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By using the published joint venture agreement form issued by Vietnam's State Committee for Cooperation and Investment (SCCI),(1) a foreign company can provide in four or five pages the legal minimum information required to establish a valid joint venture under Vietnamese law. On the other hand, the most extensive joint venture agreement filed in Vietnam since the country opened to foreign investment in 1987 totaled 168 pages, including supporting documents and annexes.
Of course, the agreement's length is less relevant than its contents to anyone considering setting up a joint venture in Vietnam. In this regard, given the current state of the law in Vietnam and the lack of experience it, foreign firms would do well to err on the side of more rather than less detail. They would be wise to negotiate detailed agreements even though the norm in Vietnam is to draw up a short agreement on general principles and leave the details to be worked out at a future date or when contingencies occur.
Some of the issues that foreign firms should consider when negotiating the joint venture agreement are discussed below, along with suggested clauses or ways to deal with them. If there is a common theme throughout this discussion, it is that educating Vietnamese partners and government officials on international commercial and legal practices is vital. Patience is also important if foreign partners want to work successfully with their Vietnamese partners and the government officials whose decisions will affect their projects.
DETAILED AGREEMENTS BENEFIT BOTH PARTIES
Detailed agreements will benefit both the foreign and Vietnamese partners to a joint venture:
* First, because of the sometimes general nature of existing law and because many laws do not yet exist, the JV agreement is a vital instrument in defining the relationship between the parties, and in dealing with issues which, in other countries, have already been addressed in law or through extensive experience and practice. Since Vietnam's legal framework remains fragile and experience limited, the joint venture agreement should go beyond its normal role of merely establishing rights and obligations.
* Second, many Vietnamese have no experience acting in commercial transactions, even in the once capitalistic southern part of the country. Most foreign partners therefore quickly learn that they have...