Enterprises should anticipate risks to restrict arising of disputes

How to avoid scams when signing investment agreements with foreign enterprises? Is there any way to make use of incentives from free trade agreements? These concerns of some enterprises are also common questions in the process of Vietnamese enterprises integrating into the global playground.
Enterprises should anticipate risks to restrict arising of disputes ảnh 1 A Vietnamese enterprise produces medical masks for export to the US. (Photo: SGGP)
The hundred-million-dollar bogus contract

Attorney Bui Van Thanh, Head of New Sun Law Firm cum Arbitrator of the Vietnam International Arbitration Center (VIAC), told the story of a Vietnamese enterprise suddenly receiving a large order from its partner, asking for the supply of medical masks for the prevention of the Covid-19 pandemic, exporting to the US, with the contract value of up to US$270 million. Due to the large value of the order, this enterprise consulted lawyers to get advice on setting up the contract and instructions on how to fulfill commitments.

He advised that enterprise, through information channels, finding out whether its partner is just a blogger or a real buyer. Besides, the terms on down payment must be strictly established.

‘After reviewing the enterprise’s capability, and supply and production capacity, it asked its partner to deposit 30 percent with the guarantee. As soon as receiving feedback from the company, its partner disappeared,’ said Mr. Bui Van Thanh.

A few days ago, the Ho Chi Minh City Center for International Integration Support (CIIS) in association with the VIAC organized a seminar on the Regional Comprehensive Economic Partnership (RCEP) and business strategy implies for enterprises in the new context. At the seminar, many economists acknowledged that free trade agreements (FTAs) in general, and the RCEP in particular, are expected to open up many export opportunities for Vietnam, and at the same time help Vietnamese enterprises to be able to better connect to the global supply chains. However, there are also challenges of trade deficit, the degree of autonomy in the supply chain, as well as the competitiveness of Vietnam compared to member countries in the RCEP.

Enterprises should be cautious

Mr. Nguyen Anh Duong, an economist at the Central Institute for Economic Management, said that in the current context, enterprises need to focus on improving their competitiveness, at the same time, thoroughly study market regulations to promptly change and make use of the benefits brought by FTAs.

Adding to this content, Mr. Tran Ngoc Binh, Head of the Import and Export Management Office of Ho Chi Minh City under the Import and Export Department of the Ministry of Industry and Trade, analyzed new points and differences related to the rules of origin of RCEP compared to FTAs that Vietnam has implemented. For instance, some products, such as textiles and processed seafood, have advantages when exporting to RCEP member countries, it is not too difficult for enterprises to implement. Noticeably, according to Mr. Binh, enterprises can carefully screen among the trade agreements that Vietnam has signed, which agreements have preferential tax rates and rules of origin that are easier to achieve to select.

Mr. Bui Van Thanh noted that for importers in large supply chains, normally, enterprises will have separate agreements on confidentiality and detail regulations, including what a trade secret is, in which cases it will be considered a violation of trade secrets, and the scope of application. If enterprises are large importers, they will require to apply those agreements and regulations to the importers, as well as all related enterprises of the importers or distributors, and manufacturers. Moreover, for sanctions, it is assumed that according to Vietnam's Commercial Law, the highest fine is only 8 percent of the violated obligation, but non-disclosure agreements can give specific numbers with high penalties. It relates to applicable law.

In fact, to enter the global playground, enterprises need to prepare lots of things, especially knowledge and understanding of domestic as well as international laws. Attorney Chau Viet Bac, Deputy General Secretary of VIAC, said that FTAs that Vietnam has participated in have created an open business environment, but they also set out requirements for signing contracts and conducting transactions strictly. Therefore, enterprises need to correctly understand the regulations to effectively apply them.

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