{"id":195,"date":"2015-07-20T13:50:41","date_gmt":"2015-07-20T06:50:41","guid":{"rendered":"http:\/\/blogs.duanemorris.com\/vietnam\/?p=195"},"modified":"2015-07-20T14:15:54","modified_gmt":"2015-07-20T07:15:54","slug":"vietnam-current-investment-and-trade-issues-and-solutions","status":"publish","type":"post","link":"https:\/\/blogs.duanemorris.com\/vietnam\/2015\/07\/20\/vietnam-current-investment-and-trade-issues-and-solutions\/","title":{"rendered":"Vietnam Current Investment and Trade Issues and Solutions"},"content":{"rendered":"

The Government of Vietnam has made certain success in stabilizing the economy to reach a high growth rate projection in 2015 by World Bank (i.e., 6%) and maintain import-export balance over the five years. Nevertheless, there are a lot of outstanding issues which should be further addressed as analysed below:
\n1.\tEnforcement and recognition of arbitral awards \u2013 Status, issues and solutions<\/strong>
\nThe major regulatory framework on arbitration proceedings in Vietnam includes the Law on Commercial Arbitration No. 54\/2010\/QH12, which took effect on 1 January 2011 (\u201cArbitration Law\u201d) and replaced the Ordinance on Commercial Arbitration (\u201cArbitration Ordinance\u201d) in 2003; Decree No. 63\/2011\/ND-CP of the Government on detailing the implementation of certain regulations in the Arbitration Law (\u201cDecree No. 63\/2011\u201d) and Resolution No. 01\/2014\/NQ-HDTP by the Vietnamese Supreme Court guiding the implementation of a number of regulations in the Arbitration Law (\u201cResolution No. 01\u201d).
\nVietnam also ratified the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 1958 in September 1995 and the provisions of the New York Convention have been incorporated into the arbitration laws in Vietnam.
\nThe above shows that Vietnam has made great attempts in building a legal framework for arbitration which played an important role in attracting foreign investment over the recent years. However, statistics from Vietnam International Arbitration Centre show that almost 50% (19 out of 44) of its awards submitted for recognition and enforcement were set aside. This is a disaster as this number is far below the statistics in other countries (for example, Japan \u2013 100%; China and Hong Kong \u2013 90% of arbitral awards are recognized and enforced).
\nThe reason behind it lies in the judges\u2019 misunderstanding of fundamental principles of arbitration, which is based on a contractual agreement between parties to submit their disagreement to a dispute settlement forum, where they await a simplified and expedited procedure. However, the judges seem to complicate it and apply very strict standards to arbitration awards that are simply unnecessary and inappropriate. The judges even re-consider the merit of the case despite it being heard by arbitrators\u2019 expertise in relevant fields and provide no chance of challenge. The main reasons for judges to annul arbitral awards could be summarized in two points as follows: (i) arbitration procedures failing to strictly follow procedures under the Civil Procedure Code; and (ii) the arbitral awards in certain aspects violating fundamental principles of Vietnamese law.
\nArbitration procedures failing to strictly follow procedures under the Civil Procedure Code
\nIt should be noted that when parties to the dispute agree to submit their case to arbitration by a contractual agreement, they already opt to select a much more simplified and tailor-made procedures than court litigation. They stipulate the rules of arbitration to be applied. The principle that, dispute resolution by arbitration is a contractually agreed process and does not involve timely and costly procedural rules as litigation does, is widely recognized in every arbitration organization in the world. Claiming that arbitration procedures do not follow procedures under the Vietnam\u2019s Civil Procedure Code is a baseless, unreasonable argument and goes against the main spirit of arbitration process.
\n The arbitral awards in certain aspects violating fundamental principles of Vietnamese law
\n\u201cFundamental principles of Vietnamese law\u201d is a very vague and ambiguous concept that is nowhere defined in Vietnamese law. Further, there is also no consistent standard of \u201cfundamental principles\u201d so the Vietnamese judges take certain discretion in assessing the compliance of arbitral awards with Vietnamese fundamental principles. They take the view that anything that is not compliant with Vietnamese administrative procedures would be considered violating \u201cfundamental principles\u201d. Due to the inaccessibility to the court\u2019s decisions by the public, it is nearly impossible to establish a well-founded jurisprudence of what \u201cfundamental principles\u201d are. It is also create unpredictability in the court decision in recognizing and enforcing arbitral awards.
\nAll of the above somehow discourages foreign investors from having their disputes resolved in judicial system of Vietnam. With an attempt to addressing this problems, certain measures are strongly requested to take by the Government.
\nHow to protect the parties from the request for setting aside an arbitral award
\nRecently, with the issuance of Resolution No. 01, the Council of Judges gave a signal to support the enforcement of domestic arbitral awards in Vietnam as well as the development of arbitration proceedings. Resolution No. 01 provides more criteria and grounds for handling a request for annulment and especially, the cases when an arbitral award is set aside are more clearly defined. However, there should also be a special mechanism to appeal to judicial decisions that annul arbitral awards on an unreasonable and wrongful basis.
\nIn order to do that, the Government should first task a special body to review all the cases that have been set aside. The content of the case as well as the court\u2019s decision must be made public for transparency purposes and this could be considered as a supervising tool of the public on the court and review process.
\n2.\tNew Investment Law and Enterprise Law \u2013 standing issues<\/strong>
\nUnder the old Investment Law, the Investment Registration Certificate (\u201cIRC\u201d) concurrently serves as the Enterprise Registration Certificate (\u201cERC\u201d) of a foreign-invested company. However, under the new Investment Law which takes effect from 01 July 2015, enterprises need to apply for two separate certificates with different application dossiers. Though the timeline and procedures seem to be quicker and clearer, investors are still concerned about the reason behind the separate applications, especially in the context of administrative reforms conducted by the Government.
\nThe new Investment Law shortens the period for charter capital contribution from 03 (three) years to (90) ninety days. In connection with the existence of two separate certificates, investors are concerned about the delay it may cause when applying for an increase in the charter capital. (Note: Charter capital is an amount contributed by the investor to establish a legal entity). Such delay could result in slow disbursement of the additional capital, which in turn affect business operations of enterprises. Thus, the Government needs to take further measures to prevent such delay.
\nWith regards to conditional sectors, the number has been reduced much compared with the old laws and from several workshops on this topic, conditional sectors will only be promulgated by the Government and the National Assembly. However, in terms of conditions applicable to doing business in conditional sectors and any inconsistency, it is unclear which law will prevail (the Investment Law itself or its implementing decrees, ordinances, etc.).
\n3.\tDraft Circular on import of used equipment \u2013 New trade restrictive measures?<\/strong>
\nDraft Circular No. 20\/2014\/TT-BKHCN is to take effect on July 01, 2015 to encourage imports of new machinery, equipment and production lines that are manufactured with the latest technology. This Draft Circular is aimed to prevent Vietnam from being a \u201cdumping ground\u201d of old technology and scrap machinery in place of China when this country adopted a regulation prohibiting imports of used machinery and equipment.
\nDespite the good intention of the Draft Circular, it somehow introduces new trade restrictive measures that could be considered as violation of Vietnam\u2019s international treaties and agreements. In particular, the Draft Circular conditions the imports of used machinery and equipment on its usage period of 10 years and remaining quality of 80%. While it is hard to evaluate the quality of technology and production lines due to available information of the products, it is even harder and impractical to apply these standards across all types of technology and production lines. Furthermore, the Draft Circular also requires the imported goods be in conformity with safety, energy saving and environment protection and be inspected before being imported and customs released. This may significantly delay the customs clearance process and create more burden for enterprises, which go contrary to the objectives mentioned in Resolution No. 19 of the Prime Minister in 2015. A question of consistency with the WTO Agreement on Pre-shipment Inspection and WTO Agreement on Technical Barriers to Trade arises in relation with the required standards and pre-shipment requirement as well.
\n4.\t Tax administration<\/strong>
\nVietnam currently ranks 78 out of 189 countries in terms of ease of doing business according to 2015 World Bank Report. This low ranking is mainly due to tax problems such as requiring importers to pay VAT twice on the same import transaction, delay in tax complaints resolution, etc.
\nIt is notable that business complaints do not mostly relate to high total tax over net profit of 40% but the compliance cost and time, lack of predictability, simplicity and transparency in the tax system.
\nThe Government should take immediate actions to improve the tax administration for a better growth in Vietnam\u2019s economy.
\n5.\tPrivatization of state-owned enterprises \u2013 the problem for every solution\u2026<\/strong>
\nState-owned enterprises have long played an important role in Vietnam\u2019s economy. These enterprises have operated in an inefficient manner compared with private companies, many enterprises operating at loss for several years. Therefore, the Government has conducted several rounds of state-owned enterprises reform. However, setting aside the ambitious target of 289 state-owned enterprises to be privatized in 2015, the privatization process has been very slow and only by name. Only 5%- 20% of the shares are offered for sale, which is too low to attract foreign investors. They will be reluctant to invest in these enterprises as long as they have no chance to gain decision-making power by purchase of shares. The Government must then show stronger effort and commitment in reforming state-owned enterprises to attract more foreign investment in the process.<\/p>\n

—o0o—<\/p>\n

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.
\nIF YOU ARE INTERESTED IN DOING BUSINESS IN VIETNAM PLEASE VISIT: www.vietnamlaws.xyz
\nTHANK YOU VERY MUCH!<\/p>\n","protected":false},"excerpt":{"rendered":"

The Government of Vietnam has made certain success in stabilizing the economy to reach a high growth rate projection in 2015 by World Bank (i.e., 6%) and maintain import-export balance over the five years. Nevertheless, there are a lot of outstanding issues which should be further addressed as analysed below: 1. Enforcement and recognition of … <\/p>\n

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