After two decades in effect, the Law on Commerce 2005 has revealed numerous bottlenecks and overlapping provisions that have increased compliance costs for businesses. The latest draft amendment is expected to remove these barriers, uphold market principles, and restore the Civil Code to its central role, helping unlock institutional constraints and encourage long-term investment.
Mr. Le Ba Ngoc, Senior Legal Specialist in the Legal Department at the Ministry of Industry and Trade (MoIT), said amending and improving the Law has become essential given that Vietnam’s total import-export turnover surpassed $930 billion in 2025, making it the 18th-largest trading economy in the world.
“Maze” of contract rules
One of the proposals attracting particular attention from lawyers and the business community is the removal of provisions concerning contracts, remedies, and commercial dispute resolution from the Law on Commerce 2005, with these matters to be governed consistently under the Civil Code.
Mr. Tran Van Dung, Attorney at Law and Chairman of Vu Mackenzie Vietnam Law Firm (VMK), said the proposal is not merely a matter of legislative drafting but a breakthrough step toward resolving a substantive bottleneck that has imposed significant costs on the economy.
The coexistence of two separate sets of rules governing civil and commercial contracts over the past two decades has created four major difficulties for businesses.
First is the conflict over applicable law and the resulting lack of predictability. When entering into a contract, businesses can find themselves in a legal maze, unable to clearly determine whether their agreement will primarily be governed by the Civil Code or the Law on Commerce. Even adjudicating bodies have not always taken a consistent approach. Case law and disputes in the construction sector have included instances in which a court of first instance applied the Civil Code, while an appellate court subsequently applied the Law on Commerce on the grounds that the transaction constituted a profit-making activity.
Second is the 8 per cent cap on contractual penalties under Article 301 of the Law on Commerce 2005. By limiting penalties to no more than 8 per cent of the value of the breached obligation, the provision has inadvertently created space for opportunistic behavior. Moving toward the Civil Code framework would give greater weight to the parties’ freedom to agree on contractual penalties, requiring them to take greater responsibility for their commitments rather than relying on the 8 per cent ceiling when deliberately breaching an agreement.
Third is the inconsistent use of legal terminology. The Civil Code uses the concept of a “serious breach,” while the Law on Commerce refers to a “fundamental breach.” Though the two concepts are substantively similar, the difference in terminology has led to prolonged disputes before courts and arbitration bodies simply over how a breach should be classified for the purpose of applying contract-cancellation remedies. Establishing a single framework under the Civil Code would eliminate these unnecessary technical disputes.
Fourth is the financial burden and pressure placed on the justice system. Data from the Vietnam International Arbitration Centre shows that the number of contract disputes reached a record 478 cases in 2024. The average cost of resolving a contract dispute in Vietnam is estimated at about 29 per cent of the value of the claim.
Mr. Dung said removing overlapping provisions from the Law on Commerce and reaffirming the Civil Code’s central role would be a bold step. The approach would reduce administrative costs, procedural time, and litigation risks, thereby improving marginal profitability and encouraging long-term investment flows into the economy.
Removing barriers
In modern business, legal compliance has become a significant cost that directly affects corporate competitiveness. To optimize the investment environment, the draft law proposes a major review and reduction of provisions that overlap with the Law on Investment, particularly those governing commercial inspection services and lists of conditional business lines and goods and services.
Regarding commercial inspection services, Mr. Ngoc said the review found that the Law on Investment 2020 removed commercial inspection services from the list of conditional investment and business sectors. However, the Law on Commerce 2005 still retains these requirements, creating an inconsistency in the legal framework. Removing commercial inspection services from the list of conditional businesses under the Law on Commerce is therefore necessary to restore consistency across the legal system.
Mr. Dung said inspection companies would have to strengthen their capabilities to remain competitive, adopt international standards such as ISO/IEC 17020 and obtain professional liability insurance. This, he said, represents a more modern approach to governance that is closer to international practice.
Alongside inspection services, the draft law also proposes completely removing provisions concerning lists of prohibited, restricted, and conditional goods and services from the Law on Commerce. According to Mr. Ngoc, an impact assessment conducted by the drafting agency found that 42 per cent of businesses face significant difficulties when having to consult and cross-check multiple legal documents governing the same business activity.
Removing these lists entirely from the Law on Commerce and consolidating them under a single framework in the Law on Investment would eliminate legal “gray areas” and allow investors to save both time and compliance costs.
Shaping markets
Looking to the long term, experts say commercial lawmaking needs to shift decisively from “managing transactions” toward “shaping markets” to meet the demands of a new era and align with the spirit of Resolution No. 66-NQ/TW from the Party Central Committee.
Looking ahead, Mr. Dung highlighted five core areas that Vietnam’s commercial legal framework needs to address.
The first is digital commerce. The second is the regulation of digital platforms and e-commerce marketplaces, including clearly defining the obligations of technology-based intermediaries. The third is establishing an online dispute resolution (ODR) mechanism to optimize time and costs for electronic transactions, following trends seen in Singapore and the EU. The fourth is promoting green and sustainable trade, supporting businesses in meeting environmental, social, and governance (ESG) standards, reducing emissions, and achieving the net-zero target by 2050. And the fifth is introducing post-regulatory impact assessment (Post-AIA) mechanisms and sunset review provisions.
Mr. Dung said sunset review and post-implementation impact assessments could serve as an automatic institutional filter. If, after three years of implementing a business condition, the number of required permits has increased, compliance costs have not fallen, and the regulation has failed to mitigate the relevant risks, the provision would automatically expire. This, he said, would be key to eliminating unnecessary sub-licenses at their root and preventing the accumulation of compliance costs.
Responding to these strategic proposals, Mr. Ngoc said regulators fully support and share the vision. In practice, the MoIT has already taken concrete steps, including advancing the Law on Commerce 2025.
In particular, on June 5 the Party Committee of the MoIT issued Resolution No. 52-NQ/DUB, directing a comprehensive review and assessment of the Law on Commerce 2005 in preparation for a new-generation commercial law. The new legislation is expected to fully integrate requirements related to green transformation, digitalization, and modern governance tools, ensuring that Vietnam’s legal framework not only moves closer to international standards but also serves as a launchpad for faster economic development in the country’s next stage.
One of the proposals attracting particular attention from lawyers and the business community is the removal of provisions concerning contracts, remedies, and commercial dispute resolution from the Law on Commerce 2005, with these matters to be governed consistently under the Civil Code.
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