Solar FIT 2 finally announced in Vietnam but strict timeline remains

Vietnam’s Prime Minister has finally issued a decision on new FITs for solar power projects. The Decision formalizes amounts many had been expecting based on previously circulated draft information but comes nearly a year after the previous FIT rate expired (June 2019) and will leave many wondering why the decision couldn’t have been made much sooner.

Decision 13/2020/QD-TTg dated 6 April 2020 confirms that the new FITs will only be available – for now at least – for projects that COD prior to 31 December 2020.   This is a ridiculously short time line considering the long lead in time for delivery of inverters and, for many projects, completing land acquisition procedures.

The new FITs are:

  • For floating solar energy projects: 7.69 US cents/ kWh
  • For ground mounted solar energy projects: 7.09 US cents/ kWh
  • For rooftop energy solar energy projects: 8.38 US cents/ kWh

While providing welcome certainty, the long delay has seriously stressed many approved and licensed solar projects.   Investors and developers had been left in the dark about what revenue they would receive while simultaneously under pressure to meet construction deadlines stated in investment approvals and PPAs.

On the positive side, the Decision confirms that projects that are eligible for the new FITs are those that obtained Decisions on investment policy prior to 23 November 2019. This throws a wider net than previously-floated criteria that projects would have to have already started construction by that date. Practically speaking however, given the tight COD deadline, it will not dramatically affect the number of projects that have a realistic shot at securing the new FIT. Project owners need to make a very calculated decision now about how hard and fast to push ahead for COD by end of the year. Among myriad factors that could threaten such a target – including COVID-19 supply chain issues – must be EVN’s capacity to integrate and connect a potential flood of projects before the deadline.

The alternative, according to the new Decision, is that project owners will need to participate in competitive auctions. Though, also coming into view now, is a new corporate direct power purchase pilot program that will be an attractive option for many developers, albeit initially limited in scope. Read some more about that scheme here.

Notably, the new Decision does not suggest that any improvements will be made to the template solar power PPA, a form widely considered unbankable for international banks. Surely however the days must be numbered for this form if the Government wants to see sound future development of solar power, not to mention lower prices, in future.

With respect to rooftop solar projects, the Decision does not – as many had hoped – increase the existing 1 MW limit (which is not a true limit per se but rather a threshold for dramatically simpler licensing). Many had advocated to increase this to 3MW but not to be.

The Decision does however expressly recognize the concept of private rooftop power sales, something previously not clearly regulated. On that point, the Decision provinces that if EVN is not the power buyer, the parties can agree on their own PPA terms, provided they are consistent with existing regulations. This will be welcome news for rooftop developers who have been currently operating in something of a grey area, often using unconventional contractual arrangements. Further detailed regulation may come from the MOIT to further elaborate this.

For more information about Vietnam’s energy sector, please contact Giles at GTCooper@duanemorris.com or any of the lawyers in our office listing. Giles is Chairman of Duane Morris Vietnam LLC, branch director of Duane Morris’ HCMC office and Asia lead for Duane Morris’ Energy Industry Group.

VIETNAM – SOLAR POWER – NEW FEED IN TARIFFS – NEW GUIDANCE FOR SOLAR ENERGY DEVELOPMENT – WHAT YOU MUST KNOW:

It has been 10 month waiting after Decision 11/QDD-TTg expired, now the Prime Minister has issued Decision 13/2020 on the incentive mechanism for solar power development. We would like to update the very new key issues as follows:

1. FIT scheme

Following notification No. 402/TB-VPCP of Prime Minister Nguyen Xuan Phuc, now FIT scheme is confirmed that it only applies for the following projects:

– For grid-connected projects: the projects that: (i) has in-principle investment decision before 23/11/2019, and (ii) COD of the whole or part(s) of project from 01/7/2019 to 31/12/2020.
– For grid-connected projects in Ninh Thuan: (i) the projects that were included into power development plans, (ii) COD before 01/01/2021, and (iii) the accumulated capacity not exceeding 2,000 MW.
It is noted that regarding grid-connected projects, FIT scheme is only applied for projects with solar cell’s capacity more than 16% or module more than 15%.

– For rooftop projects: the projects that are brought into operation, generate electricity and have electricity meter readings confirmed from 01/7/2019 to 31/12/2020.
The term of FIT scheme for the above projects shall be applied for 20 years from COD.

2. FIT2

FIT2 are as follows:
– Floating solar energy projects: UScent 7.69
– Ground mounted solar energy projects: UScent 7.09
– Rooftop energy solar energy projects: UScent 8.38

3. Competitive mechanism

The projects that do not fall with the scope of FIT scheme shall be subject to competitive sheme.

4. COD definition

COD of the whole or part(s) of the grid-connected project is defined as the date that the whole or part(s) of the project is ready to sell electricity to the buyer and satisfy the follows:
a) Has finished the initial tests for the whole or part(s) of the construction;
b) Has been issued electricity operation license;
c) Has agreed to the index of the electricity meter in order to make payment.

5. Rooftop project definition

Rooftop projects are the projects have photovoltaic panels installed on the rooftop of the construction and have the capacity not exceeds 01 MW, connect to the grids which is less than 35kV.

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Please do not hesitate to contact Dr. Oliver Massmann under omassmann@duanemorris.com if you have any questions or want to know more details on the above. Dr. Oliver Massmann is the General Director of Duane Morris Vietnam LLC.

COVID-19 Guidance for Businesses in Vietnam: New Social Distance Policies, Lockdown or not?

Vietnam has taken further concrete steps to combat the COVID-19 crisis as the fight enters a new stage. Some uncertainty remains however as to how the steps are intended to be implemented in practice.

On 31 March 2020, the Prime Minister of Vietnam issued Directive No. 16/CT-TTg on the Implementation of Immediate Measures for the Prevention of the COVID-19 pandemic (“Directive 16“).  Primarily, Directive 16 sets forth strict social distancing on a nationwide basis for 15 days starting 1 April 2020.

Specifically, the mandates set out in the Directive include:

  • Everyone is required to stay at home, except for essential trips such as buying food, medicine, for emergency circumstances, going to work at factories and businesses that do not close or suspend their operations;
  • A minimum distance of two meters is required for meetings;
  • Gatherings of more than two people are prohibited in all public places, except for workplaces, schools, and hospitals;
  • Factories and workshops are required to ensure a safe distance among employees, facemasks must be worn, and workplaces must be sterilized according to regulations;
  • All State agencies are required to implement work-from-home policy for their staff members, except for special needs;
  • Public transportation services will be suspended and travel from region to region will be minimized, except for essential goods and services; and
  • Border crossings between Vietnam and Cambodia and Laos will be temporarily closed from 1 April 2020.  Immigration will be tightly controlled at all international border crossings; all those entering from Cambodia and Laos will be quarantined in central facilities for 14 days.

Directive 16 implies, without actually stating expressly, that operation of non-essential businesses must be suspended.  However, Mr. Mai Tien Dung, Minister and Chairman of the Government Office, later clarified in an interview that the new social distancing rules are not a lockdown as in other affected countries. The message appears to be that management of businesses may make their own decisions as to whether to remain open or not. At the same time, they must be responsible for ensuring their employee’s health and safety if they choose to continue to operate. In fact, this is the status quo as employers must always bear such responsibility under workplace legislation including the Law on Occupational Hygiene and Safety. Employees who consider themselves at risk by being at the workplace have a right to refuse to work and must be paid for any ensuing absence.

Anecdotally, we have heard of police officials visiting businesses and asking them to close. Some have interpreted this as mandatory, others are being given a less clear message.

Bottom line, at the present time there are differences around the country in how Directive 16 and companies can expect local officials to provide guidance on what it means in practice for them. For example, to implement the Prime Minister’s Directive, the Hanoi City People’s Committee issued Directive 05 / CT-UBND. That Directive states that factories, production facilities, and construction sites must facilitate for officials, employees and workers to work at home (how this is intended to work for construction sites is anyone’s guess).

It goes on to say that the following factories and enterprises may continue to operate:

  • Those producing and trading in essential goods such as: processing food, fruits, pharmaceuticals, medicines, medical supplies and equipment in service of epidemic prevention and combat, national security and defense;
  • Electricity, water and sanitation services;
  • Farms breeding cattle, poultry, aquaculture;
  • Clean water supply plants;
  • Garment factories producing medical masks;
  • Plant producing bottled water, juice; and
  • Factories needing to produce orders to be paid pursuant to contracts signed before April 15, 2020.

The Hanoi PC has also identified a rather wide list of businesses that are allowed to stay open including supermarkets, banks, tourist accommodation, shopping malls, television stations, healthcare services, grocery stores, funeral homes among others.

Business owners in other locations should look out for further direction from their provincial authorities as to how Directive 16 will be applied in practice. In all cases, businesses should be pro-actively developing policies, if not already , to prepare for the prospect of heavier-handed lockdowns including, where feasible, clear work from home protocols.

For more information, please contact Giles at GTCooper@duanemorris.com or Dang Ngoc Huyen at HDang@@duanemorris.com or any of the lawyers in our office listing. Giles is co-General Director of Duane Morris Vietnam LLC and branch director of Duane Morris’ HCMC office.

COVID-19 Guidance for Employers in Vietnam: MOLISA’S Proposals for Handling Distressed Employment Arrangements

Recent guidance from Vietnam’s labor authorities provide some welcome clarity about how employers can act in these unique times and simultaneously underline that normal labor laws still apply. Employers who act in breach of the law are at risk.

The Ministry of Labor, War Invalids and Social Affairs (“MOLISA”) has just released Official Letter No. 1064/LDTBXH-QHLDTL (“OL 1064”) dated 25 March 2020 to provide guidance on employment arrangements for enterprises affected by the impact of the Covid-19 pandemic.  As follow up, the Ho Chi Minh City Department of Labor, War Invalids and Social Affairs (“DOLISA”) issued Official Letter No. 9403/SLDTBXH-LD (“OL 9403”) dated 27 March 2020 to provided further guidance for enterprises located in Ho Chi Minh City.

Primarily, OL 1064 and OL 9403 provide examples of cases where employees formally pause work for a specific period as a direct result of epidemic following negotiation and agreement with their employers on reduction of contractual salary (such amount not to be lower than the applicable regional minimum wage) pursuant to Article 98.3 of the Labor Code 2012, namely:

  • expat employees who are not allowed to enter Vietnam to return to work during the pandemic due to the entry ban;
  • employees who are subject to mandatory quarantine orders; and
  • the enterprise and/or any of its functional departments are unable to operate once situations (i) and/or (ii) above occur.

The examples provided are for illustrative/ reference purposes only and do not create any new law or provide any new legal basis for specific activity. Thus, it remains our view that, from a strictly legal basis at least, employers have discretion to choose whether to temporarily pause their operations. We have written about this in this earlier blog post.

Having said that, the guidance from MOLISA and DOLISA offers a number of lawful options for employers to handle employment arrangements during the Covid-19 epidemic starting from the most employee-friendly option down (see table below). Implicit in this is that the authorities are encouraging employers to prioritize alternatives that will maintain employment to the maximum extent possible.

OPTION DESCRIPTION OUR COMMENTS
Option 1 – temporary job transfer In case the Employer faces difficulties regarding materials supply or markets, causing redundancy, employers may temporarily transfer employees to perform work that is different than that agreed in the labor contract (Article 31 of Labor Code 2012). By this option, the salary should remain same for the first 30 days of the temporary job transfer period. After that, the salary for the new position can be 85% of the contractual salary. Also, we further note that if the temporary job transfer is longer than 60 days per year, employee consent would be required.
Option 2 – work pause The employer and employee discuss about payment of a reduced salary, not to be lower than the applicable regional minimum wage (with no work duties to be performed) for a specific period (Article 98.3 of Labor Code 2012).

 

This enables the employment relationship to be maintained but requires the affected employees’ consent to the reduced salary.

 

As noted in our earlier blog post, employees may be motivated to agree on salary reductions (i.e. – accept employers’ proposals) because, if they do not, the employer would have legal grounds to unilaterally terminate employment as a result of epidemic (subject to the generally-applicable 30 and 45-day advance notice requirement for definite and indefinite-term labor contracts respectively).

 

Option 3 – temporary delay of labor contract implementation

 

In case the work pause period under Option 2 lasts a long time and affects the employer’s ability to pay salaries, the employer and employee may agree to temporarily delay implementation of the labor contract according to Article 32 of Labor Code 2012. For practical purposes, this amounts to an agreement on unpaid leave. The employment relationship is maintained though no work is performed.
Option 4 – employment termination In case the enterprise must scale down its production causing redundancy, the employer may

conduct procedures in the law to:

 

(i) unilaterally terminate employment (Article 38 of Labor Code 2012); or

 

(ii)  Implement formal redundancy/ retrenchment (Article 44 of Labor Code 2012).

 

 

– With respect to the first option here (Article 38), we note that careful attention is required in order to utilize the employer’s right to unilaterally terminate a labor contract as it requires the employer to “take all measures” to overcome the consequences but “fail to maintain the existing operations”, and must follow a prescriptive notice period depending on their contract type (i.e., 30 and 45 days for definite and indefinite term labor contracts respectively). Also important, by going through OL 1064, it seems to us that MOLISA’s guidance is trying to narrow down the employer’s right by law to unilaterally terminate the labor contract. Specifically, OL 1064 mainly focuses on difficulties caused by material supplies and market issues within production industries and does not clearly refer to or consider service enterprises. Therefore, in the perfect world, it is highly recommended that employers under all circumstances, should seek to agree mutual termination agreement (MTA) or a resignation letter (RL) from the employees to effect termination. This is very valuable to avoid claims of wrongful unilateral termination at a later stage (potentially up to 12 months in the future).

 

– With respect to the second option here (Article 44), the employer would need to prepare a so-called labor usage plan, then consult the opinion of the relevant trade union and inform the relevant labor authorities about the same at least 30 days prior to implementing the labor usage plan re retrenchment. Again, though the law does not require employee consent if such procedures are followed, an MTA or an RL may short cut the time and procedural steps and be the preferred approach for both parties.

 

All in all, while the MOLISA and DOLISA guidance is a useful reference point for employers struggling to mitigate the impact of the COVId-19 crisis, and outlines a laudable policy preference in favor of maintaining employment relationships, it does not directly impact employers’ legal rights and options. That is, it is not mandatory to implement the steps in the order proposed by the authorities.

On the other hand, this is clearly not a green light to act contrary to law and the default position of complex procedural steps and notice periods involved in unilateral termination and retrenchment remains intact. When the dust settles, employers who flout the law may find themselves held to account.

For more information, please contact Giles at GTCooper@duanemorris.com or Le Nhan at NTLe@duanemorris.com or any of the lawyers in our office listing. Giles is co-General Director of Duane Morris Vietnam LLC and branch director of Duane Morris’ HCMC office.

COVID-19 Guidance for Employers in Vietnam: CANs and CAN’Ts

Employers the world over are facing unprecedented issues brought about by the COVID-19 pandemic. Vietnam employers are no different. They need to be able to both respond rapidly and decisively to actual facts and formal and information government direction as it arises and simultaneously comply with legal obligations set out in law and statute. What trumps what?

An earlier blog post addressed specific remuneration issues under Vietnam law (see: here). That is a topic that will be further addressed as this crisis continues to unfold globally. This post covers some additional ad-hoc issues that we have seen come up for employers in Vietnam.

As ever, these topics are subject to change, potentially very suddenly, but we’ve attempted to set out the current position in law and practice. Please get in touch for more information.

Topic 1: Right to disclose an employee’s COVID-19 status to other colleagues

Strictly speaking, this information is deemed by law to be ‘confidential medical information’ of the employee, meaning that an employer is NOT permitted to disclose the fact of an employee’s sickness to others in the absence of the relevant employee’s express consent. An employer could disclose generally that an employee has tested positive for COVID-19 without identifying the specific individual affected.

On the other hand, taking into account the wider public health imperative and the positive obligation of all infected individuals to isolate and identify individual contacts for checks (Art. 3.2.1 of Guidance on medical quarantine in term of Covid-19, under Ministry of Health’s Decision No. 904/QĐ-BYT dated 16 March 2020) plus the positive obligation on employers to disclose the positive case (noting that failure to disclose the positive case of disease is strictly prohibited under Article 8.3 of The Law on Prevention and Control of Infectious Diseases) it can reasonably be concluded that, even without express consent, employers must provide other employees and the authorities with identifying information of affected employees that they have knowledge of in order to meet wider obligations.

In other words, this is one area where it seems likely that wider public health concerns and obligations trump individual personal privacy regulations. Having said that, employers are advised to proceed in a way so as to limit, to the extent possible, the scope of privacy breaches. The practical ability to do this will vary from case to case but may includes: (i) making at least a reasonable effort to obtain prior express consent from affected employees; and (ii) disclosing the information to as small a circle of people as reasonably possible in order to address public health obligations; and (iii) ensuring that language used is as neutral as possible and does not stigmatize the individual or overly-dramatize the situation.

On the first point, employers would be well-advised to pro-actively prepare specific consent forms that can be rolled out at short notice in a bid to obtain express consent on an as-needed basis.

Topic 2: Right to require employees to work from home

Theoretically speaking, any change to an employee’s workplace as recorded in their labor contract must comply with the terms of the relevant contract or be subject to express prior consent of the employee concerned.   Despite this, in the current situation, we are of the view that employers are able to require employees to work from home regardless of the foregoing, should the employer determine that such change of location is necessary to protect health and/or to comply with orders or requests of competent authorities.

In doing so, the employer would be entitled to expect the employee to continue to discharge regular duties and working hours. Reality does however dictate that this may be difficult in practice for the employer to control and/or the employee to achieve. The employee would have a reasonably expectation of being provided necessary means to discharge duties (such as computer).

We are also of the view that employers could mandate this on the basis of implementing plans under the Law on Prevention and Control of Infectious Diseases. Again, it would be important that the plan be properly prepared and informed to employees.

It remains arguable what rights employees may have to insist on working from home where the employer reasonably considers it unnecessary for public health purposes and in the absence of any positive requirement from authorities to order work-from-home arrangements where possible.

Topic 3: Right to screen employees’ and visitors’ temperatures

The Law on Prevention and Control of Infectious Diseases 2007 generally recognizes enterprises’ rights to prepare and implement plans to prevent and control infectious diseases on a case-to-case basis.

In our view, this would provide a basis for employers to insist on temperature screening for employees and visitors entering the workplace. In fact, this is widely accepted practice by most, if not all, State authorities and State-owned enterprises in Vietnam and many private businesses as well.

It would however always be preferable to have an actual written policy that outlines the reason by reference to the Law on Prevention and Control of Infectious Diseases and procedures to implement including how to act in the case of temperatures considered to be high.

Topic 4: Right to report in case of employee’s abnormal symptoms

In principle, an employee is obliged to comply with their employer’s internal policies on labor safety and hygiene at the workplace. Specifically, one of these obligations is to report any potential risk where dangerous and hazardous factor might appear at workplace (Art. 18, Law on labor safety and hygiene 2015). Concurrently, employers are entitled to be aware of all health-related risks at the workplace and have a responsibility to keep employees and relevant authorities updated on same (Art.23.4, Law on Prevention and Control of Infectious Diseases 2007).

Therefore, it is allowable for employers to report to competent authorities and/or to update its internal management personnel in case an employee has abnormal symptoms, including without limitation to the employee’s temperature which is abnormal.

Topic 5: Right to collect employees’ personal travel information and obligation to declare same to authorities

Vietnamese law is silent on this topic. As a matter of practice, those who have recently visited/ passed through territories considered as pandemic regions (e.g., the US, European countries, China, Iran, etc.) and those suspected of suffering from Corona virus are required by the government to undergo a compulsory 14-day centralized quarantine. In addition, individuals who have been in close contact with someone who has tested positive for COVID-19 (known as ‘F0’ individuals) are also subject to such mandatory centralized isolation/ self-isolation, depending whether they are determined as F1, F2, F3, F4 or F5 individuals respectively.

Following this, it is reasonable to conclude that employers are entitled to seek and be made aware of such information with a view to best protecting all their employees and reporting same to the competent authorities where necessary.

For more information, please contact Giles at GTCooper@duanemorris.com or Le Nhan at NTLe@duanemorris.com or any of the lawyers in our office listing. Giles is co-General Director of Duane Morris Vietnam LLC and branch director of Duane Morris’ HCMC office.

 

VIETNAM – SOLAR POWER – MOIT’s PROPOSAL ON SOLAR POWER AUCTION POLICY – WHAT YOU MUST KNOW:

In Notification No. 402/TB-VPCP dated 22 November 2019, the Prime Minster concluded that rational future development of the sector necessitates introducing an auction system for solar projects. FiTs will continue to apply only for rooftop solar projects and certain already-approved ground-mounted projects. Thus, the PM had instructed the MOIT to prepare and proposal solar power auction policy for his consideration and approval.

On 19 March 2020, the MOIT has finally submitted 3 options for implementation of competitive auctions on solar power projects to the PM under its Proposal No. 1986/TTr-BCT (“Proposal“). However, MOIT has suggested the PM to implement Option 1 first in the period up to June 2021. In terms of Options 2&3, MOIT would keep working on the pilots for implementation and report the PM for approval later. The MOIT also advised the PM to consider approving addition of 21 solar power projects into the power development plan after policy for Option 1 has been adopted.

Under the Proposal, 4000 MW solar power capacity must be supplemented for the period up to 2025 and 5,600 MW solar power capacity must be supplemented for 20226 – 2030.

In brief, the key contents of three Options are as follows:

Option 1: The plan is to select solar power projects based on competitive power prices offered by the investors. Total pilot capacity for participating the auction is approx. 1600 MW of which (i) 600 MW of solar power projects which already added into the power master plan and (ii) 1000 MW solar power projects which have not yet included in the power master plan approval. The final capacity is awarded to be only 1000 MW. This plan will be conducted up to June 2021. The ceiling competitive price for auction is FIT2 i.e., 7.06 UScent for ground-mounted projects and 7.69 UScent for floating projects. The most competitive price offers will be awarded. The PPA template for 20 years from COD and auction dossier / procedure will be guided and issued by the MOIT.

Option 2: The plan is to select solar power plants based on transformers location of EVN, the preferable projects will satisfy competitive prices, technical details and locations, etc.

Option 3: the plan is to select suitable investors via auction for specific large scale solar power projects. This plan is applicable for solar power projects of 100MW or more only.

We will closely monitor to update on any further changes.

Please contact Dr. Oliver Massmann under omassmann@duanemorris.com or any other lawyer in our office list if you have questions on the topic or any other lawyer in our office listing. Dr. Oliver Massmann is the General Director of Duane Morris LLC.

COVID-19 Guidance for Vietnam-law Employers: Remuneration Focus

COVID-19 undoubtedly has impacted your business or workforce in some way. The past period has been full of challenges for all employers as we all face the actual influence of this difficult-to-control global pandemic. Clearly, this is a unique and rapidly-developing situation.

In Vietnam, the Prime Minister formally issued Decision 173/QĐ-TTg declaring that the corona virus is an epidemic (issued 1 Feb 2020 and effective on same date).   With a focus on remuneration payment to employees during the epidemic season, this article is provided based on current laws and, where relevant and available, Government ad-hoc policy and guidance.

As ever, Employers are of course free to implement policies that are more favorable than the statutory minimum. Also, this is an area subject to change, potentially very suddenly.  We will endeavor to update this as possible.

  1. Salary payment for sick employee, regardless of regular sickness or positive result of Covid-19

Once an employee has illness symptoms or is feeling un-well and then stays home, please kindly see the various options as follows, which should be considered on a case-to-case basis.

Sick Leave under Vietnam’s Social Insurance regime (SI)

If an employee is sick and obtains a valid medical certificate evidencing same, the Employer can file this medical certificate with the SI and the SI will pay sick leave entitlements to the employee.  Such entitlement is equal to the lower of 75% of the employee’s regular salary or 75% of the SI cap.

With respect to quantity, the SI will pay up to: (i) 30 days/ year for those who have contributed to the SI fund for less than 15 years; (ii) 40 days/ year for those who have contributed to the SI fund for more than 15 and less than 30 years; and (iii) 60 days/ year for those who have contributed to the SI fund for more than 30 years.

In short, assuming Employer has contributed in full as required to the SI scheme (employee and Employer contributions) then such Employer is not required by law to pay salaries for employees on sick leave.

Sick Leave voluntarily offered by Employer, in addition to SI

The above is subject to any other policies and practices that Employer may, in fact, have in place that offer greater additional benefits to employees.  Some Employers voluntarily offer extra fully-paid sick leave to employees and, if such an arrangement is in place at your company, employees would be entitled to ‘use up’ any additional ‘paid’ sick leave entitlement before filing statutory SI claims.

Unproven sickness

Strictly speaking, the SI regime will only provide salary cover for employees with certified sickness.  Thus, an employee who is isolated to be assessed as to whether they are sick or not would not be covered by the SI regime as it stands now.  In such circumstances, it would be recommended that the Employer seek to reach agreement with the employee to pause work on a reduced salary (see item #2 below).

Relationship with paid annual leave entitlement

Under all circumstances, an affected employee would be entitled to apply to take their accrued paid annual leave entitlement first.

  1. Salary payment for those who have to be home because their child’s school is closed

Very upfront, we note that this reason for being home is not considered as sick leave or leave to take care of a sick child under the age of 7, both of which are permitted reasons for absence from work covered under Vietnam’s SI regime (as explain under item #1 above). In addition, as addressed above under item #1, unproven sickness would also fall under this category.

Strictly speaking, unless the employee is able to work from home due to his/her job description and the Employer was to agree with that, absence from work for this reason is considered either absence without permission or leave pursuant and subject to the Employer’s specific leave regime.

As such, the options for salary payment would be the below, in order of priority:

Option 1: the employee applies for paid annual leave until they use up their accrued annual leave entitlement.

Option 2: the employee formally pauses work as a direct result of epidemic and following negotiation and agreement with their employer on reduction of contractual salary during such period (Art. 98.3, Labor Code 2012) (see further at item #3 below).

Option 3: the employee and their employer discuss and reach agreement on unpaid leave (Art. 116.3, Labor Code 2012).  Agreement on this in principle, and length of any unpaid leave, is essentially at the discretion of the parties to agree.

  1. Temporary suspension of operations

For avoidance of doubt, temporary suspension of operations referred to here is a decision to temporarily pause the operations and not a decision to permanently close the business location(s).

From a corporate law perspective (Art. 200, Law on Enterprises), an enterprise is entitled to make a formal application to temporarily pause/ suspend its operations (up to a maximum 2 years).  This applies at all times, regardless of occurrence of any epidemic or not.  However, formal temporary suspension of operations is not a legal basis for Employers to unilaterally terminate employee labor contracts.  In other words, existing employment must be either maintained as normal, including with respect to payment of salaries, or employment relationships terminated lawfully on some other basis.

From a labor law perspective, epidemic is a legal basis for Employers to: (i) unilaterally terminate labor contracts pursuant to Article 38.1(c), Labor Code 2012; or (ii) maintain employment relationships but negotiate reduced salaries with affected employees (such amount not to be lower than the applicable regional minimum wage) for a specific period, pursuant to Article 98, Labor Code 2012.

At this time, Vietnam law appears to be silent on how employment matters are handled in the case where Employers are ordered by competent authorities to temporarily shut down operations as a result of epidemic.  The People’s Committee of Ho Chi Minh City (PC) recently issued orders to shut down all cinemas, bars and other entertainment venues at least until the end of March 2020 without providing any specific guidance on employment-related matters.

At present then, there is no real difference in practice between a temporary closure made at the decision of the Employer as a result of epidemic and one ordered by a competent authority.  In both cases, the initial starting point is that it would need to continue to pay contractually agreed amounts. However, as noted below, the Employer should consider discussing with employees about receiving a reduced salary, not to be lower than the applicable regional minimum wage (with no work duties to be performed).  If the alternative is the (lawful) right to unilaterally terminate employment, this may be an attractive option for affected employees. In other words, employees may be motivated to agree on the reduction (accept Employer’s proposal) because, if they do not, the Employer would have legal grounds to unilaterally terminate employment as a result of epidemic (subject to the generally-applicable 30 and 45-day advance notice requirement for definite and indefinite-term labor contracts respectively).

For your information, according to Government Decree 90/2019/ND-CP, almost all of the districts of Hanoi and Ho Chi Minh Cities fall within Region 1 and the applicable regional minimum wage for 2020 is: (a) VND 4,420,000 per month for un-trained employees; and (b) VND 4,729,400 per month (i.e. an additional 7%) for trained employees.  This is approximately US$192 and $205 respectively. The minimum wage of other regions throughout the country would be a bit lower than that of Region 1.

Bottom line, despite the current laws, there might be a strong possibility that further ad-hoc regulation or policy may be issued by the Government that will affect the current status quo at law.  We will endeavor to keep you informed of any developments.

  1. Government’s guidance/ comments / indication recently about the current situation

As noted, the situation is complex and fluid.  It is quite likely that the Government will issue further policy/ regulatory guidance that will impact the current position outlined above.  At this moment, the main item of note is that the Prime Minister released the Directive No.11/CT-TTg on 04 March 2020 giving instructions to relevant agencies as outlined below.  While this is very general, it provides an indication of how things may develop so we provide it here FYI along with some initial comments.

 

  AGENCY ASSIGNMENT DM’S COMMENTS
1. Ministry of Labor (MOLISA) (i) To report on the labor and employment status in the enterprise;

 

(ii) To diversify methods of propaganda and solutions to motivate employees’ morale;

 

(iii) To support employees whose employments are terminated due to the influence of Covid-19;

 

(iv) To monitor the expat employees who come from the epidemic regions or pass by the epidemic regions; and

 

(v) to stop issuing new work permits for expat employee in a certain duration, then the Vietnam-based enterprise should be proactive to seek for alternative local employees to play roles of expat experts.

 

Item # (iii) recognizes the fact that epidemic is a legal basis for unilateral termination by Employers.
2. Vietnam Social Security To work with relevant authorities to provide guidance on temporary cessation of social insurance contributions for objects affected by Covid-19 until the end of June or December 2020, without calculating interest for late payment. Employers may be entitled to delay payment of social insurance contributions without being charged interest.

 

3. Vietnam Labor Federation To consider and guide the suitable time for collect trade union fees, so as to support enterprises affected by Covid-19. Employers may be entitled to delay payment of trade union fees.

 

 

For more information, please contact Giles at GTCooper@duanemorris.com or Le Nhan at NTLe@duanemorris.com or >any of the lawyers in our office listing. Giles is co-General Director of Duane Morris Vietnam LLC and branch director of Duane Morris’ HCMC office.

Corporate direct renewable energy deals in Vietnam move closer

Corporate renewable power purchase deals are a step closer to reality in Vietnam following a proposal from the Ministry of Industry and Trade (MOIT) recommending the Prime Minister approve a so-called DPPA pilot project this year.   In Proposal 544 dated 21 Jan 2020, the MOIT gave its formal recommendation to the PM to approve a pilot program for between 400MW – 1,000 MW of wind and solar generation capacity and provided a draft PM Decision that would enact such a pilot and establish the process to implement and operate it.

[Click here for the original Vietnamese language version of Proposal 544 and the accompanying draft Decision and here for an unofficial English translation of the draft Decision.]

Duane Morris is the legal advisor to the USAID-funded Vietnam Low Emissions Energy Program (VLEEP) that has spent several years working closely with the MOIT, ERAV, investors and consumers to advocate for a DPPA pilot program and propose a specific design and parameters.  Among other things, Duane Morris developed an action plan to devise and implement a DPPA legal framework that fits within Vietnam’s existing electricity sector legislation and is developing template agreements for use by DPPA pilot project participants.

Enabling corporate power purchases is a major step forward to enable corporates to meet their clean power objectives in Vietnam, something hitherto all but impossible.  Vietnam is home to many RE100 investors and their supply chain counterparts and demand for direct procurement of verifiable clean energy is high.  At the same time, the specific DPPA design (a virtual or synthetic model) supports the continuing development of Vietnam’s relatively nascent competitive wholesale electricity market (VWEM) and has the potential to unlock greater private financing of new clean energy capacity at a time when private finance is needed more than ever.

If the PM approves the pilot program Vietnam will be in good company.  Corporate renewable power purchase deals are growing rapidly around the world and show no signs of slowing down.  Bloomberg has reported that corporations directly bought a record 20GW of wind and solar production in 2019, some 44% more than in 2018 and triple the number in 2017.  This was said to amount to more than 10% of all the renewable energy capacity added globally in 2019, at a build cost of some US$20-$30 billion.

While the majority of these deals were in the US, activity in other markets is gathering pace.  Vietnam’s enabling legislation, if approved by the PM, is likely to see strong interest here on both investor, and consumer sides of the equation.

According to the Bloomberg report, more than 80% of the 2019 deals were done using virtual PPA models (synthetic contracts) which is consistent with the model recommended by the MOIT to the PM in Vietnam.

The PM’s draft Decision contemplates renewable gencos participating directly in the VWEM and agreeing contracts for differences (CfDs) with consumers at agreed long-term strike prices.  Consumers are motivated to participate to meet sustainability goals, satisfy customer expectations and to hedge against long-term power price fluctuations.

The draft PM Decision recommended by the MOIT contemplates a process to implement the pilot project as follows:

  1. Within 15 working days from the date on which the formal DPPA Decision comes into effect (still TBC), MOIT will publicize the details of the pilot program.
  2. Within 15 working days thereafter, MOIT will open an e-application portal for interested DPPA program participants (both gencos and consumers).
  3. Interested participants will have 45 working days thereafter to prepare and submit applications.
  4. The MOIT will have a further 45 working days to assess, select and publish a list of participants.
  5. Participants will then have 180 working days to negotiate and execute necessary agreements, complete development of projects and achieve commercial operation (for participation in the wholesale market).

These steps and timelines will be subject to final approval of the PM in the formal Decision.  It is expected that further details re project application details and assessment criteria and process will be developed by the MOIT.

Contact us for further details about the proposed design of the DPPA pilot project, the agreements involved and the process to get involved as either genco investor or consumer offtaker.

For more information about Vietnam’s energy sector, please contact Giles at GTCooper@duanemorris.com or any of the lawyers in our office listing. Giles is co-General Director of Duane Morris Vietnam LLC, branch director of Duane Morris’ HCMC office and Asia lead for Duane Morris’ Energy Industry Group.

Crunch time for PM’s decision on solar FIT2

In a 6 Feb 2020 report to the PM, the MOIT shares views received from the Ministry of Justice and Ministry of Finance on the long-awaited new FIT regime for solar projects. Interestingly, a new option has emerged: that FIT 2 could apply to all projects approved in principle prior to 23 November 2019 and that reach COD by 31 December 2020. While December 2020 is still very close and thus a practical limit, this option is still markedly broader than the MOIT’s earlier proposal that only projects that had commenced construction (with very narrow criteria of what that means) prior to 23 November 2019 (and reach COD by 31 December 2020) should be entitled to FIT 2.

If the PM accepts this new option it would significantly increase the number of already-approved solar projects potentially eligible for FIT 2. that would be welcome news for approx. 40 projects currently in FIT limbo.

With this document, it appears that all involved ministries and other stakeholders such as EVN have been formally consulted and their opinions formally shared with the PM. The ball is firmly in the PM’s court now.

See the original text of the 6 Feb report here: FIT 2

For more information about Vietnam’s energy sector, please contact Giles at GTCooper@duanemorris.com or any of the lawyers in our office listing. Giles is co-General Director of Duane Morris Vietnam LLC and branch director of Duane Morris’ HCMC office.