Discussing the settlement of dispute over profit share in business cooperation contract

The purpose of conducting business is to achieve profit. Unlike other investment relations, parties, in business cooperation contracts, are primarily bound by commitments as stipulated in the contract, rather than by the provisions of the law. Therefore, contracts in investment cooperation become the primary basis for determining the rights, obligations, and benefits of the parties, and they also serve as the grounds for resolving disputes that may arise during the course of investment cooperation. In practice, many disputes arise relating to profit agreements in these contracts, and the resolution of these disputes, in many cases, is still dependent on the findings of dispute resolution bodies. Many issues need to be specified, which is why the topic “Discussing the settlement of disputes over profit share in business cooperation contracts” has been chosen by the authors to be presented in this workshop.

Firstly, the Vietnamese law provisions regarding profit distribution agreements in business cooperation contracts.

According to Civil Code 2015, namely Article 504, it is stipulated that a business cooperation contract is an agreement reached by individuals, and legal entities with the aim of jointly contributing capital and effort to execute specific tasks, share profits, and assume collective responsibilities. Meanwhile, according to Clause 14 Article 3 of the Law on Investment 2020, a business cooperation contract (BCC) is defined as a contract signed by investors aimed at cooperating in business, sharing profits, and sharing products without setting up an economic organization.

It can be understood that a business cooperation contract is a contract that is signed by investors for cooperation in business on the contractual ground. Accordingly, capital is jointly contributed, the business is managed, risks are borne, and achieved results are shared without the establishment of any new legal entities. The contents of a business cooperation contract is prescribed in Point c, Clause 1 of Article 28 of the Law on Investment 2020 and Clause 5 of Article 505 of the Civil Code 2015. Specifically, it is compulsory to include the contents of the business investment result distribution agreement among parties.

Thus, the law only stops at stipulating one of the main contents that must be included in a business cooperation contract, which is the distribution of business investment results among parties. As for specific agreements, the general principle is that parties are allowed by the law to freely negotiate and agree upon them. This is consistent with one of the basic principles of civil law as stated in Clause 2, Article 3 of the Civil Code 2015: “Each person establishes, exercises/fulfills and terminates his/her civil rights and obligations based on freely and voluntarily entering into commitments and/or agreements. Each commitment or agreement that does not violate regulations of law and is not contrary to social ethics shall be bound by contracting parties and must be respected by other entities.”

However, with some cooperation methods, the specific provisions on profit distribution agreements that parties need to comply with are also provided by the law. 

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