Investors avoid getting lost in translation
by Bui Ngoc Hong, Partner, and Khuat Hai Long,
Legal Assistant, Indochine Law Firm
When a foreign investor does business in Viet Nam, many documents are prepared in more than one language. These documents range from transactional documents like contracts, to corporate documents like minutes and financial reports.
Many foreign investors find it difficult to determine whether a Vietnamese version of their document must be prepared. In general, Vietnamese law does not require a document be in Vietnamese. Parties to a contract can generally conclude their agreement entirely in a foreign language. Under the Civil Code, the language of a contract is subject to the agreement of the parties. For instance, if a contract between a foreign party and a Vietnamese party is made only in English, the contract is valid.
But there is a major exception: documents which must be submitted to Vietnamese authorities must be translated into Vietnamese.
For instance, Circular No 60/2007/TT-BTC of June 2007 stipulates that the language used in tax documents is Vietnamese. In practice, tax authorities interpret this provision broadly to mean that all documents submitted to tax authorities must be in Vietnamese. Consequently, when submitted for tax declaration and other tax procedures, contracts evidencing transactions for which tax payments are made must be in Vietnamese or accompanied by a certified Vietnamese translation.
Besides the tax authorities, there are a number of other cases in which a Vietnamese version of a document is required. Under Article 4 of Decree No 108/2006/ND-CP implementing the Law on Investment, the dossier submitted to Vietnamese State agencies for a foreign-invested project must be in Vietnamese. And if there is any disparity between Vietnamese and foreign language versions, the Vietnamese version governs.
Many foreign investors are aghast at this rule. Investing in Viet Nam with English as their ‘working language', many foreign investors take it for granted that English should be recognised. Negotiations for joint venture agreements and other transactional documents are regularly conducted in English, and translation is usually deemed as a ‘procedural step' when the transaction is concluded and is merely for submission of documents to Vietnamese State agencies. As such, the money and time spent on translation are limited. However, this can be risky to the foreign party if Vietnamese version contains inaccuracies that are unfavourable to them.
Another case in which contract must be in Vietnamese are technology licences. Article 14 of the Law on Technology Transfer provides, "The language of a written technology transfer contract shall be as agreed by the parties, but in the case of a transaction in Viet Nam there must be a contract in Vietnamese. The Vietnamese and the foreign language versions of a contract shall be of equal validity."
However, anyone who has ever worked in translation, particularly between languages as different as English and Vietnamese, knows that, where there is an inconsistency or disparity between two versions, giving both versions equal validity is meaningless.
Many other laws require Vietnamese versions of contracts, including Article 9 of the Law on Posts and Telecommunications; Article 11 of Decree No 48/2010/ND-CP on construction contracts; and Article 7 of Resolution No 19/2008/QH12, setting up the pilot scheme permitting foreign organisations and individuals to acquire and own residential property in Viet Nam. Many of these provisions are silent as to which language is the controlling one, which may allow the parties to designate the controlling version in cases of discrepency.
Other documents which must be translated into Vietnamese, and for which the Vietnamese version may be the governing document, include company charters, accounting documents, minutes of the general shareholders meeting, and minutes of the board of management. Articles 106 and Article 113 of the Law on Enterprises require that minutes be prepared in Vietnamese, although they may also be in a foreign language, with both versions having equal legal validity.
Article 12 of the Law on Accounting provides that "the language used in accounting shall be Vietnamese. In cases in which a foreign language must be used in source documents, records and financial reports in Viet Nam, both Vietnamese language and foreign language versions must be used simultaneously."
Provisions like these in the Law on Enterprises and the Law on Accounting, giving equal validity to Vietnamese and foreign language versions of documents, beg the question of which version prevails when there is inconsistency. In practice, however, State authorities, e.g. tax authorities or courts, are likely to work from the Vietnamese version only, making the Vietnamese version dispositive.
While this is reasonable for non-contractual documents, such as accounting documents, the ‘Vietnamese-version-prevailing' rule may not be entirely reasonable. With respect to provisions not relating to State bureaucratic administration, the controlling language of an agreement should be left up to the parties.
In the meantime, a rule is a rule. Contracting parties should ensure that Vietnamese versions of agreements are as accurate as possible and reflect the meaning conveyed in the foreign language version, since, when a dispute arises, courts, as State agencies, will make reference to Vietnamese versions. Even when the law is silent on the issue of prevailing language or grants both versions equal validity, Vietnamese judges are naturally going to work in their mother tongue.