Confidentiality obligations after termination of a business cooperation contract (BCC)

When terminating a cooperation relationship, confidentiality obligations after the termination of a Business Cooperation Contract (BCC) become a potential legal risk if they are not clearly regulated and strictly controlled.

I. Common legal risks related to confidentiality obligations after termination of a business cooperation contract

After a business cooperation contract is terminated, the parties often focus on liquidating financial obligations while overlooking confidentiality obligations that arose throughout the cooperation period. In practice, confidentiality after termination of a business cooperation contract is one of the issues that entails significant legal risks, potentially leading to complex disputes and serious damage to enterprises.

First and foremost, the most common risk is the continuous use, disclosure, or exploitation of the other party’s confidential information after the contract has been terminated. Information such as customer lists, business data, technical know-how, and development strategies may result in the loss of competitive advantage and cause direct damage to the infringed party if unlawfully used.

In addition, business cooperation contracts that fail to clearly stipulate the scope, duration, and form of confidentiality obligations after termination are also a major source of risk. When disputes arise, the absence of specific clauses makes it difficult for the non-breaching party to prove that confidentiality obligations remain effective and to determine the legal liability of the breaching party.

Furthermore, risks may arise from inadequate management, retrieval, and destruction of confidential information after contract termination. In many cases, personnel of the former cooperating party continue to retain documents and internal data without effective control mechanisms, increasing the likelihood of information leakage or unauthorized use.

Finally, insufficient awareness of confidentiality obligations after termination of a business cooperation contract may expose enterprises to legal consequences such as claims for damages, contractual sanctions, or measures under laws on the protection of trade secrets and data. These risks demonstrate that establishing and enforcing confidentiality mechanisms after contract termination is an essential requirement that must not be underestimated by parties engaged in business cooperation.

II. Understanding confidentiality obligations after termination of a business cooperation contract

In business cooperation practice, confidentiality obligations do not automatically terminate upon contract expiry, but often continue to bind the parties even after the termination of a business cooperation contract. A clear understanding of infringing acts, concepts, forms of confidentiality, and related risks enables enterprises to proactively prevent disputes and protect their lawful interests.

1. What acts commonly lead to breaches of confidentiality obligations after termination of a business cooperation contract?

Acts that breach confidentiality after termination of a business cooperation contract typically arise from the use, disclosure, or transfer of confidential information without the consent of the other party. The most common acts include using customer data, partner lists, business strategies, or technical know-how for personal business purposes or disclosing such information to competitors.

In addition, failure to retrieve, destroy, or control confidential information after contract termination can easily lead to breaches, especially electronic documents and data stored on internal systems. In certain cases, violations may also stem from individuals’ lack of awareness or compliance with confidentiality obligations, particularly personnel who were previously involved in performing the cooperation contract.

2. What is confidentiality obligation after termination of a business cooperation contract?

Confidentiality obligation after termination of a business cooperation contract refers to the obligation to continue maintaining confidentiality and to refrain from unauthorized use of information falling within the scope of confidentiality that the parties accessed during the cooperation period, even after the contract has expired or been terminated ahead of schedule.

Such an obligation may arise from provisions in the business cooperation contract, contract appendices, a separate non-disclosure agreement (NDA), or mandatory provisions of law on the protection of trade secrets, internal information, and related data. Confidentiality aims to protect the rights, reputation, and competitive advantages of the information owner.

3. What forms of confidentiality are commonly applied after termination of a business cooperation contract?

After termination of a business cooperation contract, parties commonly apply various forms of confidentiality. The most typical is an agreement that confidentiality obligations continue to be effective after termination, clearly defining the scope of confidential information, the confidentiality period, and sanctions for breaches.

In addition, technical and managerial measures such as retrieving documents, revoking system access rights, encrypting data, destroying information, or requiring relevant individuals to sign separate confidentiality undertakings are often applied. These measures help minimize the risk of information leakage after the cooperation relationship ends.

4. What risks arise from failing to maintain confidentiality after termination of a business cooperation contract?

Failure to maintain confidentiality after termination of a business cooperation contract may result in serious legal and economic risks. First is the risk of being required to compensate for damages or to pay contractual sanctions under the cooperation contract or confidentiality agreement.

Moreover, breaches of confidentiality obligations may lead to legal liability under applicable laws, including civil and administrative liability, and in particularly serious cases, criminal liability if the infringement of trade secrets is severe. At the same time, information leakage may directly affect an enterprise’s reputation, brand value, and long-term competitiveness in the market.

III. Legal regulations related to confidentiality after termination of a business cooperation contract

Confidentiality obligations after termination of a business cooperation contract are not only established based on the parties’ agreements but are also recognized and protected by Vietnamese law through various legal instruments. Understanding the relevant legal grounds and sanctions is an important basis for parties to protect their lawful rights and interests in the case of a breach.

1. Which laws regulate confidentiality obligations after termination of a business cooperation contract in Vietnam?

Confidentiality obligations after termination of a business cooperation contract in Vietnam is governed by multiple legal provisions, including:

• Law on Investment 2020: Article 28 regulates the contents of a business cooperation contract, including termination;
• Civil Code 2015: Article 512 on termination of cooperation contracts; the principle of good faith and honesty in terminating civil rights and obligations (Clause 3, Article 3);
• Law on Intellectual Property 2005, as amended in 2009, 2019, and 2022: Article 84 on general conditions for trade secrets to be protected; Article 125 on the right to prevent others from using trade secrets; Clause 1, Article 127 on acts deemed as infringements of rights to trade secrets.

Accordingly, confidentiality obligations after termination of a business cooperation contract arise not only from contractual agreements but are also recognized and protected by Vietnamese law through various statutes.

2. Are there sanctions for breaching confidentiality obligations after termination of a business cooperation contract?

Vietnamese law provides for various sanctions against breaches of confidentiality obligations after termination of a business cooperation contract.

• Civil liability: First, the breaching party may take civil liability, including the obligation to cease the infringing act and to compensate for damages caused by the breach, in accordance with Article 360 of the Civil Code 2015.
• Administrative liability:
• In addition to civil liability, breaches may be subject to administrative sanctions under laws on competition, intellectual property, cybersecurity, or data protection, depending on the nature and severity of the violation.
• For example, pursuant to Clause 7, Article 4 and Article 16 of Decree No. 75/2019/ND-CP on administrative sanctions for violations involving confidential business information, a fine ranging from 200 million VND to 300 million VND may be imposed for acts such as: Accessing or collecting confidential business information by circumventing the information owner’s security measures; disclosing or using confidential business information without the owner’s consent.
• Criminal liability: In serious cases where infringement of trade secrets causes substantial consequences, offenders may also be subject to criminal liability under the Criminal Code 2015, for example Article 288 on the crime of illegally providing or using information on computer networks or telecommunications networks.

Thus, sanctions applicable to breaches of confidentiality obligations are relatively strict, aiming to deter violations and protect the legitimate rights and interests of infringed parties.

3. Whose interests are protected when a breach of confidentiality obligations after termination of a business cooperation contract occurs?

When a breach of confidentiality obligations after termination of a business cooperation contract occurs, the lawful rights and interests of the confidential information owner are the primary objects of legal protection. Such a party has the right to request the breaching party to cease the infringing acts, compensate for damages, and apply necessary protective measures in accordance with law.

At the same time, the law also protects order and safety in business activities and fair competition, thereby contributing to the maintenance of a transparent and equitable business environment. Protecting the rights of infringed parties not only has individual significance but also reflects the role of law in safeguarding trade secrets and promoting sustainable market development.

IV. Questions related to confidentiality obligations after termination of a business cooperation contract

In practice, after a business cooperation contract is terminated, the management, use, and protection of shared information often lead to various legal issues. Below are common questions and detailed analyses to help enterprises identify risks and adopt appropriate solutions.

1. May previously shared information be used after contract termination?

The use of information after contract termination primarily depends on the confidentiality agreement and the nature of the information. If the information constitutes trade secrets, internal data, or non-public information, and the contract stipulates that confidentiality obligations remain effective after termination, the receiving party is not permitted to use such information for any purpose beyond the agreed scope.

Even where the contract doesn’t state a specific confidentiality provision, the use of information that causes damage to the other party may still be deemed a breach of the principles of good faith and honesty and an infringement of the information owner’s lawful rights and interests.

2. May the parties require the counterparty to sign a new confidentiality agreement after termination of the business cooperation contract?

Vietnamese law does not prohibit parties from entering into a separate confidentiality agreement (NDA) after termination of a business cooperation contract.

In practice, it is a commonly adopted solution to clarify the scope of confidential information, confidentiality duration, and sanctions for breaches, particularly where parties continue to have contact or retain each other’s information after termination. However, such agreements must be based on the voluntary consent of the parties and must not contravene the law.

3. What should be done if the counterparty fails to comply with confidentiality obligations after contract termination?

Upon detecting a breach, the non-breaching party should promptly collect evidence proving the unauthorized disclosure or use of information (emails, documents, electronic data, statements, etc.).

Thereafter, measures may be taken such as: Issuing a written request to cease the infringing acts; claiming compensation for damages under the contract or in accordance with the Civil Code 2015; requesting competent authorities to impose administrative sanctions; or initiating litigation before a court or arbitration to protect lawful rights and interests.

4. What can an enterprise do to prevent breaches of confidentiality obligations after termination of a business cooperation contract?

Enterprises should proactively establish a multi-layer confidentiality mechanism, including: clearly stipulating confidentiality clauses and their post-termination effectiveness; classifying confidential information; restricting access rights; requiring the return or destruction of data upon termination of cooperation; and linking confidentiality obligations with specific sanctions.

In addition, personnel training and strict internal controls are also main factors in minimizing the risk of breaches.

5. If an employee of Party A unlawfully uses Party B’s information after contract termination, who takes liability?

In many cases, Party A may still take liability for the acts of its employee if such acts are performed within the scope of employment or arise from failures in management or supervision. After compensating Party B, Party A may seek reimbursement from the infringing employee in accordance with labor law or internal agreements.

At the same time, the individual violator may also be subject to administrative or criminal liability if the conduct satisfies the elements of an offense under applicable law.

V. Are you seeking a reputable law firm to support issues related to confidentiality after termination of a business cooperation contract?

Confidentiality obligations after termination of a business cooperation contract is a complex legal issue that entails numerous risks if not properly advised and handled. Support from experienced lawyers and legal experts will help enterprises review contracts, establish appropriate confidentiality mechanisms, and represent them in protecting their rights in disputes, thereby minimizing losses and ensuring legal safety in business operations.

The above information is for reference purposes only. For detailed advice tailored to specific circumstances, please contact NPLaw for prompt consultation.