Tag Archives: COVID

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

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

  1. Force majeure

 A force majeure event under Vietnamese law

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

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

  1. The effect of a force majeure event

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

Article 351.2 of the Civil Code 2015:

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

Article 294.1 of the Commercial Law 2005:

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

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

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

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

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

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

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

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

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

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

  1. Rewriting force majeure clauses

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

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

  1. E-signatures

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

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

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

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

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

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

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

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

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

For more information, please contact Giles at GTCooper@duanemorris.com or Dang Ngoc Huyen at HDang@@duanemorris.com or any of the lawyers in our office listing. Giles is Chairman of Duane Morris Vietnam LLC and branch director of Duane Morris’ HCMC office.

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

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

The relief available under Decree 41

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

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

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

The beneficiaries provided by Decree 41

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

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

The required procedures to obtain the relief

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

For more information, please contact Giles at GTCooper@duanemorris.com or Dang Ngoc Huyen at HDang@@duanemorris.com or any of the lawyers in our office listing. Giles is Chairman of Duane Morris Vietnam LLC and branch director of Duane Morris’ HCMC office.

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.