In recent years, Vietnam has rapidly become one of the most attractive investment destinations in Southeast Asia, particularly in sectors such as real estate, infrastructure, and manufacturing. As businesses grow and expand, the likelihood of legal disputes also increases, making it crucial for international investors and businesses to understand the litigation process in Vietnam. This article aims to provide a comprehensive overview of litigation procedures in Vietnam, focusing on key steps, potential challenges, and best practices to navigate the legal landscape effectively.

Vietnam operates under a civil law system, a framework based on codified laws rather than judicial precedents. The Vietnamese legal system is structured around a number of legal documents, including the Constitution, the Civil Code, the Commercial Code, and other specialized laws governing areas such as labor, real estate, and environmental protection. The judiciary is independent, with the highest court being the Supreme People's Court of Vietnam.

Local courts handle civil and commercial disputes, while specialized courts such as the Economic Court deal with complex commercial cases. Courts at various levels are responsible for hearing and deciding cases, with the most common ones being:

The system encourages both litigation and alternative dispute resolution (ADR) mechanisms, with mediation and arbitration being strongly promoted in commercial disputes.

Litigation in Vietnam follows a structured process with several key stages. Understanding each stage helps ensure that international clients are prepared for what to expect.

2.1 Pre-Litigation Phase

Before initiating formal litigation, the first step is often to attempt to resolve the dispute through informal means:

Many disputes can be settled through direct negotiation between the parties involved. This is often the most cost-effective and efficient method, especially in commercial contracts where both parties have an interest in maintaining their relationship.

b. Mediation:

Mediation is actively encouraged by the Vietnamese court system. Courts often order mediation before proceeding to trial, as it can save time and reduce litigation costs. The mediation process typically involves the parties discussing the issues with a neutral third-party mediator. While mediation results are not legally binding unless an agreement is reached, it often leads to a settlement.

If these methods fail, the next step is to file a lawsuit in the appropriate court.

2.2 Filing the Lawsuit

a. Jurisdiction and Venue:

It is important to determine which court has jurisdiction over the dispute. In most civil cases, the court of the defendant’s residence or place of business has jurisdiction. In commercial cases, the Economic Court may be the appropriate venue if the dispute involves business transactions.

b. Filing the Claim:

2.3 Pre-Trial Procedures

Once the court accepts the claim, several steps take place before the trial begins:

a. Acceptance of the Case:

The court will review the lawsuit and determine whether it complies with the procedural requirements. If it is accepted, the court will notify the defendant and schedule a date for the trial.

b. Exchange of Documents:

The parties may be required to exchange evidence, such as contracts, invoices, witness statements, and other relevant documents. This process ensures both sides have the necessary information to present their case.

c. Preparation for Trial:

The court may request further clarification from the parties on certain issues or ask for additional documents. Pre-trial hearings may also be held to narrow down the issues and assess the possibility of a settlement.

2.4 Trial Process

The trial is the core of the litigation process. It typically follows this structure:

a. Presentation of Evidence:

Both parties present their evidence, which may include oral arguments, written documents, expert opinions, and witness testimony. The plaintiff typically presents first, followed by the defendant’s response.

b. Examination of Witnesses:

The court may examine witnesses presented by both parties. Witness testimony plays a crucial role in shaping the outcome of the case.

c. Judicial Findings:

After hearing from both parties, the judge evaluates the facts and applies the law to make a ruling. The judge may request additional evidence or adjourn the hearing for further clarification.

2.5 Post-Trial and Appeals

After the trial, the court issues a judgment. However, this is not always the final decision.

a. Judgment Issuance:

Once all evidence is presented and the arguments are made, the court will issue a judgment, which may include an order for damages, an injunction, or any other remedy deemed appropriate.

b. Appeals Process:

If a party disagrees with the judgment, they can file an appeal with a higher court. The appellate process can take several months. The Supreme People’s Court may hear appeals on specific cases, especially those with broader implications.

c. Enforcement of Judgment:

Once a final judgment is rendered, the winning party can request the court’s assistance in enforcing the judgment. This involves taking action to ensure the losing party complies with the court’s decision, whether that be through financial compensation, property transfer, or other measures.

There are several important considerations for international clients navigating the litigation process in Vietnam:

a. Language and Translation:

All court proceedings are conducted in Vietnamese. Therefore, it is crucial for foreign clients to ensure that all legal documents are translated into Vietnamese, and they may need the assistance of an interpreter during hearings.

b. Court Costs and Fees:

Court fees in Vietnam are relatively affordable compared to other jurisdictions. However, they are based on the value of the dispute. Therefore, clients should be aware of these costs in advance to better manage their budgets.

c. Duration of Proceedings:

The timeline for litigation can vary depending on the complexity of the case, the court’s schedule, and the cooperation of the parties. Civil cases typically take several months, while more complicated commercial disputes can take a year or more.

While litigation is a formal and structured way to resolve disputes, Alternative Dispute Resolution (ADR), including arbitration and mediation, is gaining popularity in Vietnam. ADR mechanisms offer several advantages, including:

a. Arbitration:

Arbitration is widely recognized in Vietnam, and the country is a signatory to several international arbitration conventions, such as the New York Convention. Many international businesses prefer arbitration for its confidentiality, efficiency, and expertise in handling commercial disputes. Arbitration decisions are enforceable in Vietnam and internationally.

b. Mediation:

Mediation has become increasingly popular in Vietnam’s legal culture, especially in commercial disputes. Courts encourage mediation at various stages of litigation, and the Vietnamese government has been active in developing frameworks to promote mediation as an effective dispute resolution method.

Vietnam’s legal system has undergone significant changes in recent years, which could impact the litigation process:

5.1. Land Law Reform and Its Impact on Litigation

Land-related disputes remain one of the most prevalent types of legal issues in Vietnam, particularly in real estate and infrastructure projects. Recent changes to the Land Law have created new opportunities and challenges for investors, property developers, and businesses, with significant implications for litigation.

a. Changes in Land Use Rights

The revised Land Law introduces clearer provisions regarding land use rights, including better regulations for land transfers, leasing, and use. This has helped make land transactions more transparent and efficient, reducing the ambiguity often associated with land-related disputes.

b. Impact on Land Disputes

Despite these reforms, land disputes remain common, especially in cases involving land expropriation by the government or land-use rights conflicts between investors and local communities. Legal battles over land acquisitions, zoning decisions, and land compensation remain significant contributors to the overall litigation volume in Vietnam.

Impact on Litigation:

The improved clarity in land use laws reduces some sources of litigation, yet disputes involving land ownership, compensation, and government land use decisions continue to create complex legal challenges. The legal framework now requires more nuanced legal counsel to navigate these disputes effectively.

5.2. Court System Reforms and the Evolution of Dispute Resolution

Vietnam's court system has been undergoing a comprehensive reform to streamline judicial processes, improve the efficiency of dispute resolution, and align with global legal standards. These changes have made the litigation process faster and more transparent, but also introduced new dynamics that require skilled legal strategies.

a. Commercial Court System

The establishment and strengthening of Commercial Courts aim to expedite the resolution of commercial and business-related disputes. These specialized courts are designed to handle complex cases involving corporations, contracts, and business transactions, facilitating more efficient dispute resolution in the business sector.

b. Rise of Arbitration

The Vietnamese government has increasingly promoted arbitration as an alternative dispute resolution mechanism. With a growing number of Arbitration Centers and international arbitration bodies gaining recognition, businesses are increasingly opting for arbitration to resolve complex commercial disputes outside of the public court system. This shift not only alleviates the burden on the national court system but also provides a faster, more flexible approach to litigation.

Impact on Litigation:

The creation of specialized courts and the increasing use of arbitration have transformed litigation in Vietnam. These changes enable businesses to resolve disputes more efficiently, with better protection for commercial interests. However, navigating the intersection of national and international arbitration practices requires expertise in both domestic law and global standards—expertise that firms like La Défense can provide.

5.3. Enforcement of Court Decisions and Challenges in Enforcement

One of the persistent challenges in Vietnam's litigation system has been the enforcement of court decisions. Although court judgments are increasingly seen as legitimate and binding, the enforcement process has often been slow and cumbersome, especially in complex commercial disputes.

a. Reforms in Enforcement Procedures

The government has introduced various reforms aimed at improving the enforcement of judgments, including more streamlined procedures and the integration of technology to monitor enforcement activities. This ensures that court decisions are executed more swiftly and transparently, benefiting both local and foreign businesses involved in disputes.

b. Technology and Enforcement

The adoption of technology in court systems has helped enhance enforcement processes. Online platforms for tracking cases and managing legal procedures are being implemented to ensure greater transparency and efficiency.

Impact on Litigation:

While these changes have improved the speed and transparency of enforcing judgments, challenges remain—particularly when enforcement involves significant assets or cross-border issues. A well-established local partner, like La Défense, is invaluable for navigating enforcement challenges, ensuring that judgments are executed efficiently.

5.4. Labor Law Reforms and Their Impact on Employment Disputes

The recent revisions to the Labor Code and other employment laws in Vietnam have led to a rise in disputes between employers and employees. These reforms, aimed at strengthening worker rights and ensuring more equitable workplace practices, have changed the landscape of employment-related litigation.

a. Key Changes in Labor Law

The new Labor Code includes updated provisions on employment contracts, severance pay, social insurance, and labor conditions. These changes reflect a stronger emphasis on protecting workers' rights while ensuring compliance with international labor standards.

b. Employment Disputes

As workers gain more legal protections, disputes regarding wrongful termination, compensation claims, and other employment matters have become more frequent. In addition, companies are facing greater scrutiny and potential litigation for non-compliance with these new standards.

Impact on Litigation:

With the increased protection for workers, employment-related disputes are expected to grow, necessitating robust legal strategies to mitigate the risk of litigation. Businesses need to adapt to the new legal framework to prevent costly legal battles and maintain good employer-employee relations.

5.5. Recent Changes in the Corporate and Investment Laws

Vietnam's Investment Law and Enterprise Law have undergone revisions to simplify procedures and attract foreign direct investment. These changes aim to foster a more conducive environment for international businesses while ensuring compliance with local legal requirements.

a. Changes to Investment and Business Regulations

The revised Investment Law and Enterprise Law streamline the process for establishing and operating businesses in Vietnam, reducing bureaucratic hurdles and creating a more transparent business environment. These reforms are designed to make the Vietnamese market more attractive to foreign investors, thereby increasing investment activity.

b. Corporate Disputes

As a result, the volume of corporate disputes is also rising, particularly in joint ventures and business partnerships, where conflicts may arise over governance, profit-sharing, or business strategies.

Impact on Litigation:

With the increase in business activities, corporate disputes, especially those related to governance and shareholder rights, are expected to increase. Businesses must ensure they have clear contracts and dispute resolution mechanisms in place to protect their interests.

The litigation process in Vietnam is structured and offers clear procedures for dispute resolution. However, international clients must be prepared for potential complexities, especially regarding language barriers, court procedures, and the enforcement of judgments.