lawyer – Page 17 – Duane Morris Vietnam

May 7, 2015May 7, 2015 by Dr. Oliver Massmann

Lawyer in Vietnam Oliver Massmann Biomass Power Plant Development – SMALL SCALE BIOMASS POWER PLANTS IN VIETNAM – HOW TO STRUCTURE IT RIGHT?

Vietnam’s economic dynamism over the past years has given rise to a swift increase inenergy demand. Electricity demand in the country has been growing in the double digits annually.Vietnam has experienced rapid economic growth since it made a shift from a highly centralised planned economy to a socialist-oriented market economy in the mid-80s. This also resulted in unprecedented growth in electricity demand, which has not been observed in any other regions or developing countries.Electricity demand in Vietnam is forecasted to increase by up to 14.2 pct. annually for the 2011-2015 period and 11.4 pct. for the 2016-2020 period, and the electricity demand is expected to increase 7 times to 800 billion Kwh in 2030.
In this context, the Vietnamese government identified the necessity that the available resources of renewable energies have to be exploited and expanded to meet such a big electricity demand. While hydroelectric energy, whose resource is abundant in Vietnam, shows certain potential risks, biomass energy could be a choice for development in Vietnam. This derives from Vietnam’s advantage of widespread agriculture. The capacity for sustainable power production from biomass amounts to just 150 million tons per annum, 700 – 780 MW for electricity generation alone can be reached.
Government’s policy with regards to renewable energies in general and biomass energy in particular
Vietnamese Government recognizes the importance of renewable energy in power development and reflects its objectives in the Master plan VII on energy development in Vietnam.The renewable energy is increasingly accounting for power sources (4.5% in 2020 and 6.0% in 2030 of the total power supply.The Master plan VII sets the renewable energy target rate at 5.6 pct. of total primary energy consumption by 2020 and 9.4 pct. by 2030. The Government’s target is to increasethe biomass power to 500 MW (0.6 pct. of electricity production) by 2020 and 2,000 MW (1.1 pct.) by 2030.
Further, on 24 March 2014, the Prime Minister issued Decision No. 24/2014/QD-TTg to provide mechanism to support biomass power plants. In particular, this Decision offers the following incentives to off-grid biomass power plants:
• Investment capital:
o The investor can mobilize capital from organizations and individuals in and out of the country for investing in implementation of biomass power projects
o Biomass power projects are entitled to incentives in terms of investment credits in accordance with prevailing legal provisions on investment credit and export credit of the State.
• Import tax: Biomass power projects are exempt from import tax for goods imported to create fixed assets for the projects; imported goods are materials, supplies and semi-products which have not been locally produced and imported for serving production of projects in accordance with prevailing legal provisions on export tax and import tax.
• Corporate income tax: The exemption, reduction of corporate income tax for biomass power projects will be conducted inthe same way as for projects which are subject to investment incentives under laws on taxation.
• Land use: Biomass power projects and power line and substation works for connecting to the national power grid are entitled to exemption or reduction of land use or land rent fees.
For on-grid biomass power projects, Electricity of Vietnam (“EVN”) is to buy all of the plant’s biomass energy output at the current price of 1,220 VND/kWh (excluding VAT, about 5.8 UScent). This price will be adjusted according to the fluctuation of the VND/USD exchange rate.
Market access for foreign investor
Currently, there is no foreign ownership restriction in energy sector in Vietnam. The foreign investor may choose among permitted investment forms: 100% foreign invested company, joint venture or public private partnership (“PPP”) in the form of BOT contract.
Starting up a biomass power plant
In order to construct a biomass power plant, foreign investors first need to apply for an investment certificate. The application process is quite complicated and involves many state agencies, with certain unpredictable issues occurring. However, as the new Investment Law and Enterprise Law, which mainly regulate investment environment in Vietnam, takes effect from 01 July 2015, it is expected that it will be more time saving and less complicated for foreign investors in the licensing process.
Either before or after the investor is on board (but in each case before the construction), it is necessary to establish the project enterprise and to secure investment certificates issued by competent authorities. Then, the project enterprise has to conclude negotiations with regard to a wide range of important project contracts including the land lease contract and the power purchase agreement (PPA).
Under the PPA, EVN (in case of network-dependent network) – or in rare cases also other buyers – undertake to purchase energy from a project enterprise for a definite period and at a specified rate. The PPA is probably the most important agreement to be negotiated because it determines the future income from the project. It is crucial that, according to the PPA, the project enterprise cannot be burdened with a penalty if the power supply is affected by small amounts of biomass. In view of the fact that at the moment there is only one buyer (EVN) for network-dependent power projects, the negotiations may be sometimes unilateral. Moreover, the electricity producers have to consider that the consumers (according to the Electricity Law) have a statutorily regulated right to renegotiate the purchase price in the medium term. They have to take it into account in their project planning.
The land or real estate lease contract in Vietnam should be kept rather simple, though the aspects of land sale approval and compensatory payments may be fraught with difficulties. Usually, the duration of such contracts should correspond at least to the loan repayment plan and, in addition, a considerable period for profit generation after the repayment of the loan should be agreed (as a rule 25-30 years). Furthermore, it is important to make sure that the land use rights of the project enterprise can be provided for the lender as security and are transferable.
Small scale biomass power project in Vietnam – How to structure it right?
Considering the monopoly role of EVN as well as tough negotiation of the PPA, investors could still get out of this trouble. According to Article 1.2 of Circular No. 56/2014/TT-BCT promulgating methods to determine electricity generation price and examination steps of the PPA, the important requirement to negotiate with EVN is whether it is an on-grid or off-grid project. If it is an on-grid project with capacity of more than 30 MW or under 30 MW but voluntarily participating in the power market, the investor must negotiate with EVN. This indicates that if the project is off-grid, there will be no requirement to negotiate with EVN.
Moreover, in order to operate small scale biomass power project, the investor needs to obtain a power operation permit issued by the local People’s Committee or the local Department of Industry and Trade as authorized by the local People’s Committee.To get such permit, the operator has to negotiate (or sign in principle) a PPA with a buyer. In case the project is off-grid and renewable energy project (biomass), the operator can negotiate with a local distributor/buyer assigned by the local People’s Committee.

Please do not hesitate to contact 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.

INTERESTED IN DOING BUSINESS IN VIETNAM? VISIT: www.vietnamlaws.xyz

THANK YOU VERY MUCH!

April 27, 2015April 27, 2015 by Dr. Oliver Massmann

Why Is It Best To Start Preparing For Transactions Now In Vietnam?

Vietnam is currently at the final stage of negotiating the Trans-Pacific Partnership (“TPP”) and the EU- Vietnam Free Trade Agreement (“EVFTA”). Meanwhile, the ASEAN Economic Community, which Vietnam became a full member in 1995, is to be established by the end of 2015. With such deep integration into the multilateral and regional economy, Vietnam is expected to be an attractive investment environment for investors and witness a significant growth in the upcoming years. Samsung Electronics Company has decided to choose Vietnam as the Number 1 country to put their world largest mobile and tablet production and invested more than 6 Billion USD after a researching worldwide. Also major Japanese companies are convinced Vietnam is a top investment destination and become the largest investors in Vietnam. However, whether foreign investors should wait until the TPP and the EVFTA are concluded and the AEC has been established to enjoy their benefits then is a big question. The following section provides an overview of these free trade agreements and the AEC to help investors understand what is awaiting them ahead and choose the right time for their investment.

TPP

The TPP is one of the largest trade and investment agreements ever to be negotiated, involving some of the largest nations in the world. Countries participating in the negotiations include those throughout the Asia- Pacific region, namely Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States and Vietnam. The TPP is touted to be the 21st century trade agreement, set a template for regional and global trade and investment and incorporate next-generation issues.

TPP Market Snapshot
• GDP: US$28,136.0 billion (2012)
• GDP per capita: US$35,488 (2012)
• Population: 792.8 million (2012)
• TPP % of world GDP: 39.0% (2012)
• TPP % of world population: 11.3% (2012)
• TPP % of world trade: 25.8% (2012)

The TPP is being negotiated across thirty chapters with deep focus on comprehensive market access, a fully regional agreement, cross-cutting issues (regulatory coherence, competiveness and business facilitation, small and medium sized enterprises, and development), new trade challenges (particularly rules on state owned enterprises and government procurement); as well as, finally, the notion of a living agreement.

The TPP would expand market access in goods and services among its signatories. The market access issues include liberalization of trade barriers protecting dairy, sugar, and rice; tariffs and origin rules affecting textiles, clothing, and footwear; and services trade reforms, especially financial services, insurance, and labor services. Vietnam would be the largest beneficiary of this trade pact, resulting from its strong trade ties with the United States, high level of protection against its main exports (i.e., apparel and footwear), and its highly competitive positions in industries such as manufacturing where China is gradually losing its competitive advantage. Statistics shows that by participating in the TPP, Vietnam’s GDP would add an additional increase of 13.6% to the baseline scenario.

Higher income will help Vietnam to invest more and grow more

Vietnam is among the largest income gains in TPP

Recently, President Barack Obama has been grated fast-track authority to negotiate the TPP with other 11 nations. This shows a step closer to its conclusion, hopefully by the end of 2015.

AEC
The AEC originates from the ASEAN Vision 2020, which was adopted in 1997 on the 30th anniversary of the Association of Southeast Asian Nations, made up of Brunei Darussalam, Myanmar, Cambodia, Indonesia, Laos, Malaysia, Philippines, Singapore, Thailand and Vietnam (ASEAN). With a population of more than 600 million and a nominal GDP of about $2.31 trillion, ASEAN is a strong economic community in Asia and also a driver of global growth.

The AEC encompass the following characteristics: (i) a single market and production base, (ii) a highly competitive economic region, (iii) a region of equitable economic development, and (iv) a region fully integrated into the global economy.
The AEC is expected to be an area where goods can circulate freely and in which custom duties on goods will be gradually reduced to 0%. It will establish ASEAN as a single market and production base, making ASEAN more dynamic and competitive with new mechanisms and measures to strengthen the implementation of its existing economic initiatives; accelerating regional integration in the prioritized sectors; facilitating movement of business persons, skilled labor and talents; and strengthening the institutional mechanisms of ASEAN.
The free flow of investment will also offer enhanced investment protection to all ASEAN investors and their investments in other ASEAN member countries, including the settlement mechanism of an investor state dispute based on a non-discrimination principle when investing in other ASEAN countries. Those principles play a very important role in providing investor confidence when making cross-border investment.

Once the AEC is completed, it will be a unified market, a common manufacturing area seeking for more dynamic and competitive development and to create new opportunities for tariff reductions as well as other trade incentives.

AEC Market Snapshot
• GDP: US$2311.3 billion (2012)
• GDP per capita: US$3748.4 (2012)
• Population: 620 million, 60% under the age of 35
• AEC % of world GDP: ~3.3%
• AEC % of world population: 9%
• AEC’s merchandise exports: US$1.2 trillion – ~54% of total ASEAN GDP and 7% of global exports
• If ASEAN were one economy, it would be the 7th largest in the world – 4th largest by 2050 if growth trends continue

EVFTA

It is estimated that Vietnam’s Gross Domestic Products (GDP) could rise by over 15% and that the value of its exports to the European Union could increase by almost 35% as a result of its entry into force.

In 2013, the EU was Vietnam’s second biggest trade partner with a total value of trade in goods of EUR 24.2 billion. In the same the EU was also Vietnam’s biggest export market with EUR 21 billion, representing 19% of Vietnam’s total export. Vietnam’s export to EU increased by 28% from 2012 to 2013. In addition, the EU is among the biggest investors in Vietnam, with 1,810 FDI projects in 2013. The EU committed to continuing to support with the foreseen assistance amount of EUR 400 million in the coming six years. EU exports to Vietnam are dominated by high-tech products including electrical machinery and equipment, aircraft, vehicles, and pharmaceutical products. Vietnam’s key export items to the EU include telephone sets, electronic products, footwear, textiles and clothing, coffee, rice, aqua products, and furniture.

The two parties have already been cooperating on various subject matters since the conclusion of the EU-Vietnam Partnership and Cooperation Agreement in June 2012. This cooperation will be brought to the next level by the conclusion of the FTA, which will tackle issues such as tariff and non-tariff barriers, regulatory issues, services, public procurement, Intellectual Property Rights, sustainable development, etc. 2015 will mark the 25th anniversary of EU-Vietnam cooperation, and it is expected to be the year the EU-VN FTA is concluded.

Conclusion: Why investment in Vietnam now – not after the trade pacts are signed and sealed?

 Vietnam ties in first place with Singapore, thus it provides highest possible protection for investment

Country Limitation of market access* Country Limitation of market access*
Malaysia medium Myanmar high
Indonesia medium Cambodia medium
Philippines medium Laos medium
Singapore low India high
Thailand medium China medium
Brunei high Vietnam low

*Typical restrictions: number of opened sectors, JV requirement, limits on foreign-owned shares, permission requirement

 Vietnam has the fastest growing middle class with a very good demographic situation: about 90 Million people of which about 50 percent are under 30 years old.

 Expectations of Vietnam parties might get unreasonable, the same as after Vietnam acceded to the WTO in 2007 and no projects could be done.

 Market opening in certain sectors, for example, media, and there could be more competing companies from the AEC with better market access to Vietnam. Thus, it is vital that investors start working on their projects now to position themselves as early as possible before the coming into effect of the trade pacts and the AEC.

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

INTERESTED IN DOING BUSINESS IN VIETNAM? VISIT: www.vietnamlaws.xyz

THANK YOU VERY MUCH!

April 23, 2015 by Dr. Oliver Massmann

Breaking News – Vietnam – Broadcasting Market – First time Investment of foreign investors possible!

For your information, on 7 January 2015, the Prime Minister of Vietnam issued Decision 01 amending the “master plan on radio and television transmission and broadcasting through 2020” (the “Master Plan”). Decision 01 officially came into effect as of 15 March 2015.

The biggest change that Decision 01 makes is involvement of enterprises of all economic sectors, arguably including foreign invested enterprises, in the transmission and broadcasting market of Vietnam. Before Decision 01, only State owned enterprises or enterprises where State has majority ownership were given access to such markets.

As a matter of fact, VTV and its affiliates/subsidiaries hold a dominant role in the TV market. The “group” is responsible for both content provision and transmission/broadcasting. When a number of software/telecommunication giants such as (Viettel, the biggest telecomunication or FPT, the largest telecommunications and software companies respectively) start their TV business by taking advantages of their available infrastructure, VTV has sought to isolate them by offering content to its affiliates and subsidiaries first. This results in a modest expansion of newcomers like FPT and Viettel for the last two years.

The cause behind such change is, on one hand, the Government’s plan to separate the pay TV transmission/broadcasting and content provision which fall inside the sphere of the Law on Telecommunications and the Law on Media of Vietnam respectively. On the other hand, the Government wishes to form major transmission/broadcasting companies of large scale which are able to cover services nationwide.

We hope the above is useful for your consideration and will keep you updated of latest developments in this sector from time to time.

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

INTERESTED IN DOING BUSINESS IN VIETNAM? VISIT: www.vietnamlaws.xyz

THANK YOU VERY MUCH!

March 30, 2015 by Dr. Oliver Massmann

Intellectual Property Rights Enforcement in Vietnam

Vietnam is currently negotiating a Free Trade Agreement with the European Union (EVFTA) as well as the Trans-Pacific Partnership with the United States (TPP). In addition, the ASEAN Economic Community will be established by the end of 2015. Thus, Vietnam will soon expect a significant increase in foreign investment, most of which will depend on the effectiveness of intellectual property protection and enforcement in Vietnam. In this context, Vietnamese enforcement agencies and the courts have been actively issuing decisions with harsh sanctions on the infringers serving as good precedents and clear warnings on future violations.

Administrative relief or civil proceeding?

However, it should be noted that presently in Vietnam, rights holders mainly seek administrative relief and border control measures before competent authorities such as the Ministry of Science and Technology Inspectorate or the Vietnam Intellectual Property Research Institute rather than pursuing lawsuits before civil courts. They view that administrative route would take less time and money compared with civil actions, taking into account the unclear legal basis of IP disputes and lack of experience of judges. The non-binding opinions of these administrative agencies could then be included in the customs record, which effectively prevent the physical entry of infringing goods at the border. However, administrative decisions only result in the fine and destruction of infringing goods without compensating for the rights holders or even payment of legal fees. As such, there has been a recent increase in litigation in courts in patent area for the past few years. With the agriculture accounts for the majority of Vietnam’s economy (80%), it is not a big surprise that the first majors patent suits took place in this area. In these cases, the courts have issued decisions in favor of the foreign agroscience companies, which would set precedents for future judgments.

Preliminary injunctive relief and permanent injunction

In civil proceedings, especially in IP area, it is sometimes importance to seek for injunctive relief. Preliminary injunctive relief has its legal basis in Articles 99-126 of the 2004 Civil Procedures Code as amended in 2011 and Articles 206-210 of the IP Law promulgated in 2005. Rights holders can request a preliminary injunctive relief if they can prove either of the following: (i) there is a threat of irreparable damage; or (ii) there is a threat of dispersal or destruction of suspected infringing goods and related evidence if they are not protected in time. The aim of injunctive relief measure is the protection of the rights holders pending the final decision of the courts. Typical preliminary injunctions are goods seizure, sealing/ freezing, prohibition on status/ ownership change/ transfer, and other measures specified in the Civil Procedure Code. However, for the courts to render an injunctive relief, rights holders are requested to pay a deposit of at least VND20 million as a security. The courts then still take great caution in applying such measure and there is no clear guidance for the court to return the deposit to the rights holders when they have concluded against the infringers. Thus, there lies a risk for rights holders when asking for preliminary injunctive relief.

While the use of preliminary injunctive relief has a clear legal basis in Vietnamese law, permanent injunction is not that case. What is normally stipulated is a cessation of the infringement but not the court order to never commit the infringement again in the future. However, it seems that the Ho Chi Minh City Court for the first time in a case initiated by a European agrochemical company against a pesticide producer in Ho Chi Minh City has ordered the infringer not to infringe the patent until the expiry date of the patent in question. This is a precedent-setting decision for future courts decisions in patent area.

Recent typical IP court litigations in Vietnam:
 Dispute between a major French cement company and a defendant in Vietnam on domain name
 Dispute between US-based Videojet Technologies Inc., and Nam Trinh JSC on trademark infringement
 Dispute between a major European agrochemical company and a pesticide producer in Ho Chi Minh City on patent infringement.

Conclusion

The developments in the IP rights enforcement system shown in the choice of civil proceedings as well as the favorable binding decisions of the courts of foreign parties are good signals for better IP environment in Vietnam. Vietnam is taking steps to assure foreign investors of effective IP rights protection when doing business in Vietnam, especially when the EVFTA and the TPP are concluded by this year.

***
Please do not hesitate to contact Mr. Oliver Massmann under omassmann@duanemorris.com if you have any questions on the above. Oliver Massmann is the General Director of Duane Morris Vietnam LLC.

INTERESTED IN DOING BUSINESS IN VIETNAM? VISIT: www.vietnamlaws.xyz

THANK YOU VERY MUCH!

March 6, 2015March 8, 2015 by Dr. Oliver Massmann

Lawyer in Vietnam Oliver Massmann Online Gaming and Gambling in Vietnam

Technically, “online gaming” [business] in Vietnam may cover: (i) “online game”, a game played over some form of computer network;[1] or (ii) “online gambling”, a term for gambling using the Internet.

In the latter case, Vietnamese law does not treat online gambling as a full-fledged, independent and separate branch of gambling industry.[2] Rather it deals with major branches of gambling activities which are (i) lottery; (ii) casino/prized electronic machines; (iii) horse and greyhound race and (iv) sports betting,[3] etc. and sets forth specific conditions and restrictions on the same. Except for online lottery, other forms of gambling using Internet-based have been so far strictly prohibited or at least not officially permitted.

It also bears noting that market access to such gambling branches varies by investment forms, legal entity of the investors and capacity thereof, etc. For example, while lottery business is solely reserved for State owned enterprises, foreign investment in casinos is permissible. By the same token, depending on characteristics of specific gambling business, the scope of activities can be either limited to a specific approved location in a major city of Vietnam (e.g. – dog/greyhound race or traditional lottery) or nationwide (online lottery).

As gambling is a sensitive activity which requires a high level of surveillance, a gambling investor must essentially follow a general principle of “doing exactly what your license states”. To make it clearer, if an investor is permitted to open a casino at a specific resort only, it will not have the natural right to offer casino products through the Internet. Similarly, besides 63 State-owned lottery enterprises in each province, a lottery corporation was established in 2013 (i.e. – Vietlott) to offer online lottery lotto games, digits games and fast drawing games nationwide. However, it can be broadly argued, though not absolutely guaranteed, that if an investor is licensed to carry out a specific [and conventional] “gambling” activities, it may have a good position to apply for the same business but operated on an Internet-based platform.[4]

Generally, an investment project in gambling must be first granted with an investment certificate issued by the people’s committee at provincial level. For such purposes, the investors must obtain in-principal of the Prime Minister on an ad-hoc basis. In fact, the Ministry of Finance (the “MOF”) is expected to play a crucial role in deciding whether a Project will be accepted. Subsequently, the project’s owner may have to obtain a special business license from the MOF upon its fulfilment of post-establishment conditions (i.e. – completion of construction works, installment of equipment and facilities, etc.).

In principle, gambling, other than lottery and betting at licensed sport center(s), is strictly prohibited in Vietnam and individuals involved in gambling activities may face criminal charge. Vietnamese law on gambling business is therefore still in its infantry stage though initial ideas date back to early 2000s. Gambling licenses have granted to selected investors mainly on a piloting scheme and with strict requirements (i.e. – not letting Vietnamese nationals in). Draft laws on sport betting, casinos, which serve as key guidance on gambling business, have been discussed from time to time but not yet been issued.

In late 2013, two major draft decrees on gambling activities (i.e. – betting[5] and casinos), content of which is not made public, were submitted by the Ministry of Finance, as the draftsperson, to the National Assembly of Vietnam for the latter opinions. It appears however that little progress has been since made due to conflicting opinions among the Government and divisions belonging to the National Assembly on these sensitive issues.[6]

To date, Vietnam has 01 national online lottery company (i.e. – Vietlott) and 63 [traditional] lottery companies operating at provincial level. 07 casino licenses have been granted to investors as a part of their resort complexes but only 6 of which have commenced their operations. A number of 5-star hotels in major cities of Vietnam are permitted to run prized electronic machines. The only house race ground which was open to public was closed in 2013. Another greyhound race ground is still active in Ba Ria – Vung Tau Province, Vietnam.

In light of the above, a foreign investor wishing to invest in this sector may consider different channels to access Vietnam online gaming market. For example, it may cooperate with licensed vendors in Vietnam as a supplier of equipment, machinery or materials or provider of technical assistance services relating to the same.[7] Or else, it may actively approach the MOF to initiate a proposed plan.

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

INTERESTED IN DOING BUSINESS IN VIETNAM? VISIT: www.vietnamlaws.xyz

THANK YOU VERY MUCH!

February 24, 2015March 8, 2015 by Dr. Oliver Massmann

Lawyer in Vietnam Oliver Massmann Transformation of the Financial Market Management

Introduction

Vietnam is one of the most dynamic markets of Asia. Since the financial institutions and authorities are a part of the general economic system, they are not only strongly involved in the changes, but also have a more solid financial basis for the competitiveness of the country. The financial sector in Vietnam is subject to substantial structural changes. It occurs at a huge speed. These changes entail great challenges for the financial managers – for instance due to the pressure on the currency with regard to the exchange rate, the inflation and the daily stock exchange fluctuations between huge profits and losses.

At the same time, the foreign capital market is still underdeveloped. Consequently, it requires the attention of authorities and managers in order to foster the system and to deal with new developments. The most important challenges consist in the transformation of the state-owned banking sector and the development of a subnational foreign capital system.

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