Joint Venture Disputes in Vietnam

Why joint venture disputes are exceptionally complex

In an ordinary commercial transaction, the parties stand on opposite sides of the contract: seller — buyer, lessor — supplier. In a joint venture, the parties are simultaneously partners and co-owners of the same enterprise. The conflict is therefore “internal” in nature: disputes over business strategy, over appointing the general director, over profit distribution — yet each side acts in the name of the company’s interests to protect its own.

The complexity also comes from a multi-layered legal structure: relations between the joint venture parties are governed simultaneously by the joint venture agreement (JVA), the company charter, the Investment Registration Certificate, the 2025 Investment Law (Law No. 143/2025/QH15, effective from 01/3/2026, replacing the 2020 Investment Law), and the 2020 Enterprise Law. When these instruments are inconsistent — e.g., the JVA says one thing, the charter another — disputes over which instrument applies are hard to avoid.

Particularly in joint ventures with foreign elements, disputes are further driven by differences in management culture and expectations: foreign parties typically want tight control over cash flow and compliance with global standards, while Vietnamese parties want flexibility and the use of local relationships. These differences simmer for years before erupting into open disputes.

The joint venture agreement (JVA): the origin of all disputes

Most joint venture disputes can be traced back to defects in the joint venture agreement signed at formation. The most dispute-prone points:

• Mismatched capital contribution and voting ratios: one party contributes less capital but demands veto rights over key decisions — and when denied, uses every means to create deadlock.
• Capital contribution obligations and sanctions for delay: the JVA sets no clear contribution deadlines or handling for late or insufficient contributions — the other party must shoulder extra capital with no legal tool to address it.
• Profit distribution and reinvestment policy: one party wants maximum dividend payouts, the other wants to retain profits for reinvestment — the JVA has no decision mechanism for disagreements.
• Non-compete clauses: one joint venture party simultaneously operates a similar business outside the joint venture, “siphoning” the joint venture’s customers and staff — disputes over the scope and validity of non-compete clauses make damages very hard to prove.
• Governing law and dispute resolution: a hastily signed JVA with no clear arbitration clause, or governing-law provisions contradicting the company charter.

Practical experience: a good JVA is not the longest one, but the one that anticipates the worst-case scenario — how the parties part ways, who may buy out whose capital, at what price, within how long. These “exit” clauses are precisely what the parties least want to discuss while happily cooperating, yet they are what decides matters when disputes arise.

Types of disputes between joint venture parties

In practice, joint venture disputes in Vietnam usually fall into five groups:

Capital contribution disputes: one party fails to contribute enough capital on time, contributes assets whose valuation is not agreed, or requests a capital increase the other side rejects. As a result, the actual ownership structure diverges from the licensed one, triggering disputes over voting ratios and profit sharing.

Governance and management disputes: disagreements over appointing the general director or chief accountant; one party believing that executives appointed by the other serve only the appointing party’s interests; disputes over the scope of authority of the legal representative.

Financial disputes: suspicion that the other side is “tunneling” the joint venture through related-party transactions (buying raw materials at high prices from the parent company, selling products cheaply to sister companies); disagreements over dividend policy; disputes over the use of reserve funds.

Strategic disputes: one party wants to expand, the other to contract; disagreements over bank borrowing or mortgaging company assets; one party wants to list the joint venture, the other opposes.

Capital transfer disputes: one party wants to sell its capital share to a third party while the other invokes pre-emptive purchase rights to block or pressure the price — a group analyzed in detail in a later section.

What these groups share: they are rarely resolved by a simple “win — lose” award, because the parties remain “bound” together in the same company. Sustainable solutions usually mean restructuring the relationship — one party buying out the other’s capital share, or jointly agreeing to dissolve.

Deadlock: when the joint venture cannot decide

Deadlock is the state where the joint venture parties cannot reach the consensus needed to pass important company decisions, paralyzing the joint venture’s operations. In a 50-50 joint venture, deadlock can occur over any decision requiring a special majority; in a joint venture where one party holds veto rights over key matters, deadlock occurs when that party uses the veto as a pressure tool.

Signs of deadlock: the members’ council/board of directors failing for consecutive meetings to pass business plans, financial reports, or profit distribution plans; the general director never appointed or repeatedly dismissed; the company unable to borrow or sign major contracts for lack of valid resolutions. If prolonged, deadlock causes not only economic harm but can push the company into insolvency.

Vietnamese law has no concept of “deadlock” as a separate regime. When deadlock occurs, the parties must rely on mechanisms agreed in the JVA and charter; where no agreed mechanism exists, the remaining routes are bringing the dispute to arbitration/courts or requesting dissolution — costly solutions that are more “destructive” than “constructive”.

Deadlock handling mechanisms: practical options

Professionally drafted JVAs usually anticipate deadlock mechanisms in escalating tiers:

• Senior-level negotiation (escalation): when the operational level is deadlocked, the issue is escalated to the parties’ top leadership (chairpersons, parent-group CEOs) for negotiation within a defined period. Many deadlocks are resolved at this step because senior leaders view the matter from a longer-term strategic perspective.
• Mediation or independent expert: for technical deadlocks (valuation, financial plans), referral to a mediator or independent expert for assessment.
• Buy-sell mechanisms: one party names a price for the other’s capital share, and the other may choose to sell its share at that price or buy the offering party’s share at the same price. This mechanism forces the offering party to name a fair price — because naming a low price means being “bought out” cheaply. Variants include the Russian roulette and the Texas shootout, each with its own advantages and disadvantages requiring careful design in the JVA.
• Tag-along and drag-along rights: when one party finds a buyer for its capital share, these clauses regulate the other party’s right to sell along or be compelled to sell along — avoiding the situation where one party is “stuck” with an unwanted new partner.

Where the JVA lacks these mechanisms, the parties may still agree supplementary ones when deadlock occurs — but negotiating an escape mechanism amid conflict is many times harder than when the original JVA was signed. This is why experienced investors always demand deadlock provisions from the outset.

Capital transfer in joint ventures: pre-emptive rights and legal barriers

When conflicts cannot be mended, one party often wants to exit. However, transferring capital in a joint venture is not as simple as selling shares of a public company, because it faces three layers of constraints:

Constraints from the JVA and charter: most JVAs grant the remaining party a right of first refusal or a consent right over transfers to third parties. Disputes often arise over: whether the offer notice was valid, how long the pre-emptive period lasts, and whether the offer price to the third party is a “good faith” price — because the selling party has an incentive to quote high so the remaining party waives its right, then sell cheaper to the third party.

Constraints from investment law: under Article 34 of the 2025 Investment Law, an investor may transfer all or part of an investment project when conditions are met: the project is not subject to termination under Clauses 1 and 2 of Article 36; the foreign investor receiving the transfer meets market-access conditions under Clause 2 of Article 21; land, housing, and real estate business law conditions are met (if any); and conditions in the investment policy approval document/Investment Registration Certificate are observed. For projects with an Investment Registration Certificate, the transfer is tied to the investment project adjustment procedure under Article 33.

Constraints from enterprise law: transferring capital contributions/shares must comply with the 2020 Enterprise Law on transfers and registration of changes to enterprise registration contents. Where the transferee is a foreign investor and the transfer changes foreign ownership beyond the threshold, additional procedures relating to market-access conditions may arise.

Experience shows many joint venture capital transfers collapse not over price, but because the remaining party uses the pre-emptive right as a tool for indefinite delay. To avoid this, the JVA should set a deadline for exercising the pre-emptive right and an independent valuation mechanism (appraisal by an independent valuation organization) where the parties cannot agree on price.

Dissolving and terminating the joint venture: when there is no way back

When all mediation and buy-sell mechanisms fail, dissolving the joint venture company is the last resort. Legally, a joint venture company dissolves on the general grounds of the 2020 Enterprise Law (expiry of the operation term, owners’ resolution, revocation of the enterprise registration certificate…). But in a deadlock context, passing a dissolution resolution is precisely what cannot be achieved, because it requires the consensus of the conflicting parties.

In that case, one party may sue in court requesting resolution of disputes relating to the company’s operations or dissolution — falling within the group of disputes between the company and its members, or among members themselves, that Clause 4 of Article 30 of the 2015 Civil Procedure Code places within court jurisdiction. However, Vietnamese courts are very cautious in ordering company dissolution at one party’s request, as it is a measure deeply intervening in the enterprise’s right of self-determination. The requesting party must prove the company has truly fallen into irreparable deadlock and that continued existence causes harm.

On the investment project side, termination of an investment project’s operations is governed by Article 36 of the 2025 Investment Law (the investor decides to terminate; termination under conditions in the contract or company charter; expiry of the project’s operation term; or the investment registration authority terminates where the project fails to remedy suspension conditions…). Project termination and company dissolution are two different but closely related procedures — the enterprise must synchronously handle tax, labor, land obligations, and ongoing contracts. Asset liquidation amid conflicting parties is the stage most prone to new disputes, from asset valuation to the payment order.

Resolving joint venture disputes: choosing the right mechanism

Given the “both partner and co-owner” nature, choosing a joint venture dispute resolution mechanism requires careful consideration:

Negotiation and mediation should be the first step in all cases — not only because of low cost, but because the parties must continue to “live together” in the company after the dispute. A win — lose award from a court/arbitral tribunal may destroy the relationship entirely, while a skillfully negotiated agreement can restructure the relationship sustainably (e.g., one party buying out the other’s share with a reasonable payment schedule).

Commercial arbitration is favored in foreign-invested joint ventures for its confidentiality, the ability to choose arbitrators versed in international investment, and awards that are readily recognized and enforced abroad. The prerequisite is a valid arbitration clause in the JVA or a separate agreement. A legal update to note: the 2010 Law on Commercial Arbitration has been amended and supplemented by Law No. 81/2025/QH15, effective from 01/07/2025 — it must be clearly distinguished from Resolution 81/2025/UBTVQH15 of the National Assembly Standing Committee (an instrument on court organization, including provisions on jurisdiction over requests to set aside arbitral awards), to avoid citation confusion.

Courts have jurisdiction over disputes among company members and between the company and members relating to the company’s formation, operations, and dissolution (Clause 4 of Article 30 of the 2015 Civil Procedure Code). Courts are the appropriate choice where interim emergency measures are needed (freezing accounts, seizing assets as security), or where one party refuses to cooperate in arbitral proceedings.

Whichever mechanism is chosen, the enterprise must prepare its evidence file carefully: the JVA and annexes, the company charter, minutes of members’ council/board meetings evidencing deadlock, financial reports, related-party transactions, and all exchanges between the parties on the conflict.

Frequently asked questions

Useful links

When you should talk to a lawyer

• The joint venture is deadlocked, with consecutive meetings failing to pass important resolutions.
• Suspecting the other joint venture party of harming the company through related-party transactions.
• Wanting to transfer capital in the joint venture but blocked by pre-emptive rights or the other party’s conditions.
• The JVA and company charter contain conflicting provisions on decision-making authority.
• Needing to activate a buy-sell mechanism or negotiate a one-party exit plan.
• Considering requesting dissolution of the joint venture company or termination of the investment project.