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Vietnam – Infrastructure and Waste Treatment Sector – Current Issues and Solutions for Investment and Outlook on the Major Trade Deals CPTPP, EUVNFTA and the EU Vietnam Investment Protection Agreement (IPA)

A. Overview
The waste treatment and infrastructure sector in Vietnam faces several issues. The waste treatment is a priority sector in Vietnam due to the urgent need to clean up urban environments in major provinces. This leads to the urgent need of waste treatment projects. However, the incentives for sponsors are limited. In particular, a regulation regarding solid waste treatment projects prevents, that the profit earned by the sponsors can raise up higher than 5%, adversely affecting the financial viability of the projects.
Regarding the infrastructure, there are two main issues. Firstly, there are only a few options for sponsors to raise capital for infrastructure projects. Besides the traditional project financing, sponsors of projects in Vietnam have hardly any other options to raise capital for it. Secondly, the development of energy efficient buildings is still in its infancy in Vietnam. Buildings are, and will remain, the largest consumers of electricity. However, just around 100 buildings have a Green Building (GB) certification. Modern, efficient infrastructure is vital to continued economic growth and lowers the costs of doing business for all investors in Vietnam.
Regarding the problems of the waste treatment, it can be determined, that due to the rapid economic growth and urbanization, public funding is unable to meet these needs. This gap has to be filled by other sources like private investment in the form of Public-Private Partnerships (PPP). In order to find private sponsors for waste treatment projects, the problem can be solved by setting a more flexible regulation instead of a fix profit limit.
The infrastructural issues can be addressed by the state setting a governmental framework to promote alternative options to raise capital. The issue regarding the energy efficiency of buildings
must already be taken up during the construction phase by using environmentally-friendly construction materials without producing higher costs and, in addition, by using multiple systems and certificates of “economic buildings”, letting the market determine which are practical and useful. These systems could be licensed for operation based on a set of simple criteria such as transparency, reliability and coherence according to recognized norms. These certificates must include incentives to encourage builders to build energy efficient buildings.

B. Waste Treatment Sector
Waste treatment is an important sector for PPP’s. However, to date there is no customized guidance on development of PPP projects in this sector. In particular, Circular 07/2017/TT-BXD (Circular 07) regulates the method for determining the price of municipal solid waste (MSW) treatment service, which is used as the basis for setting, evaluating and approving specific prices of MSW treatment services. It came into force on July 01, 2017 and applies to organizations and individuals. It does not set out a pricing mechanism that is workable for PPP projects. Circular 07 limits the profit earned by the sponsors in solid waste treatment projects to 5%, adversely affecting the financial viability of the projects.
Instead of using a maximum limit, a flexible regulation is needed. The authorized State agencies must be able to decide on appropriate service fees which will be finalized subject to the market and tender results instead of setting a cap on the fees, which, if is not in line with the market, would make projects unattractive to investors.

C. Lack of options for sponsors to raise capital for projects
Other than traditional project financing, sponsors of infrastructure projects in Vietnam have hardly any other options to raise capital for projects. The regulations on project bonds or trading
equity are either not accommodating to the nature of an infrastructure project company (e.g. the law requires that the bond issuer must be profitable in the preceding year to be eligible to issue bonds), or not available at all (e.g. strict requirements on transfer of project equity preventing project companies from raising funds on the capital market).
Being able to raise funds on the capital market would provide the sponsors with alternative financing options, especially given the unresolved financing challenges of on-going projects. The government should consider and put into place a legal framework to support such alternatives.

D. Development of green buildings in Vietnam and standards
A major issue that Vietnam faces is that energy-efficient houses hardly exist. Currently Hanoi has only around 100 buildings that are Green Building (GB)-certified or are undergoing GB certification.
However, buildings are and will remain the largest consumers of electricity. The rapid growth of urbanization and its associated life and working style, which includes intensive air-conditioning use, accounts for a considerable proportion of the energy consumption growth in the major cities of Vietnam. Proper building design can reduce this growth for the next 25 years of a building’s lifetime.
On the other hand, a development can be seen. Organizations such as the Vietnam Green Building Council (VGBC) report a significant uptick in interest over the past couple of years. Many building owners have been introduced to the concept of GB. The aim is to make buildings as energy efficient as possible. To bring absolute a real change, the problem needs to be handled on several levels.
Firstly, buildings should become more energy efficient in any case. This does not mean higher investment costs. The process can be applied from the architecture phase, with passive design and the use of environmentally-friendly construction materials, to the implementation of energy-efficient devices during construction. The aim should be that all buildings achieve the minimum standards of the VEEBC code (or a simplified version) in order to receive the Building license at Basic Design Stage. Furthermore, Electricity of Vietnam (EVN) could impose a tariff scheme that rewards low energy consumption buildings with lower prices and impose higher prices to high consumption buildings.
Secondly, the Government must provide effective encouragement for building owners to certify their buildings. In addition to international green building certifications already being used in Vietnam, such as the United States Green Building Council (USGBC) Leadership in Energy and Environmental Design (LEED) and International Finance Corporation (IFC) Edge, VGBC has developed the LOTUS certificate.
In conclusion, it would be useful, to recognize multiple systems for use in Vietnam, letting the market determine which are practical and useful. These systems could be licensed for operation based on a set of simple criteria such as transparency, reliability and coherence according to recognized norms.

E. Outlook on Major Trade Agreements TPP 11, EUVNFTA and IPA
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 provision of the agreement specified that it enters into effect 60 days after ratification by at least 50% of the signatories (six of the eleven participating countries). The sixth nation to ratify the deal was Australia on 31 October 2018, therefore the agreement will finally come into force on 30 December 2018. Vietnam has now officially become the 7th member of the CPTPP.
The CPTPP 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 bringing more foreign direct investment to Vietnam. The agreement includes a stand-alone, enforceable chapter on the environment. The chapter’s core obligations commit member countries to pursue high levels of environmental protection, effectively enforce domestic environmental laws, not derogate from these laws to encourage trade or investment and promote transparency and public participation. Those essential regulations will help to improve the cleanliness of Vietnam.
One another notable major trade agreement is the European Union Vietnam Free Trade Agreement (EUVNFTA). 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.
Both agreements promise great benefits for the infrastructure and waste treatment sector in Vietnam and will help to react on the fast economic and population growth. For instance, Vietnam will be bound by its commitments in the Government Procurement chapter in the CPTPP and the EVFTA, including the procedures to conduct a tender and in specific circumstances that the Government must conduct a public tender. The investors now have the opportunity to participate in procurement by Vietnam’s government entities and challenge the Government if it does not grant the investors the opportunity to do so in qualified circumstances.
The CPTPP and the EVFTA make it possible that foreign investors could sue Vietnam Government for its tender decisions according to the dispute settlement by arbitration rules. The violating party must take all necessary measures to promptly comply with the arbitral decision. In case of non-compliance, as in the WTO, the CPTPP and the EVFTA allow temporary remedies (compensation) at the request of the complaining party. The final arbitral award is binding and enforceable without any question from the local courts regarding its validity. This is an advantage for investors considering the fact that the percentage of annulled foreign arbitral awards in Vietnam remains relatively high for different reasons.
In conclusion, Vietnam’s strong economic growth and its demand for infrastructure development are great opportunities for investors planning to invest in Vietnam. The CPTPP and the EVFTA are effective tools to support foreign investment in Vietnam’s infrastructure sector in the form of PPP. Under these agreements, foreign investors could take recourse to arbitration proceedings and have the arbitral awards fully enforced in Vietnam.
To enable at least some parts of the FTA to be ratified more speedily at EU level, the EU and Vietnam agreed to take provisions on investment, for which Member State ratification is required, out of the main agreement and put them in a separate Investment Protection Agreement (IPA). Currently both the FTA and IPA are expected to be formally submitted to the Council in late 2018, possibly enabling the FTA to come into force in the second half of 2019.
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!

Lawyer in Vietnam Dr. Oliver Massmann – RENEWABLE ENERGY AND FEED IN TARIFFS – QUO VADIS – INTERVIEW WITH MERGERMARKET

1. Dear Dr. Massmann, a government official recently stated that the MoIT probably had enough solar projects in the pipeline, explaining for that fact that such new FIT will be much more lower than the current one (as quoted by Mr. Nguyen Ninh Hai, Deputy Director of New and Renewable Energy Department, MOIT), do you agree with this statement and why? Is there any other reason that you think make sense for planning a new upcoming FiT for solar?

OM: The number of approved solar projects has gone far beyond the target capacity in the National Power Master Plan VII (as amended). The Government has to issue a new national power master plan (PDP VIII) to reflect the new target following the market status. In addition, the grid does not have enough capacity to absorb all output from solar projects at the moment and has to be upgraded. This process should take around 1-5 years. The current FiT is also very attractive to foreign investors and high compared to some other countries. For these reasons, the Government has to issue a new FIT to slow down the development of solar projects, thus having time to improve the grid and complete the legal framework.

2. With the market now anticipating the new FiT for solar, which is underway, what is the current situation of those solar projects seeking to be the last one to enjoy the 9.35 US cents feed in tariff? Do you think the anticipation for the new FiT has triggered/ or will trigger a rise in deal value for renewables in Vietnam in the meantime? Perhaps in Ninh Thuan province? If so, by roughly how much %?

OM: Solar projects seeking to be the last one to enjoy the current FIT now have to accelerate their development process so that they will come into commercial operation by 30 June 2019. If they cannot (and this is the current situation of many solar projects), the investors tend to delay the construction and wait to see what will happen after 30 June. I am aware that the new FIT is only one of the options, besides auction or a hybrid option. The Government has not yet decided on the final model. Ninh Thuan is already overloaded and investors should look for opportunities in other provinces.

3. Besides the new FiT, what changes would you like to see in the new PPA for projects coming into operation after 30 June 2019? Can you rank these changes from most needed, needed to have, and good to have for the long-term outlook of M&A deals in renewables? Can you briefly explain the reasons for the ranking as well?

OM: The bankability of the PPA is of utmost importance. Without this, the investors find it very hard obtaining financing for their projects. Another change I expect is a clear indication of whether the PPA is a take-or-pay agreement. This will help investors secure and ensure the profits and revenue of their projects. The last change but also of not less importance is a dispute resolution clause which provides 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.

4. From talking to a market source, the current FiT rate for wind energy projects is profitable enough for investors and he himself as an investor doesn’t want the FiT rate for wind energy projects to go up any more. What would be your argument for the hike in wind FiT and how would it benefit the long-term outlook of M&A deals in wind energy projects?

OM: I believe the reason for a recent increase in the wind FiT is to improve profitability of the projects, help investors to recover the investment capital more quickly and arrange a better financing deal with the banks. I note that the PPA is only for 20 years, so if it takes too long to recover the capital, together with the high maintenance cost after that, the investors will no longer be interested in keeping the projects. The new wind FIT will make wind projects more attractive to investors for acquisitions as there is still room for further development after the projects have recovered their investment capital.

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

Vietnam Investment Review interviewing lawyer in Vietnam Dr. Oliver Massmann on trends in Mergers and Acquisitions in Vietnam

1. How do you judge the M&A trends in Vietnam at the current time?

The M&A market in Vietnam since the beginning of this year is very active. Foreign investors tend to invest in public listed companies or companies with good brand in the market. Sectors that attract the most interest of foreign investors are finance, real estate, retail, consumer goods, etc.
The reason is that the investors are very optimistic about the development of Vietnam’s market. In addition, the Government has also made several successful attempts to improve the investment environment, including the consideration for the amendment of the Law on Securities, which is believed to bring better financial sources to the country.

2. What should foreign investors benefit from the trends and what should they be aware of?

The Government’s privatization of many state-owned enterprises this year together with the fact that many enterprises with large capitalization and of great interest to foreign investors in these sectors are now preparing for the public listing give foreign investors more investment choices. However, they should conduct a full due diligence on the target to make sure that their investment is secured and in compliance with Vietnam laws.

3. What are still the shortcomings of the M&A deals in Vietnam?

Transparency is a barrier to foreign investors. The local target companies do not adopt international accounting standards or the equivalent, or are not willing to disclose sensitive information to their potential partners. In certain cases, for example, in real estate development projects, under table expenses are of great concern to foreign investors, especially those from the US, EU, UK, Japan and Korea.

4. Many people keep worry of the loss for not only local brands but also the local culture with more foreign domination after the M&A. What are your opinions about the matter?

It should not be of great concern. Foreign investors when buying in local companies/ brands usually bring technology, high-quality management standards and capital, which local companies lack. This helps the local companies/ brands better compete in the market, especially in case of Vietnam’s deep integration into the world and regional economy. Moreover, culture is something that foreign investors have to adapt to be able to survive in Vietnam. The case of Grab and Uber is an example.

5. What is the forecast of the trend in the future? And how they will drive the market?

Leading enterprises with good financial capacity and high growth in the sectors will attract both foreign and domestic investment. It is noted that in 2018, there will be a number of state-owned enterprises privatized under the Prime Minister’s decision. These enterprises include Habeco, Vinamilk, etc. which is believed to be successfully privatized following the recent success of Sabeco, another state-owned enterprise in the beverage sector under the Ministry of Industry and Trade’s management.
In terms of capital sources, we can expect a cash flow coming from major Asian economies such as Japan, Korea, Singapore, Hong Kong and especially mainland China which increases their strong presence in the market.
We strongly believe that the equitisation of SOEs of a larger scale and with a strong determination from the top would play a key role in driving the market.

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

Vietnam – Solar Power Breaking News – Possible Extension of deadline for Feed in Tariff (9.35 USD cent per KW) – what you must know:

The current solar Feed-in-Tariff for on-grid projects in Vietnam is 2,086 Vietnamese dong/kWh (equivalent to 9.35 UScents/kWh) (VAT excluded). According to Decision 11/2017/QD-TTg, this solar FIT applies for projects which come into operation before 30 June 2019 and within 20 years from the commercially operational date (“COD”) (i.e., the date when the solar plant is ready to sell electricity to the buyer – EVN).

However, from our informal high level contact within the MOIT recently, it is very likely that the solar FIT of US9.35 cents/kWh will continue to apply beyond the original COD (i.e. 30 June 2019). The deadline shall be likely extended for another half a year or another year for solar projects across Vietnam, except for projects in Ninh Thuan. This policy is not yet formally adopted but very likely will be publicized at the end of this year.

For solar projects in Ninh Thuan, the COD deadline extension will be longer (i.e. for another one and a half year from 30 June 2019). This is due to the fact that, in Ninh Thuan province, nuclear energy development has been stopped and the Government would like to develop solar energy there to support the province’s economic development.The special policy for solar projects in Ninh Thuan will be coming very soon, according to our MOIT contact. He informed us that the Deputy Prime Minister has already approved this special policy for Ninh Thuan and all await formal procedures.

We will closely monitor to update on any further changes.

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

VIETNAM – THOMSON REUTERS INTERVIEWING DR. OLIVER MASSMANN ON INITIAL PUBLIC OFFERINGS (IPO)

1. Why has there been so much IPO activity in Vietnam of late? What has been driving it?

The investors are very optimistic about the development of Vietnam’s market. Vietnam’s GDP in Q1/2018 is 7.4%, the highest rate in the past 10 years. In addition, there is growing middle class with great purchasing power. The World Bank predicts that the middle class will account for 26% of Vietnam’s population by 2026, double than the current statistics. The Government has also made several attempts to improve the investment environment.

2. How is this resulting in the legal work that the law firm is seeing out of Vietnam? What kinds of clients are you advising, and what kinds of advice are they requesting?

When the investors are new to the market, they will need legal advice to secure their investment and comply with Vietnam laws. We see this a great chance to improve our business and show our expertise in the sector. Most of our clients are from the US and Europe, who would like to take advantage of the upcoming free trade agreements such as the EU- Vietnam FTA and the CPTPP and expand their business to other neighboring countries. We mainly advise clients on due diligence of the partner, how to structure the investment and the best cooperation form.

3. What are some of the key trends you have seen among Vietnamese IPOs? How are these different from other markets in Asia/Southeast Asia?

In my view, the Government of Vietnam is more than ever expected to get money to cover its huge investment and regular payment expenses. This would serve as a key engine for a new waive of equitisiation of large State owned enterprises, especially after the successful placement of Sabeco’s shares.
In a short term, the cash flow may come to portfolio of SCIC’s list including major manufacturing companies but, in a long run, we may expect a come-back of banks, retails and real estate’s shares.
In terms of capital sources, we can expect a cash flow coming from major Asian economies such as Japan, Korea, Singapore, Hong Kong and especially mainland China which increases their strong presence in the market.
When it comes to how the IPO market of Vietnam may differ from the rest of Asia/Southeast Asia, we strongly believe that the equitisation of SOEs of a larger scale and with a strong determination from the top would play a key role in driving the market.

4. What industries are seeing the most activity – and can expect to see the most activity going forward? Why?

Financial (with major focus on real estate) sector, banking, consumption services and power sectors have been and will see further significant growth. The reason is in Q2/2018, many enterprises with large capitalization and of great interest to foreign investors in these sectors are now preparing for the public listing.

5. What are your predictions for the Vietnam IPO market in the immediate future?

The Vietnam IPO market will continue the growth. Leading enterprises with good financial capacity and high growth in the sectors will attract both foreign and domestic investment. It is noted that in 2018, there will be a number of state-owned enterprises privatized under the Prime Minister’s decision. These enterprises include Habeco, Vinamilk, etc. which is believed to be successfully privatized following the recent success of Sabeco, another state-owned enterprise in the beverage sector under the Ministry of Industry and Trade’s management.

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

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!

LAWYER IN VIETNAM DR. OLIVER MASSMANN LEGAL UPDATE MAY 2018 – SOLAR ENERGY ROOFTOP TAX BENEFITS – SOLAR POWER MASTER PLAN – PUBLIC PRIVATE PARTNERSHIPS – LATEST ON INDUSTRIAL AND ECONOMIC ZONES

1. Official No. 5111/VPCP-KTTH issued by the Government Office in response to Official Letter No. 5400/BTC-CST of the Ministry of Finance in relation to tax preferences applicable to solar roof projects of 50 kW or less.
Issuance date: 31 May 2018
Effective date: 31 June 2018
The Government in-principle approves the request from the Ministry of Finance on tax advantages applicable to solar roof projects of 50 kW or less. The Government also assigned the Ministry of Finance to issue relevant legal documents to implement this policy. Currently, request of the Ministry of Finance and draft future regulations on this topic have not yet been published.

2. Legal news: Solar power master plan – rumor on delay
The Ministry of Industry and Trade (“MOIT”) must report the list of approved solar power plants to the Prime Minister before 15 July 2018. The MOIT must also promptly finalize the national solar power development master plan for the Prime Minister’s consideration.
Currently, the number of solar power projects submitted by investors to the MOIT is significant. According to Vietnamnews, the MOIT has approved more than 70 solar power projects, with a total capacity of over 3,000MW, to come into operation before June 2019. The capacity is much larger than the combined capacity of projects by 2020 (i.e., 850 MW for solar power projects) as approved by the Prime Minister in the current power master plan VII.

Unconfirmed rumor: the MOIT (and other authorities) would likely not review and approve any application for addition of new solar power projects to the power development master plans / solar power development master plans from now until 30 June 2019. In addition, the MOIT would issue an official letter to confirm this temporary suspension.

3. Decree No. 63/2018/ND-CP issued by the Government on Investment in Form of Public-Private Partnerships (“PPP”) (“Decree 63”) replacing the old PPP Decree 15/2015/ND-CP (“Decree 15”)
Issuance date: 4 May 2018
Effective date: 19 June 2018
Decree 15, when introduced in 2015 was highly praised by legal commentators to be well drafted and make the PPP laws and regulations in Vietnam move closer towards bankable projects. However, in implementation process, there have been conflicting legal issues that deter investors from choosing PPP as an investment method, leading to a humble number of PPP projects thus far. Moreover, as PPP laws are only at Decree level, regulatory framework for PPP projects mainly includes the Law on Enterprises, Law on Public Investment, Law on Bidding, etc. most of which regulate public investment instead of private one or investment cooperation between the Government and private investors. The investors are also concerned about the stability of PPP regulations, as they are mainly Decrees. While a PPP project could take years to complete, regulations at Decree level may change and cause investors confusion in implementation of the laws. The state agencies also face certain difficulties in managing these PPP projects.
We provide below key notes on Decree 63:

Capital contribution responsibility
The investor is responsible for contributing and mobilizing capital for the project implementation, in particular, the ratio of the investor’s equity capital in total project investment capital is determined as follows:
– For projects with total investment amount of up to VND1,500 billion, the equity capital that the investor must maintain must be at least 20% of the total investment capital;
– For projects with total investment capital of more than VND1,500 billion:
o For investment portion of up to VND1,500 billion: the equity capital that the investor must maintain must be at least 20% of the total investment capital;
o For investment portion that exceeds VND1,500 billion: the equity capital that the investor must maintain must be at least 10% of the total investment capital.
There is no capital contribution requirement from the Government side.

Project approval authority
Decree 63 makes it clear the following authorities will approve PPP projects:
– The National Assembly decides the investment policy of important national projects;
– The Prime Minister decides the investment policy of the following projects:
o Projects Type A using state budget from 30% or above or below 30% but more than VND300 billion of the total investment capital of the project;
o Projects Type A using BT contracts.
– Ministers of relevant ministries decide investment policy of their own projects not falling within the approval authority of the National Assembly and the Prime Minister.
– Provincial People’s Councils decide investment policy of the following projects:
o Projects Type A not falling under the approval authority of the Prime Minister;
o Projects Type B using public investment budget; and
o Projects Type B using BT contracts.
– The provincial People’s Committee decides the investment policy of projects in their provinces not falling within the approval authority of the National Assembly, the Prime Minister and the provincial People’s Council.

Payment methods in BT projects
Practice shows that investors are very interested in well-located land when implementing BT projects. However, when such land fund gradually becomes exhausted, BT projects seem not to attract investors. Decree 63 has added another method in addition to the exchange of land for infrastructure, so that the investors will have more options in receiving payments. Specifically, the investor may also receive payment in the form of the transfer of right to conduct business, exploit works/ services, etc.

Conversion of existing public projects
Decree 63 contains procedures on converting existing public projects to PPP projects aside from other revised provisions. Those who are engaged in infrastructure projects in Vietnam may want to review how to implement such conversion in practice.

4. Decree No. 82/2018/ND-CP issued by the Government on the management of industrial zones and economic zones (“Decree 82”)
Issuance date: 22 May 2018
Effective date: 10 July 2018
Decree 82 regulates the planning, establishment, operation, policies and state management of industrial zones (IZ) and economic zones (EZ). It governs state management agencies, organizations and individuals related to investment, production and business activities in industrial zones and economic zones.
IZs are geographical areas eligible for investment incentives and enjoy preferential policies applicable to geographical areas with difficult socio-economic conditions under the investment law.
EZs are geographical areas eligible for investment incentives and enjoy preferential policies applicable to geographical areas with special difficult socio-economic conditions under the investment law.

Capital for investment on infrastructure of IZs
Investment projects on infrastructure development in IZs in areas with difficult socio-economic conditions or areas with particularly difficult socio-economic conditions shall be supported with capital from the central budget for the infrastructure investment.
Provincial People’s Committees shall balance local budgets to support investors in developing technical infrastructure systems inside and outside the IZs.

Capital for investment on technical infrastructure and social-economic infrastructure of EZ
EZ’s technical infrastructures, social infrastructure facilities and important environmental protection and treatment works shall be allocated capital from development investment sources of local budgets and support capital sources.
Large-scale infrastructure investment projects which play a key role in the development of EZs, may mobilize capital from bonds issuance. The technical and social infrastructure facilities, service works and public facilities of the economic zone may be financed by official development assistance (ODA) capital, preferential credit capital and supports other techniques.
Investment projects on construction and business of infrastructure in functional zones in EZ may mobilize capital by allowing investors to lease a part or whole of the land area in EZ for their investment or sub-lease business activities.
***
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 the Vietnamese lawyer of Duane Morris Vietnam LLC.
THANK YOU !

Lawyer in Vietnam Dr. Oliver Massmann – Public Private Partnerships – Enhancing Functionality – Making use of the Comprehensive and Progressive Trans-Pacific Partnership and the EU – Vietnam Free Trade Agreement for Better Functionality of the New PPP Decree

Decree No. 15/2015/ND-CP on public-private partnership (“PPP”) (“Decree 15”) when introduced in 2015 was highly praised by legal commentators to be well drafted and make the PPP Laws in Vietnam move closer towards bankable projects.

However, in implementation process, there have been conflicting legal issues that deter investors from choosing PPP as an investment method, leading to a humble number of PPP projects thus far. For example, Decree 15 made a progress in other previous PPP regulations in clearly allowing project contracts to be governed by foreign law, namely contracts involving a foreign party and government agency guarantee contracts. The issue only arises when it comes to real-estate related matters, which are not yet finally decided under the Land Law which law will be the governing law.

Moreover, as PPP laws are only at Decree level, regulatory framework for PPP projects mainly includes the Law on Enterprises, Law on Public Investment, Law on Bidding, etc. most of which regulate public investment instead of private one or investment cooperation between the Government and private investors. The investors are also concerned about the stability of PPP regulations, as they are mainly Decrees. While a PPP project could take years to complete, regulations at Decree level may change and cause investors confusion in implementation of the laws. The state agencies also face certain difficulties in managing these PPP projects. According to a real story shared by an officer at VCCI, after the Government signed a PPP contract with an investor, due to changes in policies, the Government amended its determination of the contract value. As a result, the land price increased by 14 times as much as previously agreed, leading to substantial loss for the investor.

According to the Ministry of Planning and Investment, during 2016-2020, it is expected that there will be 598 registered PPP projects with total investment amount of VND 250,000 billion. Given the shortcomings of Decree 15, it would be hard to achieve these numbers without its replacement by another Decree. In that context, Decree No. 63/2018/ND-CP (“Decree 63”) was issued on 04 May 2018 and takes effect from 19 June 2018 to eliminate bottlenecks in PPP implementation.
Decree 63 – What is new?

Capital contribution responsibility

The investor is responsible for contributing and mobilizing capital for the project implementation, in particular, the ratio of the investor’s capital in the owner’s equity is determined as follows:
– For projects with total investment amount of up to VND1,500 billion, the equity capital that the investor must maintain must be at least 20% of the total investment capital;
– For projects with total investment capital of more than VND1,500 billion:
o For investment portion of up to VND1,500 billion: the equity capital that the investor must maintain must be at least 20% of the total investment capital;
o For investment portion that exceeds VND1,500 billion: the equity capital that the investor must maintain must be at least 10% of the total investment capital.

There is no capital contribution requirement from the Government side.

Project approval authority

Decree 63 makes it clear the following authorities will approve PPP projects:
– The National Assembly decides the investment policy of important national projects;
– The Prime Minister decides the investment policy of the following projects:
o Projects Type A using state budget from 30% or above or below 30% but more than VND300 billion of the total investment capital of the project;
o Projects Type A using BT contracts.
– Ministers of relevant ministries decide investment policy of their own projects not falling within the approval authority of the National Assembly and the Prime Minister.
– Provincial People’s Councils decide investment policy of the following projects:
o Projects Type A not falling under the approval authority of the Prime Minister;
o Projects Type B using public investment budget; and
o Projects Type B using BT contracts.
– The provincial People’s Committee decides the investment policy of projects in their provinces not falling within the approval authority of the National Assembly, the Prime Minister and the provincial People’s Council.

Payment methods in BT projects

Practice shows that investors are very interested in well-located land when implementing BT projects. However, when such land fund gradually becomes exhausted, BT projects seem not to attract investors. Decree 63 has added another method in addition to the exchange of land for infrastructure, so that the investors will have more options in receiving payments. Specifically, the investor may also receive payment in the form of the transfer of right to conduct business, exploit works/ services, etc.

How to take advantage of the CPTPP and the EU-Vietnam FTA (EVFTA) in PPP projects to enhance the functionality of PPP projects in Vietnam

Covered government entities and agencies

According to Decree 63, tenders for the selection of PPP investors will follow the Law on Public Procurement. While the Vietnam’s Law on Public Procurement still shows some shortcomings, Vietnam will be bound by its commitments in the Government Procurement chapter in the CPTPP and the EVFTA, including the procedures to conduct a tender and in specific circumstances that the Government must conduct a public tender. The investors now have the opportunity to participate in procurement by Vietnam’s government entities and challenge the Government if it does not grant the investors the opportunity to do so in qualified circumstances.
The CPTPP and the EVFTA both make a list of government entities and agencies whose procurement of particular̉ goods and services at a particular amount must be subject to public tender. While the CPTPP only allows expansion of the list within 5 years upon the entry into force of the agreement, the EVFTA allows a longer period (i.e., 15 years).
Covered procurement

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

Criteria

How to appeal Government tender decision?

The CPTPP and the EVFTA make it possible that foreign investors could sue Vietnam Government for its tender decisions according to the dispute settlement by arbitration rules. The violating party must take all necessary measures to promptly comply with the arbitral decision. In case of non-compliance, as in the WTO, the CPTPP and the EVFTA allow temporary remedies (compensation) at the request of the complaining party.

Enforcement of arbitral awards

The final arbitral award is binding and enforceable without any question from the local courts regarding its validity. This is an advantage for investors considering the fact that the percentage of annulled foreign arbitral awards in Vietnam remains relatively high for different reasons.

Conclusion

It is crucial that foreign investors take advantage of the requirements under the CPTPP and the EVFTA to enhance functionality of their PPP projects in Vietnam. Under these agreements, specific Vietnam Government entities and agencies when procuring goods/ services above certain thresholds must conduct public tender. In case these entities make wrongful tender decisions, foreign investors could take recourse to arbitration proceedings and have the arbitral awards fully enforced in Vietnam.

***
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 !

Lawyer in Vietnam Dr. Oliver Massmann – Public Private Partnerships – Enhancing Functionality – Making use of the Comprehensive and Progressive Trans-Pacific Partnership and the EU – Vietnam Free Trade Agreement for Better Functionality of the New PPP Decree

Decree No. 15/2015/ND-CP on public-private partnership (“PPP”) (“Decree 15”) when introduced in 2015 was highly praised by legal commentators to be well drafted and make the PPP Laws in Vietnam move closer towards bankable projects.
However, in implementation process, there have been conflicting legal issues that deter investors from choosing PPP as an investment method, leading to a humble number of PPP projects thus far. For example, Decree 15 made a progress in other previous PPP regulations in clearly allowing project contracts to be governed by foreign law, namely contracts involving a foreign party and government agency guarantee contracts. The issue only arises when it comes to real-estate related matters, which are not yet finally decided under the Land Law which law will be the governing law.
Moreover, as PPP laws are only at Decree level, regulatory framework for PPP projects mainly includes the Law on Enterprises, Law on Public Investment, Law on Bidding, etc. most of which regulate public investment instead of private one or investment cooperation between the Government and private investors. The investors are also concerned about the stability of PPP regulations, as they are mainly Decrees. While a PPP project could take years to complete, regulations at Decree level may change and cause investors confusion in implementation of the laws. The state agencies also face certain difficulties in managing these PPP projects. According to a real story shared by an officer at VCCI, after the Government signed a PPP contract with an investor, due to changes in policies, the Government amended its determination of the contract value. As a result, the land price increased by 14 times as much as previously agreed, leading to substantial loss for the investor.
According to the Ministry of Planning and Investment, during 2016-2020, it is expected that there will be 598 registered PPP projects with total investment amount of VND 250,000 billion. Given the shortcomings of Decree 15, it would be hard to achieve these numbers without its replacement by another Decree. In that context, Decree No. 63/2018/ND-CP (“Decree 63”) was issued on 04 May 2018 and takes effect from 19 June 2018 to eliminate bottlenecks in PPP implementation.
Decree 63 – What is new?
Capital contribution responsibility
The investor is responsible for contributing and mobilizing capital for the project implementation, in particular, the ratio of the investor’s capital in the owner’s equity is determined as follows:
– For projects with total investment amount of up to VND1,500 billion, the equity capital that the investor must maintain must be at least 20% of the total investment capital;
– For projects with total investment capital of more than VND1,500 billion:
o For investment portion of up to VND1,500 billion: the equity capital that the investor must maintain must be at least 20% of the total investment capital;
o For investment portion that exceeds VND1,500 billion: the equity capital that the investor must maintain must be at least 10% of the total investment capital.
There is no capital contribution requirement from the Government side.
Project approval authority
Decree 63 makes it clear the following authorities will approve PPP projects:
– The National Assembly decides the investment policy of important national projects;
– The Prime Minister decides the investment policy of the following projects:
o Projects Type A using state budget from 30% or above or below 30% but more than VND300 billion of the total investment capital of the project;
o Projects Type A using BT contracts.
– Ministers of relevant ministries decide investment policy of their own projects not falling within the approval authority of the National Assembly and the Prime Minister.
– Provincial People’s Councils decide investment policy of the following projects:
o Projects Type A not falling under the approval authority of the Prime Minister;
o Projects Type B using public investment budget; and
o Projects Type B using BT contracts.
– The provincial People’s Committee decides the investment policy of projects in their provinces not falling within the approval authority of the National Assembly, the Prime Minister and the provincial People’s Council.
Payment methods in BT projects
Practice shows that investors are very interested in well-located land when implementing BT projects. However, when such land fund gradually becomes exhausted, BT projects seem not to attract investors. Decree 63 has added another method in addition to the exchange of land for infrastructure, so that the investors will have more options in receiving payments. Specifically, the investor may also receive payment in the form of the transfer of right to conduct business, exploit works/ services, etc.
How to take advantage of the CPTPP and the EU-Vietnam FTA (EVFTA) in PPP projects to enhance the functionality of PPP projects in Vietnam
Covered government entities and agencies
According to Decree 63, tenders for the selection of PPP investors will follow the Law on Public Procurement. While the Vietnam’s Law on Public Procurement still shows some shortcomings, Vietnam will be bound by its commitments in the Government Procurement chapter in the CPTPP and the EVFTA, including the procedures to conduct a tender and in specific circumstances that the Government must conduct a public tender. The investors now have the opportunity to participate in procurement by Vietnam’s government entities and challenge the Government if it does not grant the investors the opportunity to do so in qualified circumstances.
The CPTPP and the EVFTA both make a list of government entities and agencies whose procurement of particular̉ goods and services at a particular amount must be subject to public tender. While the CPTPP only allows expansion of the list within 5 years upon the entry into force of the agreement, the EVFTA allows a longer period (i.e., 15 years).
Covered procurement
Government procurement of goods or services or any combination thereof that satisfy the following criteria falls within the scope of the EVFTA and CPTPP Government Procurement rules:
Criteria EVFTA CPTPP
Monetary values that determine whether procurement by central government is covered under an agreement 130,000 Special Drawing Rights (SDRs) (US$191,000) from 15 years since the entry into force of the agreement

Initial transitional threshold: 1.5 million SDRs 130,000 Special Drawing Rights (SDRs) (US$191,000) from 25 years since the entry into force of the agreement

Initial transitional threshold: 2 million SDRs
Procurement of construction services by central government entities Initial threshold: 65.2 million SDRs

After 15 years, 8.5 million SDRs Initial threshold: 40 million SDRs

After 15 years, 5 million SDRs
Entities covered 22 central government bodies (added the Ministry of Public Security)

42 other entities: added two state-owned enterprises (Vietnam Electricity and Vietnam Railways) and two universities (Vietnam National University – Hanoi and Vietnam National University – Ho Chi Minh City)

Sub-central government coverage: Adds 2 cities: Hanoi and Ho Chi Minh – expansion of the list within 15 years since the entry into force of the agreement 21 central government bodies

38 other entities

No sub-central government coverage – expansion of the list within 5 years since the entry into force of the agreement
Exclusion of preferences for SMEs Broad exclusion applies only to procurement of goods and services whose value is estimated at 260,000 SDRs or less and may not be applied to SMEs with more than 500 permanent full-time employees.
Application of offsets Based on value of a contract Based on the total value of covered procurement
How to appeal Government tender decision?
The CPTPP and the EVFTA make it possible that foreign investors could sue Vietnam Government for its tender decisions according to the dispute settlement by arbitration rules. The violating party must take all necessary measures to promptly comply with the arbitral decision. In case of non-compliance, as in the WTO, the CPTPP and the EVFTA allow temporary remedies (compensation) at the request of the complaining party.
Enforcement of arbitral awards
The final arbitral award is binding and enforceable without any question from the local courts regarding its validity. This is an advantage for investors considering the fact that the percentage of annulled foreign arbitral awards in Vietnam remains relatively high for different reasons.
Conclusion
It is crucial that foreign investors take advantage of the requirements under the CPTPP and the EVFTA to enhance functionality of their PPP projects in Vietnam. Under these agreements, specific Vietnam Government entities and agencies when procuring goods/ services above certain thresholds must conduct public tender. In case these entities make wrongful tender decisions, foreign investors could take recourse to arbitration proceedings and have the arbitral awards fully enforced in Vietnam.
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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. Oliver Massmann is the General Director of Duane Morris Vietnam LLC.
THANK YOU !

VIETNAM- MARRIAGE AND PROPERTY/REAL ESTATE

Foreigners are better off if they do NOT marry Vietnamese nationals – what you must know:
By: Dr. Oliver Massmann and Pham Ngoc Ha

In Vietnam, there is no private ownership of land. Land is owned by the people and administered exclusively by the State. The State grants land use rights to land users being domestic organizations, domestic family households/individuals, communities of Vietnamese citizens, religious establishments, foreign organizations with diplomatic functions, Vietnamese residing overseas, foreign invested enterprises. Land users are entitled to obtain the title certificate for land use rights, so called Certificate of Land Use Rights and Ownership of Houses and Other Assets Attached to Land (LURC) or Sổ Đỏ in Vietnamese. Foreign individuals are not allowed to have land use rights, i.e., no LURC.

Whether a foreign individual married to a Vietnamese citizen can own land use rights
Given such strict prohibition in the Land Law, foreign individuals who want to have their own land plots in Vietnam, especially in Da Nang or Nha Trang with beautiful beaches, would think that marriage to Vietnamese could solve the problems.

It is a common understanding that every married couple, regardless of any nationalities, would like to make their investments, particularly in real estates, in such a manner that both spouses can be legally recognized as co-owners of the property. Vietnam Family Law has the same approach. It is provided in the law that: Common property of husband and wife includes property created by a spouse, incomes generated from labor, production and business activities, yields and profits arising from separate property and other lawful incomes in the marriage period. The land use rights obtained by a spouse after marriage shall be common property of husband and wife, unless they are separately inherited by, or given to a spouse or are obtained through transactions made with separate property. For a common property which is required by law to be registered for ownership or use, both spouses shall be named in the title certificate, unless otherwise agreed by the couple (Articles 33 and 34 of the Family Law).

One could figure that if he/she marries a Vietnamese, they could together purchase land and hence, jointly own the land. This is well backed-up by the above Family Law provision. However, there’s no such ideal scenario in Vietnam.

Family Law vs. Land Law
When the married couple finally found a perfect land plot, they would likely need to enter into a land use right transfer agreement/sale and purchase agreement and such agreement would need to be notarized to be complied with the law and ultimately for the issuance of an LURC. Here comes the issue: the Land Law will prevail the Family Law.

Even though it is provided that the land use rights obtained after marriage will be common property, it is not right in the case of marriage between a foreigner and a Vietnamese. No matter how much you contribute to buy the land, even you agree not to be a party to the transfer agreement, not to be named in the LURC, you risk losing all your money invested to buy the land.

How so?
The Land Registration Office would explain that Land Law applies in this case. Since foreign individuals are not allowed to have land use rights in Vietnam, the land purchased by the married couple could only be recognized as property of the Vietnamese spouse. In order to name only the Vietnamese spouse on the LURC, it must be the separate property.

“Separate property” in Vietnam is, among other things, property formed by the husband or wife’s separate funds. The Land Registration Office will then require a so called “Acknowledgement of Separate Property” (i.e., a Waiver of Rights) from the non-Vietnamese spouse, which generally says that the non-Vietnamese spouse acknowledges that this is his/her Vietnamese spouse’s own property which was obtained by his/her Vietnamese spouse separate funds and that the non-Vietnamese spouse will waive all rights whatsoever to such property. If you don’t agree to this Waiver, you and your Vietnamese spouse cannot get the LURC. It’s the worst case if you have paid all or most of the purchase price to the land transferor already! Take it or leave it. If you don’t agree, you will lose all; if you agree, you will lose your money but at least your Vietnamese spouse still can get the LURC. In any case, your money invested in the land is totally lost because you don’t get any consideration, legally!

Lessons Learnt
Foreign individuals should not marry Vietnamese with the main purpose to have land use rights. Do NOT marry to secure real estate – It works the other way: it’s better if you are NOT married to protect your money and rights to real estate in Vietnam. Or go the simple way: buy a condominium because foreigners can own condominiums in Vietnam on their name if they have a tourist visa. That is the golden simple way!

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!