This means that parties to such contracts will have to be returned to their original positions as if the transactions have not occurred.
The Foreign Exchange Ordinance of 2005 of Vietnam as amended in 2013 and the relevant guiding laws require all civil contracts in Vietnam that contain payment provisions to be denominated and paid in Vietnamese Dong (VND).
This is not new law but parties often ignore this to their detriment when a dispute occurs.
Regardless of the substance of the underlying dispute, the denomination of payment terms in foreign currency is the easiest way for one party to seek to get out of a contract by asking the court to void such arrangement.
There have been some cases where the courts have voided contracts for deposits denominated in USD for house/condo purchases and the sellers had to return funds to the purchasers. Note that such contracts are still void even if payments were in fact made in VND.
This is particularly detrimental to service providers because once services are rendered, returning to the original position is impossible.
Note also that under the law, the person who makes the illegal foreign currency payment may be subjected to a fine between VND 200 – 250 million and any amount paid may be confiscated. To date the State Bank of Vietnam has not yet enforce strictly these penalty provisions but it is only a matter of time.
DNLegal (7 March 2016)
