Legal And Policy Instrument In Supporting Enterprises Amidst Covid-19

July 04, 2021


Following Assoc. Professor Do Van Dai’s commentaries in series of commentaries by Vietnam International Arbitration Center (VIAC), in this interview, Lawyer Truong Trong Nghia - National Assembly Member, Partner of YKVN Law Firm and Arbitrator of Vietnam International Arbitration Center (VIAC) will elaborate on the pandemic’s impacts on Vietnamese enterprises from a legal perspective. We hope to offer useful advice and minimize the underlying risks of enterprises.

At present, the government uses legal instruments such as official correspondence, decisions, or orders to inform enterprises. As a Member of the Parliament, what is the effect of legal instruments on the current pandemic?

Fundamentally, there are two types of legal instruments:

  1. The Laws: Codes issued by the National Assembly, Decrees and Circulars of the Government, Ministries and Local Government's Circular, etc.
  2. Legal regulations: on business relations, civil transactions, commerce among other areas of trade and commerce.

They significantly influence the prevention of pandemic now. They are both a legal framework and important directions that each worker, enterprise or government agency has to comply with.

It is known that a contract clearly defines the rights and obligations of parties. However, presently, one of the parties may not be capable of fulfilling their obligations as agreed. So what are the consequences?

In addition to legal instruments, when there is a state of emergency such as a large-scale and critical pandemic, the State will immediately issue urgent decisions and directions, which affect civil relations, industrial relations, and trade. For example, in trade, merchants suffer from the prohibition/ restriction of transport, especially aviation, navigation, or border closing. The sale of goods contracts signed previously are suspended due to these bans. A similar pattern can be observed in civil transactions on tourism. Tourism activities are interrupted, delayed, or suspended indefinitely because of swift but necessary changes in regulations.

In addition to domestic legal instruments, other nations’ and international laws also greatly affect Vietnam.

A contract is an agreement between the parties. However, in the event of damage, the affected party will not waive the other party's liability. So are there any measures to ensure the balance of parties’ interests?

There are already rules governing this issue. Article 351 of the Civil Code of Vietnam states that where an obligor is not able to perform a civil obligation due to an event of force majeure, it shall not have civil liability. Three issues need to be proved: objectivity, unforeseeability, and irreparability. Force Majeure events will affect contract performance. In other words, it causes a breach of contract. In such cases, the enterprise can be considered to not have civil liability. This waiver is subject to the agreement of the parties. Besides, Article 294 of Vietnam's Commercial Law also mentions a waiver. 

However, in specific transactions, lawyers will help the parties negotiate. Where conflicts cannot be resolved by negotiation, the courts and commercial arbitration institute will take part in the negotiation,  resolve and issue a judgment/decision.

As an experienced lawyer and a Member of the National Assembly, what advice do you have for businesses to minimize possible risks in contract performance?

As a Counsel, an Arbitrator of the Vietnam International Arbitration Center, and also a Mediator of Vietnam Mediation Center (VMC), I have some precautions:

  • When signing contracts, businesses should ask experts to anticipate possible future situations. In the contract, there must be clear provisions on the responsibilities of the parties when a force majeure event occurs. This clause must be consistent with the laws of Vietnam or any third country that parties choose as the applicable law. Care should be taken to prevent invalidity.
  • In addition to the provision of force majeure, when signing the contract, the parties should also include other agreements. They can be applied in case of force majure and other situations so that one of the parties can be exempt.
  • Another important provision is the dispute settlement provision. When there is a dispute, the parties must choose a dispute resolution agency. Currently, the procedure of commercial arbitration, and especially international one, is becoming popular. It is more convenient in terms of time, method and location for the parties, during the time where international trade is developing alongside Vietnam’s integration.

Thank you Lawyer Truong Trong Nghia for your insightful sharing.

VIAC hopes that with this information, businesses will become more informed, take advantage of the laws to minimize possible risks during the current pandemic.

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