In the business environment of Vietnam, understanding the regulations and legal consequences related to investment is crucial. The necessity of investment legal services is vividly highlighted in a prominent issue – the property dispute case between Mr. Kim Heung S and Company M in Vietnam. This case not only deepens our understanding of Vietnamese investment law but also showcases the importance of utilizing investment consulting services in Vietnam from law firms like Unilaw.
The Decision No. 21/2017/KDTM-GĐT dated July 14, 2017, by the Supreme People’s Court of Vietnam, concerning the property dispute between Mr. Kim Heung S and Company M, underscored the role of Investment consulting services in Vietnam in resolving complex disputes. This case involved a joint venture contract, a factory lease agreement between the parties, and ownership rights over a plot of land and a factory in Vietnam.
Context and Development of the Case
In early 1993, Company DK (South Korea) decided to invest in Vietnam in the garment export sector. Private Enterprise M (PE M) of Mr. Han Phuc S and Mrs. Duong Thi Mai K was chosen as the joint venture partner.
The Joint Venture and Factory Lease Contract: Company DK and PE M signed a joint venture and factory lease contract. Mr. Kim Heung S from Company DK transferred money to Mr. S and Mrs. K for purchasing land and constructing a factory.
Property Dispute: During the operation, disputes arose over the ownership rights of the land and the constructed factory. Mr. Kim demanded recognition of his ownership of the land and factory or equivalent compensation.
In the operation of the joint venture contract, disputes about land and factory ownership arose, highlighting the importance of utilizing Investment consulting services in Vietnam. Early engagement with professional legal services like Unilaw’s could have limited legal risks, particularly in clarifying the purpose and terms of joint venture contracts and factory leases. Such early legal support might have clarified the terms, especially regarding land and factory purchase rather than mere leasing, thereby minimizing conflict and dispute potential.
From First Instance to Review: The Litigation Journey
The litigation process: The case went through multiple trials at different court levels, from first instance to appeal, and finally to review. The decisions at each level varied in content and conclusions about the validity of the contracts and property ownership.
Verdict Outcome: The court decided to annul both previous verdicts and sent the case file back to the Ho Chi Minh City People’s Court for retrial according to first instance procedures, as per the law.
The Main Reasons for the Supreme Court’s Decision: In-Depth Analysis
Validity of the Joint Venture Contract: The court examined the validity of the joint venture contract between Company DK and PE M. During the litigation, there was debate over whether the contract was genuine or fictitious. In reality, PE M did not contribute capital or participate in managing the company’s activities. Thus, in essence, Company M was a foreign-invested enterprise with 100% foreign capital. The first-instance court rightly declared the joint venture contract invalid.
Factory Lease Contract: The court also reviewed the factory lease contract between Mr. Kim and PE M, involving disputes over the use of money transferred by Mr. Kim to PE M. Doubts about the Contract: Company DK had transferred a total of 431,952 USD for the factory lease within a year, inconsistent with the contract terms and contrary to Han Khai T’s testimony about paying the factory lease every five years. At the time of the contract signing, Mr. S and Mrs. K did not own the factory to lease, as they had only purchased a house at address 45 T on September 14, 2013, for 480 gold taels. If Company M could not prove that the money received from Company DK was for leasing the factory, it must be considered money for land purchase and construction, as the joint venture contract was fictitious, and there was no capital contribution for investment. The receipts and money transfer slips also mentioned “payment for land” and “construction costs.” The first-instance court declared the factory lease contract invalid. Thus, the court suspected that this was a land purchase contract, not a factory lease.
Land and Factory Ownership: Another crucial issue was determining the ownership rights over the plot of land and factory. The court needed to examine whether the money Mr. Kim transferred to PE M was used to purchase land and construct a factory as agreed.
Lessons for Foreign Investors
The court analyzed and interpreted the contract to ensure it accurately reflected the original intentions and purposes of the involved parties. In this case, the joint venture contract was established only for purchasing a factory and not for adhering to the stipulated terms. Especially in a joint venture contract where one party primarily provides finance and management, while the other party makes no actual contribution, the contract might be deemed imbalanced and hence fictitious. From this case, foreign investors can draw the following critical lessons:
Avoid Legal Evasion: Foreign investors should avoid seeking ways to circumvent the law or using unclear procedures to conduct business in another country. In this case, the use of joint venture and factory lease contracts could be seen as a means to circumvent legal constraints, with the intention of purchasing a factory.
Need for Investment consulting services in Vietnam from Law Firms like Unilaw: It is crucial for foreign investors to utilize Investment consulting services in Vietnam from law firms like Unilaw. Lawyers can help them understand the legal regulations in Vietnam and ensure that all transactions and contracts comply with the law, avoiding ambiguous terms that could lead to legal risks.
Transparency and Compliance with Local Laws: Ensuring that all business activities are conducted transparently and strictly comply with the country’s laws is essential. This not only avoids legal risks but also builds credibility and trust with partners and regulatory authorities.
Understanding Local Culture and Legal Environment: Investors also need to comprehend the business culture and legal environment of the country they invest in. This knowledge helps them avoid unnecessary mistakes and make informed investment decisions.
Conclusion:
The case between Mr. Kim Heung S and Company M clearly demonstrates the importance of utilizing Investment consulting services in Vietnam and the need to understand investment law in Vietnam. The lessons learned from this case will assist foreign investors in making informed and appropriate investment decisions according to the legal environment in Vietnam.
For further detailed information or professional legal consultation related to investment in Vietnam, please contact Unilaw at 0912266811 or send a request to legal@unilaw.vn. The team of lawyers at Unilaw is ready to assist and provide the most optimal legal solutions for the needs of investors.
Explore More Legal Topics
AGREEMENT OF JOINT VENTURE
DEFINITIVE CONTRACT
CONTRACT FOR THE TRANSFER OF FACTORY BUILDING AND THE LAND-USE-RIGHT
HOTEL MASTER MANAGEMENT AGREEMENT
REAL ESTATE IN VIETNAM: WHAT DO YOU REALLY OWN?
Joint Venture Company in Vietnam
AGREEMENT ON DISPUTE SETTLEMENT COURT IN VIETNAMESE LAW
Setting Up a Foreign Company in Vietnam: A Complete Guide
