Attorney Vu Manh Quynh is the Managing Partner of ECOVIS Vietnam Law, advising international investors on Foreign Direct Investment (FDI), corporate governance, and regulatory compliance in Vietnam.

The risk management questions in this final section are the ones that experienced Vietnam investors ask first — before the IRC application, before the land lease, before the capital commitment. The investors who underestimate Vietnam’s risk landscape do not usually fail catastrophically; they experience a slow accumulation of unforeseen costs, timeline extensions, and compliance remediation that gradually erodes the return profile they modelled at the investment decision stage. The investors who succeed are the ones who understand what can go wrong, who plan the exit before they build the entry, and who structure their investment to maintain optionality throughout the investment lifecycle.

This article is Section X of the 100 FAQ about Factory Setup Vietnam series. It covers questions Q91–Q100.

What are the primary regulatory risks for a foreign-invested factory in Vietnam?

The primary regulatory risks in order of frequency and impact: (1) Policy change risk — Vietnam’s investment regulatory framework has changed substantially in each 5-year Law cycle (2014→2020→Investment Law 2025); incentive structures, EPE rules, and conditional sector lists are subject to revision; (2) Retroactive interpretation risk — provincial authorities sometimes apply new guidance to existing projects; (3) Land lease termination risk — land leases in industrial zones can be terminated for non-compliance or zone reclassification; (4) IRC condition compliance risk — failure to meet capital, headcount or production milestones can result in IRC revision or termination; (5) Foreign exchange risk — while the SBV maintains a managed float, VND depreciation affects USD-denominated cost budgets. Political risk (nationalisation, expropriation) is low by regional standards but bilateral investment treaty (BIT) protections are the appropriate structural backstop.

How do Vietnam’s Bilateral Investment Treaties protect foreign investors?

Vietnam has signed 67 BITs and 17 FTAs containing investment protection chapters (as of 2025). Key protections under most Vietnam BITs: (1) Fair and Equitable Treatment (FET) standard — protection against arbitrary or discriminatory regulatory treatment; (2) Full Protection and Security — physical security of investments; (3) National Treatment — no less favourable treatment than domestic investors in like circumstances; (4) MFN Treatment — no less favourable treatment than investors from third countries; (5) Protection against expropriation without prompt, adequate and effective compensation; (6) Free transfer of investment-related capital and returns. EVFTA’s investment chapter provides EU investors with ISDS (Investor-State Dispute Settlement) access. Structuring Vietnamese investments through a jurisdiction with a strong BIT with Vietnam (Germany, the Netherlands, South Korea) is the foundational investor protection mechanism.

What dispute resolution options are available for investment disputes in Vietnam?

Foreign investors in Vietnam have four dispute resolution pathways under Investment Law 2020 Article 14: (1) Vietnamese courts — enforceable in Vietnam, but foreign investors typically have concerns about judicial independence for disputes involving Vietnamese state entities; (2) Vietnamese arbitration — VIAC (Vietnam International Arbitration Centre) is the leading institution, with rules modelled on UNCITRAL, awards enforceable under the 1958 New York Convention; (3) International arbitration — ICC, SIAC, HKIAC, or UNCITRAL ad hoc — awards enforceable in Vietnam under the New York Convention (Law on Commercial Arbitration 2010); (4) Investor-State arbitration — available under applicable BIT or FTA investment chapter (ISDS). Contractual choice of forum should be agreed in the joint venture agreement, land lease, and all major commercial contracts before disputes arise.

What are the risks associated with industrial land leases in Vietnam?

Land lease risks for factory investors: (1) Lease term alignment — land leases in industrial parks typically run to the end of the industrial zone’s approved operating period; verify the zone’s remaining approved term matches your investment horizon; (2) Land lease termination grounds — Article 81 of Land Law 2024 specifies grounds for lease termination including prolonged non-use, environmental violations, and voluntary return; confirm your lease contains cure rights and adequate termination notice periods; (3) Sublease risk — if you lease from an industrial park developer (not directly from the state), the developer’s lease with the provincial authority must have a remaining term covering your investment period; (4) Zone reclassification — provincial master plans are reviewed every 5 years; verify that the zone’s land use classification is stable; (5) Infrastructure risk — confirm legally binding commitments from the zone developer on utility supply capacity.

How are labour disputes resolved in Vietnam?

Labor disputes in Vietnam are resolved through a three-tier mechanism under Labor Code 2019: (1) Workplace conciliation — mandatory first step for individual disputes; the workplace conciliation council (or labour conciliator) has 5 working days to reach a settlement; (2) Labour arbitration — the Provincial Labour Arbitration Council (LAC) handles individual and collective disputes; decision is enforceable if accepted by both parties; (3) People’s Court — jurisdiction over individual disputes where conciliation failed, and collective rights disputes referred from the LAC. Strike action by employees is only legal after exhausting conciliation and arbitration procedures under a defined collective labour dispute protocol — wildcat strikes outside this procedure are technically unlawful but occur. Prevention through proactive employee relations (grievance channels, regular consultations, competitive wages) is more effective than litigation.

What anti-corruption compliance obligations apply to foreign-invested companies?

Foreign-invested companies operating in Vietnam are subject to Vietnam’s Anti-Corruption Law 2018, which applies to state-sector entities. However, foreign-invested companies are also subject to their home-country anti-corruption legislation with extraterritorial reach: Germany’s StGB, the UK Bribery Act 2010, and the US Foreign Corrupt Practices Act (FCPA) all apply to the acts of employees and agents in Vietnam. In practice, corruption risk arises at: customs gate (expediting declarations), inspection pre-clearance, environmental monitoring payments, and regulatory approval acceleration. Mitigations: documented compliance policy; due diligence on local agents and customs brokers; no cash payments to government officials; all government-facing facilitation channelled through approved company accounts. Violations of home-country anti-corruption law — not Vietnam law — are the primary compliance risk for most foreign manufacturers.

How does force majeure operate in Vietnamese contract law?

Force majeure in Vietnam is governed by the Civil Code 2015 Article 156 and the Commercial Law 2005 Article 294. A force majeure event must meet three cumulative conditions: (1) the event is objective (external) and unforeseeable; (2) the party could not prevent the event despite taking all necessary measures; (3) the inability to perform is directly caused by the force majeure event. Effects: the affected party is exempt from liability for non-performance during the force majeure period and for a reasonable time thereafter. Notice obligation: the affected party must notify the other party immediately upon occurrence. COVID-19 was not automatically recognised as force majeure under Vietnam law — each case required analysis of specific contractual obligations, foreseeability at contract date, and prevention steps taken. Force majeure clauses in contracts should specify notice periods, evidence requirements, and maximum duration before termination rights arise.

Under what conditions can Vietnam terminate a foreign investment project?

Under Investment Law 2020 Article 48, an investment project can be terminated by: (1) The investor voluntarily — with written notice to the IRC-issuing authority; (2) The IRC-issuing authority — if: the investor fails to overcome the grounds for project suspension within the prescribed period; the investor provides false information in the investment registration; the investor fails to implement the project within 12 months of the IRC issuance date (or an approved extended date); or the project causes serious environmental harm or national security risk. Termination triggers asset recovery obligations: state land is returned, imported duty-exempt assets become subject to duty assessment, and any incentive recoupment may be assessed. Voluntary project termination — with proper wind-down of labour contracts, tax clearance, and asset disposal — is the cleanest exit path.

What is the process for exiting a Vietnam factory investment?

Exit options for a foreign-invested factory: (1) Share transfer — sale of 100% of equity in the FIE to a Vietnamese buyer or another foreign investor; requires IRC and ERC amendment; subject to capital gains assessment (20% on the gain); (2) Asset sale — sale of machinery and other assets to a third party; subject to VAT and asset transfer documentation; land use rights (sub-lease) cannot be transferred outside the industrial park framework without IPA consent; (3) Capital reduction — reduction of charter capital with corresponding reduction of registered investment capital; subject to creditor protection procedures under Enterprise Law 2020; (4) Company dissolution — voluntary winding up under Enterprise Law 2020 Chapter X; requires tax clearance certificate, social insurance settlement, labour contract termination, creditor notification, and DPI de-registration. Allow 6–12 months for a clean voluntary dissolution. Most practical exit: share transfer to an identified buyer with a negotiated transition period.

What are the 10 non-negotiable due diligence items before committing to a Vietnam factory investment?

Ten non-negotiable pre-commitment due diligence items: (1) Sector eligibility — confirm the product is not in the Prohibited or Conditional Investment Sector list under Investment Law 2020; (2) BIT coverage — structure via a jurisdiction with a strong BIT with Vietnam; (3) Land lease due diligence — remaining term, developer’s upstream lease, infrastructure commitments, zone master plan status; (4) Incentive verification — confirm preferential CIT rate, exemption period and eligibility conditions in writing from the IPA; (5) Environmental pre-screening — confirm EIA requirement and timeline before project schedule is fixed; (6) Utilities capacity — signed commitments from the zone developer for power, water and wastewater; (7) Labour market scan — availability of required skills in the target province at projected wage; (8) IRC timeline modelling — include realistic (not statutory) processing timelines and first-submission completeness risk; (9) Regulatory advisor appointment — engage local counsel before site selection, not after; (10) Exit planning — structure the investment from Day 1 to preserve optionality: share transfer mechanism, BIT backstop, and asset documentation.