EPC Construction Contracts: FIDIC and Vietnamese Law

A power plant, an industrial park or a petrochemical complex worth hundreds of millions of dollars usually has a single point of responsibility from drawings to handover: the EPC contractor. For foreign investors, the EPC contract on FIDIC forms is the construction industry's common language — but once the project lands in Vietnam, that contract must live with Vietnamese law, which since 1 July 2026 has been an entirely new framework: the Construction Law 135/2025/QH15 and Decree 210/2026/ND-CP. This guide compares FIDIC against Vietnamese law in detail, flags the real points of conflict, and shows how to handle them — so owners and EPC contractors do not pay for the learning curve through disputes.

Contents

• 1. What is an EPC contract? Who should care?
• 2. The current legal framework for EPC contracts
• 3. Which FIDIC forms cover EPC?
• 4. FIDIC vs Vietnamese law: 8 key comparison points
• 5. Costs, timelines and key thresholds
• 6. Common risks and mistakes
• 7. Condensed pre-signature checklist
• 8. Frequently asked questions (FAQ)
• 9. When to work with a lawyer

1. What is an EPC contract? Who should care? {#1-what-is-an-epc-contract-who-should-care}

EPC stands for Engineering – Procurement – Construction: under a single contract, the contractor takes on all three work packages — detailed design, procurement of materials and process equipment, and construction — then hands over a complete, operable facility ("turnkey"). Unlike the traditional Design – Bid – Build route, EPC concentrates all responsibility in one counterparty: the owner manages one contract, one schedule, one price.

Vietnamese law recognises EPC as a standalone construction contract type. Decree 210/2026/ND-CP (effective 1 July 2026) classifies construction contracts by nature and content into: consulting contracts, construction contracts, materials-and-equipment supply contracts, EP, EC and PC contracts, EPC contracts, turnkey contracts and others (Article 8). An EPC contract is one under which the contractor performs all design, materials-and-equipment supply and construction works.

Who should care?

• Foreign investors (FDI) building factories, logistics warehouses, data centres or energy projects in Vietnam through a single general contractor.
• Domestic and foreign EPC contractors — especially foreign contractors entering Vietnam for the first time.
• Banks and financial institutions financing projects, because the EPC structure directly affects bankability and risk allocation.
• Project management teams and supervision consultants who need to understand where responsibility sits in an EPC model.

Scope note: this guide focuses on private and FDI-funded EPC contracts. Public investment and PPP projects carry additional mandatory constraints (penalty caps, performance security, preference for domestic arbitration) — flagged separately at each point.

2. The current legal framework for EPC contracts {#2-the-current-legal-framework-for-epc-contracts}

Since 1 July 2026, the legal framework for construction contracts in Vietnam has changed fundamentally. Anyone still citing the 2014 Construction Law and Decree 37/2015/ND-CP as current law needs to update.

Construction Law No. 135/2025/QH15 (passed 10 December 2025, effective 1 July 2026) replaces the 2014 Construction Law in full. Chapter V (Articles 73–87) governs construction investment costs and construction contracts. The articles directly governing EPC contracts:

• Article 80 — definition of construction contracts, principles of conclusion, language rules;
• Article 81 — validity and legal effect of construction contracts;
• Article 82 — classification and content of construction contracts;
• Article 83 — security for performance of contractual obligations;
• Article 84 — amendment of construction contracts;
• Article 85 — suspension and termination of construction contracts;
• Article 86 — contractual bonuses, penalties, damages and dispute resolution;
• Article 87 — payment, finalisation and close-out of construction contracts.

A notable innovation of the 2025 Law: for the first time, it codifies force majeure (6 cases: natural disasters and environmental catastrophes; fire and epidemics; national security, public order and national defence emergencies; strikes, lockouts, embargoes and blockades; discovery of antiquities and archaeology; other cases under relevant laws) and fundamental change of circumstances (3 cases: changes in State policies or laws; unforeseeable abnormal geological conditions; other cases under relevant laws), linked to Articles 156 and 420 of the 2015 Civil Code. This directly affects how risk clauses are drafted in EPC contracts.

Decree 210/2026/ND-CP (issued 15 June 2026, effective 1 July 2026) details construction contracts, replacing Decrees 37/2015/ND-CP and 50/2021/ND-CP. It details Article 82 (classification and content), Article 83(4) (performance security for public investment and PPP projects), Article 84(4) (contract amendment), Article 85 (suspension and termination) and Article 87 (payment, finalisation and close-out). Contracts concluded and being performed before the Decree took effect continue under the old rules; contracts still under negotiation may apply the new rules by agreement.

Decision 1040/QD-BXD (26 June 2026, effective 1 July 2026) publishes seven model construction contracts, with Appendix VII as the EPC model — the Ministry of Construction's newest official reference form, replacing earlier circular-based models.

Related instruments: Decree 217/2026/ND-CP (construction activity management), Decree 206/2026/ND-CP (construction investment cost management), Decree 207/2026/ND-CP (quality, construction and maintenance management), the 2015 Civil Code and the 2010 Law on Commercial Arbitration.

3. Which FIDIC forms cover EPC? {#3-which-fidic-forms-cover-epc}

FIDIC (Fédération Internationale des Ingénieurs-Conseils — the International Federation of Consulting Engineers) publishes the world's most widely used standard construction contract forms. Three forms of the Rainbow Suite, second editions 2017, are directly relevant to design-and-build projects:

• Red Book — Conditions of Contract for Construction: the employer provides the design; the contractor builds to it; payment by measured quantities; an independent Engineer administers the contract.
• Yellow Book — Conditions of Contract for Plant and Design-Build: the contractor designs and builds to the Employer's Requirements; lump-sum price; independent Engineer; the contractor gets relief for unforeseeable physical conditions (Clause 4.12).
• Silver Book — Conditions of Contract for EPC/Turnkey Projects: this is the true EPC form. The contractor takes full responsibility for design, procurement, construction and handover of a complete facility; lump-sum price; no independent Engineer (only the Employer's Representative); the contractor bears almost all risk, including unforeseeable ground conditions (Silver Book Clause 4.12 offers virtually no relief — the contractor accepts "unforeseeable difficulties").

The most common mistake among Vietnamese owners is calling every "design + build" arrangement EPC and applying the Yellow Book — or the reverse: using the Silver Book for a project where the owner still wants deep involvement in design. The result: contract administration mechanics (the Engineer's role), price adjustment mechanisms and risk allocation are misaligned from day one, and disputes later are almost guaranteed.

The 2017 editions of all three forms also introduce DAAB (Dispute Avoidance/Adjudication Board) mechanisms and default to ICC arbitration unless the parties agree otherwise — a point compared against Vietnamese law in section 4.

4. FIDIC vs Vietnamese law: 8 key comparison points {#4-fidic-vs-vietnamese-law-8-key-comparison-points}

4.1. Legal character: an international form does not replace Vietnamese law

FIDIC is a set of contract conditions published by an international professional association — it is not law and has no binding force in Vietnam. Article 81 of the 2025 Construction Law provides that a construction contract is effective when it meets civil-law validity conditions and the parties have the capacity required by the Construction Law. In other words: parties are free to use FIDIC as a base, but any FIDIC clause conflicting with mandatory Vietnamese rules (language, penalties for public projects, performance security, dispute resolution for public/PPP projects) risks partial invalidity.

Correct practice: use the FIDIC Silver Book as "General Conditions" with Particular Conditions amended for Vietnamese law, plus a clear governing-law clause in favour of Vietnamese law.

4.2. Contract language

FIDIC leaves language to the parties. Vietnamese law does not: Article 80 of the 2025 Construction Law provides that the language of a construction contract is Vietnamese; where a foreign party participates, the contract is in Vietnamese and another language agreed by the parties, and if no order of precedence is agreed, Vietnamese prevails.

The practical consequence for bilingual Vietnamese–English EPC contracts: an "order of precedence of languages" clause is mandatory. Left blank, the Vietnamese version wins any conflict — even if the English version was the one negotiated in detail. Many EPC disputes in Vietnam arise simply because the Vietnamese translation of a FIDIC technical term was imprecise.

4.3. Contract price: lump sum and adjustment mechanisms

The Silver Book defaults to lump sum: the contractor commits to a fixed price for all works, with adjustment only in very narrow cases. Vietnamese law is more flexible: Decree 210/2026/ND-CP permits lump sum, fixed unit prices, adjustable unit prices, time-based, cost-plus, output-based, percentage-based and mixed pricing.

The point to align carefully is contract amendment (Article 84 of the 2025 Construction Law, detailed in Decree 210/2026/ND-CP): Vietnamese law recognises contract modification for changes in quantities, schedule and performance conditions. The Silver Book, by contrast, tightly restricts the contractor's right to price adjustments. Adopting Silver Book pricing wholesale without an Article 84-compliant adjustment mechanism can strip the EPC contractor of lawful adjustment rights when the project changes — or, conversely, deprive the owner of cost control tools.

4.4. Advance payments and guarantees

This is the "money" cluster where disputes most often start. The new framework provides:

• Maximum advance of 30% of the contract value at signing, except in special cases approved by the investment decision-maker.
• For public investment and PPP projects, the minimum advance for EPC contracts is 10% (grouped with EC, EP, PC and turnkey contracts).
• Advances above VND 1 billion require an advance payment guarantee.
• Advances are recovered progressively through payment instalments and must be fully recovered when cumulative payments reach 80% of the contract value.

The FIDIC Silver Book also has advance payment provisions (usually tied to a bank guarantee) but no such hard thresholds. When drafting EPC contracts in Vietnam, these thresholds are mandatory for state-funded/PPP projects and a sound reference for private projects. Pay special attention to foreign-currency payment clauses: they must comply with foreign exchange regulations — Vietnamese dong is the default payment currency, and any foreign-currency arrangement needs a legality check before signing.

4.5. Bonuses, penalties and damages

Article 86 of the 2025 Construction Law provides that contractual bonuses, penalties and damages must be agreed in the contract; damages are assessed on actual loss or pre-agreed loss levels corresponding to the breached obligations.

The hard rule to remember: for public investment and PPP projects, the contractual penalty may not exceed 12% of the value of the breached portion of the contract. This is a mandatory cap — FIDIC-style penalty clauses (typically LADs calculated per day of delay) exceeding the cap will be cut down when applied to public/PPP projects. For private projects, penalties are freely agreed, but the breaching party must still compensate damages beyond the penalty as agreed.

A helpful innovation: the law expressly recognises pre-agreed damage levels (liquidated damages) corresponding to breached obligations — giving FIDIC-style LAD clauses a firm legal footing in Vietnamese EPC contracts.

4.6. Dispute resolution: FIDIC's DAAB meets Vietnamese law

This is the most closely watched comparison. FIDIC 2017 sets a sequence of DAAB → arbitration (ICC by default). Article 86 of the 2025 Construction Law provides dispute resolution through: negotiation, conciliation, dispute resolution models in line with international practice, arbitration or the courts.

The new law therefore formally recognises FIDIC-style DAAB/DAB models — a major step forward. But two constraints apply to public investment and PPP projects:

1. Where arbitration is used, domestic arbitral institutions are preferred (e.g. VIAC) over ICC or SIAC;
2. Applying international-practice dispute models must follow treaty requirements or be approved by the investment decision-maker and agreed in the contract.

For private FDI projects, parties may freely choose DAAB + ICC/SIAC arbitration. Enforceability still matters: foreign arbitral awards in Vietnam must go through recognition proceedings under the Civil Procedure Code. See also the guide on construction/EPC contract disputes (T-235).

4.7. Force majeure and fundamental change of circumstances

The Silver Book places almost all risk on the contractor, including unforeseeable ground conditions — international EPC contractors accept this in exchange for a lump-sum price. Vietnamese law (new) takes a different direction:

• The 2025 Construction Law lists 6 force majeure cases and 3 fundamental-change-of-circumstances cases in construction activity (see section 2);
• Determination must meet civil-law conditions: Article 156 (force majeure) and Article 420 (performance upon fundamental change of circumstances) of the 2015 Civil Code;
• These cases link directly to project adjustment (Article 28), contract amendment (Article 84), and suspension/termination (Article 85).

The consequence: a FIDIC-style force majeure clause narrower than Vietnamese law may disadvantage the contractor; conversely, a clause entirely excluding reliance on fundamental change of circumstances risks conflicting with Article 420 of the Civil Code. When drafting EPC contracts, list force majeure events covering at least the six statutory cases, and design clear notice – proof – consequence procedures.

4.8. Suspension, termination and close-out

Article 85 of the 2025 Construction Law (detailed in Decree 210/2026/ND-CP) governs suspension and termination of construction contracts. The critical point: a party that suspends, unilaterally terminates or cancels a contract unlawfully must compensate the other party for damages and perform other obligations under civil law (Article 85(4)).

The Silver Book allows the employer to terminate for convenience with a contractual compensation mechanism. Applied in Vietnam, this must be reconciled with the termination grounds under Article 85 and civil law to avoid being characterised as "unlawful termination" — whose price is actual damages, not capped at the agreed amount.

On close-out: for public-investment and PPP projects, Article 31(3) of Decree 210/2026/ND-CP sets a 45-day maximum for contract liquidation from the date all obligations are completed or the contract is terminated; large, complex contracts may take longer but no more than 90 days. EPC parties routinely forget this deadline, leaving final accounts open for years.

5. Costs, timelines and key thresholds {#5-costs-timelines-and-key-thresholds}

The figures below come from legislation (not the firm's fees). For fee quotes on a specific matter, contact FLAT — hotline 0988424851.

Note: advance and guarantee thresholds above are mandatory for public investment and PPP projects; for private/FDI projects the parties may agree freely but should use them as reference. Specific article numbers in Decree 210/2026/ND-CP should be checked against the Official Gazette before citation in legal documents.

6. Common risks and mistakes {#6-common-risks-and-mistakes}

1. Using the FIDIC form unamended for Vietnam. Sign: signing the Silver Book in English with no Particular Conditions. Consequence: clauses on language, penalties and dispute resolution may conflict with mandatory provisions of the 2025 Construction Law. Prevention: always draft Particular Conditions reviewing every FIDIC clause against the 8-point checklist in section 4.

2. Choosing the Yellow Book instead of the Silver Book (or vice versa). Sign: a turnkey project on the Yellow Book; an owner wanting to approve every design drawing but signing the Silver Book. Consequence: contract administration and risk allocation misaligned with actual intent; disputes over "who owns the design". Prevention: settle the owner's design-involvement level before choosing the form.

3. No agreed order of precedence of languages in bilingual contracts. Sign: a Vietnamese–English contract with no prevailing-language clause. Consequence: Vietnamese prevails by default (Article 80) — potentially reversing the negotiated intent. Prevention: state the order of precedence and have a bilingual lawyer review the Vietnamese translation.

4. Foreign-currency payment clauses breaching foreign exchange rules. Sign: agreeing full USD payment without checking permissibility. Consequence: the payment clause risks invalidity; project cash flow stalls. Prevention: check foreign exchange regulations before fixing the payment currency; default to VND.

5. No variation mechanism compliant with Article 84. Sign: copying the FIDIC variation procedure without linking it to contract amendment under Decree 210/2026/ND-CP. Consequence: the contractor performs extra works that are never recognised for payment, or the owner is held hostage on schedule. Prevention: design a clear variation order process — who may request, response deadlines, valuation method, and contract addendum procedure.

6. Foreign EPC contractor lacking a construction activity permit. Sign: a foreign contractor winning an EPC package without completing its Vietnamese construction activity permit. Consequence: failure to meet capacity conditions under the Construction Law; the contract's legality may be questioned; the project stalls. Prevention: make the construction activity permit a condition precedent.

7. Missing performance security for public/PPP projects. Sign: an EPC contract for a public investment project with no security measures under Article 83(4). Consequence: breach of mandatory rules, affecting validity and budget-funded payment. Prevention: check Decree 210/2026/ND-CP in detail at the drafting stage.

7. Condensed pre-signature checklist {#7-condensed-pre-signature-checklist}

• [ ] Choose the right FIDIC form: Silver Book for turnkey EPC, Yellow Book for Design-Build with an independent Engineer.
• [ ] Draft Particular Conditions reviewing all FIDIC clauses against the 2025 Construction Law and Decree 210/2026/ND-CP.
• [ ] State the order of precedence of languages in bilingual contracts (Vietnamese prevails by default).
• [ ] Fix the pricing form and a contract amendment mechanism compliant with Article 84.
• [ ] Set advance thresholds, advance guarantees and the advance recovery schedule correctly.
• [ ] Check penalty levels: no more than 12% for public investment/PPP projects.
• [ ] Design a multi-tier dispute mechanism (negotiation → conciliation/DAAB → arbitration), noting the domestic-arbitration preference for public/PPP projects.
• [ ] List force majeure events covering at least the six statutory cases; plan for fundamental change of circumstances.
• [ ] Confirm the contractor (especially foreign contractors) meets capacity and permit requirements.
• [ ] State the contract liquidation period (max 45 days; 90 for complex contracts — public/PPP projects) and each party's finalisation duties.

8. Frequently asked questions (FAQ) {#8-frequently-asked-questions-faq}

Is it mandatory to use FIDIC forms for an EPC contract in Vietnam? No. FIDIC is an international standard form with no binding force under Vietnamese law. Parties may use the EPC model in Appendix VII of Decision 1040/QD-BXD (effective 1 July 2026) or their own form, provided they comply with the Construction Law 135/2025/QH15 and Decree 210/2026/ND-CP. In practice, many FDI owners use the FIDIC Silver Book as a base and amend it for Vietnamese law — a perfectly valid approach if the amendments are drafted carefully.

What is the difference between an EPC contract and a Design-Build contract? EPC (FIDIC Silver Book) places almost all design, price and schedule risk on the contractor, with lump-sum turnkey delivery and no independent engineer. Design-Build (FIDIC Yellow Book) also gives design to the contractor but allocates risk more evenly, with an independent Engineer administering the contract and relief for unforeseeable conditions. Choosing the wrong form is one of the most expensive mistakes in practice.

Can a foreign investor sign an EPC contract in English in Vietnam? Bilingual contracts are allowed, but a construction contract in Vietnam must be in Vietnamese. Under Article 80 of the Construction Law 135/2025/QH15, where a foreign party participates, the contract is in Vietnamese and another language agreed by the parties; if no order of precedence is agreed, Vietnamese prevails in case of conflict. Next step: always include a prevailing-language clause and have a bilingual lawyer review the translation.

What is the maximum contractual penalty for an EPC contract? For public investment and PPP projects, the penalty may not exceed 12% of the value of the breached portion of the contract (Article 86(3), Construction Law 135/2025/QH15). For private projects, the penalty is freely agreed; beyond the penalty, the breaching party must compensate damages as agreed in the contract.

What is the maximum advance payment for an EPC contract? Under Decree 210/2026/ND-CP, the advance may not exceed 30% of the contract value at signing (except in special cases approved by the investment decision-maker). For public investment and PPP projects, the minimum advance for EPC contracts is 10%; advances above VND 1 billion require an advance payment guarantee; the advance must be fully recovered when cumulative payments reach 80% of the contract value.

Which law applies to EPC contracts signed before 1 July 2026? Contracts concluded and being performed before Decree 210/2026/ND-CP took effect continue under the rules in force at conclusion. Contracts still under negotiation may apply the new rules by agreement, consistent with the contractor selection process and other relevant laws.

9. When to work with a lawyer {#9-when-to-work-with-a-lawyer}

EPC contracts are typically high-value and long-duration, so the cost of one badly drafted clause can exceed initial advisory fees many times over. Work with a lawyer when:

• Preparing to sign a high-value EPC contract, especially with a foreign contractor or owner;
• Converting a FIDIC Silver/Yellow Book form into a Vietnam-compliant contract;
• The project shows signs of delay, quantity variations or quality/payment disputes;
• Reassessing an EPC contract signed before 1 July 2026 under the new legal framework;
• Preparing an EPC dispute for negotiation, DAAB, arbitration or litigation (see also the guide on construction/EPC contract disputes — T-235).

FLAT LAW FIRM advises comprehensively on EPC and construction contracts for foreign investors in Vietnam: drafting and review, negotiation with general contractors, risk management during performance, and dispute resolution. Contact our hotline 0988424851 for advice on your specific matter.

References

• Construction Law No. 135/2025/QH15 (effective 1 July 2026)
• Decree No. 210/2026/ND-CP detailing construction contracts (effective 1 July 2026)
• Decree No. 217/2026/ND-CP detailing construction activity management
• Decree No. 206/2026/ND-CP detailing construction investment cost management
• Decision No. 1040/QD-BXD dated 26 June 2026 publishing model construction contracts (Appendix VII: EPC model)
• Civil Code 2015 (91/2015/QH13)
• Law on Commercial Arbitration 2010 (54/2010/QH12)
• FIDIC Conditions of Contract for EPC/Turnkey Projects (Silver Book), Second Edition 2017; Conditions of Contract for Plant and Design-Build (Yellow Book), Second Edition 2017

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