I often receive the same and popular question from many of my clients whether they can write contract value in Vietnamese Dong, which is converted from USD in their contracts? One of the reasons, among others, why many Vietnamese people want to write the contract value in USD or in Vietnamese Dong, which is converted from USD in their contracts, is because of the exchange rate fluctuations between VND and USD, where the VND is often seen to suffer from price escalation.

It is very simple to answer this kind of question as it is clearly stated under the applicable regulations of Vietnam. Specifically, pursuant to Ordinance No. 06/2013/UBTVQH13, within the territory of Vietnam, all transactions, payments, listings, advertisements, quotation, pricing, writing price on contracts, agreements and other similar forms of residents and non- residents must not be effected in foreign exchange except for cases permitted in accordance with regulation of the State bank of Vietnam. This regulation is further detailed by Circular No. 32 / 2013 / TT-NHNN which provides that in Vietnam’s territory, except for the cases allowed to use foreign specified in Article 4 of this Circular, all transactions, payments, listing, advertisements, quotations, pricing, prices in contracts, agreements other similar forms (including conversion or adjustment of prices of goods and services, the value of contracts and agreements) of residents and non-residents are NOT allowed to be conducted in foreign currency.

Thus, it can be seen that the contract valued in Vietnamese Dong, which is converted from USD is NOT allowed under the applicable regulations of Vietnam. However, another question is that whether such kind of contract is invalid under the laws of Vietnam?

The Civil Code 2015 of Vietnam stipulates that civil transactions with objectives and contents which breach prohibitions of the laws of Vietnam or which contravene social ethics shall be invalid. Meanwhile, pursuant to the Law on Promulgation of Legislative Documents, the Ordinance No. 06/2013/UBTVQH13 and the Circular No. 32 / 2013 / TT-NHNN are NOT laws. Consequently, the contract valued in Vietnamse Dong, which is converted from USD violates the regulations on the foreign exchange, but these violated regulations are NOT the laws. As such, it can be affirmed that that contract may not possibly be considered invalid.

In fact, there are a number of ways to resolve the above subject matters, depending on the nature of the transaction, expectations of the parties to the contract… which can be possibly shared in the next topic.

For your information, in Vietnam, laws are legal documents which are promulgated by National Assembly of Vietnam (Constitutionally, the National Assembly of Vietnam is the highest government organization and the highest-level representative body of the people. It has the power to draw up, adopt, and amend the constitution and to make and amend the laws. It also has the responsibility to legislate and implement state plans and budgets), meanwhile, the Ordinance No. 06/2013/UBTVQH13 and the Circular No. 32 / 2013 / TT-NHNN as mentioned in this topic are regulations which are NOT promulgated by the National Assembly of Vietnam.

By: Richard Luu