Category Archives: Investment in Vietnam

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: 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.

Narrow view of “under construction” may spell end of FiT goal for vast majority of Vietnam’s approved solar power projects

Only a tiny proportion of already-approved solar projects may qualify for Vietnam’s next feed in tariff (FiT 2) according to draft opinions from the MOIT.  If the Prime Minister agrees with the approach, many projects with already-signed PPAs, some in very advanced stages of development, look set to be forced into participating in tariff auctions or, worse, have their approvals withdrawn altogether.

The unsigned and undated MOIT document follows the Prime Minister’s surprise announcement dated 22 November that FiT 2 will only be available for projects with signed PPAs that are “under construction” and provided they reach COD by end of 2020.  The MOIT document seeks to define what “under construction” means for this purpose.  It takes a narrow view, referring to Article 6.1.b of Decree 59/2015/ND-CP dated 18 June 2015 re management of construction projects to suggest that for a project to be considered “under construction” the project must have completed appraisal of detailed / technical construction designs prior to 22 November 2019.

According to the MOIT’s data contained in the draft, it appears that only four out of 23 projects having already-signed PPAs but not yet reached COD would meet this criteria (some sources indicate there may be in excess of 30 such projects).  That would leave the vast majority of projects with signed PPAs out of contention for FiT2 and left scratching their heads as to what happens next.

As noted, the draft letter sighted is unofficial and draft only at this time so it is not yet definitive.  From our point of view, the MOIT is offering a far too narrow interpretation of what “under construction” could/ should mean.  Article 6.1.b of Decree 59 provides for numerous additional steps in the construction process that, if considered, would broaden the net substantially.  For example, it also refers to land allocation or lease; site investigation works, demining (if any); construction survey work; formulation, appraisal and approval of design and construction estimates; issuance of construction permits (if required); selection of contractors and signing of construction contracts, among other points.  There are approved projects that have paid for land clearance and compensation and started some site preparatory works but have held off completing detailed construction design appraisal pending the next FiT policy news.

As ever, it remains to be seen what final decision the PM will make on this issue.  It is not unreasonable to believe that the PM may consider the MOIT’s suggestion to be too narrow considering the substantial resources already committed by developers on many of these projects, some of which signed PPAs late 2017/ early 2018 expecting to make the FiT 1 cut off of 30 June 2019 and that have been left in limbo over the past nearly 6 months while the PM mulls the country’s new solar policy.

Watch this space.

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.

BREAKING NEWS – Vietnam’s PM decides to do away with solar FiTs in favor of auctions

Get ready for auctions!  After months of confusion and uncertainty over the policy for solar power development in Vietnam Prime Minister Nguyen Xuan Phuc today issued his conclusions and looks to have signed the death knell for solar feed in tariffs (FiT) in favor of competitive auctions.

In Notification No. 402/TB-VPCP dated 22 November 2019, the Prime Minster concluded that rational future development of the sector necessitates introducing an auction system for ground-mounted solar projects.  FiTs will continue to apply only for rooftop solar projects and certain already-approved ground-mounted projects.

The decision comes nearly five full months after expiry of the blanket 9.35c/ kWh FiT issued in April 2017 that kicked off a huge, and largely uncontrolled, rush that culminated in some 4,500MW of solar generation capacity becoming operational by July 2019 and, reportedly, an incredible 35GW of registered interest.  The first number alone is some 500% more than the 850MW of solar that was planned to be operational by 2020 in National Power Development Masterplan 7 (revised as of 2016).  That both highlights just how frenetic the activity was and also how efficiently the private sector is able to get these projects developed, financed and constructed.  Just imagine what could be done with an international-standard PPA and a developed grid infrastructure.

The Prime Minister, in his conclusions, chides the MOIT for the helter skelter development over the past two years, with many projects concentrated in areas where grid infrastructure is unable to properly serve the facilities resulting in widespread curtailment problems.  The Prime Minister has urged the MOIT to learn its lessons and re-orient itself towards a new reality.  The gold rush days are over and developers can expect a more rigorous licensing and approval process for new projects now.

FiTs aren’t entirely dead yet though.  The Prime Minister’s conclusions suggest, without stating definitively, that certain projects will still be entitled to FiTs.  Specifically, ground-mounted projects that already have signed PPAs and can be put into operation in 2020 appear set to continue to enjoy FiTs.  Rooftop solar projects will also continue to enjoy FiTs.  The Prime Minister has instructed the MOIT to propose the final FiT terms, including a list of projects entitled to enjoy the new FiT, and present them for his approval by 15 December 2019.  While the number is still unknown, it is widely expected to be 7.09c for ground-mounted projects and stay at 9.35c for rooftop projects (which are favored due to not needing land to be allocated).

Certain, already announced, special rules for Ninh Thuan province will continue to apply with some adjustment.  Specifically, some already-approved projects in that province will continue to enjoy the 9.35c FiT but only until total operational capacity there reaches 2000 MW or until the end of 2020, whichever comes first.  The race is on there.

For all other ground-mounted solar projects, the Prime Minister has determined that competitive auctions are the way forward.  No doubt having an eye on the September 2019 auctions in Cambodia that resulted in solar tariffs as low as 3.87c, and record low prices in other markets around the world, this is seen as the appropriate way to marry investor appetite with actual conditions.  There is of course a huge question mark over how such auctions will function in practice and there remains a lot to be seen.  Most significantly, will there be any changes to the standard PPA terms to facilitate low prices.  If not, the market will have to put a firm price on the bankability and contractual risk.

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.

Update on draft new Labor Code for Vietnam

The Ministry of Labor, War Invalids and Social Affairs (MOLISA) released another draft of the new Labor Code (the Draft Code) on 19 August 2019 with a view to improving the current Vietnamese legal framework by further aligning it with the overall development of the Vietnamese labor market, from both employer and employee’s perspectives.

The below highlights some of the key amendments being proposed in the Draft Code, together with some comments on the same based on long-standing practice in this sector in Vietnam.

PROPOSED CHANGE

 

OUR NOTES
Form of labor contract For the first time the execution of labor contract via electronic methods are formally recognized, e.g. emails.

 

On this basis, please kindly be advised that the agreed negotiations between Employer and Employee including without limitation to the job offer recorded via emails systems might be deemed as a binding contractual agreement, unless otherwise expressly repealed by the formal labor contract.

 

Prohibited acts Employer is prohibited to force the employee to perform a labor contract so that the employee can pay back an amount of debt that he/she borrows from the employer.

 

In other words, a loan that an employer grants to an employee shall constitute a separate civil-law relationship which is independent from the labor-law employment.
Type of labor contract To remove the seasonal labor contract. Namely, according to the Draft Code, there would be two types of labor contract: (i) definite term of up to 36 months; and (ii) indefinite term.

 

We however note that there exist some different schemes for labor contract of less than 12 months and labor contract of 12-36 months, such as prior notice in case of unilaterally termination.
Contents of labor contract To allow parties to agree on the non-disclosure agreement including rights, obligations and compensation in case of breaches.

 

This proposal adds extra protections for employers. Nevertheless, there remains no regulation on non-competition or non-solicitation agreements in the Draft Code as currently drafted.

 

Probationary period To add a special category of ‘enterprise manager’ who may be subject to a probationary period of up to 180 days (instead of the 60 day max under current law).

 

We note that the definition of ‘enterprise manager’ will be in line with Law on Enterprises.
Unilateral termination by employer To add three circumstances in which an employer can unilaterally terminate a labor contract:

 

(i)        if employee reaches his/her statutory retirement age;

(ii)       if employee is absent from work for 5 consecutive working days without a proper reason;

(iii)      if employee provides false info (e.g. qualifications) for the purpose of recruitment.

 

At first glance, this would grant employer with extra lawful grounds for the purpose of unilateral termination. It is however recommended that the employer should await further guidance in detail for the purpose of implementation.
Time frame for payment of termination package According to the Draft Code, employer would have 14 working days from the date of termination for the purpose of termination package payment.

 

The doubles the current requirement of 7 working days.
Salary payment Employers are obliged to provide employees a monthly pay slip to breakdown the differences between net and gross salary amounts at the time of salary payment.

 

 

By this approach, the drafting team is trying to build up the transparent regime of remuneration payment which can help to enable an employee to be aware of the social insurance, health insurance and unemployment insurance contributions, personal income tax and other withholding amounts from his/her gross salary, if any.

 

Form of salary payment To pay salary in cash is formally recognized without any restrictions.

 

This requires further guidance from the Government as it would prima facie conflict with certain mandatory accounting-related requirements.

 

Overtime payment There are two options:

 

(i)        Option 1: to remain same, i.e. 150%, 200%, and 300% for regular day, weekly days off and public holidays respectively; or

 

(ii)       Option 2: to increase the overtime payment, i.e. up to 180%, up to 240%, and up to 360% for regular day, weekly days off and public holidays respectively.

 

At the time of this Draft Code, the drafting team is carefully considering these two options. The latter is undoubtedly more preferable from the employee’s perspective.

 

Putting that aside, the Draft Code is proposing to increase annual overtime cap into 400 hours (from current 300 hours).

Annual leave calculation The principle of pro-rata calculation is formally recognized by the law for those who do not work for 12 months in full. This widely-accepted practice in Vietnam looks set to be formally reflected in the new law.
Labor Discipline If the violation is clearly stated in the labor code or the labor contract, employer can still apply labor discipline [in the absence of the (registered) internal labor regulations (the ILR)].

 

 

This would be a major change.  We currently presume however that it may be intended only to apply to employers with less than 10 employees that are not required by law to have and register ILR.

 

Labor contract term for expat employee The Draft Code is saying that expat can enter into a number of consecutive definite-term labor contracts, term of which must be in line with that of the work permit (the WP).

 

 

That is to say, the indefinite-term labor contract is not applicable to expat employees.

 

WP exemption category To add extra condition for WP exemption subject. Specifically, owner or capital contribution member of a limited company would be exempted from WP requirement only if his/her/their ownership value in the company (employer) reaches VND 1 billion (equivalent to US$42,750).

 

This is likely aimed at a loophole where expat employees are granted ‘super minority’ shareholder status in order to enjoy WP exemption.

 

This amendment is to minimize the aforesaid legal gap. In other words, WP exemption is a statutory entitlement applicable to ‘true’ shareholders/ owners only.

 

WP extension WP can be extended once, for another additional term of maximum 2 years.

 

Under current law, WP re-issuance is required upon expiration with cumbersome paperwork.

 

Subject to further guidance on the extension procedure, it is hoped this will reduce admin burden on employers.

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For more information about labor laws in Vietnam please contact Giles at Gtcooper@duanemorris.com or Nhan Le at Ntle@duanemorris.com

The beat goes on: Vietnam’s new solar tariff documents add to the uncertainty

A flurry of recent official communications on the new solar FiT regime have only added to uncertainty about the income stream for solar projects in Vietnam after June 2019.

Following nearly two months of relative silence last draft proposed new FiTs were made public (read about them: here and here), the PM and MOIT have exchanged letters indicating that policy and decision makers are still some distance apart on a final position.

In a letter to the MOIT last week, the PM proposed that the provinces be divided into two regions with different tariffs, half the number of regions proposed by the MOIT recently,  and meaning lower overall tariffs for Northern provinces which have barely seen any solar project action since the sun rush kicked off a couple of years ago.

The MOIT responded by urging the PM to further consider the 4 region options it previously tabled in April and May.

On the other hand, the PM’s letter indicates some sympathy for projects struggling to meet the current 30 June 2019 COD deadline, intimating that they ought to be allowed to continue to enjoy the current 9.35c tariff  if their efforts to meet the COD deadline have been hamstrung by matters outside their control (e.g. – land clearance).  The MOIT response takes a  harder line on this, giving its view that the 30 June 2019 deadline should remain a bright line with no exceptions (outside of those Ninh Thuan projects already granted an extension last year).

With the MOIT now seeking further opinions from EVN, the MOF and MOJ, one imagines it is could be risky to assume that the new FiT rates will be officially promulgated prior to the existing ones expiring on 30 June.

The two regions and corresponding FiTs for different kinds of solar projects as proposed by the PM are:

Region I (all Provinces except Region II Provinces)

Floating solar power = VND1,758/ kwh = 7.69 US cents / kwh
Ground mounted solar power = VND1,620/ kwh = 7.09 US cents / kwh
Roof solar power = VND1,916/ kwh = 8.38 US cents / kwh

Region II (Phú Yên, Gia Lai, Đăk Lăk, Khánh Hòa, Ninh Thuận and Bình Thuận Provinces)

Floating solar power = VND1,655/ kwh = 7.24 US cents / kwh
Ground mounted solar power = VND1,525/ kwh = 6.67 US cents / kwh
Roof solar power = VND1,803/ kwh = 7.89 US cents / kwh

Be aware: these are far from final.  Watch this space.

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.

Compulsory Social Insurance for expats working in Vietnam – who’s in and who’s out?

Ever since the Law on Social Insurance[1] was issued in late 2014, employees and employers have been on notice that “expat employees working in Vietnam” will be required to participate in the State’s compulsory social insurance (SI) regime “from 2018”.  2018 came however with no further clarity around the details.

In October 2018, the Government issued Decree no. 143/2018/ND-CP[2] guiding the Law on SI and providing that “Employees who are expats working in Vietnam shall be required to participate in the SI program if they obtain work permits, practicing certificates, practicing licenses issued in Vietnam, indefinite-term employment contracts or employment contracts valid for at least one year with employers in Vietnam.” (Article 2.1). Also in the same decree, several exceptions from SI participation are listed, including intra-company transferees and expats reaching retirement age.

According to the statistics of the Ministry of Labor, War Invalids and Social Affairs (“MOLISA”), 64% of applicable expats working in Vietnam joined the SI scheme under Decree 143[3]. Having said that, there remains confusion amongst both employers and expats employees as to the subjects of application of the law.

Finally, on 18 March 2019, MOLISA issued Official Letter no. 1064/LDTBXH-BHXH[4] clarifying the issue of exactly which expats will be required and not required to participate into the Vietnam-law SI scheme.

Specifically, expat employees working in Vietnam must satisfy all of the following criteria in order to be applicable for the SI scheme:

SI ELIGIBILITY CONDITIONS FOR EXPATS

 

NOTES
Nationality Non-Vietnamese nationals working in Vietnam An overseas Vietnamese national entering Vietnam to work via his/her passport of a foreign country would be deemed as a non-Vietnamese national working in Vietnam.

 

Licenses Work permits, practicing certificates, practicing licenses issued by the competent authority in Vietnam

 

As a side note, a work permit issued for
an expat entering Vietnam to supply services to a Vietnam-based entity would not fall under this category. 
Employment Indefinite-term or at least one-year definite-term labor contract with a Vietnam-based employer. We are of the view that a definite-term labor contract (from 12 to 24 months) would suffice in this regard.

 

It is worth noting that term of expat’s labor contract must be in line with term of his/her valid work permit, which is maximum 24 months from a theoretical perspective.

 

Age Men: Under 60 years old

Women: Under 55 years old

Please kindly be advised that these retirement ages are being proposed to increase to 62 for male and 60 for female according to the draft of new labor code.

 

Others NOT falling under the scope of statutory intra-company transferees, i.e. any expat managers, chief executive officers, experts and technicians, who have been employed by the offshore enterprise for at least 12 months and are temporarily re-assigned/ seconded to its Vietnam-based commercial presence (e.g. subsidiary, representative office, or branch). Frankly speaking, an expat deemed an intra-company transferee with his/her work permit exemption certificate would be NOT eligible to attend the SI scheme.

For ease of reference, timeline and ratio for SI contributions applicable to both employer and expat employees under Decree 143 please see the table below.

In short, employers who hire expat employees would have to bear an extra liability to ‘part’ pay SI from 1 December 2018 and to ‘fully’ pay SI from 1 January 2022 while the relevant expat employees will NOT commence contributing to the scheme until 1 January 2022.

Sickness and Maternity Labor Accident and Occupation Disease Pension

and

Death Allowance

Total
Since

1 December 2018

Employer 3% 0.5% 0% 3.5%
Expat Employee 0% 0% 0% 0%
Since

1 January 2022

Employer 3% 0.5% 14% 17.5%
Expat Employee 0% 0% 8% 8%

Importantly, please also note that there is a statutory maximum cap for all SI contribution, as with caps applicable to Vietnamese employees, if the expat employee’s actual gross salary is higher than the maximum cap, the cap becomes the basis of the % calculation. Specifically, in light of SI, the basis for % calculation would be (i) the actual gross salary OR (ii) 20 times of ‘Base Salary[5], whichever is lower. Accordingly, such cap shall apply equally to both the employer % contribution and the employee % contribution.

 

[1] Law on Social Insurance no. 58/2014/QH13 dated 20 November 2014 (“Law on Social Insurance”)

[2] Decree no. 143/2018/ND-CP dated 15 October 2018, elaborating on Law on Social Insurance and Law on Occupational Safety and Hygiene regarding compulsory social insurance for employees who are foreign nationals working in Vietnam (“Decree 143”)

[3] http://thoibaotaichinhvietnam.vn/pages/tien-te-bao-hiem/2019-03-20/hon-64-lao-dong-nuoc-ngoai-da-tham-gia-bhxh-bat-buoc-69060.aspx

[4] Official Letter no. 1064/LDTBXH-BHXH issued by the MOLISA dated 18 March 2019

[5] ‘Base Salary’ is a measure set by the Vietnamese government from time to time. The current Base Salary applicable since 1 Jan 2019 is VND 1,390,000 / month, corresponding to a monthly cap of VND 27,800,000. However, it is worth noting that the Base Salary will change effective 1 July 2019 to VND 1,490,000, corresponding to a monthly cap of VND 29,800,000.

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For more information about labor laws in Vietnam please contact Giles at Gtcooper@duanemorris.com or Nhan Le  at NTLe@duanemorris.com