ISSUE OF JULY 2026 – NEW POINTS IN THE 2025 CONSTRUCTION LAW, IMPACT ON BUSINESSES

1. Reclassification of construction investment projects

The 2025 Construction Law streamlines the classification of projects from the four categories under the 2014 Construction Law (public investment capital; state capital other than public investment capital; PPP; and other capital) down to three categories under Article 17: (i) public investment projects; (ii) PPP projects; and (iii) business investment projects – which comprise the majority of enterprise-sector projects, including those of state-invested enterprises operating under the Law on Enterprises. The classification of an enterprise’s project as a “business investment project” has implications running throughout the entire Law: the enterprise is entitled to independently determine the content of the design and to self-appraise and approve the design developed after project approval[1]; to independently select its project management model[2]; and is not required to comply with the cost-norm system and the cost-management principles applicable to public investment projects[3].

Enterprises with state capital participation (for example, a joint-stock company with controlling state capital that nonetheless operates under the Law on Enterprises) should review the classification of their projects under the three new categories, as this classification determines the entire set of appraisal, permitting and cost management procedures to be applied. Misclassification may result in the wrong procedure being followed or in compliance obligations being overlooked.

2. Reform of the legal regime governing construction contracts

The 2025 Construction Law comprehensively revises and supplements the chapter on construction contracts[4] so as to align it with the Law on Bidding and the 2015 Civil Code, and to reinforce the principle of freedom and voluntariness of agreement. The new provisions of greatest importance to enterprises are as follows:

• Force majeure events and fundamental change of circumstances

Force majeure events and fundamental change of circumstances for the first time codified in the construction sector, these serve as grounds on which the parties may amend, suspend or terminate a contract where an objective change of circumstances arises. Under Article 13, force majeure events in construction activities include situations such as natural disasters, environmental catastrophes, fire, epidemics, or states of emergency relating to national security, social order and safety, and national defence. In addition, collective actions or acts obstructing trade such as strikes, work stoppages, embargoes and blockades as well as matters arising from the discovery of antiquities or archaeological finds at the construction site, are also classified within this category. The Law further provides for other cases prescribed by relevant specialised legislation, so as to ensure comprehensive coverage of objective changes of circumstances beyond the will of the parties.

A fundamental change of circumstances in construction activities is established where the State changes its policies or laws, or where abnormal geological conditions arise that could not have been foreseen in the course of the survey and at the time the contract was originally concluded. Other cases prescribed by relevant law may also be treated as a fundamental change of circumstances where continued performance of the contract on its original terms would cause serious harm to one of the parties. The determination of such events must fully satisfy the requirements of civil law as to objectivity and the impossibility of remedy notwithstanding the application of all necessary measures.

• Security for the performance of obligations under a construction contract[5]

According to the new Construction Law, the employer is entitled to require the contractor to provide security for the performance of its obligations; conversely, the contractor is entitled to require the employer to demonstrate its financial capacity or to provide security for its payment obligations, except cases that the construction contract forms part of a public investment project.

Furthermore, the right to require the investor to demonstrate financial capacity or to provide security for its payment obligations is a useful tool enabling contractors and suppliers to protect themselves against the risk of late payment; enterprises acting as contractors should incorporate this provision into the contract templates they currently use. Conversely, enterprises acting as investors in business investment projects should note that this obligation is not exempted in the same manner as for public investment projects, and should review their existing penalty clauses to avoid overlap with the newly recognised pre-agreed (liquidated) damages mechanism.

3. Design verification requirements for works subject to fire prevention and fighting appraisal

Under the 2025 Construction Law, verification of the design of works subject to fire prevention and fighting (“FPF”) appraisal has become a mandatory legal requirement carrying greater precedence than under the previous regulations. Specifically, pursuant to Clause 5, Article 26, the new Law expressly provides that works forming part of a construction investment project that are subject to design appraisal for FPF purposes under the law on fire prevention and fighting, rescue and salvage must undergo design verification to ensure compliance with FPF design requirements. This represents a shift in the management process, in that the verification result is not merely a technical procedural matter but also serves as an important legal and professional basis on which the construction authority appraises the Feasibility Study Report. This requirement is intended to strengthen quality control of the design from the project’s preparation stage onward, enabling the investor and other stakeholders to identify and remedy defects in fire-containment, evacuation or technical-system solutions at the drawing stage, thereby enhancing the level of safety assurance for the works and protecting the overriding interests of the community.

In addition to making the verification step mandatory, the 2025 Construction Law also establishes a close coordination mechanism among the regulatory authorities and clearly assigns responsibility to the investor throughout the life of the project. When appraising the Feasibility Study Report, the construction authority is responsible for evaluating the FPF design solution to ensure strict compliance with applicable technical regulations and standards[6]. For special projects such as special public investment projects, FPF requirements are further tightened, in that the construction design must be reviewed by a consultancy organisation, which must conclude that FPF requirements have been satisfied prior to approval. Another notable innovation is the amendment and supplementation of the Law on Fire Prevention and Fighting, Rescue and Salvage to establish, on a unified basis, that the construction authority will organise the appraisal of FPF content as part of its appraisal of the project, thereby reducing the administrative burden on enterprises while still ensuring an adequate degree of specialised scrutiny. Once the project has been approved, the investor is granted the authority to self-appraise and approve the design subsequently developed, but remains fully responsible for satisfying the legal requirements on FPF and for ensuring the safety of neighbouring works in accordance with the dossier previously verified and appraised[7].

4. Changes to the conditions for commencement of construction

The provisions on conditions for commencement of works under Article 48 mark a significant step forward in modernising administrative procedures, in particular through the digitalisation of the notification process. Accordingly, in addition to the underlying requirements such as availability of the construction site, a valid construction permit (for works not exempted) and an approved construction drawing design the investor may now discharge its obligation to give notice of commencement by written or online means to the local state authority responsible for construction[8]. This innovation is linked to the principle of construction-order management applying continuously from the time the notice of commencement is received through to acceptance testing and hand-over of the works for operation[9].

One of the most significant departures from the previous regulations is the complete abolition of the requirement to “allocate sufficient funding in line with the project schedule”, which was a mandatory requirement under the 2014 Construction Law[10]. The removal of this financial condition from the commencement dossier under Article 48 reduces the administrative burden and shifts responsibility for ensuring resources from a pre-commencement control mechanism to the investor’s own autonomy and accountability in the course of project management. This change reflects the new regulatory approach of the Construction Law, which focuses on removing obstacles so that works can proceed on site as soon as the essential technical and legal requirements have been satisfied.

In addition, Article 48 establishes a particularly streamlined commencement mechanism for projects of an important or urgent nature. For emergency or urgent works, or for special public investment projects carried out under the direction of the Politburo, the Secretariat or the Government, the conditions for commencement are reduced to the minimum, requiring only that the site be available for hand-over, in whole or in part[11]. For private dwelling houses of households and individuals, procedures are likewise simplified: the obligation to give notice of commencement expressly does not apply[12], and it is only required that the owner hold a construction permit (where applicable) and ensure that the works are built on land lawfully designated for residential use in accordance with the applicable regulations[13].

5. Streamlining of administrative procedures and expansion of construction-permit exemptions

For business investment projects, the Law allows the person deciding on investment to use a FEED design[14] or a technical design in place of the basic design in the Feasibility Study Report; in addition, the investor is permitted to self-appraise, control and approve the design subsequently developed after project approval, rather than submitting it for appraisal by the construction authority as previously required, except for works that have a significant impact on public safety or that are subject to fire prevention and fighting appraisal.

At the same time, Article 89 significantly expands the scope of exemption from construction permits, the most notable cases being: works forming part of a project for which the Feasibility Study Report has already been appraised by the construction authority and approved, which are not required to obtain a separate construction permit; and Grade IV works and private dwelling houses of fewer than 7 storeys with a total floor area of less than 500 m², located outside areas subject to a detailed plan or an architectural-management regulation. In return, investors of works falling within the exempt categories must give notice of commencement together with a dossier equivalent to a permit-application dossier, for the purposes of construction-order management.

The transfer of design self-appraisal authority to investors, together with the expanded permit exemption, will considerably shorten investment-preparation time, but will also shift the entire legal responsibility for the quality and safety of the design and the lawfulness of the works onto the investor. Enterprises should strengthen internal controls or engage an independent verification consultant, and should retain complete commencement-notice dossiers equivalent to permit dossiers, so as to avoid being treated as having constructed without a permit in the event of an inspection.

6. Abolition of the construction activity capacity certificate for enterprises

Article 88 of the 2025 Construction Law entirely abolishes the requirement for organisations and enterprises to satisfy capacity conditions and to hold a construction activity capacity certificate a requirement that, under Article 148 of the previous instrument, had entailed a fairly onerous application and renewal procedure. This change is of particular significance for foreign invested enterprises newly entering the Vietnamese market for construction consultancy, design, supervision and construction services. The Law continues to require a practising certificate for individuals holding key positions[15], but has removed the requirement for an examination on professional experience and legal knowledge as a condition for the issuance of an individual practising certificate.

Responsibility for the practical verification of capacity now shifts to the investor when selecting a contractor, and to the individual practitioner through his or her individual practising certificate. Enterprises should review their internal capacity records to ensure that key personnel hold the appropriate practising certificates, as this will now be the principal basis for demonstrating capacity when bidding or entering into contracts, in place of the enterprise capacity certificate that has been abolished.

7. Changes concerning pre-agreed (liquidated) damages and compensation

One of the important changes introduced by the 2025 Construction Law is the formal recognition of pre-agreed (liquidated) damages as a basis for determining compensation under a construction contract. Under Clause 2, Article 86, compensation for damage is now determined on the basis of two parallel factors: actual loss, and the pre-agreed levels of damages corresponding to each contractual obligation breached and the specific degree of breach. This represents a significant advance on the 2014 Construction Law, which focused primarily on requiring the parties to prove the actual loss incurred a process that was often difficult, costly and time-consuming in the resolution of disputes.

In legal substance, pre-agreed damages do not entirely replace actual damages, but instead become a flexible risk-management tool, enabling the parties to anticipate the consequences of breach as early as the contract-negotiation stage. The parties may pre-calculate the level of compensation for material breaches such as delay in handing over the site, delay in the progress of a key work item, or breach of material specifications resulting in the need for replacement. This approach makes construction contracts more transparent and is particularly useful for large-scale, long-duration projects involving multiple subcontractors, thereby helping to better protect the cash flow and commercial interests of the parties concerned.

In addition, the 2025 Construction Law also draws a clear distinction between the regime of penalties for breach and the regime of compensation for damage, so as to avoid confusion in practical application. Unlike investment projects without state capital, where the penalty level is applied on the basis of the principle of free agreement under Article 418 of 2015 Civil Code[16], for public investment projects and PPP projects, Clause 3, Article 86 maintains a cap on the penalty for breach of not more than 12% of the value of the breached portion of the contract; the breaching party nevertheless remains obliged to pay compensation for damage at the pre-agreed level, or for the actual additional loss arising, to the other party and to any third party, as applicable. This clear recognition of the bases for compensation requires enterprises, when drafting contracts, to define specific measurement criteria and to avoid arbitrary levels of compensation, so as to limit the risk of an interpretation unfavourable to them in the event of a dispute.

[1]Article 26 of the 2025 Construction Law

[2]Article 32 of the 2025 Construction Law

[3]Articles 73, 77 and 78 of the 2025 Construction Law

[4]Articles 80–87 of the 2025 Construction Law

[5]Article 83 of the 2025 Construction Law

[6]Article 27 of the 2025 Construction Law

[7]Articles 29 and 30 of the 2025 Construction Law

[8]Clause 2, Article 48 of the 2025 Construction Law

[9]Article 47 of the 2025 Construction Law

[10]Point dd, Clause 1, Article 107 of the 2025 Construction Law

[11]Clause 2, Article 48 of the 2025 Construction Law

[12]Point dd, Clause 1, Article 48 of the 2025 Construction Law

[13]Clause 3, Article 48 of the 2025 Construction Law

[14]Overall technical design (FEED), as defined under Clause 13, Article 3

[15]Chief/lead of design, survey, design verification and construction supervision; lead of cost management

[16]Pursuant to Article 4 of the 2025 Construction Law