolution, depending on the nature of the conflict.

Mediation and Arbitration

Before resorting to litigation, businesses in Vietnam are often encouraged to pursue alternative dispute resolution (ADR) methods such as mediation and arbitration. ADR is less adversarial and more cost-effective than going to court. Arbitration is a popular option, particularly for foreign companies, as it allows disputes to be resolved by neutral third parties.

For example, the Vietnam International Arbitration Centre (VIAC) is a preferred venue for handling complex business disputes. Arbitration allows parties to resolve conflicts without the lengthy delays often associated with court proceedings. In addition, mediation is a more collaborative approach where a neutral mediator helps the parties reach a mutually agreeable solution.

Litigation in Vietnamese Courts

If ADR methods fail or are not appropriate, corporate disputes may be resolved in court. The litigation process in Vietnam involves a structured legal framework, beginning with filing a lawsuit, followed by pre-trial motions, court hearings, and finally, the verdict. Litigation can be a lengthy and expensive process, making it essential to engage experienced corporate lawyers familiar with Vietnam’s legal system.

Case Study: Resolving a Shareholder Dispute in Vietnam

A Vietnamese technology firm, “TechCo,” was recently involved in a significant shareholder dispute. The conflict arose when minority shareholders felt excluded from important company decisions regarding a merger with a foreign investor. The shareholders claimed that the majority shareholder, who also served as the CEO, breached fiduciary duties by failing to disclose material information about the merger.

Legal Approach: LeTran Law was engaged to represent the minority shareholders. We immediately initiated a thorough review of the company’s corporate governance policies and the shareholder agreement. It was found that the CEO had indeed violated specific provisions regarding shareholder voting rights and transparency.

Dispute Resolution Strategy: Rather than proceeding directly to court, we recommended arbitration through the Vietnam International Arbitration Centre (VIAC). This approach allowed the dispute to be resolved faster and with less public exposure than a court trial would have.

After several arbitration sessions, the arbitrator ruled in favor of the minority shareholders. The merger was delayed until proper shareholder consultation occurred, and the CEO was instructed to pay damages for breaching fiduciary duties.

Outcome: The arbitration led to a more favorable merger agreement for all shareholders, ensuring that the interests of minority shareholders were safeguarded while avoiding a costly and prolonged court battle.

The Role of Legal Experts in Corporate Litigation

Navigating corporate litigation in Vietnam requires a deep understanding of local laws, business practices, and international regulations. Working with experienced legal professionals ensures that your business is well-equipped to handle disputes effectively, whether through litigation, arbitration, or mediation.

At Le & Tran, we specialize in complex corporate litigation cases, offering expert legal services to businesses across multiple sectors, including technology, finance, and real estate. Our team’s extensive experience allows us to provide tailored legal strategies that align with your business goals. Contact us today for a consultation and get the legal support you need to resolve complex business disputes efficiently.