Vietnam's Novaland wins lawsuit against Korean giant Taekwang Vina over HCMC project

Vietnam's leading developer Novaland has won a legal dispute with South Korea’s Taekwang Vina regarding a major real estate project in Thu Duc city, Ho Chi Minh City.

The company said that the Vietnam International Arbitration Centre (VIAC) entirely rejected Taekwang Vina’s counterclaims and upheld the claims of Gia Huy Real Estate Investment and Development Co., Ltd., a subsidiary of Novaland, ordering the Korean partner to continue performing the contract signed on April 16, 2018 concerning a VND10 trillion ($385 million) real estate project in Long Thanh My ward.

The 7/5 Residential Area project was previously a shooting range managed by Military Region 7. In December 2003, the Prime Minister issued a decision to reclaim the land and transfer it to the Ho Chi Minh City People’s Committee for socio-economic development.

From 2004 to 2013, the project was assigned to 7/5 Company to build a residential area according to the plan. In December 2014, A-Sung International Vina Co., Ltd. (100% owned by TKG Taekwang Vina) became the project investor.

In April 2018, Taekwang Vina signed a contract to transfer 100% of A-Sung International Vina’s shares to Gia Huy Real Estate, effectively handing over full project ownership to the Novaland subsidiary.

Taekwang Vina received a partial payment between April and June 2018. The remaining amount was to be paid after Taekwang Vina fulfilled key transaction conditions, including compensation for site clearance and delivery of clean land. A 1% penalty per month applied for any delay in meeting these conditions.

Despite repeated delays by Taekwang Vina and multiple requests for extensions and penalty waivers, Gia Huy Real Estate, in the spirit of cooperation, agreed to these requests, according to Novaland.

By December 2018, Novaland had raised a VND1.73 trillion ($66.6 million) bond package in preparation to make the final payment. However, Taekwang Vina deliberately stalled the opening of an escrow account required for the transaction, escalating tensions between the parties, Novaland said.

In 2023, after Novaland refused a proposed transfer price increase, Taekwang Vina unilaterally declared the contract terminated, citing Novaland’s difficult financial situation as justification.

In response, Gia Huy Real Estate filed for arbitration at VIAC, demanding that Taekwang Vina fulfill its contractual obligations.

Taekwang Vina counter-sued, requesting that the contract termination be deemed valid and seeking to retain hundreds of billions of VND (VND100 billion = $3.85 million) already received from Gia Huy since 2018.

VIAC ruled in favor of Gia Huy Real Estate, rejecting all of Taekwang Vina’s claims and confirming that the contract remains valid under Vietnamese law. The ruling requires Taekwang Vina to proceed with the capital transfer of A-Sung International Vina - the project investor - to Gia Huy Real Estate.

A Novaland representative described the victory as a positive milestone, following a series of supportive policy developments from the Vietnamese government and regulatory agencies aimed at easing difficulties for the company’s projects.

Earlier, in a separate dispute involving Vietnamese state-run cooperative Saigon Co.op, VIAC ruled on March 11 in favor of Novaland and its subsidiary Nova An Phu, compelling Saigon Co.op to fulfill its obligations under a 2016 development contract for a real estate project in Long Phu ward, also Thu Duc city.

If Saigon Co.op fails to comply, Novaland and Nova An Phu are entitled to directly engage with relevant authorities to secure land use rights, ensuring their legitimate interests.

The Saigon Co.op An Phu project spans 6.9 hectares, with an estimated investment of nearly $450 million. The development will include a shopping mall, luxury apartments, office space, and a hotel.

Novaland is listed on the Ho Chi Minh Stock Exchange (HoSE) as NVL. The stock closed Tuesday, the last trading before Vietnam's five-day holiday, at VND11,400 ($0.44) per share.