investor – Page 2 – Duane Morris Vietnam

June 11, 2018 by Dr. Oliver Massmann

LAWYER IN VIETNAM DR. OLIVER MASSMANN – E-COMMERCE – THE WORLD BANK IS ASKING DUANE MORRIS VIETNAM ON THE LOGISTICS FOR E-COMMERCE – HERE ARE OUR ANSWERS:

ONLINE PAYMENTS
1. Which types of online payment solutions are available in your country?
Digital wallets[1], Internet Payment service providers[2] (IPSPs, also called as aggregated account or the third‐party biller), and Payment service providers[3] (PSPs).

2. What services do most Payment service providers (PSPs) offer in your country?
Opening merchant accounts[4], or providing access to aggregated accounts, at the acquiring bank, Transact multiple payment methods, and Security services, such as risk management.

3. What categories of PSPs are available to provide digital payment services in your country?
Retail PSP[5], Micropayment PSP[6], Government PSP[7] and Non‐issuing PSP[8].

4. What are the main laws and regulations that establish how PSPs are regulated and supervised in your country?
Law on State Bank of Vietnam 2010, Law on Credit Institutions 2010, Decree No. 101/2012/ND‐CP on non‐cash payment as amended, Circular No. 39/2014/TT‐NHNN guiding intermediary payment services as amended, Circular No. 46/2014/TT‐NHNN guiding non‐cash payment services.

5. How many business days does it take for PSPs to obtain a license to provide digital payment services?
60 days by law.

6. What is the main authority in charge of issuing licenses and supervising PSPs in your country?
The State Bank of Vietnam

7. According to the law, how long (in years) is the PSP license valid in your country?
10 years (Article 16.3 of Decree No. 101/2012/ND‐CP)

8. Which of the following documents are required for the PSP license application?
Registration documents (including certificate of incorporation and the Articles of Association); The business model, specifically outlining the type of digital payment services and payment instruments envisaged; Evidence that the PSP applicant holds the minimum initial capital required; A certified copy of the bank guarantee on the initial capital; A description of the measures implemented to ensure adequate levels of operational reliability, including disaster recovery and business continuity mechanisms; A description of how the PSP Applicant will settle payment transactions accompanied by a certified copy of the agreement with a settlement bank or a designated payment system; A copy of the system rulebook, detailing the operational rules of the envisaged payment scheme; A risk management system; A report of a feasibility and risk assessment study; An internal control system; and An outsourcing agreement if any.

9. According to the law, do PSPs have to meet the requirement of minimum initial capital at the time of authorization?
Yes. USD2.2 million (Article 15.2(c) of Decree No. 101/2012/ND‐CP).

10. According to the law, do PSPs have to establish at least one separate account with commercial banks to safeguard User Funds[9]? What are required for PSPs when managing the separate account(s)?
They must ensure all received funds are placed in a ring‐fenced account at commercial bank exclusively dedicated for this purpose as approved by the Central Bank; Ensure that the account balance is not at any time be less than the outstanding balance owed to Users; Not use the Funds to engage in any lending activity, including (but not limited to) the provision of credit and overdraft facilities; Not invest User Funds in any type of financial asset; and Not transfer User Funds to another account used for other business activities.

11. According to the law, do PSPs have to hold and account User Funds separately from any other funds they hold for other business purposes?
Yes. (Article 8.2 of Circular No. 39/2014/TT‐NHNN).

12. According to the law, do PSPs have to ensure that User Funds are covered by an insurance policy or a guarantee from a credit institution?
No.

13. According to the law, do PSPs have to seek for approval from the related authority before they intend to outsource any operational functions?
They cannot outsource the licensed activities (Article 6.2 of Circular No. 39/2014/TT‐NHNN).

14. According to the law, do PSPs, their agents and users have to comply with Anti‐Money Laundering and Combating of Financing of Terrorism (AML/FT) law, standards and measures?
Yes. (Article 7 of Circular No. 39/2014/TT‐NHNN).

15. According to the law, which of the following documents that PSPs/agents require when performing customer due diligence processes?
For any natural person users: An original copy of a valid ID card/passport
For any legal person users: Investment/ Enterprise registration certificate; and Copy of passports of authorized signatories.

16. According to the law, are PSPs allowed to charge users for registration?
Yes. (Articles 10‐13 of Circular No.39/2014/TT‐NHNN).

17. According to the law, do PSPs have a monthly load limit for Electronics Inc.[10] through an issued payment instrument in your country?
No.

18. According to the law, do PSPs have a single payment transaction limit for Electronics Inc. through an issued payment instrument in your country?
No.

19. What information is required for PSPs to disclose to Electronics Inc. upon the execution of a payment transaction?
A unique reference number enabling the payer/payee to identify the payment transaction; The payment transaction amount; The identity of the payer/payee; and The date on which the payment order was placed.

20. What are the main laws and regulations that govern the payment and settlement system in the country?
Decree No. 101/2012/ND‐CP, Circular No. 39/2014/TT‐NHNN, Circular No. 46/2014/TT‐NHNN.

21. Does the PSP require additional information from Electronics Inc. for cross border payment transactions?
Yes. The information include Additional identity confirmation and Detailed transaction purpose.

22. Does Electronics Inc. have to pay additional service fees to the PSP for cross border e‐commerce transactions?
Yes. The fees include Currency conversion fee and International transaction fee.

23. Based on the pricing model above, how much transaction fee does Electronics Inc. have to pay on a $20 transaction to the PSP in your country?
Domestic e‐commerce: Below $0.05 USD dollar
Cross border e‐commerce: $0.05 ‐ $0.10 USD dollar

24. What are the main laws and regulations about online payment authentication standards in your country?
Law on Internet information security 2015, Law on Information Technology 2006, Law on E-transactions 2005, Circular No. 35/2015/TT‐NHNN, Circular No. 47/2014/TT‐NHNN.

25. According to the law, do PSPs have to provide two‐factor authentication using standards like 3D Secure?
Yes.

26. According to the law, do PSPs and users (like Electronics Inc.) have to comply with the Payment Card Industry Data Security Standard (PCI DSS)?
Yes. (Section 2, Point 3.1.3, Decision No. 488/QD‐NHNN).

27. According to the law, do PSPs and users (like Electronics Inc.) have to install Transport Layer Security (TLS) or Secure Sockets Layer (SSL) on webpage or internet browser?
Yes. (Article 15 of Circular No. 47/2014/TT‐NHNN).

28. According to the law, how long (in years) does PSPs have to store and retain all user and transaction data from that of the original transaction?
20 years (Article 9.1(a) of Regulation attached to Decision No. 376/2003/QD‐NHNN).

29. According to the law, how long (in years) does a PSP have to store all details data of users’ personal information after the user relationship is terminated?
20 years from the original transaction, not depending on the relationship termination

30. According to the law, PSPs should keep user identification data and transaction records confidential and can only be made available to?
The corresponding User, the State Bank of Vietnam, or By a court order in the country.

31. What are the main laws that regulate chargebacks regarding online payments in your country?
The Civil Code of Vietnam, Circular No. 39/2014/TT‐NHNN.

32. The legal framework on chargebacks apply to:
Fraudulent transactions, Credit and service not processed; and An error in the amount.

33. According to the law, do banks hold initial amount to cover prospected chargebacks?
No.

34. Is there a legal time limit for Electronics Inc. to notify the PSP of any unauthorized/incorrectly executed payment transaction?
No.

35. After a successful dispute, how many business days it usually takes for customers to get a full chargeback of the original form of payment or an Electronics Inc. gift card?
3-10 days.

36. Do PSPs set a maximum predetermined threshold of monthly chargeback rate for Electronics Inc.?
No.

DIGITAL MARKETS
1. Are merchants selling goods through Electronics Inc. legally mandated to comply with a legal framework on online consumer protection? (i.e. is there an online consumer protection law in your country?)
Yes. Law No. 59/2010/QH12 on Consumer Protection.’

2. Are merchants selling goods through Electronics Inc. (i.e. engaged in distance or off‐premises selling) legally mandated to comply with online information disclosure rules?
Yes.

3. What information are merchants on Electronics Inc. legally mandated to disclose to consumers prior their online purchase?
Full business address of the merchant (i.e. geographical address); Identity of the merchant (i.e. trading name, phone number, fax number, email address, etc.); Product information (availability, price, description, etc.); Delivery information (time, price, etc.); Information about payment processes; Information about the existence of a right of withdrawal (or cancellation); Information about complaint handling; Information about the party bearing the cost of returning the goods in case of cancellation; Information on out‐of‐court complaint and redress mechanism; Information on product guarantee, rights and obligations of the merchants and customers in each transaction.

4. Are online information disclosure rules specified above applicable to mobile devices?
Yes.

5. Considering a domestic merchant selling a computer charger on Electronics Inc.’s platform, he is legally mandated to comply with the following general rules related to the right of withdrawal (or cancellation) for online purchases:
Information duty: Electronics Inc. must inform the customer of his right of withdrawal
Absence of reason: Electronics Inc.’s customer can withdraw from contract with no reason
Withdrawal period: Electronics Inc.’s customer can withdraw from contract after receiving the product

6. What is the period (in number of days) during which the customer of Electronics Inc. can withdraw (cancel) its purchase without any penalties and without giving any reason (also called cooling‐off period), if applicable?
It depends on policy of each merchant.

7. In case of a dispute between a domestic customer and a domestic merchant on Electronics Inc. for a low value sale (less than 30USD), what types of procedures are legally available for the domestic consumer acting individually?
Use of the general judicial system for addressing online disputes; Use of alternative dispute resolution (ADR) mechanism such as consultations, conciliation, or mediation; and Other provision for a dispute resolution mechanism (e.g. administrative procedures before a specific authority).

8. Are merchants on Electronics Inc. legally mandated to comply with redress rules for online purchase of goods?
Yes.

9. What types of remedy are legally enforced for online purchase of goods?
Monetary remedy: monetary payment
Non‐monetary remedy: repair, replacement

10. Is Electronics Inc, an e‐commerce platform, considered as an internet intermediary in your jurisdiction?
No.

11. Bearing in mind that it processes data such as name, surname, data of birth, email address, mail address, credit card information, preferences of its customers, does Electronics Inc., an e‐commerce platform, have to comply with a legal or regulatory framework on data privacy?
Yes. Decree No. 52/2013/ND‐CP.

12. Bearing in mind that Electronics Inc. is managing the data it collects, does it have to process differently non‐sensitive and sensitive personal data?
Yes.

13. What categories of personal data are considered sensitive in Electronics Inc.’s jurisdiction?
Political opinions, Sex life, Sexual orientation.

14. Under which conditions can Electronics Inc. lawfully process computerized personal data of its adult customers (also called data subject)?
The customer has given consent to the processing of his personal data for one or more specific purposes;
Processing is necessary for the performance of a contract to which the customer is party;
Processing is necessary for compliance with a legal obligation to which Electronics Inc. is subject.

15. Regarding consent, what are the legal grounds on which Electronics Inc. can lawfully get its customer’s consent (the customer is an adult) when collecting (non‐sensitive, if applicable) personal data:
Consent must be freely given
Consent must be specific
Consent must be informed
Consent must be non‐ambiguous
Consent must be distinguishable from (or tied to) other matters
Consent must be obtained by a specific method.

16. Regarding data access, if a customer (an adult) requests Electronics Inc. information on the processing of his personal data and is ready to bear the cost of it, to what degree is Electronics Inc. obliged to provide it?
The customer can access all his personal data with no condition

17. Regarding data deletion (or erasure), if a customer (an adult) requests the deletion of his personal data to Electronics Inc., to what degree is the latter obliged to comply?
All personal data must be deleted (or erased) under certain conditions; and Electronics Inc. can apply suitable measures to protect the data or inform the customer that the request cannot be processed due to a technical reason or any other reasons.

18. Is Electronics Inc. required to establish a procedure for the deletion of personal data if requested by a customer (an adult)?
Yes.

19. To what degree is Electronics Inc. allowed to transfer personal data of local customers (also local citizens) to non‐domestic third parties?
Totally free with certain countries but subject to certain conditions.

20. What are the general conditions under which Electronics Inc. can engage in cross‐border data trade with a nondomestic third party? (general conditions exclude specific conditions such as model contract clauses, binding corporate rules or other contractual arrangements.)
Adequacy approach: The country in which a non‐domestic third party is based has an “adequate level of protection”, “an equivalent protection”, “a sufficient level of protection”, or any provision entailing an adequacy approach.

21. What circumstances constitute an “adequate level of protection” when trading personal data with a third‐party country?
the nature of the personal data, the country of final destination of that information, the law in force in the country in question, the international obligations of that country, any relevant codes of conduct or other rules which are enforceable in that country; any security measures taken in respect of the data in that country.

22. Bearing in mind that Electronics Inc. is considered as a data controller, does Electronics Inc. have to comply with any of the following security requirements for automated (computerized) personal data?

Adoption of an internal policy for establishing procedures for preventing and detecting violations; Performance of internal controls; Assessment of the harm that might be caused by a data breach; Awareness program among employees.

23. Bearing in mind that Electronics Inc. processes personal data for marketing purposes, is it monitored by a supervisory authority?
No.

24. Does Electronics Inc. have to comply with the following administrative procedures with the supervisory authority to lawfully process personal data for marketing purposes?
There is no administrative procedures to process personal data for marketing purposes.

25. Given that Language Inc.[11] and free‐lance instructors[12], based abroad, sign a local contract (Language Inc. is based in your country), what are the types of e‐signature granting the same legal status as handwritten contracts?
E‐signature (click wrap, digitized signature, etc.)
Digital signature (need for a public key)

26. Does Language Inc. need to comply with any requirements on the use of a specific technology (e.g. PKI) for a digital signature to have legal validity?
Yes. PKI.

27. On the contrary, is any form of digital signature including the following requirements equally acceptable?
The digital signature helps verify the identity of the signatory (origin).

28. Does the use of a specific technology (e.g. PKI) grant additional legal benefits in terms of the legal recognition of the digital signature (e.g. validity in terms of burden of proof)?
No.

29. Does Language Inc.’s signature need to be certified by a Certification Authority (CA) in order to be recognized as having full legal validity?
Yes.

30. Do certification authorities (CAs) need a license to operate?
Yes. The conditions include: (1) Being enterprises established under the laws of Vietnam; (2) Having sufficient financial capacity to establish a system of technical equipment, organization, and maintenance of activities in accordance with the scale of service provision; (3) Depositing at a commercial bank operating in Vietnam or having a guarantee of a commercial bank operating in Vietnam of not less than 5 (five) billion VND, or insurance buying commitments to solve risks and the compensation that may occur during the course of service provision and make payment for expenses receiving and maintaining database of enterprises in the event of withdrawal of licenses; (4) Having team of technical staffs, managers, administration staffs, security managers and customer service personnel meeting professional requirements and scale of services deployment of having no criminal records; (5) The legal representative having knowledge of law on digital signatures and certification service of digital signatures; (6) Suitable formulation of technical equipment system; (7) Having feasible technical plans and business plans, consistent with the technical regulations and mandatory standards to apply; (8) Having plans to control the entrance and exit of head offices, the right to access the system, right to enter, exit the place where the equipment is located for providing for certification service of digital signatures; (9) Having contingency plans to maintain the continuous, safe operation, and overcome when the problem occurs; (10) The entire system of equipment used to service providers is located in Vietnam; (11) Construction of offices, places where the machinery and equipment is located in accordance with the requirements of the law on prevention and combat of fire and explosion; having ability of fighting against floods, earthquakes, electromagnetic interference, illegal intrusion of man; and (12) Having public certification regulations in the form issued by the Ministry of Post and Telecommunications, and contents in accordance with relevant laws.

31. How many CAs are available in your jurisdiction?
6-10 CAs.

32. Please list the most popular Certification Authorities available in your city:
1: VNPT‐CA 2: CA2‐CA 3: Viettel ‐CA

33. What is the average time and cost for Language Inc. to obtain a digital signature from a certification authority (if applicable)?
5‐10 days; USD50‐210 per 15-month package

34. Does your country have a national VAT/GST scheme applying to imported services bought on the internet?
Yes.

35. If applicable, is there a registration process for VAT/GST purposes for foreign‐based companies (like tutors) selling through Language Inc.?
Yes. There is no threshold under which foreign‐based companies do not need to register.

BROADBAND REGULATORY FRAMEWORK

1. Does your country have a national broadband plan or policy to develop a high-speed access network?
Vietnam has a national broadband plan in 2016 under Decision No. 149/QD-TTg of the Prime Minister dated 21 January 2016 approving the program on the development of broadband telecommunications infrastructure through 2020

2. What is the main body responsible for planning implementing the national broadband plan
Ministry of Information and Communications is the main body to plan and implement the national broadband.

3. Does the plan include blended finance or PPP investment schemes for broadband expansion?
We are not aware of the plan includes blend finance or PPP investment schemes or applicable financial instruments.

4. Does the plan include government investment in infrastructure to make broadband more broadly available?
The Government focus to investment in the following area:
First Mile: international gateways or the segment of a telecommunications network where the internet enters a country such as through cable landing stations or satellite links
Middle Mile: national backbone networks, or the segment of a telecommunications network linking a network operator’s core network to the local network plant

5. Does the plan include investments in cross border links and networks?
The plan under WTO’s Commitment include investments in cross border links. There are agreements in effect or in preparation with other countries to foster cooperation or joint investment for cross border.

6. Does the plan or policy include new internet exchange points (IXPs)?
We do not see any updates related to internet exchange points in the policy

7. Does the plan have a universal service fund (USF)
Yes. Vietnam has a universal service fund at http://www.vnpt.vn and there is implicit funding arrangement for USF

8. Are there fiscal incentives to accelerate internet deployment?
Now there are not fiscal investment to accelerate internet deployment.

9. Does Vietnam have a unified licensing regime?
Yes. WTO’s Commitment, Law on Investment 2014

10. Does Vietnam have a policy for releasing more licensed spectrum?
Yes. Circular 46/2016/TT-BTTTT on list of license-exempt radio serves and accompanying technical and operational conditions.

11. Does Vietnam assign spectrum on the basis of competitive auctions?
Yes. The spectrum auction winner are primarily evaluated on speed of build out, technology and quality of spectrum.

12. Does Vietnam have policies and regulations that allow the following practices for spectrum allocation?
Yes. Vietnam has spectrum shortage evaluations and spectrum caps.

13. What is the duration of the spectrum license?
15 years

14. Is there equal access to shared and/or government owner infrastructure such as road, railways, water and power lines?
No.

15. According to the law, does Vietnam require its cable operators to provide open access for internet services?
No.

16. Does your country have unbundling and line sharing rules?
No.

17. What restriction, if any, are placed on the level of foreign ownership of foreign telecom operators?
We see the minimum level of local ownership mandated.

18. Are there regulations regarding portability or preventing customer lock-in
No.

19. Does your country’s national broadband plan or policy set performance targets?
Vietnam has the national broadband plan with minimum download speed 22.77 mbps and minimum upload speed 22.28 mbps.

20. Does Vietnam’s national broadband plan or policy allow different access technologies?
Yes

21. Are there backward compatibility requirements with legacy infrastructure?
Yes

22. Does Vietnam’s national broadband plan or policy set date localizations requirements
Yes

23. Are there spectrum harmonization efforts in the national broadband strategies?
No.

24. Does Vietnam’s national broadband plan set coverage targets?
Yes. The plan includes population with broadband with 40% of the population, schools with broadband with 99% of schools and e-government with 100% national information portal, government portal.

25. Are peak usage charges allowed
No.

26. Are there fiscal incentives to increase access to broadband?
Yes. Incentives in rural broadband subsidies

27. Does Vietnam’s broadband plan or program include the rollout of free, public access points?
Enterprise Registration Certificate
ID Card or Passport of the legal representative
Contract Service with the broadband provide

28. What documents are needed in order to secure a business broadband connection?
Enterprise Registration Certificate
ID Card or Passport of the legal representative
Contract Service with the broadband provide

29. Please list what Broadband Access Providers are available to connection in Vietnam?
VNPT, Viettel, FPT

***
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. Oliver Massmann is the General Director of Duane Morris Vietnam LLC.
THANK YOU!

April 2, 2018 by Dr. Oliver Massmann

Lawyer in Vietnam Dr. Oliver Massmann WORLD BANK/IFC IS UPGRADING VIETNAM ON OECD INVESTOR PROTECTION RULES, SECURITIES LAWS AND ACCOUNTING STANDARDS

The Law on Enterprise in 1999 introduced the first legal framework on corporate governance in Vietnam. Since then, a number of other legal regulations have been issued, including the Law on Securities in 2006, the Corporate Governance Code in 2007, as amended in 2012, and Disclosure Rules in 2012, 2015 (for listed companies). Most recently, Law on Enterprise 2014, Decree No.71/2017/ND-CP providing guidelines on corporate governance of public companies and Circular 95/2017/TT-BTC, issued in order to further improve the legal framework for corporate governance and requirements on disclosure of information and transparency of securities markets to satisfy requirements for the development of capital markets and international integration. New Securities Law are expected to be submitted and discussed in the National Assembly of Vietnam at 6th Session, XIV by October 2018.
We outline below certain key progress and upcoming changes in corporate governance and accounting rules of Vietnam:
Corporate Governance encouraging investments
Good corporate governance reduces emerging market such as Vietnam vulnerability to financial crises, protects property rights, reduces transaction costs and the cost of capital, and promotes capital market development. Other words, weak corporate governance reduces investor confidence and discourages outside investment.
I. 2016, International Finance Corporation (IFC) published a research named Corporate Governance Success Stories in Vietnam, which expressly praised Vietnam’s improvements on corporate governance. Based on the latest corporate governance assessment conducted by Asian Development Bank in 2013, the corporate governance score for Vietnam in 2013 has risen 19.2%, compared to that scored in 2012.
I. confirmed its ongoing effort to raise greater awareness of merits of corporate governance through several programs working and coordinating with Ministry of Finance of Vietnam, State Securities Commission of Vietnam (“SSC”) and other state authorities to improve corporate governance (especially for public companies) in Vietnam.
New Decree 71 and Circular 95 continuously promoting good Corporate Governance for Public Companies
On 6 June 2017, the Government issued Decree No. 71/2017/ND-CP providing guidelines on corporate governance applicable to public companies (“Decree 71”). Decree 71 became effective on 1 August 2017 and replaced Circular No. 121/2012/TT-BTC issued by the Ministry of Finance on 26 July 2012 (“Circular 121”).
On 22 September 2017, the Ministry of Finance issued Circular No. 95/2017/TT-BTC (“Circular 95”) guiding the implementation of some articles of Decree 71 on corporate administration of public companies.
We highlight the key provisions of Decree 71 as follows:
1. it clarifies and provides detail restriction on intercompany loans and guarantees from the public company to the company’s shareholders and shareholders’ related persons;
2. it provides 2 options for organization of the public companies: (x) General Meeting of Shareholders, Board of Management, Board of Controllers, and General Directors, or (y) General Meeting of Shareholders, Board of Management and General Directors;
3. it provides new conditions and qualification of an independent member of the Board of Management;
4. it provides stricter qualifications and conditions to prevent conflict of interest in public companies such as (x) chairman of Board of Management cannot be the General Director (effective 1 August 2020), (y) members of Board of Management of a public company cannot be member of board of management of more than other 5 companies (effective 1 August 2019), and (z) transactions between a public company and its controllers, any management personnel and their related persons to be approved by the General Meeting of Shareholders or the Board of Management;
5. it provides more detail disclosure requirements: for example, salary of general director and other management members are required to be separately stated on annual financial statements of the company and reported to the General Meetings of Shareholders at the annual meeting; and
6. it and Circular 95 provide a new template of charter for public companies. It is not expressly compulsory for public companies to use the sample charter or the sample internal regulations but they are encouraged to use them for the purpose of ensuring compliance with the corporate governance requirements provided for under Decree 71, the Law on Securities and the Law on Enterprises.
Draft New Securities Law on Restructuring Securities Market
On 11 January 2017, the Ministry of Finance of Vietnam published a draft new Securities Law for collecting public opinions and comments (“Draft Law”). The Draft Law is expected to be finalized, submitted and discussed in the National Assembly of Vietnam at 6th Session, NA XIV by October 2018.
The Draft Law aims at (i) creating more efficient framework for regulating securities and securities market, (ii) developing Vietnamese securities market in line with international regulations, practice and norms in order to promote Vietnam’s securities market from a frontier to an emerging market, and (iii) diversifying securities products and reforming procedures for attracting investors.
We highlight the key changes of the new Draft Law as follows:
1. Increasing powers for State Securities Commission of Vietnam to effectively govern the securities market and address promptly the wrongdoings: for example, SSC will be authorized to require persons to provide information / documents in relation to wrongdoings; require the credit institutions to provide relevant information about transactions made via banks; and summon the relevant parties to meet and work with the SSC;
2. Enabling more qualified goods to be available for the securities market: for example, qualifications for determining public companies will be improved to target medium and large size enterprises (not including small size enterprises), more securities products such as derivatives will be available for trading in the securities market, OTC regulations will be adopted, etc.;
3. Restructuring the securities market: for example, Hanoi Securities Stock Exchange and Ho Chi Minh Securities Stock Exchange will be merged to establish the national securities stock exchange in the form of a single member state-owned limited liability company to control and regulate the whole national securities market;
4. Restructuring the Vietnam Securities Depository: for example, increasing the powers and activities of Vietnam Securities Depository such as registration of securities offsetting, mortgage and pledge, etc.;
5. Revising current policy to attract foreign investments in securities market: for example, removing restriction of maximum ratio of 49% foreign invested capital applicable to conditional sectors (not committed under WTO services schedule of Vietnam); and
6. Improving the quality and time of information disclosure obligations, increasing the transparency of the securities market.
Notable comments on Vietnam’s adoption of international accounting rules
Currently, 93 per cent (133 of 143 jurisdictions) around the world have publicly confirmed International Financial Reporting Standards (IFRS) adoption and implementation, and 83 per cent (119 of 143 jurisdictions) require all or most domestic public companies to comply with IFRS. Adopting IFRS standards in a comprehensive way often takes 5 to 10 years depending on the conditions and ability of each country.
Vietnamese Ministry of Finance representative reported the latest changes in accounting standards as contained in Circular 200/2014/TT-BTC (as amended), which was mostly up-to-date, practical and in increased accordance with international standards.
Regarding the roadmap for Vietnam, it is planned by the state authorities that during 2018 – 2020, 10 to 20 simple IFRS standards will be selected to be put into practice, and officially applied for all the firms listed on the stock market from 2020.
All other businesses that have sufficient conditions and wish to apply IFRS are also encouraged to. But from 2023 to 2025, all firms within the country will have to complete their conversion process.
Conclusion
Although corporate governance in Vietnam has made a certain progress, however, it remains lower than the good regional and international standards and practices. We strongly believe that our long-term cooperation and coordination with international organizations and State authorities on reforming and developing corporate governance and other investment and compliance rules will help investors to understand and plan properly their strategy in Vietnam’s securities market.
***
Please do not hesitate to contact Dr. Oliver Massmann and Tran Minh Thanh 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 and Tran Minh Thanh is Vietnamese lawyer of Duane Morris Vietnam LLC.
THANK YOU !

December 22, 2017 by Dr. Oliver Massmann

VIETNAM – AUTOMOTIVE SECTOR – CURRENT ISSUES AND SOLUTIONS FOR INVESTMENT AND OUTLOOK ON MAJOR TRADE DEALS TPP11 AND EUVNFTA

A. ISSUES AUTOMOBILE SECTOR

1. Small production and competition
2016, the Automobile market in Vietnam reached over 300,000 units (consisting of: 230,000 CKD and 70,000 CBU vehicles). However, the overall production only covers around 50% of the total capacity. Furthermore, investors do not decide to invest in long –term project due to big fluctuations in the past and the lack of a stable market. It is very risky for suppliers to invest in high investment producing parts due to disadvantages of small production. These high prices on parts manufactured locally is affecting the competition between local parts and imported parts. As a result, many suppliers cannot afford and sustain the production in the Vietnamese market.
Moreover, with the lack of local manufactured parts available in Vietnam, CKD vehicle assemblers need to import the most parts and materials which is causing higher costs due to logistics, packaging and import duty. Thus, these conditions are opening a gap between Vietnam CKD vehicles and CBU vehicles from about 10-20%.

2. Critical delivery capability of suppliers
A fully assembled car is consisting of hundreds of parts. As a result, car assemblers need a well-structured supply chain meeting their supply requirements. In Vietnam, many Vietnamese suppliers cannot provide materials in the required QCD standards for being able to take part in the international supply chain. Furthermore, the technology transfer, the right on use of patents, licensing agreements and copywriting permits are still required and not developed enough to ensure supply in global standard. Moreover, the safety standards for 4-wheel parts production is not developed as required yet.
In addition, the government is not developing well-supporting policies or measures to ease the production and trade for suppliers. In the last years, the government issued supporting decrees but they contain complicated procedures. There is no list provided containing information about all relevant suppliers available in Vietnam. As result, it is very difficult for companies to find all needed suppliers to ensure efficient production.
Further policies for stabilizing the market are to be made. Countermeasures and infrastructure development is a very important aspect to improve current issues. Moreover, the production cost cap and the gap between CBU and CKD vehicles need to be narrowed by setting new regulations or enforcing policies. Lastly, the government needs to give incentives to attract investments to support the development of the automobile sector.
Suppliers should try to go in cooperation with foreign suppliers for transferring technology to Vietnam and take part in databases for suppliers. National suppliers have to listen to international companies to develop the understanding of vehicle assemblers and their requirements. If assemblers find supplier companies understanding their needs and they are able to operate in the way of those needs, new investments will be attracted in the future.

3. Issues with Decree 116/2017/n33-CP on requirements for automobile supplier, importer, manufacturer and automobile aftersales guarantee and maintenance
a. Article 6, clause 2 point a rules that CBU importers must submit vehicle type approval certificate (VTA) and COP factory certificate. These have to be issued from the overseas authority. This is a major issue due to every agency is following national regulations and is adjusting their work to domestic requirements. It is unbearable to demand that suppliers must adjust work on regulations to each export country. In addition, there is no VTA authority in some countries (for example: Korea), so that, the VTA certificate cannot be issued to CBU importers in these countries. As result, the requirement of certificates’ issuance is a major reason for slow development of the automobile sector. Thus, Vietnam is limiting market access to some foreign investors in a very critical way. Furthermore, tests on safety and emission will be conducted of every single CBU shipment. This provision will highly increase the production time. However, the requirement of testing each shipment should be amended due to lack of necessity. Moreover, the government should start accepting the UNECE certificate. It is an internationally accepted certificate while it is meeting the Vietnamese requirements as well. In addition, the government needs to act as fast as possible to create transparent and stable environment for investors and their businesses in the automobile sector due to recent production cancellations of some enterprises on import of CBU vehicles.
b. Article 7, clause 1, point a provides the requirement of test roads with 800m length for CKD makers by 17 April 2019. The requirement of owning a test road is a huge financial burden, even renting test roads is very expensive and most producers are not owning test roads or do not have so much land available for that use.

B. ISSUES MOTORCYCLE SECTOR

1. Intellectual property
Intellectual property infringement is not only a small deal in Vietnam. Many Illegal imitations of motorbikes and parts, for example, Honda or Piaggio are manufactured in Vietnam. This is causing bad impacts on business and consumers due to lack of quality of imitated vehicles or parts of it. Furthermore, decreasing prestige and competitiveness are notable consequences of intellectual property infringement. There have to be further regulations on protection of intellectual rights and guidelines on enforcing these rights should be provided soon.

2. Increase of VAT
The increase of VAT from 10 to 12% on purchase of motorcycles is planned. Still, the motorbike is the main transportation vehicle used by Vietnamese in cities and rural areas. The increase of VAT will lead to worse socio-economy growth, thus, the government again should overthink the necessity of this planned measure.
C. OUTLOOK ON MAJOR TRADE AGREEMENTS TPP 11 AND EUVNFTA
In January 2017, US President Donald Trump decided to withdraw from the US’ participation in the TPP. In November 2017, the remaining TPP members met at the APEC meetings and concluded about pushing forward the now called CPTPP (TPP 11) without the USA. The agreement shall be signed by all member states by the first quarter of 2018. After that, it has to be ratified in each member state before taking effect.

The effects of the TPP 11 promising great benefits for the automotive sector in Vietnam. The TPP 11 is targeting to eliminate tariff lines and custom duties among member states on certain goods and commodities to 100%. Due to mostly high tariffs on vehicles, the TPP will impose great impact on production, business and trade flows. For ensuring the better market access under the TPP, suppliers must satisfy the regional value content requirements (RVC), thus, Vietnam will have to adjust regulations to ensure the satisfaction of the requirements of the TPP. As a result, Vietnam will be more competitive, but also be able to offer international standards to foreign investors.

One another notable major trade agreement is the EUVNFTA between the European Union and Vietnam. The EUVNFTA offers great opportunity to access new markets for both the EU and Vietnam. It will help to bring more capital into Vietnam. In addition, the EUVNFTA will boost the most economic sectors in Vietnam. In particular, the agreement will impose new foreign direct investment in Vietnam but there still remain problems regarding lack of infrastructure and low technology. On the other hand, it will also give the chance for better transfer of technology from Europe to Vietnam. Furthermore, the low labor costs in Vietnam are a big advantage for European investors to do business in the automotive sector in Vietnam.

Furthermore, the Investor State Dispute Settlement (ISDS) will ensure highest standards of legal certainty and enforceability and protection for investors. We alert investors to make use of these standards! We can advise how to best do that! It is going to be applied under the TPP 11 and the EUVNFTA. Under that provision, for investment related disputes, the investors have the right to bring claims to the host country by means of international arbitration. The arbitration proceedings shall be made public as a matter of transparency in conflict cases. In relation to the TPP, the scope of the ISDS was reduced by removing references to “investment agreements” and “investment authorization” as result of the discussion about the TPP’s future on the APEC meetings on 10th and 11th November 2017.
Further securities come with the Government Procurement Agreement (GPA) which is going to be part of the TPP 11 and the EUVNFTA.
The GPA in both agreements, mainly deals with the requirement to treat bidders or domestic bidders with investment capital and Vietnamese bidders equally when a government buys goods or requests for a service worth over the specified threshold. Vietnam undertakes to timely publish information on tender, allow sufficient time for bidders to prepare for and submit bids, maintain confidentiality of tenders. The GPA in both agreements also requires its Parties assess bids based on fair and objective principles, evaluate and award bids only based on criteria set out in notices and tender documentation, create an effective regime for complaints and settling disputes, etc.
This instrument will ensure a fair competition and projects of quality and efficient developing processes.

***
If you have any question on the above, please do not hesitate to contact Dr. Oliver Massmann under omassmann@duanemorris.com . Dr. Oliver Massmann is the General Director of Duane Morris Vietnam LLC.

Thank you very much!

December 18, 2017December 18, 2017 by Dr. Oliver Massmann

Vietnam – Real Estate Sector – Current Issues and Solutions for Investment and Outlook on Major Trade Deals TPP 11 and EUVNFTA

A. INTRODUCTION
The legal framework for the real estate sector in Vietnam is set with the Law on Real Estate Business 2014 (LREB), the Law on Residential Housing 2014 (LRH) (both effective since 1st July 2015). The LREB is guided by Decree No. 76/2015/ND-CP, the LRH respectively is guided by Decree No. 99/2015/ND-CP. In addition, long-awaited Decree No. 01/2017/ND-CP was released on 6 January 2017 and is amending three decrees guiding the law on land 2013 (Land Law).
The provisions of the mentioned regulations have brought more investment in the real estate market to Vietnam. They have reduced barriers for investment and widened accessibility to properties in Vietnam.

B. ISSUES
However, not every issue is solved yet.
1. Delay in issuance of land use right certificate (LURC) for foreign investors
The issuance of the land use right certificate to foreigners is one essential requirement for developing projects on purchased land. Article 75 of Decree 95/2015 provides the obligation for the Department of Construction on issuing the “Foreign Ownership Prohibited Projects List”. However, the list is not released yet. As result of that, the Department of Natural Resources and Environment is refraining from issuing LURCs to foreigners.
As conclusion, the Foreign Ownership Prohibited Projects List should be issued as soon as possible so that foreigners purchasing land in Vietnam can obtain the LURC and are able to develop their projects.
2. What are ‘’foreign invested enterprises”?
The LREB, the Land Law and the Law on investment 2014 (LOI) rule about “foreign invested enterprise”. There remain uncertainties about this term.
The LREB is not providing any definition for foreign invested enterprises. Furthermore, the Land Law is providing that joint ventures enterprises, 100% foreign invested enterprises and Vietnamese enterprises of which foreigners are buying shares, merche with and acquire are included as foreign invested enterprises without any given guidance about percentage of ownership. Under the LOI an economic organization with foreign investors being member or shareholder shall be a foreign invested enterprise if part of ownership of the foreigner in the economic organization is 51% or more. On the other hand, organizations with foreign members or shareholders holding less than 51% are not classified as domestic enterprises under the LOI.
However, this issue is crucial due to different treatment of foreign invested and domestic enterprises. For example, domestic enterprises are able to transfer land use rights in form of division whereas this is prohibited to foreign invested enterprises.
Further, the Document No. 386/BXD-QLN (28 February 2017) issued by the Ministry of Construction states that the LREB does not need to provide provisions relating to foreign invested enterprise as the LOI has already did. However, Document 386 does not state that LREB can adopt the same definition of foreign invested enterprise the term remains ambiguous under the LREB.
3. Restrictions on sources of capital
Due to limiting the sources of capital for residential housing by the LRH, foreign developers cannot obtain loans from offshore credit institutions and non-credit institutions anymore. This measure is reducing the ability and opportunity to raise capital effectively and the competitiveness for foreign developers. Even though, there is no necessity for limiting opportunities to raise capital from legitimate sources.
4. Change of land user rights in case of acquisition of shares/ capital contribution
Article 2.27 of Decree 01/2017 provides the obligation for enterprises on assigning for land use rights or registering changes in the land and assets attached to the land when there is any change in the land user in case of acquisition shares or contribution of capital with land use rights included. In case of acquiring land, the land still remains with the same enterprise. Furthermore, the assigning process can impose financial obligations. This issue can lead to difficulties for investors when they acquire shares or contribute capital in enterprises.
5. Investment Approvals
The main approval for residential developments is either an investment in-principle decision (IID) or investment in-principle approval (IAA). In addition, an investor wishing to establish a company in Vietnam needs an investment registration certificate (IRC).
a. Circumstances requiring an IID:
Article 32 of the LOI is ruling the requirement of the IID that is only applying to projects where developers receive land use rights from State directly by way of allocation or lease of land without auction, tendering or transfer. Furthermore, the Land Law states the only way developers can receive land from State is either by way of allocation or lease of land. As a result, it is uncertain in which way developer can receive land by transfer.
b. Investment approval for capital contribution by way of land use rights:
Under a joint venture between a domestic and foreign investor to develop residential housing projects, the domestic investor will contribute capital by way of land use rights. In such case the IID is required only in cases of allocation or lease of land by the State without auction tendering or transfer. It is uncertain if the IIA will be required in cases of tendering or transfer.
Under the Law of Construction 2014 the developer has to obtain the construction permit before he can commence the project. It is not clear if the IIA is required to obtain the construction permit. This requirement could lead to lack of ability on proceeding the project in cases where obtaining the IIA failed.
On the other hand, if the IID is required, the developer will have more assurance because of the possibility to obtain the IID before the land use right is contributed.
c. Overlapping investment approvals
As mentioned above, the LOI provides the requirement of the IRC apart from the IID and IAA. For projects which require the IID, the IRC will be issued automatically after 5 working days from the Issuance of the IID. The content of the IID is similar to the IRC and no additional documents are necessary for issuance of the IRC. As a result, the IRC is not necessary when the IID is issued.
For projects requiring the IIA, the developer shall obtain the IRC first, then set up the company before obtaining the IIA. As mentioned above, the developer is unable to develop the project without IIA in cases of failing to obtain the IIA. Furthermore, the IIA and IRC are dealing with authorities and their approvals and the IIA is issued based on the 1/500 planning approval so that the necessity of the IRC is not given.
6. Capital contribution in the form of land use right
The Land Law and the Law on Enterprises 2014 provide possibility of contribution land use rights by individuals of a peace of land as capital to an enterprise for a certain time period.
Under Article 80 of Decree No. 43/2014/ND-CP (15 May 2014) on guiding the Land Law, capital contribution in form of land use rights shall terminate if the individual capital contributor passes away. As a result, if the capital contributor is passing away the capital contribution agreement will be terminated which will cause affection of the enterprise’s LURC and its land use rights. On the other hand, the Law on Enterprise 2014 stipulates that if an individual contributes land as capital the enterprise will have the right over the land.
Therefore, Article 80 of Decree No. 43/2014/ND-CP has caused confusion and uncertainty for developers in case to consider receiving land use rights from individuals.
7. Conducting real estate business on land contributed as capital
Under the Land Law, domestic and foreign invested enterprises are entitled to receive capital contribution by way of land use rights. However, there is no provision in the LREB regarding contributions as capital for organizations and individuals. As a result, organizations are not entitled to receive capital contribution by way of land use rights for developing real estate projects. This is causing inequalities and an unfair competition in the real estate sector.

C. OUTLOOK ON MAJOR TRADE AGREEMENTS TPP 11 AND EUVNFTA
In January 2017, US President Donald Trump decided to withdraw from the US’ participation in the TPP. In November 2017, the remaining TPP members met at the APEC meetings and concluded about pushing forward the now called CPTPP (TPP 11) without the USA. The agreement shall be signed by all member states by the first quarter of 2018. After that, it has to be ratified in each member state before taking effect.
The effects of the TPP 11 promising great benefits for the real estate sector in Vietnam. The TPP 11 is targeting to eliminate tariff lines and custom duties among member states on certain goods and commodities to 100%. This will make the Vietnamese market more attractive and could cause motivation for foreign enterprises to settle to Vietnam for building warehouses, offices, setting up plants or even for investing in the real estate sector because the market is becoming more dynamic with the TPP.
One another notable major trade agreement is the EUVNFTA between the European Union and Vietnam. The EUVNFTA offers great opportunity to access new markets for both the EU and Vietnam. It will help to bring more capital into Vietnam. In addition, the EUVNFTA will boost the most economic sectors in Vietnam. Establishments in other economic sectors in Vietnam will have impact on the real estate sector due to its association with these sectors such as healthcare, technology or education.
Furthermore, the Investor State Dispute Settlement (ISDS) will ensure highest standards of legal certainty and enforceability and protection for investors. We alert investors to make use of these standards! We can advise how to best do that! It is going to be applied under the TPP 11 and the EUVNFTA. Under that provision, for investment related disputes, the investors have the right to bring claims to the host country by means of international arbitration. The arbitration proceedings shall be made public as a matter of transparency in conflict cases. In relation to the TPP, the scope of the ISDS was reduced by removing references to “investment agreements” and “investment authorization” as result of the discussion about the TPP’s future on the APEC meetings on 10th and 11th November 2017.
Further securities come with the Government Procurement Agreement (GPA) which is going to be part of the TPP 11 and the EUVNFTA.
The GPA in both agreements, mainly deals with the requirement to treat bidders or domestic bidders with investment capital and Vietnamese bidders equally when a government buys goods or requests for a service worth over the specified threshold. Vietnam undertakes to timely publish information on tender, allow sufficient time for bidders to prepare for and submit bids, maintain confidentiality of tenders. The GPA in both agreements also requires its Parties assess bids based on fair and objective principles, evaluate and award bids only based on criteria set out in notices and tender documentation, create an effective regime for complaints and settling disputes, etc.
This instrument will ensure a fair competition and projects of quality and efficient developing processes.

D. CONCLUSION
The mentioned issues are affecting the competitiveness in the real estate sector. The given restrictions, additional obligations for foreign investors, the lack of clear guidelines on implementing regulations are hurdles for investors seeking to invest in this sector in Vietnam. In view of the government’s commitments to ensure growth and the issues mentioned above, it is necessary to create clear guidelines for eliminating confusion to the investors and real estate buyers. Furthermore, the upcoming major trade agreements will have a great impact on the development of the real estate sector in Vietnam. On the other hand, the Vietnamese government still has to make further improvements on the legal environment for ensuring the implementation of the agreements.

Thank you very much!

November 17, 2017 by Dr. Oliver Massmann

VIETNAM – BOOM TIME – The Trans Pacific Partnership Agreement now becomes the Comprehensive and Progressive Agreement for the Trans-Pacific Partnership – What is next?

Overview on the Trans Pacific Partnership Agreement (TPP) – now the Comprehensive and Progressive Agreement for the Trans-Pacific Partnership (CPTPP)

The TPP was originally known as the Trans- Pacific Strategic Economic Partnership concluded in 2006 among Singapore, New Zealand, Chile and Brunei (P-4 agreement) as a means to promote trade liberalization in the Asia- Pacific Region. As its name indicates, the original purpose of the agreement was only to address economic issues. As the number of participating countries in the P-4 agreement increased, starting with the United States in September 2008 and other countries to follow being Australia, Peru, Vietnam, Malaysia, Canada, Mexico and Japan until July 2013, the agreement is agreed to be “a comprehensive, next-generation regional agreement that liberalizes trade and investment and addresses new and traditional trade issues and 21st-century challenges” by TPP Trade ministers. In June 2015, the United States approved the trade promotion authority for President Obama. The Agreement finally becomes as it is today through tough negotiation rounds, while the last round in Atlanta in September 2015 was considered the most intensive one. The TPP was already concluded on 06 October 2015. However, in January 2017, right after President Trump took his office, the United States formally expressed its withdrawal from the agreement, leaving other 11 parties with the decision to continue the agreement without the United States or not. In November 2017, during APEC meeting in Da Nang, Vietnam, ministers from 11 countries decided to push ahead with the TPP with its new name – CPTPP with only 20 items suspended out of an around 5000-page document, mainly in the Intellectual Property chapter.

CPTTP will help Vietnam make good use of international cooperation opportunities, balance relationships with key markets, approach larger markets including Japan and Canada, boost import-export, reduce import deficit, and attract foreign investment. In addition, CPTTP will also help Vietnam’s economy allocate its resources more effectively, enabling active supports to the processes of restructuring, innovation and improving regulations, and improve administrative reforms.

What makes CPTPP the template for next-generations trade agreements – What are beyond the WTO?

Freer trade zone

Commitments in Trade in goods

Tariff and non-tariff barriers are reduced and removed substantially across all trade in services and goods under the CPTPP. Import tariffs are reduced for 100% goods traded among member states, with more than 90% being eliminated immediately when the Agreement takes effect. The CPTPP also covers issues which have never been addressed in the WTO, including export duties, import duties for re-manufactured goods, market access for re-furbished goods, stricter regulations on import and export licensing, monopolies and goods in transit.

Lower tariff barriers from the CPTPP will give Vietnam greater access to large consumer markets in Japan, Canada and Australia. The potential positive effect on trade could be transformative, with estimates that the CPTPP will boost Vietnam’s exports by over 37% until 2025.

Commitments in Trade in services and Investment

All 11 member states give consent to a liberalized trade in this area. More sectors are opened in the CPTPP compared with the WTO, such as telecommunications, distribution and manufacturing sectors.

In addition, besides incorporating basic WTO principles (national treatment (NT), most-favored nation treatment (MFN), market access, and local presence), the CPTPP takes a negative approach, meaning that their markets are fully open to service suppliers from other CPTPP Parties, except otherwise indicated in their commitments (i.e, non-conforming measures). In order to make such reservations, the member state must prove the necessity of such preservation and negotiate with other member states. If approved, the non-conforming measures are only limited to such list, except for measures in certain sensitive sectors which are included in a separate list. Member states are only allowed to adopt policies that are better than what they commit (ratchet principle). The CPTPP also includes obligations on removal of performance requirements (i.e., no conditions on local content requirements, export conditions, use of certain technology, location of the investment project, etc.) and reasonable requirements on senior management and board of directors. Notably, the CPTPP Chapter on Investment for the first time makes it very clear and transparent concerning the MFN principle, that countries operating in multi-state regime must give foreign investors the best investment conditions of all states, regardless of the state where the investment takes place. Investors are also allowed to petition against the Government from the investment registration stage.

Textiles

Textiles are among Vietnam’s core negotiating sectors. According to suggestions by the United States, negotiations on textiles were conducted separately from negotiations on market access for other goods. To be qualified for CPTPP preferential tariff treatment, the CPTPP applies the yarn-forward principle, meaning textile products must be produced in CPTPP countries from yarn forward. However, the CPTPP includes exceptions that allow (i) certain materials to be sourced from outside CPTPP (“Short supply list”), (ii) certain manufacturing phases (for example, dying, weaving, etc.) to be conducted outside CPTPP; and (iii) one country to be able to use non-CPTPP materials in exchange for its export of certain textile goods to another country.

Government procurement

The CPTPP makes a list of government entities and agencies whose procurement of a particular̉ goods and services at a particular amount must be subject to public tender. This chapter includes NT and MFN principles, removes tender conditions favoring local tenders such as using local goods or local suppliers, conditions on technology transfer or two-way trade and investment, etc. These rules require all parties, especially Vietnam, in the context of China’s bidders predominantly win the bids with cheap offer price but low-quality services, to reform their bidding procedures and protect their own interests by disqualifying tenders with poor performance and low capacity.

Investor-State Dispute Settlement

The CPTPP aims at protecting investors and their investment in the host country by introducing requirements on non-discrimination; fair and equitable treatment; full protection and security; the prohibition of expropriation that is not for public purpose, without due process, or without compensation; the free transfer of funds related to investments; and the freedom to appoint senior management positions regardless of nationality. For the first time investors may sue the Government for its violation of investment-related commitments.

CPTPP also includes procedures for arbitration as means of settling disputes between investors and the host state. It covers new provisions compared with existing agreements such as transparency in arbitral proceedings, disclosure of filings and arbitral awards, and participation of interested non-disputing parties to make amicus curiae submissions to a tribunal. Arbitral awards are final, binding and fully enforceable in CPTPP countries.

Application of the CPTPP and older/ existing agreements

Member states of the CPTPP acknowledge existing rights and obligations of each member under existing international agreements to which all CPTPP member states are parties (for example, the WTO Agreement, NAFTA, or bilateral agreements) or at least two member states are parties. In case there is any consistency between a provision of the CPTPP and a provision of another agreement to which at least two CPTPP member states are parties, these parties will consult with each other to reach a mutually satisfactory solution. Please note that the case where an agreement provides more favourable treatment of goods, services, investments or persons than that provided for under the CPTPP is not considered as an inconsistency.

Implementation deadline of the CPTPP

Brunei, Canada, Malaysia and Vietnam still have some outstanding issues, so further negotiations are necessary. Canada and Japan will also have to agree on auto rules in the CPTPP. However, negotiators have set the goal of signing the CPTPP in the first quarter of 2018. After that, all 11 countries will have to ratify it before it can come into effect.

***

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. Oliver Massmann is the General Director of Duane Morris Vietnam LLC.

THANK YOU !

November 10, 2017 by Dr. Oliver Massmann

CASINO BUSINESS UNDER STRICT REGULATIONS

On 20 January 2017, the Government issued a long-awaiting casino business decree No. 03/2017/ND-CP (Casino Decree). Although the issuance of the Casino Decree after almost 10 years of waiting opens a promising market to casino industry, foreign investors have been very hesitant and in the waiting mode for further clarification documents from competent authorities. Finally after more than six months since the Casino Decree’s effective date, on 05 October 2017, the Ministry of Finance issues Circular No. 102/2007/TT-BTC (Casino Circular) guiding the Casino Decree. The Casino Circular helps complete the regulatory framework for casino business in Vietnam and put the young industry in momentum growth.

Local Vietnamese eligible for gambling

Local Vietnamese will be permitted to gamble at specific casinos approved by competent authority on a 3-year trial basis (i.e. – calculating from the first day opening of the authorized integrated resorts). According to the public media, only 02 casinos are open to Vietnamese individuals on a 3-year piloting scheme, which are located within complex resorts in Phu Quoc District, Kien Giang Province (South Vietnam) and Van Don District, Quang Ninh Province (North Vietnam). A small likelihood that Ho Tram Resort would join the list.

Local players are permitted to enter casinos if they essentially satisfy the following conditions: (i) 21 years old or above; (ii) monthly salary of VND10 million or more (equivalent to approximately US$440); (iii) paying entrance fee of VND1 million (US$44)/24 hours/ person or VND25 million (USD1,100)/ month/ person; and (iv) not being objected in writing by siblings, spouses and/or biological and adopted parents to play at casinos. However, these conditions, especially the monthly income requirement, are complicated to prove and were not previously dealt with in the Casino Decree. The Casino Circular then substantiates this requirement as below:

– Having documents (tax declarations/ confirmation by tax authorities) proving taxable income at level 3 or above pursuant to the Law on Personal Income Tax;

– Notarized house/ assets lease contract, where the total monthly rent is VND 10 million or above;

– Notarized bank savings book or bank statement of savings with a term of one year or more and having monthly interest from VND10 million or above;

– Other documents proving that the usual monthly income of players being VND 10 million or above; or

– In case a single document mentioned above is not sufficient to prove the VND10 million monthly income, players can submit several documents to prove such total monthly income.

Casinos under strict supervision of tax authorities

Casino-operating enterprises must arrange a place in the casino with necessary means and equipment for state authorities to perform the casino management and surveillance directly or via electronic equipment and camera system. Transactions under supervision are monetary transactions and/ or tokens related ones. These transactions must also be recorded ad reported to the tax authorities.

In addition, state authorities also supervise, either directly or via electronic and camera system, the inventorying and calculation of transactions performed at cashier area and/ or areas for counting and storing cash and tokens.

Foreign currency control in casino business

Casino-operating enterprises must exchange Vietnamese Dong or other currencies for tokens and vice versa for players.

The exchange rates for Vietnamese Dong or other currencies to tokens and vice versa must be based on the purchasing rates on the transaction date announced by the licensed bank where the casino-operating enterprise’s specialized foreign currency account is opened. In case the transaction date falls on days off or public holidays, the exchange rates must be based on the rates announced on the previous transaction date.

A casino-operating enterprise may accept bank cards of players to exchange for tokens when they play in the casino. The transaction must be in Vietnamese Dong.

In case the Vietnamese players win the prizes, they are only allowed to receive the prize in Vietnamese Dong (whether in cash or by bank transfer). This is not the case for foreign players where they can also receive the prize in foreign currency.

Conclusion

The issuance of the Casino Decree and the Casino Circular timely open Vietnam’s young casino industry to attract foreign investment and limit foreign currency loss to other neighbouring countries. According to recent statistics, Vietnam loses about USD800 million in tax revenue annually from gamblers who cross the border to Cambodia. This is even more critical as many countries in the region already allows casino business such as Macau, Singapore, Philippines, Korea and recently Japan. In such scenario, the Vietnam Government still has a lot to do in order to not only retain Vietnamese players in the market but also attract foreign players who are already familiar with other casinos in the region.

***

If you have any question on the above, please do not hesitate to contact Dr. Oliver Massmann under omassmann@duanemorris.com. Dr. Oliver Massmann is the General Director of Duane Morris Vietnam LLC.

Thank you very much!

October 23, 2017 by Dr. Oliver Massmann

Lawyer in Vietnam Dr. Oliver Massmann – Solar Power – Payment mechanism from Vietnam Electricity (former Electricity of Vietnam, EVN) to Solar IPP – What you must know:

1. The periodicity of payment for energy sales by client (EVN) to IPP

The IPP and EVN will together read the metering result on a monthly basis on a mutually agreed date to determine the power delivered and received in a month. The IPP will record the result in writing and send it together with the invoice to EVN within 10 working days from the result reading date. The payment deadline for EVN is within 15 working days from the receipt of the IPP’s invoice.

2. Frequency of price adjustment such that payment in VND reflects equivalent USD value

It is not clear in both Decision 11 and Circular 16, but we understand that the adjustment will be made at the time of payment for grid connected projects. For on-grid rooftop projects, the adjustment is made annually. Provision have been included in previous power project documents.

3. Mechanism for price adjustment (e.g. is applicable price adjustment is weighted average of adjustment period such that seller is not exposed to changes to VND/USD exchange rate).

For on-grid projects, the adjustment is made at the time of payment. For on-grid rooftop projects, the adjustment is made annually. It means that the FiT for on-grid rooftop projects remains the same in a year. The FiT for on-grid rooftop projects for the next year will be adjusted based on the announced VND/USD exchange rate on the last working day of the preceding year.

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.

THANK YOU !

October 4, 2017 by Dr. Oliver Massmann

VIETNAM – MAIN ISSUES RESTRAINING INFRASTRUCTURE DEVELOPMENT AND OUTLOOK ON THE EUROPEAN UNION-VIETNAM FREE TRADE AGREEMENT (EVFTA)

Vietnam’s ability to continue expanding its economy is linked to competitiveness. It is clear that supporting institutional regulatory reform and infrastructure development will ensure economic growth in the country. In practice, this approach is feasible by promoting public-private partnership (PPP). This goal includes a long-term investment in infrastructure that harmonizes PPP investors and Vietnamese Government’s interests.

By way of illustration, State-owned enterprises (SOEs) remain dominated in Vietnam. However, due to budget pressure, the government is committed to reform SOEs. Accelerating the development of foreign investment requires new approach to create a favorable legal framework for PPP. The issuance of a long awaited Decision 58/2016/QD-TTg (Decision 58) on classification of SOEs, is expected to facilitate the process.

Another key aspect to consider is SOE equitization for revenue reasons. In 2016, the State received approximately USD800 million from equitization and allocated some of these funds to reduce budget deficit.[1] Although the equitization process started in 1992, only around 2,600 firms have been equitized in the first 13 years of that program.[2] Meanwhile, the goal during 2014-2015 was to equitize 432 SOEs.[3] According to Decision 58, it is expected to rearrange 103 SOEs and equitize 137 SOEs within 2016-2020 period.

The historic poor performance of SOEs equitization is about to change gradually. Furthermore, there are some questions to address from the investors perspective since the State plans to retain ownership from below 50% (in 106 enterprises), 50%- 65% (in 27 enterprises) and above 65% (in 4 enterprises) by 2020 across different sectors.

Despite the efforts to enhance investments in infrastructure and energy, many issues related to the implementation of current regulations that affect transparency and enterprise value remain unresolved, namely:

Share price

Currently share price as determined by the Government must be market price. There are cases when market price is determined based on the listed price or transaction price in the UpCom market. However, such market price determination is not fair and accurate when the shares are sold to strategic shareholders due to the nature of the participants in the securities markets (i.e., participants are mainly financial institutions and speculators) as well as the minority percentage of listed stock compared with the total shares of the listed companies. Indeed, share price when sold to strategic shareholders must be the lowest successful bid price in an IPO. In addition, share price of joint stock companies listed on UpCom market must not be within the price range of that securities code on the transfer date.

Public-private partnership (PPP)

Implementation of Decree 15 on PPP has shown certain limitations. Opening a new chapter of PPP requires further work in understanding strategic factors that make PPP effective and ensure that key risk minimizing solutions are undertaken properly.

Bankability is a crucial issue during the project structuring phase. The requirements for a project to be bankable differ from sector to sector or by jurisdictions. However, there are common factors that render the project bankability and raise its risk exposure such as restrictions on mortgaging land use rights to foreign lenders, complex investment approvals to investors (e.g., land acquisition process), and payment ability of an SOE off-taker. Therefore, practical preferential policies should be issued to strengthen PPP investment.

In addition, investment in the form of PPP is more complex than public investment. However, in the management of PPP projects, public investment laws and regulations have currently been applied, resulting in lengthy investment procedures. Furthermore, there is a problem regarding the limited resources allocated to authorized state agencies (ASAs). It is expected that Decision 522 on managing and using project development fund raised by Asia Development Bank and Agence française de développement (AFD) will help to support the ASAs in preparing for the project development.

With regard to infrastructure projects, the current legislation allows some flexibility regarding the use of incentives under the Investment Law. Nevertheless, the principle of the PPP framework is to develop highly-efficient projects through loans from private investors such banks or credit institutions and thus releasing the State from financial burdens. If local companies borrow from commercial state banks, this will not meet the PPP principle. In addition, the limited attractiveness of PPP framework also deter local and foreign non-State banks from offering loans.

It is worth considering a risk allocation framework that harmonizes with the general principle that risks should be allocated to parties that are in the best position to manage them or make reasonable determination of that risk.

Power project developments

One issue is project implementation timeline in Circular 43/2016/TT-BCT. Specifically, this legal instrument requires project development commitments from investors and requirements to seek the MOIT’s approval when there are delays in the project implementation. According to Circular 43, if a BOT project falls behind the agreed timeline, the adjustments will only be approved under limited exceptions such as (i) force majeure events; (ii) the misconduct of competent authorities or (iii) the misconduct of a third party. In practice, the schedule agreed between the MOIT and investors is difficult to meet as a result of complex project preparation process as well as involvement of many related parties.

Outlook on the EVFTA

The market access commitment in the EVFTA goes largely beyond both those in the WTO and other FTAs ratified by Vietnam, thereby giving EU enterprises the best possible access to the Vietnamese market. Accordingly, provisions on SOEs are considered the most ambitious disciplines that Vietnam has ever reached. Such rules will put private enterprises on an equal level with enterprises where the Government is the owner. Under the EVFTA, EU companies will be permitted to bid for contracts in infrastructure, power distribution, railway and healthcare projects the same as Vietnamese bidders.

Conclusion

Investment in infrastructure is considered as a strategic measure to reach sustainable development in Vietnam. Indeed, the government has improved the legal framework to support PPP model and privatization of energy and power sectors. However, it needs a much clearer plan in improving the quality of new regulations in order to ensure a fair and transparent process. Furthermore, the equitization progress seems to be disappointing since only 52 SOEs were equitized in 2016. In this context, to ensure the equitization efficiency, it is urgent to address the impact of these remaining issues on project’s viability and aim at the highest level of risk management. Finally, Decision 58 represents a good opportunity for EU companies to engage in large- scale PPP projects. However, investors need to carefully conduct a due diligence before any investment.

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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.

Thank you!

September 14, 2017 by Dr. Oliver Massmann

Vietnam – Solar Power Taking Off – PPA Breaking News- The text of the PPA is issued – How to work with it:

Following the issuance of Decision No. 11/2017/QD-TTg of the Prime Minister on mechanism for encouragement of development of solar power in Vietnam (Decision 11), on 12 September 2017, the Ministry of Industry and Trade officially released Circular No. 16/2017/TT-BCT guiding Decision 11 (Circular 16). Circular 16 is aimed at providing regulations on formulation, approval and amendment of the national as well as provincial power master plan. In addition, the solar Power Purchase Agreement (Solar PPA), which is of great interest for many foreign investors, is also provided in Circular 16 as a mandatory template for future on-grid and rooftop solar power projects with only minor changes expected to be permitted during the contract negotiations.

In essence, the Solar PPA is almost the same as current applicable PPAs for renewable projects. This creates bankable issues for solar projects and a hindrance to foreign investors planning an investment in the sector.

Feed-in-Tariff (FiT)

Circular 16 repeats the solar FiT for power output from on-grid projects and excessive power output generated from rooftop projects specified in Decision 11 to be VND2,086/kWh or US 9.35 cents/kWh. This FiT only applies to on-grid projects and rooftop projects coming into commercial operation before 30 June 2019 and will remain within 20 years from the commercial operation date. We note that while the FiT for power output from on-grid projects is adjusted according to the fluctuation in the VND/USD exchange rate, meaning at any time during the year, it is not the same for rooftop projects. Instead, the mentioned FiT for excessive power output generated from rooftop projects remains the same throughout the first year of operation, and the new FiT for the next year will be adjusted based on the announced VND/ USD exchange rate of the last working day of the previous year.

EVN’s rights and obligations as the sole off-taker

EVN is delegated to purchase all power output generated from solar power projects pursuant to terms and conditions of the Solar PPA within 20 years.

It is noteworthy that the Circular 16 and the Solar PPA list out certain circumstances where EVN is not obliged to purchase power as negotiated with the seller, for example:

when EVN is in the process of installing equipment, or making repairs, replacement, inspection or examination of the grid connection of the seller’s power plant;
when the transmission grid or the distribution grid connected to EVN’s grid has a problem or grid equipment directly connected to EVN’s transmission grid or the distribution grid has a problem; and
when EVN’s grid needs support to recover after the incident in accordance with the provisions of operation of the national power system and the standards, technical regulations of the electric industry.

Unfortunately, the current Solar PPA does not include provisions protecting the interests of the seller in the abovementioned circumstances. It is quite risky for the producer if the output is ready to be fed to the grid but the connection is not available to do so. Absent a clear indication of whether the Solar PPA is a ‘take or pay” agreement, investors will find it difficult to secure and ensure the profits and revenue of their projects.

Dispute resolution

The Solar PPA allows either party to the agreement to bring the dispute to local courts for litigation and other energy-related state bodies of Vietnam (General Directorate of Energy and the Electricity Regulatory Authority of Vietnam) for mediation and resolution.

The Solar PPA does not provide for international arbitration to be an option to resolve the dispute. This could be a great concern for foreign investors, especially those of large utility scale projects.

Other key issues of concern

No Government guarantee to enhance the credit of EVN as the sole off-taker;
No provision addressing the risks of changes in applicable laws; and
The Solar PPA is required to follow a specific template, which is not bankable.

Conclusion

Although these abovementioned bankability issues remain in the Solar PPA as the same for other renewable energy PPAs, we have assisted our clients on different large scale power projects, also in the Renewable Energy sector and managed to win bankable PPAs with EVN. We strongly believe that our track record experience will help investors and the same will be done for the Solar PPA.

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September 5, 2017September 6, 2017 by Dr. Oliver Massmann

Vietnam Wind Power is taking off – The new Feed in Tariff – what you must know:

Decision No. 37 of the Prime Minister on supporting regime for wind power projects provides an FIT of 7.8 UScent/ kWh. This FIT applies to two current projects in operation in Binh Thuan, namely Phu Lac and Binh Thuan No. 1. For Bac Lieu near shore wind project, the FIT follows a special financial regime, being 9.8 UScent/kWh. However, with the current FIT, the Ministry of Industry and Trade (MOIT) opines that it will be difficult for these plants to recover their investment capital.

Thus, the MOIT has recently proposed the Government to increase wind FIT for inland wind power plants to 8.77 UScent/ kWh and to 9.97 UScent/kWh for near shore wind projects. This proposal is expected to attract more investors in the market as well as create incentive for current projects whose pre-feasibility reports have been approved by the MOIT to come into real operation.

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If you have any question on the above, please do not hesitate to contact Dr. Oliver Massmann under omassmann@duanemorris.com. Dr. Oliver Massmann is the General Director of Duane Morris Vietnam LLC.

Thank you very much!