Vietnam is shaping strategic steps to become a destination for global capital flows, most notably with the plan to establish international financial centers in Ho Chi Minh City and Da Nang. As the doors of integration open wider, domestic enterprises will have opportunities to access large-scale investment projects, but at the same time must also face more sophisticated legal risks.
One of the risks that is often overlooked but can alter the entire course of a transaction is ratification—an act that may appear merely procedural but in fact carries significant binding legal force. The case of Permana v One Tree Capital Management in Singapore is a typical example, offering valuable practical lessons for Vietnamese enterprises in managing risks when participating in international investment projects. This analysis will focus on clarifying the legal nature of ratification through the Permana v One Tree Capital Management case, while linking it to Vietnamese law and investment practice, in order to highlight potential risks as well as key considerations for Vietnamese enterprises in international investment projects.
1. Case Summary
The case of Tonny Permana v One Tree Capital Management Pte Ltd before the Singapore Court revolved around a commercial dispute concerning the restructuring of a cross-border investment and the legal effect of ratification. Mr. Tonny Permana, an Indonesian businessman, invested USD 1.6 million in a shopping mall project in Malaysia through a convertible loan note (CLN) secured by personal guarantees and share pledges from the project company’s founders. This investment was arranged by One Tree Capital Management, a Singapore fund management company led by Mr. Gerald Yeo. One Tree altered the investment structure: the CLN was replaced by a shareholder loan in the name of One Tree, and Mr. Permana executed a Trust Deed authorizing One Tree to hold the loan “on his behalf.” This restructuring eliminated all the original security. When the project company went bankrupt, Mr. Permana lost his entire investment and sued One Tree and Mr. Yeo, alleging fraud, misrepresentation, breach of fiduciary duty, breach of agency duty, negligence, and dishonest assistance.
The Singapore Court dismissed all of Mr. Permana’s claims, holding that One Tree’s fiduciary duties were confined to the contractual framework and did not extend to the broader obligations of a trustee. More importantly, Mr. Permana’s execution of the Trust Deed was deemed to constitute ratification, by which he accepted the restructuring and forfeited the right to sue for prior breaches. The Court further found insufficient evidence of fraud and emphasized that, as a professional investor, Mr. Permana was expected to understand the risks of his commitments.
This judgment is significant in underscoring the legal weight of ratification: a single signature may extinguish the right to bring claims for prior breaches. At the same time, the case reaffirms the Singapore Court’s strict approach in safeguarding contractual certainty and limiting fiduciary obligations in the context of international commercial investment.
2. Explanation of Ratification
Ratification in international commercial law refers to the act by which a party, after becoming aware of or being informed of an act or transaction (potentially adverse), signs or otherwise confirms in writing its acceptance of that act, thereby rendering a transaction that might otherwise be void valid and binding from the outset.
Vietnamese law also provides for ratification. The Civil Code 2015 stipulates that if a representative without authority enters into a contract, but the contract is subsequently ratified, it shall be effective from the time of its conclusion. The Law on Enterprises 2020 likewise permits a company to ratify decisions of its legal representative so as to bind the company to third parties. This means that in practice, once a Vietnamese enterprise ratifies, it cannot invoke “lack of authority” or “procedural defects” to invalidate the contract. Ratification may serve to ensure stability and certainty in transactions, but conversely, if undertaken without due caution, it may deprive enterprises of the ability to protect their interests, even where the counterparty has committed serious breaches. In the context of international investment projects, Vietnamese enterprises are often under pressure to swiftly sign restructuring or supplemental documents, and the greatest risk is inadvertently waiving the right to sue or accepting the release of security.
3. Vietnamese Legal Practice on Ratification
As Vietnamese enterprises increasingly participate in international investment projects, the risks of ratification warrant particular attention. In practice, a single ratifying signature in restructuring or amending documents may entail serious legal consequences:
Loss of the right to sue: When a Vietnamese enterprise signs a document acknowledging the restructuring or amendment of a contract, such act is often regarded as consent to legalize the entire transaction, including prior breaches. This may result in the enterprise inadvertently waiving its right to sue the counterparty for breaches of obligations, fraud, or past misconduct. In the event of a dispute, courts or arbitral tribunals may rely on the ratification to dismiss claims for damages.
Loss of security: One of the gravest risks is that ratification may amount to acceptance of the release or alteration of security measures such as personal guarantees, share pledges, or asset mortgages. These are the “shields” protecting the enterprise’s interests. Without awareness, ratification may deprive the enterprise of crucial tools to recover capital when the project fails or the counterparty becomes insolvent.
Difficulties in international enforcement: In international disputes, courts and arbitral tribunals often treat ratification as binding evidence of the enterprise’s consent. This makes it difficult for Vietnamese enterprises to argue coercion or lack of agreement. Moreover, when judgments or awards are brought to Vietnam for recognition and enforcement, Vietnamese courts are also inclined to respect such ratification, leaving enterprises with little recourse.
Impact on reputation and finance: An imprudent ratification decision may not only cause direct financial loss (loss of capital, loss of claims) but also damage the enterprise’s reputation in international markets. Foreign partners and investors may perceive Vietnamese enterprises as lacking prudence in risk management, thereby reducing their ability to raise capital, access international credit, or participate in major projects. In the global competitive environment, reputation and credibility are invaluable intangible assets.
4. Notes for Vietnamese Enterprises When Ratifying
Exercise caution before signing Enterprises must not sign any supplemental documents, contract addenda, or agreements such as Trust Deeds without fully understanding the legal consequences. A single signature may legalize prior breaches by the counterparty, depriving the enterprise of the right to sue or of security. Therefore, careful review, risk analysis, and long-term impact assessment are essential before signing.
Seek independent legal advice In international transactions, the governing law may differ significantly from Vietnamese law. Enterprises should consult experienced domestic counsel to understand Vietnamese legal implications, and also engage international counsel or foreign law firms to analyze the impact under the governing law of the contract. Independent advice helps enterprises avoid being led by counterparties or signing under disadvantageous circumstances.
Reserve rights If commercial reasons or negotiation pressure compel an enterprise to sign a ratification document, it should expressly state in the document or addendum: “This execution does not constitute a waiver of the right to bring claims for prior breaches.” Such a reservation preserves the enterprise’s ability to litigate in the future and prevents the ratification from being construed as comprehensive.
Internal procedures Enterprises should establish multi-tier approval mechanisms, particularly for transactions involving security, loan restructuring, or material contract amendments. This process should include legal review, financial assessment, and opinions from supervisory boards or boards of directors, with execution permitted only upon high-level consensus. This minimizes risks arising from unilateral or unauthorized ratification by individuals or departments.
Choice of governing law and dispute resolution forum: In international contracts, the choice of governing law and dispute resolution forum is decisive. Different legal systems treat ratification differently: some regard it as a complete waiver of claims, others allow partial reservations. Enterprises should carefully consider, and where possible, select laws and forums that afford stronger investor protection, or at least are familiar to Vietnamese law.
Risk management training: Management and legal departments should receive regular training on legal risks in international transactions, particularly ratification risks. Raising awareness helps enterprises avoid imprudent decisions and fosters a sustainable risk management culture. This is vital for Vietnamese enterprises to enhance credibility and competitiveness in global markets.
Conclusion
The case of Tonny Permana v One Tree Capital Management demonstrates the extraordinary legal force of ratification in international commercial transactions. A single signature acknowledging a restructuring extinguished the investor’s right to sue, even where the counterparty had arguably committed serious breaches. This judgment reflects the Singapore Court’s strict approach to safeguarding contractual certainty and emphasizes that stability and transparency in transactions are prioritized over considerations of fairness to one party. It serves as a warning to investors and enterprises that imprudent ratification may become a “legal trap” depriving them of protective remedies.
For Vietnam, the lesson is of critical importance. Current law, particularly the Civil Code 2015 and the Law on Enterprises 2020, also recognizes the binding effect of ratification. Once an enterprise ratifies, the transaction is deemed valid from inception, and the enterprise cannot invoke “lack of authority” or “procedural defects” to invalidate the contract. Accordingly, in international investment projects, Vietnamese enterprises must exercise utmost caution, establish rigorous internal control mechanisms, and always engage professional legal counsel before making any ratification decision, in order to safeguard long-term interests and maintain credibility in the global marketplace.
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