Settling Disputes Arising From International Transportation Contracts Without The Applicable Law Clause

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Settling Disputes Arising From International Transportation Contracts Without The Applicable Law Clause

The determination of the applicable law when resolving disputes concerning legal relations involving foreign elements is one of the important factors that help resolve disputes because such legal relations have arisen conflicts of laws that could make it difficult to resolve disputes. The determination of the applicable law when resolving disputes concerning legal relations involving foreign elements is one of the important factors that help resolve disputes because such legal relations have arisen conflicts of laws making it difficult to resolve disputes.

Accordingly, disputes arise in relation to a contract of international cargo transportation between Vietnamese legal entities (cargo delivered to buyer at a port in Hong Kong) while the involving parties to this contract are not having any agreement on applicable laws is an example that can be given to analyze the applicable law for resolving disputes involving foreign elements as follows:

1| Sources of laws governing commercial relations related to the contract of sea transportation for this case

  • The legal documents of Vietnam applied to regulate this legal relation:
    • Civil Code 2015 and its implementing documents;
    • Law on Customs 2014 and its implementing documents;
    • Law Commercial 2005 and its implementing documents;
    • Vietnam Maritime Code 2015 and its implementing documents;
    • Other relevant legal documents
  • International agreements related to international transportation activities:
    • Hauge Rules;
    • Hauge-Visby Rules;
    • Hamburg Rules;
    • Rotterdam Rules.

However, at present, Vietnam has not participated in any international agreements related to international transportation activities as mentioned above.

Besides, Article 665 of Civil Code 2015 provides:

“Article 665. Application of international treaty in terms of civil relations involving foreign elements

1.In case an international treaty to which the Socialist Republic of Vietnam is a signatory contains regulations on rights and obligations of contracting participants in the civil relations involving foreign elements, such international treaty shall prevail.

2. In case an international treaty to which the Socialist Republic of Vietnam is a signatory contains provisions different from those in this Code and other laws in terms of applied law on civil relations involving foreign elements, such international treaty shall prevail.           

Therefore, international agreements related to international transportation activities will not be prioritized to apply for governing the trade relation involving foreign elements as mentioned above.

2| The applicable law is determined in accordance with the Civil Code 2015

According to Article 664 of the Civil Code 2015, the applicable law to civil relations involving foreign elements is determined as follows:

 “Article 664. Determination of law applying to civil relations involving foreign elements

1.The international agreements to which the Socialist Republic of Vietnam is a signatory or Vietnamese law shall apply to civil relations involving foreign elements.

2.In case the international agreements to which the Socialist Republic of Vietnam is a signatory or a Vietnamese law stipulates that contracting parties have the right to select applied law, the law applied to civil relations involving foreign elements shall be determined according to the selection of the contracting parties.

3.If it fails to determine the applied law as prescribed in Clause 1 and Clause 2 of this Article, the applied law is the law of the country that closely associates with the civil relations involving foreign elements.

Therefore, in this case (i) the parties did not agree to choose the applicable law and (ii) Vietnam is not a signatory of international agreements related to transport/logistics activities, so according to Clause 3 Article 664 of the Civil Code 2015, the applicable law will be determined in accordance with the laws of the country with the most closely related relation to such commercial relation involving foreign elements.

According to the provisions at Point b Clause 2 Article 683 of the Civil Code2 015 below, the law of the country shall be treated as the law of the country with which such contract closely associates is the law of the country where the provider being juridical person is established:

“Article 683. Contracts

  1. Contracting parties in a contract may agree to select the applied law for the contract, other than regulations of Clauses 4, 5 and 6 of this Article. In case the contracting parties fail to agree the applied law, the law of the country with which such contract closely associates shall apply.
  2. The laws of any of the following countries shall be treated as the law of the country with which such contract closely associates:

…..

b) The law of the country where the provider being natural person resides or the provider being juridical person is established in terms of service contracts;

…..”

In this case, both the service provider and the service user are Vietnamese legal entities, so according to the Civil Code 2015, the applicable law is the laws of Vietnamese.

3| The applicable law is determined in accordance with the Vietnam Maritime Code 2015

For legal relations involving foreign elements having a conflict of law, the principles of applying the law under the Vietnam Maritime Code 2015 are prescribed as follows:

“Article 3. Rules of application of laws in case of conflict of laws

……

4. Any legal relation concerning a freight shipping contract shall be governed by the laws of the country to which freight is shipped as agreed upon in this contract.

In this case, according to the contract, the goods shall be shipped to a port in Hong Kong. Therefore, based on the provisions the Vietnam Maritime Code 2015 above, the applicable law is the laws of Hong Kong law.

The above sets out the grounds for determining the law that applies to these foreign civil law relations between the parties to an international freight contract. However, it can be seen that the applicable law is determined by the 2015 Civil Code and the applicable law defined by the Vietnam Maritime Code 2015 is different, namely:

  • According to the Civil Code 2015: the laws of Vietnam will be applied
  • According to the Vietnam Maritime Code 2015: the laws of Hong Kong will be applied

However, in Clause 1 Article 663 of the Civil Code 2015 is prescribed as follows:

 “Article 663. Scope

  1. This Part provides for applied law to civil relations involving foreign elements.

If any regulation of law providing for applied law to civil relations involving foreign elements complies with Article 664 through Article 671 of this Code, it shall prevail; if it does not comply with those Articles, Part Five of this Code shall prevail.

……”

In this case, the applicable law is determined in accordance with Clause 4, Article 3 of the Vietnam Maritime Code 2015, which is contrary to the applicable law defined in Clause 3, Article 664 of the Civil Code 2015, therefore the provisions of the Civil Code 2015 will be applied, it means the laws of Vietnamese will be applied in priority to resolve the dispute of international transportation contract above.

If you have any questions or require any additional information, please contact Apolat Legal – An International Law Firm in Viet Nam.

This article is for general information only and is not a substitute for legal advice.