Legal protections for local companies

For Vietnam, a highly open economy integrated into global supply chains, such tariffs pose substantial challenges. International businesses operating in Vietnam, including US-based companies, are likely to face rising operational costs, contractual strain, and potential legal disputes resulting from sudden regulatory shifts in importing jurisdictions.

To safeguard ongoing commercial relationships with Vietnamese counterparts, foreign businesses should assess their legal exposure and contractual protections in light of tariff policy volatility. In this regard, Vietnamese law offers two legal frameworks that may support affected parties to manage such disruptions: force majeure and hardship.

Under Vietnamese law, a force majeure event is defined as an event which occurs objectively which cannot be foreseen and remedied by all possible necessary and admissible measures being taken.

Based on this definition, a force majeure event must satisfy three conditions: it must occur objectively, be unforeseeable, and remain irremediable despite all possible efforts. If such an event occurs, the affected party is entitled to an exemption from liability for non-performance (failure to fulfil contractual obligations), including liability for contractual damages.

Except for this definition and its consequences, Vietnamese law does not provide a definitive list of force majeure events, implying that parties are generally free to define them in their contracts.

Where tariffs or non-tariff actions are specifically identified as force majeure events in the contract, the affected party may invoke the clause to suspend the performance until the force majeure event ceases. However, invoking force majeure without a prior agreement can be difficult unless the affected party can demonstrate that all three conditions are met – an often challenging burden.

Meanwhile, Vietnamese law does provide for the continued performance of contracts in the event of substantial changes in circumstances, with characteristics generally aligned with what is referred to as hardship under certain jurisdictions and international instruments, such as the Principles of International Commercial Contracts.

This concept refers to a substantial change in circumstances that significantly alters the balance of the contract, even though it does not make performance impossible. Accordingly, a party may seek to re-negotiate the contract under certain conditions: the change must arise from an objective cause that occurs after the formation of the contract; it must have been unforeseeable at the time the contract was signed; and had the change been known in advance, the contract either would not have been signed or would have included substantially different terms.

Other conditions are if continuing to perform the contract without any adjustment would cause serious harm to one of the parties; and the affected party must have taken all necessary and reasonable measures to mitigate the impact of the change.

In general, hardship supports continuation of the contract rather than termination. If re-negotiation fails, the affected party may request a court or arbitral tribunal to either terminate or modify the contract. Termination is granted only if it causes less harm than forcing performance under changed terms.

Logically, hardship is more applicable to tariff-related disruptions, as they may significantly affect the expected benefits without making performance impossible. That said, the party invoking hardship bears the burden of proving that the tariff changes go beyond ordinary commercial risk and fundamentally alter the contract’s balance.

To benefit effectively from these protections, businesses should draft contracts with tailored clauses that define tariff and non-tariff measures (such as import/export restrictions) as force majeure or hardship events. Clarity in contractual language will improve enforceability and facilitate more equitable risk allocation.

Both foreign and domestic businesses should also prepare practical strategies for managing their global trade continuity. These include careful selection of governing law, dispute resolution mechanisms favouring mediation and arbitration, and well-defined risk allocation provisions. Additionally, consulting legal counsel during contract negotiations is essential to ensure legal resilience amid ongoing policy uncertainty.

Beyond legal clauses, businesses should maintain thorough records of how tariff changes affect their operations, fulfill ongoing obligations where possible, and document mitigation efforts. This not only supports legal arguments in the event of a dispute but also preserves trust in business relationships.

The current tariff turbulence is a reminder of the indirect legal risks inherent in international trade. For foreign businesses operating in Vietnam, it underscores the urgent need for well-drafted contracts and a robust legal framework. Amid an increasingly unpredictable global landscape, companies should reassess existing agreements, evaluate potential exposures, and implement preventive strategies to ensure business continuity and legal protection.