Associate Le Dang Khoa

Junior Associate Dinh Ho Nhi Ha

DIMAC Law Firm

1. Main points and assumption

1. The draft Land Law amendment ("Land Law 2024") allows Vietnamese commercial arbitrators in accordance with commercial arbitration law ("Arbitration") to have jurisdiction in resolving disputes over land arising from commercial activities.

2. Due to unclear legal provisions, not in every case of land disputes arising from commercial activities do arbitrators have jurisdiction. It depends on the interpretation and explanation by the competent court regarding arbitration activities based on the provisions of the Land Law 2024 and the Civil Procedure Code 2015 ("CPC").

3. Article 470 in the CPC could render many arbitration agreements ineffective or lead to the annulment of arbitration awards, especially in M&A transactions, if the parties do not pay attention to "foreign elements".

4. The analysis below is based on the assumption that when a land dispute is considered "direct", meaning the main subject of the dispute is the right to use land, including rights and obligations stipulated in the Land Law 2024 and the Land Law 2013. Conversely, "indirect" disputes have a main subject that is not land.

2. Main contents

On the morning of January 18, 2024, the XV National Assembly officially passed the draft Land Law 2024. Accordingly, the Land Law 2024 contains many changes compared to the previous law.

Of particular note, Article 236.5 of the Land Law 2024 stipulates that "Disputes between parties arising from commercial activities related to land shall be resolved by the court according to the provisions of civil procedure law or by Vietnamese commercial arbitration according to the provisions of commercial arbitration law".

Thus, while in the Land Law 2013, the competent authority to resolve land disputes could only be the competent People's Court (“Court”) or the People's Committee (“PC”) according to Article 203, in the Land Law 2024, the jurisdiction to settle land disputes has been expanded to commercial arbitration if the dispute arises from commercial activities ("Commercial Dispute").

Although this content is considered a bright spot as it addresses the practical needs of the legal market for resolving Commercial Disputes and also contributes to sharing the workload for the Court and/or PC, it is necessary to acknowledge that there are still some unclear issues that disputing parties and/or dispute resolution authorities need to consider when applying it in practice, especially when examining the jurisdictional issue of resolving Commercial Disputes between the Land Law 2024 and the CPC.

Specifically, based on the provisions of Article 236.5 of the Land Law 2024 and Article 470.1.(a) of the CPC, there is no clear basis to determine whether the Court or Arbitration will have jurisdiction to resolve Commercial Disputes with foreign elements if (i) the parties have previously agreed that Arbitration is the dispute resolution mechanism, and (ii) this agreement is not rendered ineffective or cannot be implemented according to the current provisions of commercial arbitration law ("Legal Issue").

To be clear, real estate, as defined by the Civil Code 2015 ("CC"), includes (i) land; (ii) houses, structures attached to the land; (iii) other property attached to the land, houses, structures; and (iv) other property as stipulated by law. Based on a comparison of jurisdictional provisions between the Land Law 2024 and the CPC, the following real estate will be understood to be limited to the scope of land.

1. Regarding the Legal Issue, based on the provisions of Article 3.24 of the Land Law 2013 and Article 3.47 of the Land Law 2024, as well as the general provisions in Article 1 of both the Land Law 2013 and 2024, it can be said that disputes related to land naturally fall under the regulation of land law ("Land Disputes"). However, this regulation does not explicitly specify whether Land Disputes here refer to direct or indirect disputes concerning land.

1. In the case of Land Disputes being understood to encompass both direct and indirect disputes, the regulation would be quite similar to the provision regarding disputes "related to rights over real estate located in the territory of Vietnam" under Article 470.1.(a) of the CPC ("Related Disputes"), excluding the specific "foreign elements" issue stipulated in Article 470 of the CPC.

Therefore, assuming that a dispute arises between company A and company B regarding a land lease contract, in which company A is a foreign-invested economic organization leases the land to company B, a domestically company ("Scenario"), the question is whether this will be considered a Related Dispute under the CPC due to the foreign element in the form of a "foreign organization," or will it be considered a Land Dispute under the Land Law 2024?

Currently, legal provisions do not clearly define what constitutes a "foreign organization". Therefore, it is possible that a "foreign organization" could be interpreted to include "foreign-invested economic organizations". And, Land Disputes can be the same as Related Disputes. The consequence is a potential legal jurisdiction conflict between Article 470.1.(a) of the CPC and Article 236.5 of the Land Law 2024.

In this situation, resolving the conflict cannot rely on the provisions of the CPC and the Land Law 2024 because there are no regulations for resolving conflicts in these legal normative documents. Nevertheless, based on Article 156.3 of the Law on Promulgation of Legal Normative Documents 2015 ("Law on Legal Normative Documents 2015"), it can be stated that if a jurisdictional conflict arises, the provisions of the Land Law 2024 will take precedence because it is a document issued by the National Assembly later than the CPC.

2. In the case where Land Disputes are only explained in the form of direct disputes, the Scenario would be difficult to categorize as Land Disputes due to (1) the absence of direct factors regulating the rights and obligations of the land user, in this case, company A; and (2) the lease contract for the land does not alter the direct rights and obligations of company A with the State

2. To clarify, despite the assumption made in section A, the factors determining what constitutes "direct" or "indirect" are not currently specifically defined in legal normative documents. However, Related Disputes can be interpreted in a very broad sense, encompassing both "direct" and "indirect" disputes, considering the interpretation in the Decision No. 09/2023/HS-PT dated January 17, 2023, by the Superior People's Court in Hanoi ("Hanoi Superior Court") regarding the recognition and enforcement in Vietnam of the decision of a foreign Arbitration ("Decision 09").

Specifically, when interpreting Article 470 of the CPC, the Hanoi Superior Court explained as follows: "[...] if recognizing and enforcing the decision of a foreign Arbitration in Vietnam [...] the enforcement process [...] must enforce [...] real estate [...] in Vietnam. According to Article 470 of the Civil Procedure Code, which regulates the 'Exclusive jurisdiction of Vietnamese courts,' only Vietnamese courts have jurisdiction to resolve matters related to rights over real estate located in the territory of Vietnam. Therefore [...] we do not accept the request for recognition and enforcement [...] as it has no legal basis [...]"

Thus, due to (i) the "foreign element" in the "foreign organization" part, and (ii) the factors "direct" and "indirect" in Land Disputes or Related Disputes not being clearly defined in the law, there is a significant risk if the element of "land" appears in M&A transactions and the parties have agreed to Arbitration as the dispute resolution mechanism.

In summary, despite the analyses presented above, in practical terms, the Land Law 2024 was only approved on January 18, 2024, and there has not been a final official version yet. Therefore, these analyses may no longer be applicable if the official Land Law 2024 undergoes modifications different from the final draft presented to the National Assembly.

Nevertheless, considering a broader context regarding the definition of "real estate" and its relation to the CPC in residential housing law, real estate business law, construction law, and other real estate regulations, these analyses may still retain their value.

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