Contract disputes with foreign enterprises at alarming rate

Due to carelessness in selecting investors, many investors have come to Vietnam to cooperate and use the services of domestic enterprises, then welshed on their debts. Currently, the courts and arbitration centers in the country have received lots of debt collection lawsuits against some international investors and corporations.

Contracts and petitions for debt collection at court. (Photo: SGGP)

Contracts and petitions for debt collection at court. (Photo: SGGP)

For instance, Thailand’s Banpu Power Public Company Limited, which said in the self-introduction on its website that it is an international corporation with a widespread subsidiary network, investing in energy in many countries, is currently facing a debt collection lawsuit. Specifically, from 2017, Banpu Power Public signed a consulting contract with Indochine Investment Consultant and Trading Promotion Joint Stock Company to seek opportunities for renewable energy investment in Vietnam. After completing the procedures and determining the investment location, Banpu Power Public Company Limited financed the establishment of a company in Vietnam, named BPP Vinh Chau Wind Power Company Limited (Vinh Chau Company for short).

After that, Vietnam Investment Company signed directly with Vinh Chau Company investment consulting contracts in wind power in Soc Trang Province. The last contract had an execution time from June 2019 to the end of 2019. However, after that, Vinh Chau Company did not pay the consulting firm, although Vietnam Investment had sent requests for payment several times. After the contract expired in March this year, Vinh Chau Company sent a written document to Vietnam Investment, requesting to terminate the contract to avoid the payment when the contract was done. For having not claimed its money, Vietnam Investment filed a lawsuit against Vinh Chau Company to the court of Vinh Chau District in Soc Trang Province.

Another example is that Indochine Investment Consultant and Trading Promotion Joint Stock Company signed a consulting contract with BRE Singapore Private Limited Company. Although the execution time of the contract was over, BRE Singapore still did not pay, so the former took the latter to the Ho Chi Minh City court, asking for the payment of the consultation fee of more than US$64,000.

The arbitration center in Ho Chi Minh City has also received many debt collection lawsuits against foreign corporations and enterprises that used the services but did not make payment. Particularly, IDC Company requires Banpu Power Public to pay more than $60,000 for the consulting contract No. BPP AGT 1811-0165 signed on January 1, 2019; IDC requests Power Vietnam to pay $130,000 for the consulting contract No. BPP-AGT 1908-0159 signed on September 3, 2019; VNI Company asks the arbitrator to force Power Vietnam Company to pay more than $272,000 for the consulting contract No. BPP-AGT 1908-0153.

How to minimize risks?

When there is a contract dispute, it is not easy to make a court claim for money. Like the case of Vietnam Investment Company suing Vinh Chau Company, which is invested by Banpu Power Public Limited, to court, the court announced the first time that the defendant did not have a head office. The plaintiff is worried that if that enterprise flees away, there will be no chance for it to collect the debt. This is not a special case because the specific characteristics of investment consulting activities are usually at the time when foreign investors set foot in Vietnam, looking for investment opportunities, so they have not had a head office and have not poured investment capital. As a result, there are no physical assets to enforce the judgment if the plaintiff wins the case.

Lawyer Mai Cong Minh of the Ho Chi Minh City Bar Association said that for runaway enterprises that no longer operate at the registered offices, it is extremely difficult to find and identify them. Many petitioners have had to give up their lawsuits because they do not have time to track down where the defendants operate to provide the court. If the defendant is a foreign investor who has returned to its home country, it is almost impossible for the petitioner to sue or ask the court to summon the defendant, so the petitioner will suffer a dead loss. Currently, most of the consulting contract disputes are in the fields of energy, electricity, and capital contribution – the industries that many people almost trust unconditionally because of the high investment value so they did not draw up contracts tightly.

To limit disputes, besides fully binding contractual terms, the most important thing for the overseas partner is to make deposits or have the guarantee from banks to secure the payment of the contract. This regulation may increase costs, so to compete, the consultant may bear this fee for the bank, in return, the payment for the entire contract is guaranteed, and risks are minimized. The second problem is that no matter how much the values of the contracts, they must be conducted according to the law. Thirdly, regarding the terms of dispute resolution, enterprises should choose Vietnam laws as the applicable law, which Vietnamese enterprises understand clearly. When negotiating a place to settle a dispute, they should choose a domestic arbitrator as the settlement place to have a fast and compact procedure.

'Some investment activities are not clear. They carry out many other activities in the name of investors. For example, there are cases in which investors transfer millions of US dollars into Vietnam via personal accounts in the name of charity, but whether the money is used for charitable purposes, it is still being investigated. There are cases of transferring charity money from abroad into Vietnam via personal accounts, and then they go to the country to take it back. Therefore, on one hand, the State should strictly control investment activities and money transfers of foreign investors to prevent money laundering that affects monetary security. At the same time, it should strictly eliminate investors who do not respect the laws of Vietnam,' said Associate Professor - Dr. Duong Anh Son, Dean of the Faculty of Economic Law of the University of Economics and Law.

By Han Ni – Translated by Thuy Doan

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