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Procurement for FDI Projects Using International Loans: Conflicts Between Lender Rules and Vietnam’s Bidding Law

6 min readFLAT LAW FIRM

An FDI project borrows from an international development bank to buy an equipment line: the lender requires procurement under its own guidelines, with eligible-country lists and its own complaint process, while the project team in Vietnam is used to applying Bidding Law 22/2023/QH15. This conflict is not resolved by which side is ‘stronger’, but by a choice-of-law rule already written in Clause 2, Article 3 of the Bidding Law — provided the project falls in exactly the category that rule covers. This article stratifies international loan types to determine which regime governs each FDI project, and the handling process when two regimes collide on one equipment package.

The choice rule in Clause 2, Article 3: the loan agreement prevails within its scope

Clause 2, Article 3 of Bidding Law 22/2023 sets the principle: where an international treaty to which Vietnam is a member, or a loan agreement, provides for contractor selection differently from this law, the treaty or loan agreement applies. This is a conditional ‘law yields’ mechanism: the loan agreement must be one the Vietnamese side concluded within that loan’s framework, and the lender’s procurement rules prevail only within the packages of the project using that agreement’s funds. Outside that scope, the Bidding Law and Vietnamese law continue to apply in full.

The practical consequence is that one investor may run two regimes in parallel: packages funded by the lender’s loan follow the lender’s procurement guidelines — nationality eligibility criteria, international bid advertising, evaluation on the lender’s criteria set, complaints escalated to the lender — while packages funded by own capital or state capital follow Vietnam’s Bidding Law. Delimiting packages by funding source right inside the project’s contractor selection plan is the compulsory operation that keeps the two regimes from mixing.

Stratifying loans: not all ‘international capital’ triggers the yielding rule

Tier one is ODA and concessional loans attached to a loan agreement between the Government of Vietnam or an authorised body and a bilateral or multilateral lender: this is the core case of Clause 2, Article 3, and the lender’s procurement regime governs the project’s packages exactly per the agreement. Tier two is the FDI enterprise’s own international commercial loans — foreign bank loans, international syndicated loans — with no State-level loan agreement: here, the lending bank’s procurement conditions are credit contract terms binding the enterprise civilly, not a choice-of-law rule under Article 3.

Tier three is pure private procurement with no lender conditions attached: the Bidding Law in principle governs contractor selection using state capital and other statutory cases; an FDI enterprise’s procurement with its own capital sits outside the law’s main scope and is organised under the enterprise’s internal procurement rules, bound by civil and commercial law and its investment charter. Confusing the three tiers — above all applying ‘lender rules’ to a pure commercial loan or applying the Bidding Law to private procurement — is the source of most disputes and re-audits in FDI projects with an international loan element.

Typical collision points between the two regimes

Collision point one is bidder nationality conditions: lender guidelines usually limit bidders to the lender’s member or eligible countries, while domestic bidding under Vietnamese law has its own preference and protection mechanisms for domestic bidders in statutory cases. Collision point two is the complaint channel: under the lender, complaints escalate to the lender itself and can lead to a misprocurement declaration and result cancellation; under Vietnamese law, petitions run through the investor, the bidding authority and a separate handling mechanism. Collision point three is dossier language, bid currency and price evaluation criteria — differences that look technical but are enough to make one dossier win under one regime and fail under the other.

The way to govern collisions is a regime comparison table for each package built at planning time: a lender-rules column, a Vietnamese law column, and a final applicable-rule column citing Clause 2, Article 3 or the credit contract as its basis. This comparison table is the first document both the lender’s audit and the Vietnamese inspection will request — having it ready turns every conflict question into a lookup question instead of an argument.

Consequences of applying the wrong regime, and locking risk from the borrowing stage

Applying the wrong regime is not merely a procedural error: with lender funds, misprocurement can be declared ineligible for disbursement by the lender, forcing repayment of drawn amounts or cancelling financing for the package — a direct financial risk to project cash flow. For packages under the Bidding Law, the wrong regime leads to bid cancellation, penalties and petitions that stretch the schedule. Both directions of error are expensive, and both originate in failing to stratify funding sources at the start.

Risk locking must begin at loan negotiation: the procurement clauses in the loan agreement and credit documents should be read by the project legal team together with the lender’s procurement guidelines, listing planned packages and their corresponding regimes in a project plan annex. Where a package changes funding source mid-course — part shifting from loan to own capital — the applicable regime must be re-determined in writing before bid documents issue. The discipline of ‘one package, one regime, one written basis’ is the only operating principle that lets a multi-source FDI project pass both international audit and domestic inspection without redoing any package.

Frequently asked questions

For an FDI project using international loans, whose procurement rules apply?

Under Clause 2, Article 3 of Bidding Law 22/2023, where the project uses loan funds under a loan agreement Vietnam concluded with the lender and that agreement provides for contractor selection differently from Vietnamese law, the lender’s rules govern the packages using those funds. Conversely, for an FDI project on a pure international commercial loan with no State-level loan agreement, the bank’s procurement conditions are merely credit contract terms; and pure private-capital procurement sits outside the Bidding Law’s main scope and follows the enterprise’s internal procurement rules.

How are conflicts between lender procurement rules and Vietnamese law resolved?

Conflicts are resolved by the choice-of-law rule in Clause 2, Article 3 of Bidding Law 22/2023 rather than by the parties’ strength: within packages using the loan agreement’s funds, lender rules prevail; outside that scope, Vietnamese law applies. The practical governance is to delimit packages by funding source inside the contractor selection plan and build a regime comparison table per package — bidder nationality conditions, complaint channels, dossier language, evaluation criteria — with the applicable basis stated for each package.

What procedure governs equipment procurement for projects using ODA or concessional loans?

A project using ODA or concessional loans procures equipment under the contractor selection provisions of the loan agreement and the lender’s procurement guidelines for packages on those funds, per Clause 2, Article 3 of Bidding Law 22/2023: from bid advertising, bidder nationality conditions and dossier evaluation to the complaint mechanism escalating to the lender. Packages of the same project on funds outside the loan agreement still follow Vietnamese law matching those funds.

In procurement with international loans, the first question is never ‘what is the process’ but ‘which tier is this money’. Stratifying funding sources correctly under Clause 2, Article 3 of the Bidding Law turns an apparent power conflict into a lookup problem with a written answer.

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