In the context of globalization, the 1980 Vienna Convention (also known as the “CISG”) plays a crucial role in regulating international sales contracts (“ISC”) to minimize legal conflicts among member states. CISG not only brings uniformity to international commercial law but also helps businesses effectively leverage global trade advantages. However, the application of CISG in Vietnam requires enterprises to understand how to appropriately utilize this Convention in accordance with the Vietnamese legal system to effectively handle arising disputes.
In this article, BLawyers Vietnam presents 03 notes for resolving disputes about ISC under CISG and Vietnamese law.
1. Overview of CISG
As an international treaty drafted based on the provisions of the two Hague Conventions of 1964, CISG was established as a unified legal framework for sales transactions between countries worldwide.
Accordingly, CISG was initiated in 1968, adopted in Vienna (Austria) on 11 April 1980, and officially came into effect on 01 January 1988.
On 18 December 2015, Vietnam officially approved its accession to CISG, becoming the 84th member state of this Convention. CISG has been officially effective in Vietnam since 01 January 2017.
2. Considerations for applying CISG in resolving disputes about ISC
2.1. Applicability of CISG based on the business locations of parties in ISC
Pursuant to Article 1.1.a CISG, ISC between Vietnamese enterprises and their foreign partners are governed by CISG only if the parties have business locations in CISG member states.
Thus, ISC signed by Vietnamese enterprises will be governed by CISG if the other party has a business location in a member state of the Convention (the list of member states is presented in Appendix 2 CISG).
Note:
- In cases where a party has more than one business location, the business location is determined as the place most closely related to the contract’s conclusion and performance, considering circumstances known or contemplated by the parties at any time before or at the time of contract conclusion (Article 10.1 CISG).
- If a party does not have a business location, their habitual residence is considered (Article 10.2 CISG).
2.2. Applicability of CISG based on parties’ agreement in ISC
In addition to the cases mentioned in Item 2.1 above, CISG can be applied when the parties agree to apply this Convention, specifically:
- The parties have specific clauses stipulating the application of CISG in ISC; or
- At the time of contract conclusion and performance, the parties do not have an agreement to apply CISG in ISC. However, during dispute resolution, the parties agree to apply CISG and are accepted by the adjudicating panel or arbitration council.
For the case in Item 2.2.(ii), the trial panel or arbitration council tends to recognize the application of CISG based on the following legal grounds:
- Pursuant to Article 14.2 of the Law on Commercial Arbitration 2010, for disputes involving foreign elements, the arbitration council applies the law chosen by the parties; if the parties do not agree on the applicable law, the arbitration council decides to apply the law deemed most appropriate.
- Pursuant to Article 683.1 of the Civil Code 2015, parties in contractual relations may agree to choose the applicable law for the contract, except in the following cases:
- Contracts involving real estate are governed by the law of the country where the real estate is located for the transfer of ownership, other rights to the property, leasing, or use of real estate to secure obligations;
- The law chosen by the parties in labor contracts or consumer contracts affects the minimum rights of employees or consumers according to Vietnamese law; if so, then Vietnamese law is applied;
- The parties may agree to change the applicable law for the contract, but such change must not affect the rights and legitimate interests of third parties benefiting before the change, unless the third party agrees.
Based on the principle of freedom to choose the applicable law for contracts – a principle widely recognized in international jurisprudence of many countries – parties in contracts, regardless of their headquarters in member states, have the right to choose CISG. This right is not limited by the time of agreement, even when a dispute has arisen.
2.3. Applicability of CISG based on international jurisprudence
Pursuant to Article 1.1.b CISG, CISG applies to ISC between parties with business locations in different countries, and pursuant to international jurisprudence, the applicable law is the law of a CISG member state.
Thus, even if one or both parties in the contract do not have business locations in CISG member states, CISG still applies if the law governing the contract is the law of a CISG member state.
For example: A Vietnamese company (from a CISG member country) and an Indonesian company (not yet a CISG member) enter into an ISG, in which the parties agree that Vietnamese law shall govern the contract. In this case, since Vietnam is a member of the CISG, the CISG becomes part of Vietnam’s legal system. Therefore, the CISG will apply to the signed ISC between the two companies
It should be noted that if the chosen law is the law of a member state that has reserved Article 1.1.b, CISG will not apply. Specifically, according to Article 95 CISG, if a member state declares a reservation of Article 1.1.b, CISG will not apply to contracts signed between a party with a business location in that country and a party with a business location in a non-CISG member state.
For example: A Singaporean company (CISG member state) and an Indonesian company (not yet a CISG member state) sign an ISC, in which the parties agree that the applicable law governing the contract is Singapore law. In this case, although Singapore is a CISG member state, the Convention cannot be applied to govern the contract because Singapore has reserved Article 1.1.b of CISG.
The above is not official advice from BLawyers Vietnam. If you have any questions or suggestions about the above, please contact us at info@blawyersvn.com. BLawyers Vietnam would love to hear from you.
Date: 22 May 2025
Writer: Chi Huynh
