All posts by Giles T. Cooper

COVID-19 and eligibility to enter Vietnam

Border Control

As of the date of this post, the Government of Vietnam still maintains suspension of entry for expats, including people with a Vietnamese visa exemption certificate.  A potential date to allow foreigners to enter Vietnam again has not been formally announced by the Government yet, though further information is expected imminently.

The current entry restriction, which came into effect on 22 March 2020, has limited exemptions for diplomatic, official duty, as well as special circumstances, including experts, business managers, high-skilled technicians (pursuant to Government’s Decree 11/2016/ND-CP, it can be interpreted that experts, business managers, high-skilled technicians are those who have been issued with work permits to legally work in Vietnam), and other essential categories as determined by the Government of Vietnam.  That is to say, statutorily speaking, there exists a possibility where such subjects are entitled to enter Vietnam, subject to approval of provincial People’s Committee and Department of Immigration, after the  consultation with the Ministry of Public Security, Ministry of National Defense, Ministry of Foreign Affairs, Ministry of Health, and other relevant agencies.

Despite this, to the best of our knowledge, though feasible in theory, practice appears to be different and it seems no formal approval has been granted yet, partly due to absence of any guidance from the Government to each province in detail.

Should an enterprise wish to send an expat (with a valid work permit) to Vietnam to manage operations in Vietnam at the moment, they should seek approval for entry on a case-by-case basis from the provincial People’s Committee and Department of Immigration as first priority.

Quarantine Requirements in Vietnam

Since 8 March 2020, all people who have arrived from outside the country must (i) complete a medical declaration form, which can be done by completing a paper form on arrival or a digital form online before the trip via this link https://tokhaiyte.vn/ and (ii) undertake COVID-19 testing. On this basis, regardless of whether the COVID-19 testing result is positive or not, everyone entering Vietnam, including Vietnamese nationals, have been subjected to mandatory, centralized quarantine for 14 days. It is worth noting that this quarantine period, under some circumstances, might be prolonged to more than 14 days, at the broad discretion of the authorities.

Hệ thống thông tin quản lý Khai báo Y tế

tokhaiyte.vn

Hệ thống thông tin quản lý khai báo y tế

So-called “centralized” quarantine sites in Vietnam may be basic facilities. Therefore, Ministry of Health released Decision No. 1246/QD-BYT on 20 March 2020 (“Decision 1246”) to grant more flexibilities for the mandatory quarantine. Specifically, a person subject to quarantine is entitled to request to be quarantined at a permitted hotel to enjoy better facilities and would need to bear all accommodation expenses during the quarantine period.

By law, this requires the individual to simply (i) fill in a Request Form under Annex 2 of Decision 1246; and (ii) submit same to immigration authority. However, we note that the procedure for this step is neither transparent nor well-organized and unlikely to be workable in practice on an ad-hoc basis.  It is thus necessary to ensure that arrangements are confirmed directly with the relevant provincial authorities of the port of entry.

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 Chairman of Duane Morris Vietnam LLC and branch director of Duane Morris’ HCMC office.

COVID-19 GUIDANCE FOR BUSINESSES IN VIETNAM: FORCE MAJEURE EVENTS AND E-SIGNATURES

The COVID-19 pandemic has given rise to many questions regarding force majeure and e-signatures. In particular, parties to commercial contracts are keen to know (i) whether they can be released from liabilities by relying on a force majeure clause and (ii) whether they can execute contracts by electronic signatures instead of the traditional “wet ink” signatures which have become almost impossible in the context of the COVID-19 pandemic.

  1. Force majeure

 A force majeure event under Vietnamese law

Vietnamese law defines force majeure in Article 156.1 of the Civil Code as “an event which occurs in an objective manner which is not foreseeable and which is not able to be remedied by all possible necessary and admissible measures being taken”.

For contracts that have been entered into prior to the COVID-19 pandemic, affected parties will have to prove that the pandemic satisfies all three components of a force majeure event in order to rely on this statutory right. The first two can be easily met – the corona virus is an objective event that cannot be foreseen. However, the trickiest part for parties would be the last component – whether the party has taken all reasonable measures to prevent the effect of the pandemic on their performance of the contract. This is a subjective test, and will need to be analyzed on a case-by-case basis taking actual facts into account.

  1. The effect of a force majeure event

The effect of a force majeure event is that the affected party who fails to perform its obligation under a contract will be released from liabilities. The relevant provisions are Article 351.2 of the Civil Code 2015 and Article 294.1 of the Commercial Law 2005 as quoted below:

Article 351.2 of the Civil Code 2015:

Where an obligor fails to perform correctly an obligation due to a force majeure event, it shall not have civil liability unless otherwise agreed or otherwise provided by law.

Article 294.1 of the Commercial Law 2005:

A defaulting party will be exempt from liability upon occurrence of a force majeure event.

The wording of Article 294.1 of the Commercial Law 2005 does not explicitly require a causal link between a force majeure event and the default of the affected party. However, logically speaking, to be released from liabilities, the fault should be caused by a force majeure event. It is also worth noting that according to the Commercial Law 2005, in order to be released from liabilities, the affected party is required to (i) immediately notify the other party in writing of the force majeure event and the potential consequences of such event; and (ii) promptly notify the other party when the force majeure event ceases to exist.

Regarding the possibility to terminate a contract, neither the Civil Code 2015 nor the Commercial Law 2005 allows parties to terminate a contract due to a force majeure event. However, the Commercial Law 2005 allows an extension of the deadline for the performance of a contract, and a refusal to perform a contract in the event of a prolonged event. The affected party who refuses to perform the contract due to a prolonged force majeure event must notify the other party of its refusal to perform the contract within ten days from the expiry date of the extended deadline for performance of the affected party’s obligations and before the other party commences to perform its contractual obligations.

  1. Alternative approaches for affected party due to COVID-19

Besides a force majeure event, an alternative approach for parties to consider in the context of the COVID-19 pandemic is fundamental changes clauses provided by Article 420 of the Civil Code 2015. Article 420 the performance of a contract under a fundamental change of conditions, which is quite similar to hardship clauses in other civil jurisdictions. Specifically, a circumstance is deemed fundamentally changed when the following elements are met:

  • The change occurs due to objective reasons after the execution of the contract. The COVID-19 pandemic would seem, prima facie, to satisfy this element;
  • At the time of contract execution, the parties could not foresee any change in circumstances. Contracts executed prior to the COVID-19 pandemic would also seem to satisfy this element;
  • There is such a fundamental change in circumstances that if the parties had known in advance, they would not have executed the contract, or might have executed it but with completely different content. This element is likely to be satisfied as well;
  • The continued performance of the contract without an amendment would cause serious damage to one party. The satisfaction of this element would depend on specific facts of each case; and
  • The affected party has taken all necessary measures in its capability in accordance with the nature of the contract but it still cannot prevent, mitigate the impact on its interest. The satisfaction of this element would also depend on specific facts of each case.

A key difference between a force majeure event and a fundamental change, which is also what might make proving the COVID-19 pandemic to be a fundamental change easier than a force majeure event, is that, with respect to the former, affected parties need to prove that the contractual performance is impossible while, for the latter, affected parties only need to prove that the performance of the contract is possible but with substantial disadvantages to the affected party.

In the event of a fundamental change regulated by Article 420, affected parties may request the other party to re-negotiate the contract within a reasonable period of time. Where the parties to the contract cannot agree on amendment to the contract as such, either party may request a court to:

  • terminate the contract at a specified time; or
  • amend the contract to balance the rights and benefits of the parties;

Of note, the court is only permitted to decide on the amendment to the contract where the termination of such contract would cause loss and damages greater than the costs for the performance of the contract when amended.

  1. Rewriting force majeure clauses

Proving any pandemic, the COVID-19 as analyzed above for an example, is onerous and requires a lot of efforts from affected parties while the outcome is unpredictable as ever. That is why we have seen plenty of new drafting around force majeure terms expressly referencing to pandemic in general and the COVID-19 in particular, as below for an example, which is highly recommended to be incorporated into contracts to be entered into.

Force Majeure Event means an event that wholly or partly prevents or delays the performance of obligations and/or the adherence to deadlines or time periods arising under this Agreement and shall include, without limitation, an act of God, explosion, accident, fire, lighting, earthquake, storms, flood or similar cataclysmic occurrence; an act of war , blockade, insurrection, lockouts, or other labor difficulties; restrictions or restraints imposed by law or by rule, regulations or order of any deferral, state or local government, governmental agency or quasi-governmental agency; a pandemic; COVID-19 (Coronavirus)-related events, including, by way of example but not limitation, quarantines, third party vendor shut downs, business shut downs, and travel restrictions; action or failure to act of any federal, state or local government, governmental agency or quasi-governmental agency; and interruption or other loss of utilities due to causes beyond the reasonable control of the Purchaser.”

  1. E-signatures

Under the Law on Electronic Transactions 2005, an e-signature is defined as being created in the form of words, script, numerals, symbols, sounds or in other forms by electronic means, logically attached or associated with a data massage, and being capable of identifying the person who has signed the data message, and being capable of identifying the consent of that signatory to the contents of the signed data message.

The law also provides that parties to a transaction have the right to agree to use or not to use an e-signature to execute data messages (e.g. a soft copy of a contract exchanged via emails) unless otherwise regulated by the law. In the context of the COVID-19 pandemic, it is advisable that parties explicitly agree on the e-signatures having the same validity of “wet ink” signatures. Internationally we have seen new drafting around e-signatures as below, for an example:

The words “execution,” “signed,” “signature,” and words of like import in this Agreement shall be deemed to include electronic signatures which shall be of the same legal effect, validity or enforceability as a manually executed signature, to the extent and as provided for in all applicable law.”

Notwithstanding the agreement of the parties on the validity of e-signatures, according to Article 24.1 of the Law on Electronic Transactions, e-signatures must satisfy the following conditions in order to have same legal effect with a “wet ink” signatures:

  • The method of creating the e-signatures permit the identification of the signatory and to verify his/her approval of the contents of the data message; and
  • Such method is sufficiently reliable and appropriate for the purposes for which the data message was originated and exchanged.

In addition, Article 21.2 of Law on Electronic Transactions also generally requires e-signatures to satisfy the following “safety” conditions:

  • The data used to create an e-signature is owned only by the signatory;
  • The data used to create an e-signature is under the control of only the signatory at the time of signing;
  • All changes to an e-signature after the time of signing is detectable; and
  • All changes to the contents of the data message after the time of signing is detectable

As all these conditions are vague and may give rise to uncertainty, a practical solution is to resort to third-party certification service providers. Enterprises/individuals can register their e-signatures with such service providers and will receive a certificate of validity of the respective e-signatures.

All analysis aside however, Vietnam remains an ‘old school’ jurisdiction for the time being and, where possible to obtain wet signatures on contracts and contract related documents such as formal notices it remains advisable to do so.

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 Chairman of Duane Morris Vietnam LLC and branch director of Duane Morris’ HCMC office.

Vietnam’s renewable energy industry amid COVID-19: facts, force majeure and (patchy) Government support

Vietnam’s renewable energy development over the past three or so years can variously be described as frenetic, chaotic and heartening. Look past all the noise about non-bankable agreements, insufficient transmission infrastructure and bureaucratic black holes, and it’s clear the market has spoken. Vietnam currently has the largest installed solar capacity in Southeast Asia and is taking strides on wind too. Between May and July 2019, an incredible 82 ground mounted solar plants were connected to the national grid (total of 4,464 MW), more than 400% the target that had been set for 2020. The Ministry of Industry and Trade recently announced that the country is aiming to boost power output produced by renewable energy to about 23% by 2030.

The sector as a whole is also poised on the brink of a new phase. Feed in tariffs are coming to an end, low hanging fruit projects have been developed and local banks’ capacity to continue to finance development is stressed. Meanwhile, energy demand rises steadily and right-minded global citizens are clamoring for an end to coal and a rapid transition to renewable energy sources.

Into this heady mix arrived a novel corona virus and the disease known as COVID-19.

For all the momentum, the clean-energy sectors – solar, wind, energy storage, and companies transforming the power grid – will not escape the COVID-19 impact. They face serious questions across the board: from supply chain issues to workforce shortages, to more macro questions about the economy, energy demand and availability of finance.

New FiT announcement for solar does little to calm waters

Which is why the Prime Minister’s Decision 13 on 6 April 2020 announcing the new solar power feed in tariffs was both a blessing and a curse. On the one hand, the market finally has long-awaited certainty over revenue stream. On the other hand, the COD deadline to qualify for the new tariffs – 31 December 2020 – is like a bad joke. See more about this here: https://blogs.duanemorris.com/vietnam/2020/04/07/solar-fit-2-finally-announced-in-vietnam-but-strict-timeline-remains/

In fairness, the 31 December 2020 deadline had been flagged for some time, but the long delay in making it formal, only to finally issue the Decision in a period of unprecedented global chaos and lockdown, with a deadline just 8 months away, almost seems cruel.

Module production facilities in Vietnam usually carry one or two months of supplementary materials inventory on-site. If production interruptions lasts longer than one month, factories in Vietnam will start to see supply shortages that will reduce their production output. Developers waiting for module delivery from mainland China in the second quarter of 2020 will very likely not see the orders delivered on time. Late module delivery will affect project construction schedules around the world, and projects with Q3 and Q4 2020 targets are likely to be hit particularly hard.

In other words, if you are a ground-mounted solar developer in Vietnam today and had been waiting for certainty of revenue stream before pulling the trigger on procurement (let alone land clearance costs), good luck.

Wind makes out better

Similar to the solar industry, COVID-19 has already interrupted the supply chain for wind power plants, which will lead to commissioning delays. Leading turbines suppliers have already announced delays in delivery dates for turbines and other essential equipment citing force majeure clauses in supply contracts.

Looking past supply, the longer strict public health measures stay in place, the more likely it is that equipment prices will be impacted as well.

At least for wind power projects, Vietnam’s Government seems to be listening. As a result of the COVID-19 situation and pleas from investors, on 9 April 2020, the Ministry of Industry and Trade proposed to the Prime Minister a FiT extension for wind projects until 31 December 2023 (a substantial 2+ years extension on the current deadline of 1 November 2021). The MOIT proposes in Official Letter 2491 that a new FiT should apply from1 November 2021 to 31 December 2023 and thereafter wind power tariffs should be subject to auction.

It remains to be seen if the MOIT proposal will be accepted and if prompt action is not taken, foreign clean energy development companies may withdraw from the wind and solar power market because of the possible negative impacts of COVID-19 on their global operations. Vietnam may lose investment disproportionately because it is considered a high-risk market. The virus could also make it harder to keep wind and solar farms up and running, due to travel bans and maintenance delays.

COVID-19 re-writes force majeure clauses

Where coronavirus causes business disruption, from fulfillment of deliveries to cancellation of events, a common question is whether commercial parties can rely on force majeure clauses in their contracts.

Vietnamese law defines force majeure in Article 56 of the Civil Code: “An event of force majeure is an event which occurs in an objective manner which is not able to be foreseen and which is not able to be remedied by all possible necessary and admissible measures being taken”.

For contracts that have been entered into prior to the COVID-19 pandemic, project developers will have to prove that the pandemic satisfies all three components of a force majeure event in order to rely on this statutory right. The first two can be easily met – the corona virus is an objective event that cannot be foreseen. However the trickiest part for developers would be the last component – whether the developer has taken all reasonable measures to prevent the effect of the pandemic on their project. This is a subjective test, and will need to be analyzed on a case-to-case basis taking actual facts into account.

Internationally, we see plenty of new drafting around force majeure terms expressly referencing COVID-19. An example is:

“Force Majeure Event means an event that wholly or partly prevents or delays the performance of obligations and/or the adherence to deadlines or time periods arising under this Agreement and shall include, without limitation, an act of God, explosion, accident, fire, lighting, earthquake, storms, flood or similar cataclysmic occurrence; an act of war, blockade, insurrection, riot, civil disturbance, sabotage, strikes, lockouts, or other labor difficulties; restrictions or restraints imposed by law or by rule, regulation or order of any federal, state or local government, governmental agency or quasi-governmental agency; a pandemic; COVID-19 (Coronavirus)-related events, including, by way of example but not limitation, quarantines, third party vendor shut downs, business shut downs, and travel restrictions; action or failure to act of any federal, state or local government, governmental agency or quasi-governmental agency; and interruption or other loss of utilities due to causes beyond the reasonable control of the Purchaser.”

Even though the force majeure clauses in standard wind and solar PPA do cover epidemic, they do not refer to epidemic-related events caused by third parties or those within the control of the government (government FM events). Since the power purchaser in Vietnam (EVN) is a State-owned enterprise, this raises the concern of EVN relying on government FM events to exempt itself from obligation. The lack of distinction emphasized between natural FM events and government FM events in the standard clauses, and the lack of expansion on the general reference to “epidemic”, puts power developers in a fragile spot amid this novel virus situation. As a result, it is advised that developers should always try to negotiate their PPAs to reflect international standards. This is of course easier said than done, but doesn’t mean efforts should be ignored.

On the developer’s side, it remains to be seen whether the standard PPA terms on force majeure might operate to allow extensions to COD deadlines, especially considering the deadlines are mandated in legislation. This is a topic that would bear much more scrutiny on a case-to-case basis.

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.

COVID-19 GUIDANCE FOR BUSINESSES IN VIETNAM: DEFERRAL OF TAX AND LAND RENTAL PAYMENT

The Government on 8 April 2020 issued Decree 41/2020/ND-CP on extension of deadlines for taxes and land rental payment (“Decree 41”) with immediate effect to support businesses, among other subjects, affected by COVID-19 pandemic.

The relief available under Decree 41

Primarily, the decree extends deadline for payment of value added tax (VAT) excluding VAT for imports, corporate income tax (CIT), personal income tax (PIT) and land rental payment.  Specifically, eligible enterprises and organizations can defer their VAT amount payable for the assessment periods of March, April, May, June of 2020 (for monthly tax declaration cases) or the first two quarters of 2020 (for quarterly tax declaration cases) for five months.  They can also defer their final CIT payment of 2019 and their CIT provisional payments for the first two quarters of 2020 for a period of five months.

With respect to household businesses and individuals, the deferral of deadlines for VAT and PIT payments can be extended until 31 December 2020.

Regarding the land rental payment, enterprises, organizations, households, and individuals with direct land lease contracts with the State can defer the first installment of their annual land rental payment which are due on 31 May 2020 for five months.

The beneficiaries provided by Decree 41

It is worth noting that the relief provided by Decree 41 is only available to certain enterprises, organizations, households, and individuals.  The beneficiaries under Decree 41 includes:

  • Enterprises, organizations, households, and individuals operating in agricultural, forestry and fishery manufacturing; food processing and manufacturing; garment and textile manufacturing; wooden, metal, paper, plastic and rubber products manufacturing; metallurgy, mechanical engineering; electronic products, computers and optical products manufacturing; automobile manufacturing; and construction;
  • Enterprises, organizations, households, and individuals operating in transportation and storage services; accommodation and catering services; training and education; medical and social assistance activities; real estate businesses; labor and employment services; travel agents, tour businesses and supporting services relating to tour promotion; artists, recreational activities, sport activities, museums and cinemas; and
  • Enterprises, organizations, households, and individuals producing auxiliary and key mechanical products; micro and small-sized enterprises; credit organizations, and branches of foreign banks which support their customers affected by COVID-19 pandemic.

The required procedures to obtain the relief

Taxpayers must submit a pro forma request to the local tax authorities before 30 July 2020 to be considered for the extension of deadlines for relevant taxes and land rental payment.

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 Chairman of Duane Morris Vietnam LLC and branch director of Duane Morris’ HCMC office.

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.

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.

 

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.

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.