Category Archives: Vietnam – General

3 Things About Vietnam’s Updated Legal Framework for Biomass Power Projects

Despite abundantly available biomass feedstock of agricultural origin, ranging from sugar bagasse, wood chip to rice husks and stalks, biomass as a source of renewable energy does not seem to have received the same amount of attention from the government of Vietnam as solar or wind power. It took the government more than six years to acknowledge the modest results of the current incentives package and adopt measures to give a new push to the development of biomass power plants. This was done on 5 March 2020 when the Prime Minister issued Decision No. 08/2020/QD-TTg (“Decision 08“) amending Decision No. 24/2014/QD-TTg dated 24 March 2014 (“Decision 24“) on support mechanisms for the development of biomass power projects in Vietnam. Decision 08 introduces a number of important changes which will take effect on 25 April 2020.

Increase of the Feed-in-Tariffs (“FiT”)

The FiT for electricity produced by combined heat and power (“CHP”) biomass power plants will increase from USD 5.8 cents per kWh to USD 7.03 cents (VND 1,634) per kWh.

The government has also abandoned the use of avoided cost schedules (calculated based on the cost of electricity produced by coal-fired power plants) published annually for determination of the electricity purchase price from non-CHP biomass electricity producers. The FiT for these projects is set at USD 8.47 cents (VND 1,968).

The FiTs are exclusive of value-added tax and are adjusted according to USD/VND exchange rate. The new FiTs will be also benefit the biomass power projects which have started operating before 5 March 2020 for the remaining terms of their power purchase agreements (“PPAs”).

Technical standards for electricity generation equipment

Decision 08 introduces a new requirement to comply with technical standards applicable to biomass electricity generation equipment and quality norms applicable to electricity produced by biomass power plants. Similar requirements already exist in recent regulations applicable to solar and wind power projects. The technical standards and norms will be elaborated by the Ministry of Industry and Trade (“MOIT”) which is also responsible for the issuance of a new model PPA for biomass projects.

Possibility of alternative off-takers

Under Decision 08 Electricity of Vietnam (“EVN”) (directly or through its authorised group entities) remains the sole off-taker of the electricity generated using biomass. However, the new decision also opens the door to “organisations assuming the rights and obligations” of EVN (or its relevant group entities) to become biomass electricity off-takers. This new development is in line with the government’s road-map for the liberalisation of Vietnam’s electricity markets (wholesale and then retail) by 2025. It is not clear whether this would improve the bankability of biomass PPAs, since EVN, as a State-owned enterprise, still enjoys strong government support while such backing may not be available to other off-takers in the future.

The possibility of selling electricity produced by biomass power plants directly to end users is not contemplated by the government at this stage. A recently published draft regulation on pilot Direct PPAs does not seem to include biomass power projects.

The hope is that above changes will make biomass power projects more attractive for investors. Whether the government’s target to increase the share of electricity produced from biomass to 2.1 percent of the total generated electricity by 2030 set out in the Revised Power Development Master Plan VII is achievable still depends a great deal on the new biomass PPA and technical requirements for biomass power projects to be issued by the MOIT in the coming months.

 

 

 

 

 

 

EU-VIETNAM FREE TRADE AGREEMENT AND INVESTMENT PROTECTION AGREEMENT – MOST LIBERALIZED MARKET ACCESS FOR SERVICE SECTORS AND UNMATCHED LEGAL CERTAINTY – LATEST UPDATE – WHAT YOU MUST KNOW:

I. OVERVIEW

On the 2nd of December 2015, after almost three years and 14 rounds of negotiation, President Donald Tusk, President Jean-Claude Juncker and Prime Minister of Vietnam Nguyen Tan Dung announced the conclusion of the negotiations on the EU-Vietnam Free Trade Agreement (EVFTA). The EVFTA is a new-generation free trade agreement between Vietnam and the EU. On the 26th of June 2018, the EVFTA was split into two separate agreements: the Free Trade Agreement (EVFTA) and the Investment Protection Agreement (EVIPA). In August 2018, the EU and Vietnam completed the legal review of the EVFTA and the EVFTA requires ratification by the European Council as well as the consent of the European Parliament, while the EVIPA required additional ratification by parliaments of each individual EU Member State.

On the 30th of June 2019, EU Commissioner for Trade Mrs. Cecilia Malmstrom, together with the Romanian Minister for Business Mr. Stefan-Radu Oprea, representing the EU, signed the EVFTA and EVIPA in Hanoi, together with H.E. Prime Minister Nguyen Xuan Phuc and Vietnamese Government leaders. The Prime Minister expressed his belief that the European Parliament, parliaments of EU Member States, and the Vietnamese National Assembly will soon ratify the EVFTA and EVIPA. Both Trade and Investment agreements were endorsed by the European Parliament on the 12th of February. The EVFTA was approved by the EU Council on 30th of March 2020, thus the implementation of the EVFTA is therefore imminent if the Vietnamese National Assembly gives its approval at its May session, meaning that an entry into force early this summer is possible for the EVFTA. It will take more time for the EVIPA to enter into force because this agreement is subject to the endorsement of the Member States’ parliaments.

Both agreements are expected to bring significant advantages for enterprises, employees, and consumers in both the EU and Vietnam. Vietnam’s GDP is set to increase by 10-15 percent while exports are predicted to rise by 30-40 percent over the next 10 years. Meanwhile, the real wages of skilled labourers could rise by up to 12 percent, with salaries of common workers increasing by 13 percent. Once the EVFTA has entered into force, and once Government policies and institutional reforms begin to take effect, Vietnam’s business activities will boom. However, challenges still remain. In this chapter, EuroCham’s Legal Sector Committee will raise the issues relevant to their particular industries and make specific recommendations in order to address these concerns.

II. MARKET ACCESS FOR GOODS AND SERVICES

1. General market access for goods and services

The EVFTA is the most comprehensive and ambitious trade and investment agreement that the EU has ever concluded with a developing country in Asia. It is the second agreement in the ASEAN region, after Singapore, and it will intensify bilateral relations between Vietnam and the EU. Vietnam will have access to a potential market of approximately 446 million people and a total GDP of US$13,918 billion.

Meanwhile, exporters and investors from the EU will have further opportunities to access to one of the largest and fastest-growing countries in the region. According to a report released in early 2017 covering 134 cities worldwide, Hanoi and Ho Chi Minh City are ranked among the top 10 most dynamic cities due to their low costs, rapid consumer market expansion, strong population growth and transition towards activities attracting significant amounts of FDI. According to the World Bank, Vietnam has one of the fastest-growing economies in the world — 7.1% GDP growth in 2018, and 6.7% at the mid-point of 2019. To put that in perspective: Vietnam’s GDP is growing at almost twice the rate of the USA.

In addition, Vietnam has the fastest-growing middle class in the region. It is predicted to almost double in size between 2014 and 2020 (from 12 million to 33 million people). Vietnam’s super-rich population is also growing faster than anywhere else, and there is no doubt that it will continue to rise over the next ten years.

2. Market access for goods

Nearly all customs duties – over 99 percent of the tariff lines – will be eliminated. The small remaining number will be partially liberalised through duty-free quotas. As Vietnam is a developing country, it will liberalise 65 percent of the value of EU exports to Vietnam, representing around half of the tariff lines, at entry into force. The remaining duties will be eliminated over the next ten years. This is an unprecedented, far-reaching tariff elimination for a country like Vietnam, proving its aspiration for deeper integration and trading relations with the EU.

Meanwhile, the EU agreed to eliminate duties for 84 percent of the tariff lines and 71 percent of its trade value for goods imported from Vietnam immediately at the entry into force of the EVFTA. Within 7 years from the effective date of the EVFTA, more than 99 percent of the tariff lines will have been eliminated for Vietnam. This is a wider reduction compared with the 95 percent of the tariff lines that the former TPP countries offered to Vietnamese imports. In the ASEAN region, Vietnam is the top country exporting goods to the EU. However, the market share of Vietnam’s products in the EU is still small. As a result of the EVFTA, the sectors set to benefit most are main export sectors that used to be subject to high tariffs from the EU including textiles, footwear, and agricultural products. The EU is also a good point for Vietnam to reach other further markets.

Vietnam will benefit more from the EVFTA compared with other such agreements, since Vietnam and the EU are considered to be two supporting and complementary markets. In other words, Vietnam exports goods that the EU cannot or does not produce itself (i.e. fishery products, tropical fruits, etc.) while the products imported from the EU are also those Vietnam does not produce domestically, including machinery, aircraft and high-quality pharmaceutical products.

With better market access for goods from the EU, Vietnamese enterprises could source EU materials, technology, and equipment at a better quality and price. This, in turn, will improve their own product quality and ease Vietnam’s burden of over-reliance on its other main trading partners.

The EVFTA is considered as a template for the EU to further conclude FTAs with other countries in the ASEAN region with the aim of concluding a region-to-region FTA once there is a sufficient critical mass of FTAs with individual ASEAN countries. This process could take about 10-15 years. Thus, Vietnam should take advantage of this window of opportunity before FTAs with others in the region are concluded and take effect to become a regional hub.

3. Market access for EU service providers

Although Vietnam’s WTO commitments are used as a basis for the services commitments in the EVFTA, Vietnam has not only opened additional sub-sectors for EU service providers, but also made commitments deeper than those outlined in the WTO, offering the EU the best possible access to Vietnam’s market. Sub-sectors that are not committed under the WTO, but under which Vietnam has made commitments under EVFTA, include: Interdisciplinary Research & Development (R&D) services; nursing services, physiotherapists and para-medical personnel; packaging services; trade fairs and exhibitions services and building-cleaning services.

When these services reach international standards, Vietnam has a chance to export high-quality services, resulting in not only an increase in export value but also export efficiency, thus helping to improve the trade balance.

III. GOVERNMENT PROCUREMENT

Vietnam has one of the highest ratios of public investment to GDP in the world (39 percent annually from 1995). However, until now, Vietnam has not agreed to its Government procurement being covered by the Government Procurement Agreement (GPA) of the WTO. Now, for the first time, Vietnam has undertaken to do so in the EVFTA.

The EVFTA commitments on Government procurement mainly deal with the requirement to treat EU bidders, or domestic bidders with EU investment capital, equally with Vietnamese bidders when the Government purchases goods or requests a service worth over the specified threshold. Vietnam undertakes to follow the general principles of National Treatment and Non-discrimination. It will publish information on intended procurement and post-award information in Bao Dau Thau – Public Procurement Newspaper – and information on the procurement system at muasamcong.mpi.gov.vn and the official gazette in a timely manner. It will also allow sufficient time for suppliers to prepare and submit requests for participation and responsive tenders and maintain the confidentiality of tenders. The EVFTA also requires its Parties to assess bids based on fair and objective principles, evaluate and award bids only based on criteria set out in notices and tender documentation and create an effective regime for complaints and settling disputes. These rules require Parties to ensure that their bidding procedures match the commitments and protect their own interests, thus helping Vietnam to solve its problem of bids being won by cheap but low-quality service providers.

Government procurement of goods or services, or any combination thereof, that satisfy the following criteria falls within the scope of the EVFTA Government Procurement rules:

Criteria – EVFTA

IV. INVESTMENT DISPUTE SETTLEMENT

Investment disputes now could be settled under the EVIPA. In disputes regarding investment (for example, expropriation without compensation or discrimination of investment), an investor is allowed to bring the dispute to the Investment Tribunal for settlement. To ensure the fairness and independence of the dispute settlement, a permanent Tribunal will be comprised of 9 members: 3 nationals each appointed from the EU and Vietnam, together with 3 nationals appointed from third countries. Cases will be heard by a 3-member Tribunal selected by the Chairman of the Tribunal in a random way. This is also to ensure consistent rulings in similar cases, thus making the dispute settlement more predictable. The EVIPA also allows a sole Tribunal member where the claimant is a small or medium-sized enterprise or the compensation of damaged claims is relatively low. This is a flexible approach considering that Vietnam is still a developing country.

In case either of the disputing parties disagrees with the decision of the Tribunal, it can appeal to the Appeal Tribunal. While this is different from the common arbitration proceeding, it is quite similar to the 2-level dispute settlement mechanism in the WTO (Panel and Appellate Body). We believe that this mechanism could save time and cost for the whole proceedings.

The final settlement is binding and enforceable from the local courts regarding its validity, except for a five-year period following the entry into force of the EVIPA (please refer to further comments in the Legal Sector Committee’s chapter on Judicial Recourse).

V. CONCLUSION

The EVFTA and EVIPA, once ratified by Vietnam, will create sustainable growth, mutual benefits in several sectors and be an effective tool to balance trade relations between the EU and Vietnam. Vietnam is making continuous efforts and progress to meet the high standards set out in the two FTAs and is currently offering greater opportunities for foreign businesses in preparation for the FTAs’ finalisation. It is now time for foreign investors to start their business plans and grasp the upcoming clear opportunities.

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

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

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

1. FIT scheme

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

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

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

2. FIT2

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

For Ninh Thuan province, grid-connected solar power projects that (ii) COD before 01/01/2021, and (iii) the accumulated capacity not exceeding 2,000 MW will be applied the FiT of UScent 9.35.

3. Competitive mechanism

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

4. COD definition

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

5. Rooftop project definition

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

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

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

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

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

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

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

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

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

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

 

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

 

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

 

Option 3 – temporary delay of labor contract implementation

 

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

conduct procedures in the law to:

 

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

 

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

 

 

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

 

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

 

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

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

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

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

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

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

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

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

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

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

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

We will closely monitor to update on any further changes.

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

VIETNAM – POWER DEVELOPMENT MASTER PLAN – LATEST NEWS – WHAT YOU MUST KNOW:

The MOIT Party’s Committee have issued Resolution No. 21-NQ-BCSD dated 10 Jan 2020 on the principles and procedure of the amendment and supplement power development plan. We would like to update the very fresh news on priority of project inclusion in the upcoming power development plan.

Priority is given to power grid projects first, followed by power source projects. Moreover, it is given to the areas with less renewable energy projects and with the capacity to release power. The national power development plan, approved by the Prime Minister, only includes 220kV and above power grid projects and 50 MW and above power source projects. Solar power projects are temporarily not under individually inclusion.

Regarding power grid projects, the highest priority goes to the ones included in EVN’s five-year Plan (approved by Prime Minister) and the 220kV transmission grid projects which are included in the Provincial PDP 2016-2025. Those projects are not subject to application requirements. The followed priority order is: (i)The projects included in PDP7 which adjust progress and scale; (ii) The projects help relieving hydroelectric and renewable power; (iii) Projects for new or adjusted load such as industrial zones or plants need large power; and (iv) Power connection projects which are included in the plan but not yet approved for connection or is proposed for adjustment.

Regarding power source projects, priority order is: (i) Wind projects with the capacity to finish plant and grid before 11/2021 in the areas without grid overload, therein prioritize the projects which have finished the first phrase, is proposing to increase capacity or is carrying out the second phrase using the existing connection infrastructure; (ii) sewage-to-power projects; (iii) biomass power; (iv) Hydroelectric projects prosing for capacity adjustment; (v) New hydroelectric power; (vi) Traditional projects, prioritize the ones with large renewable energy auxiliary (hydro, gas).

New guidance for the proposal of wind power projects has been released. Areas with less projects and capable to absorb more power such as Quang Binh, Ha Tinh, Ba Ria-Vung Tau, Hau Giang, etc. would be prioritized. The areas with more projects follow, prefer the areas have taken into account power release. In addition, the evaluated projects would be reviewed first, followed by the others in chronological order.

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

VIETNAM – SOLAR POWER – LATEST NEWS ON FEED IN TARIFF AND FIT-ELIGIBILITY – WHAT YOU MUST KNOW:

After the Government Office’s notification No. 402/TB-VPCP dated 22 November 2019 on solar power FiT2 and auction scheme, the MOIT has coordinated and consulted with EVN, MOF and MOJ to finalize its draft solar power FIT2. On 31 December 2019, a final draft submission letter from MOIT (with signature but no stamp) (NB: no draft FiT2 PM Decision attached also) for FiT2 PM Decision has been internally circulated. To our knowledge, this submission letter and the draft FiT2 PM Decision would be duly executed and submitted to the Prime Minister no later than COB next week. Please kindly find below our highlights of this draft submission letter of MOIT.

1. FIT2 Eligibility

The MOIT insisted that in order to be eligible for FiT2, solar power projects must (i) have been in principle approved, and added in the relevant power development planning, (ii) have signed PPAs with EVN, (iii) be “under construction” prior to 23 November 2019, and (iv) reach COD by end of 2020.

The MOIT document defined 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 either detailed or technical construction design (as the case may be) prior to 22 November 2019. Based on the reports of EVN dated 2&12 December 2019, MOIT determined there are only 7 solar power projects of 320 MW which are currently eligible for FiT2. The list of FiT2 eligible solar power projects is attached at Schedule 1 of the draft FiT2 PM Decision which has not yet been disclosed.

The MOIT also mentioned (i) Schedule 2 for solar power projects have been in principle approved, and added in power development planning, signing PPA, (ii) Schedule 3 for list of 30 solar power projects in Ninh Thuan province of 1,933 MW, and (iv) Schedule 4 for list of 22 projects that have been appraised for master plan addition and reported to the Prime Minister. The foregoing schedules have not yet been disclosed.

As reported before, EVN sent letter no. 6774/EVN-TTD dated 12/12/2019 to MOIT to suggested FiT2 to be applied to the projects which have construction contracts before 22 November 2019 (of any part of the project) and have evidence on the implementation of the project. In addition, EVN suggested that MOIT may consider decreasing the FiT2 in proportion to the construction delay status of relevant projects (e.g., 5% of FIT2 for any quarter failing to meet construction deadline). However, the MOIT did not agree with this proposal from EVN.

2. FIT2 Price for Solar Power Projects / Rooftop Solar (RTS) Projects

The submission letter is not very clear on the FiT2 price but very likely MOIT will keep the last draft FiT2 price structure i.e., (i) 7.06 UScent per Kwh for ground-mounted solar power projects and (ii) 7.69 UScent per Kwh for floating solar power projects.

In terms of RTS projects, MOIT proposed the price to be 8.38 UScent per Kwh. The MOIT did not agree with EVN’s proposal to remain 9.35 UScent per Kwh for RTS projects during 2020.

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

VIETNAM – SOLAR POWER – KEY POLICY NEWS – What you must know:

After Prime Minister Nguyen Xuan Phuc’s notification No. 402/TB-VPCP on 22 November 2019 on FiT 2 and auction scheme, we would like to update some key policy progress as belows:

1. Most recent draft of MOIT on FiT 2
The draft only allows only a tiny proportion of already-approved solar projects may qualify for FiT following MOIT document dated 22 November suggested 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 4 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).

2. Document no.9608/BCT-DL on suspension of the approvals for solar power projects

Vietnam’s Ministry of Industry and Trade has issued OL 9608/BCT-DL, in which it urges provinces and directly under the Central Government and the Electricity of Vietnam, on stopping proposals and agreements for solar power projects (SPPs) under Feed in Tariff (FIT) mechanism. The ministry said that only projects with signed FIT contracts that are scheduled for completion scheduled by the end of this year will be able to secure subsidies, while all of the remaining projects will have to compete again in future auctions. The Ministry of Industry and Trade is now working with ministries and agencies to complete the draft of a new auction mechanism.

3. Respond from EVN to MOIT
EVN has sent letter no. 6774/EVN-TTD dated 12/12/2019 to MOIT to suggested FiT 2 to be applied to the projects which have construction contracts before 22/11/2019 (of any part of the project) and have evidence on the implementation of the project. In addition, EVN suggested that to the grid-connected projects under COD before 1/7/2019, the remaining part which has not put under COD is entitled to FiT2.

4. Temporary accounting of FIT price for COD projects after 30/6/2019.
EVN has issued letter no.6909/EVN-TCKT, which instructs businesses to temporarily account FIT price of 1.916 VND/kWh (VAT excluded), unless any other guidance is issued.

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

VIETNAM – THE NEW COMPETITION LAW – PRAGMATIC PROGRESS – WHAT YOU MUST KNOW:

The National Assembly on 12 June 2018 passed the Law on Competition No. 23/2018/QH14 (“Law on Competition 2018”). Effective from 1 July 2019, the new law replaced old Law on Competition No. 27/2004/QH11 (“Law on Competition 2004”).The new law has made progressive reforms from the previous law. Significantly, the Law on Competition 2018: (i) expands scope of application; (ii) creates and holds the new competition agency accountable for its duties; (iii) adds new types of prohibited anti-competitive agreements;(iv) reforms the concept of enterprise dominance); and (v) introduces the leniency policy to violators of the law.

Expansion scope of application: the new law shall govern activities by Vietnamese or foreign entity or individual which have or may have the “competition restraining impact” to Vietnam market. The competition authority of Vietnam has the authority to deal with offshore activities and transactions having impact on Vietnam market. In addition, the new law is applicable to apply to non-enterprises entities, which are public service units such as hospitals, or schools.

Accountability of the new competition agency: the Law on Competition 2018 has created a new governmental body namely National Competition Commission (“NCC”). NCC is a body of the Ministry of Industry and Trade, NCC replaces the dual agency system under the Law on Competition 2004 which it shall exercise discretion to investigate and adjust the cases involving restraint of competition and unfair competitive practice. However, as a body of MOIT, NCC’s independence and impartiality is controversial when there is an involvement of state-owned-enterprises. The NCC is accountable for its failure to adjust the case during the prescribed time by paying compensation where there is loss or damage suffered by the enterprise. Anti-competitive agreements: the Law on Competition 2018 has provided four new types of prohibited anti-competitive agreements namely: (i)agreements to share customers; (ii) agreements not to engage in transactions with enterprise which is not a party to the agreement; (iii) agreements to limit the product sale market or sources of supply goods and services of parties not participating in the agreements; and (iv) other agreements which have or may have significant competition restraining impact. The new law replaces the threshold of 30% combined market share when determining the anti-competitiveness of the agreements. The Law on Competition 2018 imposes the significant competition restraining impact assessment to determine whether the agreement is prohibited.

The assessment shall take into account the: (i) market share ratio of enterprises participating in the agreement;
(ii) the barriers to market access or expansion; (iii) restriction of research, development and renovation of technologies or restriction of technological capacity; (iv) reduction of the ability to access or possess essential infrastructure; (v) increase of costs and time of customers in purchase of goods or services from enterprises participating in the agreement or when changing to purchase other relevant goods or services; and (vi) hindering competition in the market via the control of special factors in industries and sectors relating to the enterprises to the agreement. The restraint of competition agreements are applied to horizontal agreements between parties in the same related market or vertical agreements between parties in the same supply chain. The agreement in restraint of competition might be exempted for up to five years.Reform of abuse of dominance: the Law on Competition 2018 upholds the market share presumption under the old law. However, the new law replaces the concept of “substantially restrain competition” test by “significant market power” test to identify enterprises dominance in the market.The identifying factors are:(i) market share between enterprises in the relevant market; (ii) financial strength and scale of enterprise; (iii) barriers to another enterprise to enter or expand the market; (iv) capability of holding, accessing and controlling the market for distribution and sale of goods or services or the supply of goods and services; (v) advantages of technologies, technical infrastructure; (vi) ownership and right to possess and access infrastructure; (vii) ownership and right to use objects of intellectual property rights; (viii)the ability to switch to sources of supply and demand of other relevant goods or services; and (ix) special factors in the industry or sector in which the enterprise is conducting business. In terms of group dominance, the new law additionally stipulates that five enterprises with total market share of 85% or more in the relevant market is a group of enterprises with dominant market position.

Enterprise with market share of less than 10% in the relevant market is not a member of the group dominance. Previously, the law prohibits an economics concentration transaction only (e.g., a merger, consolidation or buy-out) if the combined market share of enterprises is more than 50% of the relevant market. However, under the new law, this condition is replaced by factors as to whether an economic concentration has or may have significant competition restraining impact.

Leniency policy: the Law on Competition 2018 for the first time stipulates the lenient approach as to reduce or exempt penalties for enterprises which voluntarily report their violation of the law to the competition authority prior to the investigation. The leniency does not apply to enterprises forcing or organizing other parties to participate to the agreement. Three applicants to leniency shall be entitled to an exemption of up to 100%, 60% and 40% of penalty accordingly. It remains to be seen how this Leniency approach is handled in practice by the authorities but it is the first step in the right direction.

If you have any question on the above, please do not hesitate to contact Dr. Oliver Massmannn under omassmann@duanemorris.com or any other lawyer listed in our office listing. Dr. Oliver Massmann is the General Director of Duane Morris Vietnam LLC. Thank you very much!