Dr. Oliver Massmann – Page 49 – Duane Morris Vietnam

April 23, 2015 by Dr. Oliver Massmann

Breaking News – Vietnam – Broadcasting Market – First time Investment of foreign investors possible!

For your information, on 7 January 2015, the Prime Minister of Vietnam issued Decision 01 amending the “master plan on radio and television transmission and broadcasting through 2020” (the “Master Plan”). Decision 01 officially came into effect as of 15 March 2015.

The biggest change that Decision 01 makes is involvement of enterprises of all economic sectors, arguably including foreign invested enterprises, in the transmission and broadcasting market of Vietnam. Before Decision 01, only State owned enterprises or enterprises where State has majority ownership were given access to such markets.

As a matter of fact, VTV and its affiliates/subsidiaries hold a dominant role in the TV market. The “group” is responsible for both content provision and transmission/broadcasting. When a number of software/telecommunication giants such as (Viettel, the biggest telecomunication or FPT, the largest telecommunications and software companies respectively) start their TV business by taking advantages of their available infrastructure, VTV has sought to isolate them by offering content to its affiliates and subsidiaries first. This results in a modest expansion of newcomers like FPT and Viettel for the last two years.

The cause behind such change is, on one hand, the Government’s plan to separate the pay TV transmission/broadcasting and content provision which fall inside the sphere of the Law on Telecommunications and the Law on Media of Vietnam respectively. On the other hand, the Government wishes to form major transmission/broadcasting companies of large scale which are able to cover services nationwide.

We hope the above is useful for your consideration and will keep you updated of latest developments in this sector from time to time.

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

INTERESTED IN DOING BUSINESS IN VIETNAM? VISIT: www.vietnamlaws.xyz

THANK YOU VERY MUCH!

April 16, 2015 by Dr. Oliver Massmann

Vietnamese Clean Development Mechanism CDM market – The perspective of an emission certificate buyer

Overview of the CDM market in Vietnam

Certain projects for the reduction of emissions in Vietnam are suitable for purchasing certified emission reductions (CERs) under the Clean Development Mechanism (CDM). The buyers sign an agreement with local project owners in order to obtain rights to CERs from the project. Purchasers are usually ultimate consumers and speculators. Most CERs are eventually used by power companies and other purchasers from the EU area that meet the requirements as well as governments of developing countries etc. The buyers of primary CERs obtain at the European Climate Exchanges a discount compared to the secondary market price because they carry considerable delivery risks and typically have met CDM related expenses. Delivery risks arise typically through project execution, but also in form of CDM registration- and validation-related risks. Validation-related risks are highlighted due to the fact that out of 85 projects which have been uploaded for evaluation in Vietnam only 8 have been registered yet. Over 40% of the projects have been under validation for a year.

Vietnam’s market potential

Vietnam could have the potential to generate up to 10 million CERs. However, it is subject to acceleration of the validation process, i.e. the publication of standard CEF for the Vietnamese grid, the encouragement of required local approvals etc. Due to delays in project validation and construction, the scope will be probably smaller. The global recession has adversely affected the access to financing, which in turn affected particularly the hydropower sector (the main CDM project type in Vietnam).

Due to uncertainties with regard to the system after 2012, projects have to be registered or ordered as quickly as possible. Although the market price of CERs has decreased due to the impact of global recession, there is still a sufficient demand for Vietnam’s CERs. Purchasers are prepared to change to new product fields and are particularly interested in projects with a high sustainable development value for the local community.

CER portfolio management

Compliance buyers have to administer their portfolio intensively in order to reflect their intended and actually provided loans. Higher prices are paid usually in connection with project types involving high registration and verification risks. Furthermore, higher costs could be incurred within projects which are well advanced in respect of construction, but it will be dependent on this and not on increased registration risks. In case of projects which have already been started, the earlier CDM consideration as part of an additionality analysis has to be proven. Distribution of risk is an important risk management instrument. For example, many buyers may have a big percentage of their portfolio in Chinese CERs, so it is recommendable to have a look at other markets, such as SE Asia etc. Distribution of risk extends right up to technology type.

Most important project types in Vietnam

– hydropower: most common project in Vietnam. Validation risks are named as medium and verification risks are low. Although in these projects are a long construction period and often numerous delays.
– wastewater used for generate energy: 7 projects are already applied for registration. Risk of validation is low to medium, construction time is low (often less than one year) and the risks of validation is medium size.
– other renewable energy types: wind is a high potential, so far only one project existing. Also bio energy project have a high potential. Risks of validation and verification are low to medium, even there is a long construction period.
– MSW-treatment- are only few projects so far, but there is a high potential for composting. Risks of validation are low to medium, medium risks of verification and medium period of construction.

Most important feasible project types in Vietnam

Case studies:

BinhThuan: 30 MW wind farm project

This project, construction of the first wind farm in Vietnam, is run by the Vietnam Renewable Energy JSC. The first turbine group has been already installed on the construction site. In April 2009, the project has been registered with the CDM EB. A production of electricity of 91.571 MWh/year is expected, whereas over 59,000 t of CO2 emissions/year are to be reduced.

Case study – Cu Chi 1000t/d MSW processing plant
This project was developed by Tam SinhNghia (TSN) and includes composting of 1000 t/d of municipal solid waste (MSW). The expected emissions reduction of CH4 avoidance is estimated at roughly 1 million tCO2e (more than seven years of credited period).

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

INTERESTED IN DOING BUSINESS IN VIETNAM? VISIT: www.vietnamlaws.xyz

THANK YOU VERY MUCH!

April 16, 2015April 16, 2015 by Dr. Oliver Massmann

Investments in the Energy Sector

Future market development and opportunities for foreign players
– Vietnam’s strategies and master plan with regard to the expansion of renewable energies by 2015 and visions for the years ahead…

General overview:

Vietnam’s requirement for renewable energies rises sustainably (in the past, in the present and in the future by an average of 10% per annum). The country becomes increasingly dependent on the world energy price because the growth of domestic energy sources is most likely not able to keep up with the economic growth rate. The high potential of the hydroelectric power will be consumed primarily in the next decade, with gas and coal supplies being limited, so that in the near future Vietnam will have to import coal for energy production. In this context, the Vietnamese government identified the necessity that the available resources of renewable energies have to be exploited and expanded, and the currently existing obstacles gradually removed.

Potential and current status of the expansion of renewable energies:

Vietnam has potential resources of renewable energies. These sources, which can be exploited and actually utilized, include small-scale hydropower, wind power, biomass, biogas, bio fuel, energy from domestic waste, solar energy and geothermal energy.

– Small-scale hydropower: taking into consideration the economic efficiency and profitability, it is classified as the most viable form of renewable energies. More than 1 000 locations show a potential for the development of small-scale hydropower in the range from 100 kW to 30 MW and a total capacity of more than 4 000.
– Wind power: Vietnam’s potential for wind power is classified as very high. However, as currently no reliable studies exist, the resources cannot be precisely quantified. In fact, available data on wind power potential show discrepancies. Figures from 1,785 MW up to more than 8 700 MW or even way above 100 000 MW are mentioned.
– Biomass: as the agriculture in Vietnam is widespread, so a high potential of power from biomass is available, too. The capacity for sustainable power production from biomass amounts to just 150 million tons per annum, 700 – 780 MW for electricity generation alone can be reached.
– Solar energy: Total number of sunshine hours up to 1400 – 3000 hours/year, the average total radiation amounts to 230 – 250 kcal/cm2, and strengthens towards the south. Solar energy can be used for water boiling, power production and other purposes, as e.g. drying, cooking etc.
– Geothermal energy: the recent figures show that Vietnam’s potential for geothermal energy amounts to about 200 – 340 MW.

Current status:
Currently, the consumption of renewable energies consists to the greatest extent in energy recovery from biomass in its original form. The proportion of energy from raw biomass to total energy requirement is high and amounts to roughly 38% of the entire final consumption of energy and about 30% of total initial energy consumption.

Power production for grid connection: There are only two kinds of small-scope hydropower with a capacity of over 300 MW; 30 MW from biomass (sugar cane waste) and 2.4 MW from household waste.

Network-independent power supply: Renewable energy sources have been utilized to supply rural areas, distant and remote territories as well as islands. 1.25 MW solar power, 1.2 MW wind power and more than 50 MW small and micro hydropower plants have been built and operated.

Biofuel: The government signed a decision on the approval of a project for “biofuel development”. In the country, 6 projects for ethanol production have been established, with each project showing an average capacity of 100 million liter /year. Several of the projects will start the production in 2010.

Summary of the strategies for the development of renewable energies and development targets in Vietnam

Development perspectives: – the development of renewable energy with economic feasibility is given priority; – the development of renewable energy to supply rural areas with electricity is fostered and supported; – support and investment in further development of certain technologies with regard to renewable energies which are not economically viable yet; – the development of renewable energies in cooperation with the government based on the principle of effective combination of market mechanisms; – the development of renewable energies in close relation to sustainable economic, social and environment-friendly development in order to reduce the effects of the climate change and the development of the environment.

Overall goals: – Improvement of the energy infrastructure, extension of energy sources, ensuring energy security, environmental protection and sustainable development, mitigation of damages with regard to the effects of climate changes; – to increase the national production and the national consumption of renewable energies; – Completion of the energy program in the mountainous region and contribution to the accomplishment of government objectives to provide electricity for rural areas.

Special goals: – to increase the share of renewable energies in the overall national energy production – from 1.3 billion kWh in 2008, by at least 7 billion kWh in 2015 and 20 billion in 2025; – by 2020, 100% of households in rural areas ought to be supplied with electricity; – increase of the number and the area of application of cooking devices which can be powered by solar energy, namely from the current very low percentage to 18 million m2 (in 2015) and 9 million m2 (in 2015); – increase and expansion of the area of application of biogas technologies from 0.12 million m3 of the current construction volume to 5 million m3 in 2015 and 15 million m3 in 2025; – to increase the number of households utilizing highly efficient biomass; – to increase the number of households using devices for conversion of efficient biomass (cooking devices with more than 30% efficiency) from the current low number to 1 million households in 2015 and 4 million households in 2025; – in 2015, the production of ethanol and vegetable oil should amount to 250 000 tons, which corresponds to 1% of the crude oil requirement. In 2015, the production of ethanol and bio-oil should reach 1.8 million tons and cover 5% of the crude oil requirement.

Solutions for implementation

General principles:

– all organizations, individuals, domestic enterprises, foreign enterprises and organizations have to be encouraged to participate; – promotion of projects concerning renewable energies in order to ensure better marketing;
– the government should support the national grid connection at the same or lower cost compared to avoidable economic cost of projects within the scope of renewable energies;
– the government should simplify the operation of the market; – preferential prices for renewable energies should be fixed on the basis of cost effectiveness aspects; – the government should support the use of renewable energies for the supply of rural areas with electricity;
– the government should support the initial phase for the promotion of installation and upgrading of technologies related to renewable energies for effective heat and fuel production and its use, based on the principles of standard and quality assurance.

Solutions and roadmap for implementation:
– establishing a national liaison body for the development of renewable energies; – preparation of a roadmap for organizational structure development; – preparation of a roadmap for supporting grid connection of the projects regarding renewable energies; – preparation of a roadmap for renewable energy development for heat and biofuel production; – preparation of most favorable terms of registration for CDM for projects based on renewable energies.

On financing of renewable energies in Vietnam: The basics

In order to be able to keep pace with growing requirement Vietnam’s for energy, an increase of the production capacity by approximately 4,000 MW per annum and its supply into the national grid are required.

Based on rapid shrinkage of Vietnamese gas and oil reserves (which will be exhausted within coming 20 to 30 years), the experts predict that, from 2020, in order to ensure the operation of its power plants Vietnam will have to import a volume of 100 million tons of coal per annum. Consequently, Vietnam will be dependent on the import of fossil fuels, unless it develops its enormous potential of renewable energy. Despite the negligible current capacities of renewable energy plants, Vietnam is blessed with considerable potential in this area which can be developed as alternative energy sources for the benefit of Vietnam. In spite of the fact that the current legal framework is very underdeveloped yet, the government, namely the Ministry of Industry and Trade, has adopted a constructive and supportive course which, in combination with political and financial assistance on the part of international institutions, makes this sector increasingly attractive for foreign investors.

Rich sources of clean energy

Vietnam has countless clean energy sources: Its abundance of streams, sources and nine main rivers gives Vietnam a place among the top 14 of countries with the best conditions for conversion of hydropower into electricity; its first-class coastal locations can boast a wind force of 860 to 1410 kWh/qm per annum or 800 to 1000 kWh/qm per annum; the tropical climate provides solar resources with a solar radiation between 3 and 4.5 kWh/gm/day in winter and about 4.5 to 6.5 kWh/qm/day in summer. Against this background, some experts even claim that Vietnam can completely cover its requirement for electricity by the use of renewable energies.

The government has gradually created a legal framework for the promotion of development of renewable energies in Vietnam. This new legislation does not establish any restriction for foreign investors that invest in renewable energies and introduces a favorable tariff for renewable power plants with an installed generation capacity of up to 30 kWh. According to this legislation, Electric of Vietnam (EVN), the only electric power company (and the only electricity buyer), will acquire electricity generated by such plants at approximately 11 US cent per kWh during peak load times of the dry season. The corporate income tax (CIT) for these project enterprises is limited to a rate of 10% and granted for a time frame of 15 years; in special circumstances, it can be even extended to just under 30 years. The entire equipment and machinery which are imported as inherent parts of solar or wind power plants are duty-free. Moreover, CDM projects (Clean Development Mechanism) are entitled to subventions provided that the production costs exceed the selling price.

… but challenges lie ahead …

Despite this country’s undisputable potential of resources of alternative energy, investors bringing in funds for Vietnam’s production efficiency within the scope of renewable energies are confronted with considerable challenges:

1 The lack of reliable legal framework conditions.

2 Protracted negotiations of electricity purchasing agreement with the EVN.

3 The lack of electricity supply tariffs which would be stringently required for successful renewable energy projects.

The supply tariff is a preferential price which is paid by power suppliers when purchasing electricity generated by an authorized producer of renewable energy for a timeframe from 15 to 20 years for electricity units fed into the grid. The payment for such renewable power plants is financed regularly by allocation of cost to all consumers as well as partly by government aid for renewable energies. The combination of preferential tariffs and the obligation to purchase enables feed-in tariffs to function in monopolistic or oligopolistic markets. Presently, the Vietnamese law does not provide for any feed-in tariffs. Article 31 of the Electricity Law provides principally that the producer price (i.e. the selling price ex power plant) must not exceed the tariff determined by the competent government agency.

EVN still refers to an out-dated rate according to Decision No. 2014/QD-BCN (of 2007) with a tariff for hydropower between 2 and 5 US$ cent and for combined gas turbine power plants from 3.5 to 4.7 US$ cent. Despite the fact that the preferential tariff was fixed for smaller renewable power plants, the price of 11 US$ cent /kWh is applied only during peak periods in the raining season. Energy purchasing at other times costs about 11 cent/kWh.

The main obstacle for electricity purchasing by EVN at an increased price is the low retail price. Even though from 2010 the electricity rates will be based on market prices, the prices for households being ultimate consumers remain a matter of annually determined fixed prices. Meanwhile, a fixed maximum price for consumers form the industry and service sector is applicable. Against the background of the risk of social unrest, a substantial increase of the retail price in the short term is not realizable.

The monopoly of the EVN is one of the main reasons why investors are discouraged from entering the renewable energy market. EVN is currently de facto the only buyer and controls the electricity feed-in, transmission and supply to ultimate consumers. A free competition in electricity generation can hardly be guaranteed because EVN, being the only buyer, operates also enterprises just in this sector. It was criticized that the National Load Dispatch Center or A0, a subdivision of EVN that is authorized to electricity feed-in for the entire national grid, does not draw on the capacity of expensive oil-fired or gas turbine power plants even in case of marginal underload of the power grid.

There is a great deal of administrative barriers which have to be broken down by investors when initiating a power project in Vietnam. A power plant project has to be in accord with the master plan at national level or at the level of a particular province. If a project is not listed in these master plans, it requires the approval on the part of the Prime Minister or the Ministry of Industry and Trade. Furthermore, before obtaining the investment certificate, foreign investors have to conclude a Power Purchase Agreement with the EVN. PPA negotiations and application for investment certificates as well as power plant operator’s licenses may take months if not years.

How can investors survive?

Projects in the renewable energy sector are – as long as no feed-in tariffs are introduced – not viable. Insofar, 2015 should be a good year with a prospect for implementation of a meaningful legislation in this area; namely, the national Master Plan for Renewable Energies and the Decree on power feed-in tariff. The adoption of such documents will clarify the attitude of the government towards the development in the renewable energy sector.

At this stage, a clear and feasible strategy regarding the investment form is a prerequisite for economic involvement in this growth sector. Project financing (as limited recourse financing) is a classical but effective approach to capital raising on a bigger scale. No large projects in the range of renewable energies have been realized in Vietnam so far, but there were already a number of financially intensive BOT power projects in the thermal power sector (namely Phu My 2.2 and Phu My 3) which can have a role model function also in the renewable energy sector. Moreover, on a case-by-case basis, preferential tariffs and other financial incentives as a basis for BOT projects can be negotiated.

Certified emission reductions (CER) trading can be taken into consideration because of continuing great demand for CERs from projects with high sustainability value for local community. The focus should be on CDM projects with smaller and medium financial volume as well as lower guarantee and delivery risk. However, CER trading should not be regarded as primary financing option. In view of yet very rudimentary legal framework for CDM projects as well as the lack of precise and official statistics on the basis of which future emissions would be determined, the validation necessary for such trading is much more difficult. It is to be stated that from 85 projects selected for validation in Vietnam yet only eight have been verified, and only one project (Rang Dong oilfield gas separation and utilization) was granted a CER.
In a growth market like Vietnam, well thought-out planning and thorough understanding of local legal situation and the obligatory approval procedures are basic prerequisites for successful investments. The renewable energy sector is no exception here.

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

INTERESTED IN DOING BUSINESS IN VIETNAM? VISIT: www.vietnamlaws.xyz

THANK YOU VERY MUCH!

March 30, 2015 by Dr. Oliver Massmann

Intellectual Property Rights Enforcement in Vietnam

Vietnam is currently negotiating a Free Trade Agreement with the European Union (EVFTA) as well as the Trans-Pacific Partnership with the United States (TPP). In addition, the ASEAN Economic Community will be established by the end of 2015. Thus, Vietnam will soon expect a significant increase in foreign investment, most of which will depend on the effectiveness of intellectual property protection and enforcement in Vietnam. In this context, Vietnamese enforcement agencies and the courts have been actively issuing decisions with harsh sanctions on the infringers serving as good precedents and clear warnings on future violations.

Administrative relief or civil proceeding?

However, it should be noted that presently in Vietnam, rights holders mainly seek administrative relief and border control measures before competent authorities such as the Ministry of Science and Technology Inspectorate or the Vietnam Intellectual Property Research Institute rather than pursuing lawsuits before civil courts. They view that administrative route would take less time and money compared with civil actions, taking into account the unclear legal basis of IP disputes and lack of experience of judges. The non-binding opinions of these administrative agencies could then be included in the customs record, which effectively prevent the physical entry of infringing goods at the border. However, administrative decisions only result in the fine and destruction of infringing goods without compensating for the rights holders or even payment of legal fees. As such, there has been a recent increase in litigation in courts in patent area for the past few years. With the agriculture accounts for the majority of Vietnam’s economy (80%), it is not a big surprise that the first majors patent suits took place in this area. In these cases, the courts have issued decisions in favor of the foreign agroscience companies, which would set precedents for future judgments.

Preliminary injunctive relief and permanent injunction

In civil proceedings, especially in IP area, it is sometimes importance to seek for injunctive relief. Preliminary injunctive relief has its legal basis in Articles 99-126 of the 2004 Civil Procedures Code as amended in 2011 and Articles 206-210 of the IP Law promulgated in 2005. Rights holders can request a preliminary injunctive relief if they can prove either of the following: (i) there is a threat of irreparable damage; or (ii) there is a threat of dispersal or destruction of suspected infringing goods and related evidence if they are not protected in time. The aim of injunctive relief measure is the protection of the rights holders pending the final decision of the courts. Typical preliminary injunctions are goods seizure, sealing/ freezing, prohibition on status/ ownership change/ transfer, and other measures specified in the Civil Procedure Code. However, for the courts to render an injunctive relief, rights holders are requested to pay a deposit of at least VND20 million as a security. The courts then still take great caution in applying such measure and there is no clear guidance for the court to return the deposit to the rights holders when they have concluded against the infringers. Thus, there lies a risk for rights holders when asking for preliminary injunctive relief.

While the use of preliminary injunctive relief has a clear legal basis in Vietnamese law, permanent injunction is not that case. What is normally stipulated is a cessation of the infringement but not the court order to never commit the infringement again in the future. However, it seems that the Ho Chi Minh City Court for the first time in a case initiated by a European agrochemical company against a pesticide producer in Ho Chi Minh City has ordered the infringer not to infringe the patent until the expiry date of the patent in question. This is a precedent-setting decision for future courts decisions in patent area.

Recent typical IP court litigations in Vietnam:
 Dispute between a major French cement company and a defendant in Vietnam on domain name
 Dispute between US-based Videojet Technologies Inc., and Nam Trinh JSC on trademark infringement
 Dispute between a major European agrochemical company and a pesticide producer in Ho Chi Minh City on patent infringement.

Conclusion

The developments in the IP rights enforcement system shown in the choice of civil proceedings as well as the favorable binding decisions of the courts of foreign parties are good signals for better IP environment in Vietnam. Vietnam is taking steps to assure foreign investors of effective IP rights protection when doing business in Vietnam, especially when the EVFTA and the TPP are concluded by this year.

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

INTERESTED IN DOING BUSINESS IN VIETNAM? VISIT: www.vietnamlaws.xyz

THANK YOU VERY MUCH!

March 26, 2015March 26, 2015 by Dr. Oliver Massmann

Lawyer in Vietnam Oliver Massmann Government’s Strong Efforts to Improve Business Environment

On March 12, 2015, the Government has just issued the new Resolution 19/NQ-CP/2015 on key duties and solutions to improve business environment and national competitiveness in 2015 – 2016 (“Resolution 19”).

Resolution 19 provides several measures / objectives including decreasing administration procedure time (tax declaration, custom / port clearance, social insurance declaration, establishment of new companies, bankruptcy, etc.), removing some procedures, conditions such as legal / criminal records of foreign investors acquiring shares / equity in Vietnam, revising regulations / law to promote the business, procuring relevant State authorities to act and prepare action plans to do before 30 April 2015, report to the Government on a quarterly basis, etc.

The new Resolution also lays out strong commitments and positive changes to be made by Government bodies, which are expected to have the business environment targets of Vietnam reaching ASEAN-6 and ASEAN-4 averages in 2015 and 2016 respectively.

The new Resolution prioritizes the following:
1. In 2015, approaching and exceeding ASEAN-6 averages, notable targets are:
• Lower tax payment period to 121.5 hours/year as maximum, develop and disclose the database on tax refund;
• Rapidly decrease processing time for clearance of exports and imports of goods to 13 and 14 days respectively;
• Processing time for business establishment procedures is 6 days as maximum;
• Processing time for bankruptcy procedures is decreased from 60 months to no more than 30 months
2. In 2016, Vietnamese business environment index to approach ASEAN-4 averages on certain areas, notable areas are:
• Business establishment and investor protection to be in Top 60 and 50 countries respectively, processing time for tax payment and compulsory insurance is 168 hours/year.
• Simplify the procedure and reduce processing time for registration of property ownership and use rights to 14 days as maximum
• Access to credit index reach Top 30 countries of the World Economic Forum.
• Simplify the procedures and reduce processing time for commercial disputes to 200 days as maximum (400 days currently) and 24 months (60 months currently), especially for cases involving SMEs through court method.

Resolution 19 also calls for more active participation of business associations and professional bodies in policy review and valuations as well as closer coordination with Government bodies to support business development and resolve business issues.

***

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

INTERESTED IN DOING BUSINESS IN VIETNAM? VISIT: www.vietnamlaws.xyz

THANK YOU VERY MUCH!

March 19, 2015 by Dr. Oliver Massmann

Lawyer in Vietnam Oliver Massmann – The New Wave of M&A in Vietnam

The 2005 Law on Investment and Law on Enterprises laid a foundation for establishing a new Vietnamese investment regime in general and creating a level playing field for foreign and local investors in particular. The legal framework for the M&A sector in Vietnam has since been developing at a rapid pace. Currently, with some limitations under both Vietnamese law and Vietnam’s WTO commitments, foreign investors can freely acquire shares in Vietnamese enterprises. The new wave of M&A sets to hit Vietnam, as Vietnam is once again perceived as an attractive investment market. The primary investors have been from Japan, Korea, Taiwan and recently from the ASEAN countries, particularly Singapore and Thailand. Once the Trans-Pacific Partnership (“TPP”) and Free Trade Agreement between EU and Vietnam (“EVFTA”), which currently enter their final rounds of negotiation, are concluded, they may also drive more interest in M&A activities in Vietnam.
We much appreciate that the recent development of the Investment Law and Enterprise Law highlighted endeavors of the Government of Vietnam on easing the procedures of M&A activity in Vietnam. The Government of Vietnam by introducing the new Investment Law and Enterprise Law at the end of 2014 has made stronger commitment on the improvement of M&A regulatory framework to re-ignite M&A activity in Vietnam.
Recent M&A deals
M&A activities in Vietnam witnessed a steady growth after Vietnam officially became a member of the World Trade Organization in 2007. Vietnam saw the first M&A wave in the period of 2008 – 2013 with a reported total value of US$15 billion when the Japanese investors kept rushing to Vietnam and made about US$1.2 billion worth deals in 2012. Japan leads the nation that bring M&A deals in Vietnam in terms of both quantity and value. This helps the M&A market in Vietnam reach of peak of US$5.1 billion in that year. According to statistics from Capital IQ, there were 92 successful M&A deals in 2008, 308 deals in 2012 and 182 deals in 2013. Fast-moving consumer goods is considered as the most attractive sector, with the total M&A transaction value up to US$1 billion, accounting for 25% of the total M&A value in Vietnam while the retail and real property have always been robust in M&A with big deal value.
Vietnam’s M&A market saw a strong recovery in 2014 when six deals are reportedly made every week. The total M&A deals in 2014 was 313 with value of US$2.5 billion, a 15% increase compared with the previous year. Notable deals in 2014 include the acquisition of all 19 supermarkets of Cash & Carry and their related real property of Metro by Berli Jucker with a deal value of US$ 879 million; Vingroup, one of the biggest local private companies in Vietnam, bought 70% of Ocean Retail Company’s capital; Mondelez International acquired 80% of Kinh Do Joint Stock Company’s capital in sweets manufacturing section at US$370 million; and Standard Chartered Private Equity acquired a significant minority stake in An Giang Plant Protection Joint Stock Company at US$90 million. The business community highly hope that total value of M&A deals could reach US$20 billion in the second wave (2014-2018).
Good news for M&A in Vietnam
Starting from 01 July 2015, foreign investors will not need to undergo lengthy investment certificate procedures when buying stakes in Vietnamese target companies. While this remains to be seen, the change, introduced by the new Investment Law, will hopefully end years of uncertainty and frustration faced by foreign investors eyeing Vietnam market entry or expansion via M&A.
We have seen a strong increase of interest from international investors, especially in the last months of 2014 continuing into 2015. The TPP (which includes the U.S. and Japan), the EVFTA as well as tariff reductions under the AFTA are all scheduled for this year. These will increase market access for foreign investors in Vietnam and lower barriers to trade in goods and services.
Why is the investment certificate question so important?
Under current law, Vietnam has different licensing procedures for foreign and domestic investors. The Investment Certificate (“IC”) serves as business registration for foreign investors. In practice, despite a 45 day maximum statutory time limit, the IC process can take 4 to 6 months or longer, while domestic business can be registered within a day.
Under the new Investment Law, the IC is replaced by an “investment registration certificate” (“IRC”) and an enterprise registration certificate (“ERC”). Obtaining ERCs should be straightforward, as they only contain basic business info and also apply to domestic investors. The IC process now statutorily takes 15 days while ERCs are issued within 3 working days. The process may be longer in practice but it is better than before in terms of clear application of time frame.
Explicitly, no IRC for M&A activity!
Foreign ownership in public companies, including listed companies or companies with 100 shareholders or more with contributed equity of VND 10 billion or more, cannot exceed 49%. Although in principle enterprises with foreign ownership of up to 49% are entitled to the same treatment as local companies, such rules appear to be disregarded in practice. For example, the Department of Planning and Investment (DPI) of Ho Chi Minh City refused to register the distribution of pharmaceutical products of a local company on the ground that 4.3% of its shares were then held by foreign investors. It is therefore very difficult for foreign investors to conclude an M&A deal.
Now, the new Investment Law expressly provides that no IRCs will be required for acquisitions of target companies. As a result, the time needed to complete purchase of stakes in Vietnamese entities is expected to be reduced tremendously. Buying into public companies listed on the Vietnamese stock exchanges will not require IRC either, but foreign ownership of listed companies is still capped at 49% (and max. 30% for financial institutions). Rumors have long abounded that the caps will soon be raised but, until that day, investors will need to buy unlisted companies to take control.
Provincial Departments of Planning and Investment (DPI) will still have to “register” (read: “approve”) plans to acquire a majority of a target or stakes in a company that is active in a “conditional” sector. Conditional sectors for foreign investors include construction, urban planning and education (Annex 4, new Investment Law). In practice, DPI officials have broad discretion to approve applications, but they should need much less paperwork then for an IRC application.
In addition, the business registration office will have to update ERCs to reflect changes in a unlisted company’s ownership, statutorily, in 3 working days.
New waves of M&A?
With positive changes that the new Investment Law brought, together with a significant equitization target of about 368 state-owned enterprises in 2015, the conclusion of the TPP and EU-Vietnam FTA as well as the formation of ASEAN Economic Community by the end of this year, Vietnam will witness another wave of M&A. Banking and finance will attract main foreign investment as the number of commercial banks are required to be reduced to 13-15 in 2017 and smaller banks under the pressure of competition and capital requirements will look for new foreign investors to achieve expansive. In addition, consumer goods and real estate also remain attractive sectors.

ABOUT THE AUTHOR
Mr. Oliver Massmann is General Director of Duane Morris Vietnam LLC, a subsidiary of Duane Morris LLP (US). He has been practicing law in Vietnam for 20 years and is influent in English, German and Vietnamese. He has been long regarded by Legal 500 and other reputable professional magazines as one of leading individuals who has been at the center of some of the most notable M&A transactions in recent years in Vietnam.
Mr. Oliver Massmann can be reached at OMassmann@duanemorris.com for any questions relating to M&A activities in Vietnam in general and this article in particular.

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March 19, 2015March 19, 2015 by Dr. Oliver Massmann

Lawyer in Vietnam Oliver Massmann Retention of Title under Vietnamese Law

Introduction

Retention of title is first mentioned in the Civil Code of Vietnam. The Civil Code of Vietnam was introduced in 1995 and it is the first Civil Code of Social Republic of Vietnam (“Civil Code”). However this issue has not yet developed into a separate concept and is regulated spread. Regulations on retention of title/reservation of ownership can be found in purchase and sale, contract for the sale and purchase of house, goods delivery.

In addition, the retention of title is also regulated in commercial laws. The Commercial Law of Vietnam was passed two years after the Civil Code (10 May 1997). It is also a landmark legal document and plays an important role in regulating commercial activities in Vietnam.

Establishment of ownership rights

According to the Civil Code, the ownership is established under many foundations. For example, establishment of ownership with respect to revenue gained from labor and legal business, in accordance with an agreement, in cases of merger or under a statute of limitations, etc.

In case of establishment of ownership in accordance with agreement, a person to whom a property has been transferred through a contract for the purchase and sale, gift, exchange or loan shall have the right to own such property as from the time of receipt of the property, if not otherwise agreed or the law does not otherwise provide.

Time of ownership transfer

According to the Civil Code, in case of sale and purchase agreement, the moment at which the ownership is transferred is defined in the following cases:

• the moment at which the buyer receives the property;
• the completion of the procedures for registering of ownership rights of such property;

However, except where the laws otherwise provide, the two parties are free to negotiate on the time of ownership transfer, provided that the agreement does not violate the law.

Therefore, the responsibility of bearing risks shall still belong to the seller until the property is handed over to the buyer; whereas the buyer shall bear the risk to the property in question as from the receipt of that property, if not agreed otherwise.

Similarly, in case of property that must be registered of the ownership rights, the seller shall bear the risks until the completion of the registration procedures; meanwhile the buyer shall bear the risk as from the completion of the registration procedures, even when the buyer has not received the property. However, it is noteworthy that the buyer and the seller have their freewill to agree upon the moment for bearing risk.

The Commercial Law also has similar regulation on the moment of transfer of ownership rights (Article 62, the Commercial Law), i.e. the moment when the seller delivers the goods to the buyer unless otherwise agreed upon by the two parties or provided by law. However, the Commercial Law also regulates that, in case where obligatory conditions are agreed upon in the sale and purchase agreement without which the seller shall be unable to deliver the goods, or the buyer shall be unable to receive the same, then the ownership of the goods in question shall be transferred from the seller to the buyer only when such conditions are met (Article 62, Commercial Law).

The obligatory conditions under Vietnam law may be understood as conditions for the transaction to become effective including the conditions on the person participating in the transaction, its purpose, content and the form, and the voluntary of the involving person.

Agreement and Retention of Title/Reservation of Ownership

Ownership is a very developed concept in the civil law branch of Vietnam, however retention of title is regulated scattered. Purchase by deferred payment or payment in installments is the most evident example for retention of title in Vietnam law.

Article 461 of the Civil Code provided that,

“…The seller is entitled to reserve his/her ownership rights to the sold object until the purchaser has made full payment, except in circumstances where otherwise agreed”.

Therefore, in case of deferred payment or payment in installments, the seller is entitled to reserve his/her ownership to sold object until the purchaser has made full payment, except otherwise agreed. The purchaser shall only be entitled to use the object purchased by deferred payment or by payment in installments and must bear the risk during the use period, except otherwise agreed.

Besides, the parties may agree upon the trial use of purchased object by the buyer for a period referred to as the trial use period. In the trial use period, the object shall still remain under the seller’s ownership. The seller shall bear all risks with respect to the object. Within the trial use period, the seller is not permitted to sell, give as gift, lease, exchange, mortgage or pledge of the property or offer it as a guarantee, while the purchaser has not yet replied.

Conclusion

In conclusion, according to Vietnam law, the ownership can be reserved in the following cases:

• the agreement of the related parties;
• the type of the agreement; and
• the prescribed law.

—o0o—
Please do not hesitate to contact Mr. Oliver Massmann under omassmann@duanemorris.com if you have any questions on the above. Oliver Massmann is the General Director of Duane Morris Vietnam LLC.

INTERESTED IN DOING BUSINESS IN VIETNAM? VISIT: www.vietnamlaws.xyz

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March 17, 2015March 17, 2015 by Dr. Oliver Massmann

Lawyer in Vietnam Oliver Massmann – Vietnam a future International Competitor in Wind Energy ? Oliver Massmann – Ho Gia Le Hoang

Potential of Wind Energy Industry in Vietnam
Vietnam has a significant potential for wind energy with an average wind speed of more than 6m/s, surpassing that of all neighbouring Southeast Asian countries. With more than 3,000km coastline and plenty of islands, the total potential of wind energy in Vietnam is estimated to be as high as 713,000MW – 510,000 MW on land and 203,000 MW in islands. In comparison, this is 200 times more than the production volume of the largest hydropower plant, Son La (Vietnam), in Southeast Asia and 10 times larger than the projected total capacity of the electricity industry in 2020.
Since the electricity demand in Vietnam is forecasted to increase by up to 14.2 pct. annually for the 2011-2015 period and 11.4 pct. for the 2016-2020 period , and the electricity demand is expected to increase 7 times to 800 billion Kwh in 2030, Vietnam will then have to invest in energy sources to meet this big demand. Such investment is vital given Vietnam’s expected dependence on imported coal, one of their primary resources for electricity production, by 2015. Additionally, hydroelectric energy is quite abundant in Vietnam but poses certain underlying risks. Therefore, Vietnam will have no choice for power development other than renewable energy in general and wind energy in particular.
Government’s Policy On Development Of Renewable Energy
The important role of renewable energy in general and wind energy in particular is recognized by Vietnamese government and reflected in the Master plan VII about energy development in Vietnam. The renewable energy is increasingly accounting for power sources (4.5% in 2020 and 6.0% in 2030 of the total power supply). The Master plan VII sets the renewable energy target rate at 5.6 pct. of total primary energy consumption by 2020 and 9.4 pct. by 2030. The Government’s target is to increase the wind power to 1,000 MW (0.7 pct. of electricity production) by 2020 and 6,200 MW (2.4 pct.) by 2030.
Moreover, as the energy prices in Vietnam are not very high, there are many incentives and preferential treatment offered by the Vietnamese Government to the wind power industry. Decision 37 offers the following incentives and preferential treatment in terms of funding, tax and fee to wind energy project as follows:
i. Funding: The investor can raise funds in different forms permitted by relevant lawsfrom individuals and organizations in and out of the country and may have access to State credit for investment pursuant to the laws.
ii. Tariff: The investor is exempted from tariff on goods imported to create fixed assets and goods used as raw materials, input or semi-finished products that are not available at home for the project’s operation in line with the Law on Import and Export Duties , Law on Tax Mangagement and other relevant regulations on export and import duties.
iii. Corporate income tax: Wind power projects enjoy the same preferential treatment in investment in terms of exemption and reduction of corporate income tax as for other projects in line with the Law on Investment , Law on Corporate Income Tax and other documents guiding the enforcement of these laws : Perferential corporate income tax rate of 10% applies to newly-established enterprises for 15 years.
If the given project is classified as a large scale project, a project using high or new technology and in special need of investment, the above preferential tax rate may be extended to less than 30 years following a decision of the Prime Minister.
In addition, other preferential treatments in infrastructure for wind energy projects are available as follows:
i. Projects on installing wind powers, lines and transformer stations connected to the national grids enjoy the same exemptions and reductions in land rental as projects being entitled to special investment treatment.
ii. In line with the approved power development plan, the provincial people’s committee allocates land to the investor to implement wind power projects. The compensation for existing land users and support for site clearance complies with the provisions of land law in force.
In addition, in accordance with Decision 37, Electricity of Vietnam (“EVN”) is to buy all of the plant’s wind energy outputand the Vietnam Environment Protect Fund will accordingly subsidize to EVN with the current subsidized tariff of 204 VND/kWh (about 01 UScent).
Market Access Of Foreign Investor
Currently, there is no foreign ownership restriction in energy sector in Vietnam. The foreign investor may choose among permitted investment forms: 100% foreign invested company, joint venture or public private partnership (“PPP”) in the form of BOT contract.
Wind energy projects require high investment rates, while the electricity production costs are always high. Though the Government agrees to buy wind energy at high price, the investors still do not dare to pour their money into the sector for fear of the risks resulting from unstable policies.
In such circumstances, PPP is the most reasonable solution. Recently on 14 February 2015, the Government issued a long-awaited Decree on PPP models, Decree 15/2015/ND-CP which will replace previous legal regulations on PPP or BOT with the intention of promoting private investment in infrastructure to boost economic growth in Vietnam. The PPP model can help ease the burden on capital arrangement, share and minimize risks, take full advantage of the management resources and improve the policies’ transparency, thus bringing the highest possible effectiveness of the projects. For its great advantages, PPP has been applied in many countries in the world.
In Vietnam, BOT is the best investment form for energy projects since it is easier to negotiate more favorable electricity rates and obtain more government guarantees, especially in the context that EVN – a state-owned electricity company, is obliged to purchase all electricity from the projects. Moreover, the investor can receive more fiscal and financial incentives.
Wind energy will be an interesting sector in Vietnam for a foreign investor in the middle and long term, especially at the stage of fully competitive retail market. Despite the main obstacles to foreign investors such as high production cost, time taken for investors for investment capital recovery, and the lack of a competitive sale price, foreign investors still receive many preferential policies and incentives. When Vietnam energy market becomes a fully competitive retail market, the wind energy project will play a more important role and the investor will gain higher actual profits.
Starting Up A Wind Energy Project
Generally speaking, the start-up process in Vietnam is now still pretty complicated with the involvement of many licensing authorities and state agencies that make time-consuming and costly for developers. However, with the recent promulgation of new Investment Law and Enterprises Law which will take effect from 01 July 2015, the Government of Vietnam has showed the sign on improvement of bussiness and investment enviroment and both new laws are aimed at reducing licensing complexity and granting easier market access.
Currently there has yet been any national plan for wind energy and consequently, there is no specific procedure for investment in wind energy project. Thus, until such a plan is finalized, the investment procedure remains uncertain. Wind energy projects must be in alignment with the national energy sector’s development and priorities will be given to those with high economic and financial efficiency, as well as plans to connect with national or regional grids.
Acording to Decision 37 , until the planning is completed and approved, the Prime Minister will have to decide on any wind energy project. Moreover, under Circular 32 , the investor can only invest in the wind energy project included in the list of wind energy projects approved by the Ministry of Industry and Trade (“MOIT”). The MOIT requires project owners follow its guidelines and stipulates that capital investment from a project owner must exceed 20 percent of the project total investment capital. The provincial people’s committees will be the sole authorities to grant licenses after getting approval from the MOIT.
In order to commence the construction, the investor must satisfy many requirements, including but not limited to obtaining the investment certificate, having signed the power purchase agreement and electricity integration agreement. Gerally speaking, the start-up process involve many state authorities from local level to the central level.
For reference, according to the GIZ/MOIT Wind Energy Project , to set up a wind energy project, the developer must take the following steps:
Step 1: Site selection – Due to the absence of a national wind power plan, site selection is based on relevant past data such as wind data, wind energy atlas, etc. Permission from the provincial people’s committee (PPC) and provincial Department of Industry and Trade (DoIT) is needed for site surveying and resource assessment is needed for a feasibility study.
Step 2: Assessment of wind resources at the selected site – Wind measuring poles are installed (if not available at the selected site) and wind is measured for at least 1 year.
Step 3: Pre-feasibility study and request for inclusion in the power development plan – If the project area has wind resources, a pre-feasibility study for investment in the area is prepared and submitted to the MOIT together with a request to include the project in the power development plan. The MOIT shall consider and submit it to the Prime Minister for approval (as wind power is still new in Vietnam and there is a missing protocol for it, all wind power projects larger than 50 MW need approval by the Prime Minister. After the Prime Minister approval, the project documents are to be submitted to the DoIT for approval.
Step 4: Investment report (Feasibility study) – After the DoIT approval of the pre-feasibility study, an investment report (feasibility study) is prepared and submitted to the MOIT for appraisal.
Step 5: Signing of power sale contract with the EVN – In accordance with Decision 37, EVN is to buy all of the plant’s wind power output. Contracts on power sale, grid connection and electric measurement system design must be signed.
Step 6: Project implementation – The project will not start until the approval of the technical design and investment report by the related agencies such as DoIT, Department of Construction, Department of Natural Resources and Environment and others.
Step 7: Building – Building starts.
Above steps are the technical approval process that a wind power developer needs to comply with to be approved for project implementation. However, the developer needs also to work with the licensing authorities (i.e. the Department of Planning and Investment of the province where the project is located and the Ministry of Planning and Investment) in line with the investment procedure under the Investment Law. In Vietnam, the investment certificate is an official legal document issued by the State authority to certify the rights and obligations of the project developer and also the incentives that the developer may enjoy from the project implementation.
The developer needs to perform the procedures for obtaining investment certificate in parallel with the technical approval since the beginning of the site selection steps . The current Investment Law provides for a 45-day time frame for issuance of an investment certificate (while the New Investment Law which takes effect from 01 July 2015 shortens this time frame to 15 days), starting from the date of receipt of a ‘complete’ application dossier. Our experience in dealing with typical investment projects indicates that you should anticipate this process to take longer than the statutory time limit, even from 6 to 8 months at least.
Vietnam – Future International Competitor In Wind Energy?
Theoritically speaking, Vietnam can be seen as an international competitor in wind energy because it has a significant potential for wind energy, an increase of electricity demand and Government’s preferential policies and incentives to facilitate renewable energy in general and wind energy in particular. According to World Bank research to build wind power potential map for Vietnam, Thailand, Laos and Cambodia, Vietnam has higher wind power than other South East Asia countries with 8.6 percent of Vietnam’s territory having wind energy development potential (in comparison with 2.9% in Laos, and just 0.2% in Cambodia and Thailand). In practice, there are increasing interest and new projects in wind energy from Vietnamese and foreign investors. According to the website of GIZ Wind Energy Project: http://www.renewableenergy.org.vn/, until May 2012, there are 67 wind energy projects in Vietnam which are developing at different stages and this number is expected to increase in the upcoming time.
Although Vietnam possesses considerable potential for the development of wind power, an energy sector which has attracted strong interest from domestic and foreign investors, the current wind energy project development has only tapped into a small portion of Vietnam’s wind potential, and there are still many things Vietnam needs to change and take stronger action. Otherwise, Vietnam can hardly become an international competitor in wind energy.
Up to now, the total potential of wind energy in Vietnam is only an estimate while a final issue for the bankability of a wind energy project is the wind speed feasibilty studies for that the investors need reliable wind speed studies and wind speed towers to measure. In practice, the standard requirements of foreign banks are such feasibility studies involve about 2 years of measurement. However, the “reliable” studies in Vietnam’s wind energy are still lacking to our best knowledge.
At present, Vietnam still features the “Single Buyer Model” with EVN who is the only offtaker, except for power generation projects under 3 MW. The EVN monopoly in power sector should be removed and EVN must be restructured by splitting up into many corporations with separate powers and duties (i.e, operation, transmion, distribution).
In the meantime, Vietnam needs to highly prioritie the application of more transparent policies and mechanisms. Under Circular No. 32/2012/TT-BCT, Vietnam provides a standard power purpose agreement (“PPA”) form for all wind energy projects on power sale, grid connection and electric measurement system design. This standard PPA is a good start but still needs to be improved to make wind energy projects bankable. However, the negotiation process of the PPA signing with EVN is very time consuming and it is almost impossible to predict how long it will take to negotiate the relevant PPA with EVN, even it has taken up to 6 years in some cases to negotiate a PPA for a coal fired power plant with EVN in the past. That is a deterrent for foreign investors if they cannot calculate that into the development costs. Meanwhile with such red-tape hurdle, the operation costs for wind energy projects in Vietnam are still much more an overal “estimate” than a “real and realistic calculation”.
The low power purchasing price is also a big barrier to wind energy projects. The Government should also adopt a feed-in tariff (“FIT”) for wind energy in particular and renewable energy in general. The basics of a FIT mechanism is that additional costs for production of energy will be divided among electricity users to assure a stable cash flow for renewable energy developers. Under Decision 37, EVN has the responsibility for buying the whole electric output from wind power projects with the electric buying price at the point of electricity receipt is 1,614 dong/kwh (excluding VAT, equivalent to 7.8 UScents/kwh). This current subsidized tariff is too low in comparison with that in other ASEAN countries (19 UScents/kWh in Thailand and 21.8 UScents/kWh in Philippines ). In practice, the wind energy producers in Vietnam keep complaing about very low purchasing price while the current cost of electricity generated from wind power plants is still quite high due to large technical investment.
Recently, Vietnam’s Prime Minister issued Decision 31/2014/QD-TTg on solid waste-to-energy projects to provide a ground-breaking feed-in tariff for power suppliers of up to “VND 2,114/kWh (equivalent to 10.05 US cents/kWh)”, whichis more than 25 percent higher than the 7.8 cent applicable to wind energy projects. From the internet, we have also been told that the MOIT proposed to the Government to approve for an FIT increase of up to 12 UScents/kwh to make the wind energy projects become more financially feasible. With this trend of development, the Goverment showsan effort to pave the way for the development of more wind power projects in Vietnam.
If the FIT is not increased to region levels and until there is no clear roadmap for negotiating the PPA, it will be very difficult to attract foreign investors. The foreign investors have the choice in which country they will invest and if the FIT, for example, in the Phillipines is about TRIPLE more than that in Vietnam, then the investors will not think twice whether to come to Vietnam or invest in the Phillipines
—o0o—
Please do not hesitate to contact Mr. Oliver Massmann under omassmann@duanemorris.com if you have any questions on the above. Oliver Massmann is the General Director of Duane Morris Vietnam LLC.

INTERESTED IN DOING BUSINESS IN VIETNAM? VISIT: www.vietnamlaws.xyz

THANK YOU VERY MUCH!

March 16, 2015 by Dr. Oliver Massmann

Rechtsanwalt in Vietnam Oliver Massmann Verbesserter Zugang zur Auslandsbeteiligung

Im Sommer steht in Vietnam ein neuer Liberalisierungsschritt an. Mit Inkrafttreten des neuen Investitionsgesetzes und des Unternehmensgesetzes öffnet sich das Land weiter für ausländische Investoren. Und versucht, ihnen den Einstieg in den Markt zu vereinfachen. So reduziert das Investitionsgesetz die Anzahl der verbotenen und beschränkten Geschäftszweige von zuvor 51 auf nunmehr sechs. Auch die Anzahl der beschränkten Wirtschaftszweige wurde herabgesetzt: von 386 auf 267. Generell erlaubt das neue Gesetz den Investoren nun ein Engagement in allen Branchen, die nicht ausdrücklich davon ausgeschlossen sind. Das ist im Vergleich zum alten Gesetz, das Investitionen nur in ausdrücklich erlaubten Branchen genehmigte, ein Fortschritt. Folglich besteht mehr Transparenz und Investoren steht eine größere Bandbreite an Investitionsmöglichkeiten zur Verfügung.

Begriffsdefinition des ausländischen Investors
Darüber hinaus definiert das Investitionsgesetz den Begriff des ausländischen Investors neu. Bisher wurde ein ausländischer Investor als jede Art von juristischer oder natürlicher ausländischer Person definiert, die Mittel aufwendet, um in Vietnam zu investieren. Diese Definition hat in den vergangenen Jahren viel Verwirrung darüber gestiftet, ob von einem ausländischen Investor zu sprechen ist, wenn ein Ausländer 1 %, 49 % oder 51 % der Firmenanteile hält. In diesem Punkt schafft das Investitionsgesetz Klarheit. Denn es führt eine einfachere Definition ein. Den Begriff des „ausländisch-finanzierten Unternehmens“ ersetzt es durch die Formulierung „Wirtschaftsunternehmen mit ausländischem Kapital“. Ein ausländischer Investor ist demnach nun jede ausländische Rechtsperson nach ausländischem Recht.
Allerdings erhellt das neue Leitbild vom „ ausländisch beherrschten Unternehmen“ – eine Entsprechung zum früheren „Unternehmen mit ausländischem Kapital“ – nicht die Bedeutung des vorherigen Begriffs. Ein „ausländisch beherrschtes Unternehmen“ ist als Wirtschaftsunternehmen definiert, das einen Gesellschafter oder Anteilseigner hat, der ausländischer Investor ist. Welches Beteiligungsverhältnis dafür nötig ist, ist nicht definiert.

Projekte werden nach Zweck eingestuft
Einstweilen wird durch das Investitionsgesetz aus dem Jahr 2014 das Beteiligungsverhältnis über die Zulassung zu Investmentvorhaben ausländischer Investoren bestimmen. Sofern das nicht ausreichend in den Durchführungsbestimmungen dargelegt sein wird, werden Schwierigkeiten bei Investitionsanträgen unvermeidbar zunehmen. Weiterhin unterscheidet das Investitionsgesetz nicht mehr zwischen direkten oder indirekten Investitionen. Stattdessen werden Projekte nach ihrem Zweck eingestuft:

• Gründung eines neuen Unternehmens für ein Investi¬tionsvorhaben,
• Investition als öffentlich-private Partnerschaft (PPP),
• Investition als Kooperationsvertrag,
• Kapitaleinlage, Kauf von Anteilen oder Einzahlung von Einlagen in ein Unternehmen.

Gewisse Änderungen ergeben sich dadurch auch auf die Ausgestaltung von Investitionenin Vietnam. Noch wichtiger ist, dass das Gesetz Abschreibungsrichtlinien für Fusionen und Übernahmen enthält.

Getrennte Anträge bei IRC und ERC
Ein bei Neugründungen interessanter Punk ist die Abschaffung des Investitionsanmeldungsnachweises (IRC) für Investitionsvorhaben inländischer Investoren. Das gilt unabhängig von der Höhe der Investitionssumme. Ferner findet die Zulassung – zuvor in Form von Investitionsanmeldung und Wertermittlung – nicht mehr zweistufig statt. Wenn ausländische Investoren ein Unternehmen in Vietnam gründen möchten, müssen sie anstelle der gleichzeitigen Beantragung von IRC und Unternehmensanmeldung (ERC) nun zwei unterschiedliche Anträge stellen: für das IRC und das ERC. Das könnte hinsichtlich der Kosten und der Zeit für ausländische Investoren schwieriger sein.
Ändern wird sich durch das Investitionsgesetz auch der Umgang mit Kapitaleinlagen. Sie können nun folgendermaßen abgewickelt werden:

• Kapitaleinlage, die zum ersten Mal oder von Aktiengesellschaften ausgegeben wird
• Kapitaleinlagen in Gesellschaften mit beschränkter Haftung oder Partnerschaftsgesellschaften
• Kapitaleinlagen in Unternehmen, die nicht in die beiden erstgenannten Kategorien fallen.

Ausländische Investoren, die Kapitaleinlagen, Beteiligungs- oder Anteilskäufe vornehmen, müssen dies beim lokalen Ministerium für Industrie und Handel melden. Dazu zählt, wenn sie in Unternehmen, die zu für ausländische Investoren beschränkten Wirtschaftszweige gehören, Kapital einlegen, Beteiligungen oder Anteile kaufen. Auch wenn die Investition im Ergebnis auf einen Anteil von 51% des Stammkapitals oder mehr abzielt, muss sie angemeldet werden. Davon betroffen sind auch Unternehmen, an denen ein ausländischer Investor 51% oder mehr des Stammkapitals hält oder die Mehrheit der Partner ausländische Personen sind.

Bitte kontaktieren Sie den Autor Oliver Massmann direkt unter omassmann@duanemorris.com wenn Sie Fragen haben. Oliver Massmann ist der Generaldirektor von Duane Morris Vietnam LLC.

INTERESSE AN VIETNAM? Besuchen Sie: www.vietnamlaws.xyz

VIELEN DANK!

March 6, 2015March 8, 2015 by Dr. Oliver Massmann

Lawyer in Vietnam Oliver Massmann Online Gaming and Gambling in Vietnam

Technically, “online gaming” [business] in Vietnam may cover: (i) “online game”, a game played over some form of computer network;[1] or (ii) “online gambling”, a term for gambling using the Internet.

In the latter case, Vietnamese law does not treat online gambling as a full-fledged, independent and separate branch of gambling industry.[2] Rather it deals with major branches of gambling activities which are (i) lottery; (ii) casino/prized electronic machines; (iii) horse and greyhound race and (iv) sports betting,[3] etc. and sets forth specific conditions and restrictions on the same. Except for online lottery, other forms of gambling using Internet-based have been so far strictly prohibited or at least not officially permitted.

It also bears noting that market access to such gambling branches varies by investment forms, legal entity of the investors and capacity thereof, etc. For example, while lottery business is solely reserved for State owned enterprises, foreign investment in casinos is permissible. By the same token, depending on characteristics of specific gambling business, the scope of activities can be either limited to a specific approved location in a major city of Vietnam (e.g. – dog/greyhound race or traditional lottery) or nationwide (online lottery).

As gambling is a sensitive activity which requires a high level of surveillance, a gambling investor must essentially follow a general principle of “doing exactly what your license states”. To make it clearer, if an investor is permitted to open a casino at a specific resort only, it will not have the natural right to offer casino products through the Internet. Similarly, besides 63 State-owned lottery enterprises in each province, a lottery corporation was established in 2013 (i.e. – Vietlott) to offer online lottery lotto games, digits games and fast drawing games nationwide. However, it can be broadly argued, though not absolutely guaranteed, that if an investor is licensed to carry out a specific [and conventional] “gambling” activities, it may have a good position to apply for the same business but operated on an Internet-based platform.[4]

Generally, an investment project in gambling must be first granted with an investment certificate issued by the people’s committee at provincial level. For such purposes, the investors must obtain in-principal of the Prime Minister on an ad-hoc basis. In fact, the Ministry of Finance (the “MOF”) is expected to play a crucial role in deciding whether a Project will be accepted. Subsequently, the project’s owner may have to obtain a special business license from the MOF upon its fulfilment of post-establishment conditions (i.e. – completion of construction works, installment of equipment and facilities, etc.).

In principle, gambling, other than lottery and betting at licensed sport center(s), is strictly prohibited in Vietnam and individuals involved in gambling activities may face criminal charge. Vietnamese law on gambling business is therefore still in its infantry stage though initial ideas date back to early 2000s. Gambling licenses have granted to selected investors mainly on a piloting scheme and with strict requirements (i.e. – not letting Vietnamese nationals in). Draft laws on sport betting, casinos, which serve as key guidance on gambling business, have been discussed from time to time but not yet been issued.

In late 2013, two major draft decrees on gambling activities (i.e. – betting[5] and casinos), content of which is not made public, were submitted by the Ministry of Finance, as the draftsperson, to the National Assembly of Vietnam for the latter opinions. It appears however that little progress has been since made due to conflicting opinions among the Government and divisions belonging to the National Assembly on these sensitive issues.[6]

To date, Vietnam has 01 national online lottery company (i.e. – Vietlott) and 63 [traditional] lottery companies operating at provincial level. 07 casino licenses have been granted to investors as a part of their resort complexes but only 6 of which have commenced their operations. A number of 5-star hotels in major cities of Vietnam are permitted to run prized electronic machines. The only house race ground which was open to public was closed in 2013. Another greyhound race ground is still active in Ba Ria – Vung Tau Province, Vietnam.

In light of the above, a foreign investor wishing to invest in this sector may consider different channels to access Vietnam online gaming market. For example, it may cooperate with licensed vendors in Vietnam as a supplier of equipment, machinery or materials or provider of technical assistance services relating to the same.[7] Or else, it may actively approach the MOF to initiate a proposed plan.

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

INTERESTED IN DOING BUSINESS IN VIETNAM? VISIT: www.vietnamlaws.xyz

THANK YOU VERY MUCH!