Public-Private Partnership (PPP) has been the cornerstone for infrastructure development and has been utilized in the past in Vietnam with varying degrees of success. Those agreements were often legally cumbersome and were put together largely on faith that both the government and investor would live up to their end of the agreement. With the implementation of the CPTPP and EVFTA/IPA and the new Law on Investment in the form of PPP 2020, the regulatory environment has shifted towards favorable conditions for PPP to become a bedrock of Vietnam’s development.
The Comprehensive and Progressive Trans-Pacific Partnership (CPTPP) came into force on 14 January 2019 for Vietnam and currently include the following signatories: Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam. In addition, China, Ecuador, Taiwan and United Kingdom applied and awaiting result on their accession to the CPTPP. The EU-Vietnam Free Trade Agreement (EVFTA) came into force on 1 August 2020 between the European Union countries and Vietnam.
Public Procurement:
Vietnam has one of the highest ratios of public investment-to-GDP in the world (39 per cent annually from 1995). However, Vietnam did not agree to its Government procurement being covered by the Government Procurement Agreement (GPA) of the WTO until the EVFTA
The FTA commitments on Government Procurement mainly deal with the requirement to treat EU bidders, or domestic bidders with EU investment capital, equally with Vietnamese bidders when the Government purchases goods or requests a service worth over the specified threshold. Vietnam undertakes to follow the general principles of National Treatment and Non-discrimination. It will publish information on intended procurement and post-award information in Bao Dau Thau (Public Procurement Newspaper) and information on the procurement system at muasamcong.mpi.gov.vn and the official gazette in a timely manner. It will also allow sufficient time for suppliers to prepare and submit requests for participation in responsive tenders and maintain the confidentiality of bidders
The FTA also requires its parties to assess bids based on fair and objective principles, evaluate and award bids only based on criteria set out in notices and tender documentation, and create an effective regime for complaints and settling disputes. These rules require parties to ensure that their bidding procedures match the commitments and protect their own interests, thus helping Vietnam to solve its problem of bids being won by cheap but low-quality service providers.
Dispute Resolution:
An often overlooked but critical aspect from the investor’s perspective has been the dispute resolution process before these trade agreements were in-force. Generally speaking, before CPTPP and EVFTA/IPA, most foreign investors only had the Vietnamese courts to address any dispute.
To protect interests of foreign investors, CPTPP allows foreign investors to initiate a lawsuit in International Arbitration center in case interests of foreign investors are infringed by one member country (for example, expropriation, nationalization, minimum standard of treatment…), except in case disputes arising from the implementation of commitments or obligations of investment agreements and investment authorization.
This is also covered in the EU-Vietnam Investment Protection Agreement (EVIPA). The EVIPA is a sister agreement of the EVFTA and is pending ratification by EU member states before it can come to force, expectedly by 2023. In disputes regarding investment (for example, expropriation without compensation or discrimination of investment), an investor is allowed to bring the dispute to the Investment Tribunal for settlement. To ensure the fairness and independence of the dispute settlement, a permanent Tribunal will be comprised of nine members: three nationals each appointed from the EU and Vietnam, together with three nationals appointed from third countries. Cases will be heard by a three-member Tribunal selected by the Chairman of the Tribunal in a random manner. This is also to ensure consistent rulings in similar cases, thus making the dispute settlement more predictable. The EVIPA also allows a sole Tribunal member where the claimant is a small or medium-sized enterprise, or the compensation of damaged claims is relatively low. This is a flexible approach considering that Vietnam is still a developing country.
In case either of the disputing parties disagrees with the decision of the Tribunal, it can appeal to the Appeal Tribunal. While this is different from the common arbitration proceeding, it is quite similar to the two-level dispute settlement mechanism in the WTO (Panel and Appellate Body). We believe that this mechanism could save time and costs for the whole proceedings.
The final settlement is binding and enforceable from the local courts regarding its validity, except for a five-year period following the entry into force of the EVIPA (please refer to further comments in the Legal Sector Committee’s chapter on Judicial and Arbitral Recourse).
Vietnam’s other specific commitments under the CPTPP:
Regarding telecommunication services: Allow CPTPP countries to set up joint ventures with a capital contribution of not more than 49% for basic telecommunications services attached to the network infrastructure. With value-added telecommunication services attached to the network infrastructure, we agree to allow the establishment of a joint venture with a capital contribution not exceeding 65% after 5 years after the date of entry into force of the Agreement. With services not attached to the network infrastructure, open to CPTPP countries to invest and set up enterprises with 100% foreign capital after 5 years from the date of entry into force of the Agreement.
Vietnam’s other specific commitments under the EVFTA:
Regarding Engineering services (CPC 8672) and Integrated Engineering Services (CPC 8673): for commercial presence, the supply of services related to topo¬ graphical, geotechnical, hydro geological and environmental surveys and technical surveys for urban-rural development planning, sectoral development planning are subject to the authorization of the Government of Viet Nam.
Regarding Construction and related engineering services (CPC 514-518): cross border supply of services is fully open and foreign investors can open their branched in Vietnam, though the chief the each branch must be a resident in Vietnam.
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.