Cross border supply of online advertising services into Vietnam

For online advertising, placing advertisement through big US internet companies such as Google or Facebook is a must for many Vietnamese companies. Under the WTO Commitments, Vietnam undertakes to allow cross-border supply for advertising services (CPC 871, excluding advertising for cigarettes) with no limitation. As such, a foreign company should be able to provide online advertising services to Vietnamese customers without having to set up a commercial presence in Vietnam.

That being said, Decree 181/2013 does not allow Vietnamese organisations or individuals to place their online advertisement directly on overseas server-based website. Instead, online advertisement with foreign internet companies must be placed via a local advertising service provider in Vietnam. In addition, 15 days before the placement of the local advertiser’s advertisement on its website, the foreign publisher is required to report the corporate information and key business lines of the authorised local advertising service provider to the Ministry of Culture, Sports and Tourism.

On the other hand, under the Advertising Law, foreign organisations or individuals not having a commercial presence in Vietnam must conduct the advertisement of their products, goods or services in Vietnam via an advertising service provider in Vietnam. In theory, these restrictions may be viewed as contrary to Vietnam’s undertaking under the WTO Commitments which allow cross-border supply for advertising services without limitation. However, it is not clear if one can successfully invoke the WTO Commitments.

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Potential restriction on foreign investment in printing business

Under the commitments of Vietnam to the WTO (WTO Commitments), printing service is considered as a part of services incidental to manufacturing (CPC 88442). Accordingly, under the WTO Commitments,  from 11 January 2015, a foreign investor should be allowed to set up a wholly owned printing subsidiary in Vietnam.

However, under Decree 69/2014, a company involved in the printing of newspapers, statutory forms issued by the State authorities, anti-counterfeit stamps, and “financial invoices” must “have Vietnamese owners”. It is not clear if this means that (1) all owners of such printing company must be Vietnamese or (2) at least one owner of such printing company must be Vietnamese. In either case, the restriction under Decree 69/2014 seems to be contrary to the WTO Commitments. 

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Foreign invested enterprises in trading business

Under Decree 23/2007, a foreign invested enterprise (doanh nghiệp có vốn đầu tư nước ngoài) involved in import, wholesale, and retail of goods will need to obtain a trading licence (giấy phép kinh doanh) and, if applicable, a retail outlet licence . A foreign invested enterprise wishes to open more than two retail outlets will need to go through an Economic Need Test except in certain limited circumstances. So being a foreign invested enterprise in trading business would mean more restrictions and regulatory obstacles.

Decree 23/2007 does not define what is a “foreign invested enterprise”. However, it appears that in order to qualify as a foreign invested enterprise, one must have an Investment Certificate. This is because the procedures to issue a trading licence under Decree 23/2007 must be done in conjunction with the procedures to issue or amend an Investment Certificate.

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Unclear Legal Capacity of Vietnamese Company’s Branches

Under Article 84.2 of the Civil Code 2015, a branch (chi nhánh) of a legal entity has the duties to perform all or parts of the legal entity’s functions. However, a branch is not allowed under the Civil Code 2015 to act as an authorized representative of a legal entity. Accordingly, it is not clear in what capacity a branch would perform the functions of a legal entity.

Logically, in order for a branch to perform all or parts of the legal entity’s functions, either

  • Option 1: a branch could be allowed to act as an authorized representative of a legal entity under another law; or

  • Option 2: a branch could perform the functions of a legal entity in its own name and capacity. In other words, a branch can perform the functions of a legal entity without needing an authorization from the parent entity and the action (or inaction) of a branch will be deemed an action or inaction of the parent entity.

The Ambiguous Definition of "Economic Organization" in the Land Law 2024

The term “economic organisation” (tổ chức kinh tế) was first introduced under the Investment Law 2014 and refers to, among other things, any company or organisation incorporated in Vietnam. Over time, the term “economic organisation” has been used consistently in other legislations and allows for a consistent application of the law. However, the Land Law 2024 has introduced significant confusion as to the meaning of the term “economic organisation”. In particular, it is not clear under the Land Law 2024, if the term “economic organisation” only refers to companies or organisations, which are not controlled by foreign investors and do not include companies or organisations which are controlled by foreign investors. The lack of clarity has important implication on how the Land Law 2024 is implemented. For example, if the term “economic organisations” under the Land Law 2024 includes organisations which are controlled by foreign investors then a foreign bank branch could have a clear legal basis to take mortgage over land use rights and assets attached to land.    

Rights Of Dissenting Bondholders Who Disagree With A Restructuring Proposal For Corporate Bonds Issued Before September 2022

The corporate bond crisis in Vietnam started in 2022 during which many corporate bonds issued before September 2022 under Decree 153/2020 were defaulted by the issuers (Pre-2022 Bonds). To facilitate the potential restructuring of Pre-2022 Bonds, in 2023, the Government issued Decree 8/2023 which allows for the bond issuers and the bondholders to agree to amend the terms of a Pre-2022 Bonds including the extension of the duration for the Pre-2022 Bonds to up to two years. However, the rights of a bondholder who disagrees with a restructuring proposal for a Pre-2022 Bond are not clear. 

Under Decree 8/2023, the duration and the repayment schedule of a Pre-2022 Bond could be extended if the proposed extension is approved by bondholders representing 65% or more of the total number of outstanding bonds. Decree 8/2023 further provides that for bondholders who do not agree to changes in the conditions and terms of a Pre-2022 Bond (dissenting bondholders), the issuer is required to negotiate with the dissenting bondholders. If a dissenting bondholder does not accept the proposed negotiation plan, the issuer must fully fulfill its obligations to that dissenting bondholder in accordance with the original bond issuance plan. This requirement holds even if the proposed changes have been approved by the other bondholders who hold 65% of the outstanding bonds.

Essential Watchlists For Compliance With Anti-Money Laundering Regulations In Vietnam

Under anti-money laundering (AML) regulations, reporting entities (e.g., credit institutions) are required to be aware of several key watchlists, maintained by relevant Vietnamese authorities, to ensure compliance with their AML obligations. This blog will introduce those watchlists and discuss specific requirements related to them.

Essential watchlists under AML regulations

Under AML regulations, the Vietnamese Government maintains the following watchlists:

(1)             A Blacklist (danh sách đen in Vietnamese): including (a) list of organizations and individuals involved in terrorism and terrorism financing compiled by the Ministry of Public Security (MPS), and (b) a list of organizations and individuals designated as being involved in the proliferation and financing of the proliferation of weapons of mass destruction, compiled by the Ministry of National Defense (MND);

(2)             A warning list/Grey list (danh sách cảnh báo in Vietnamese): A list of organizations and individuals compiled by the State Bank of Vietnam (SBV) to warn about those with a high risk of money laundering; and

(3)             A list of Foreign politically exposed person (PEP List) (danh sách cá nhân nước ngoài có ảnh hưởng chính trị in Vietnamese): A list of foreigners who hold a senior position in foreign agencies, organizations, and international organizations, notified by the SBV.

There are no specific guidelines on how to access these watchlists or the procedure for screening data against them. However, except for the Grey List, which has not yet been published by the SBV, the Blacklist ((1)(a) and (1)(b)) and PEP List can be found via the national portals of the MPS, MND, and SBV (see embedded links).

New Financing Regime For A Commercial Housing Project in Vietnam

Under the Housing Law 2023, a developer of a commercial housing project could raise financing from the following sources:

  • equity capital of the developer;

  • capital raised from joint venture, business cooperation, and contribution from other organizations or individuals (BCC Capital);

  • capital raised from issuance of corporate bonds, shares, and fund units;

  • pre-sale proceeds raised from sale and purchase agreements or hire and purchase agreements with regards to future houses signed with customers;

  • debt financing raised from credit institutions or finance organizations operating in Vietnam (bank loans).

In comparison with the Housing Law 2014, the Housing Law 2023 clearly includes capital raising from issuance of bonds and fund units but excludes pre-sale proceeds of leasing agreements for future houses. In this post, we will discuss each of the sources of financing for a commercial housing project. The Housing Law 2023 still does not allow a developer of a commercial housing project to raise debt financing from offshore lenders.

New Law on Credit Institutions 2024 (Part 2)

This post continues discussing some additional changes of the LCI 2024. For changes discussed in our Part 1, please see here.

1.         Lowering the limit on total credit balance

The LCI 2024 lowers aggregate credit limit over the CI’s equity capital for a customer, a customer and its related persons over different periods. Specifically:

The Supreme Procuracy’s Clarification On Various Legal Issues In Vietnam

On 26 March 2024, the Supreme People’s Procuracy of Vietnam (the Supreme Procuracy) issued Official Letter no. 1083/VKSTC-V9 (the Official Letter) to respond to inquiries from local procuracies regarding supervision in legal proceedings regarding civil, marriage and family matters. Although these clarification and interpretation are non-binding, they constitute an important source of interpretation for the procuracy system to rely on. However, one should note that interpretation by a procurator is not binding on the court and therefore is not as important as a guidance issued by the superme court.

In this post, we will discuss some statements of the Supreme Procuracy under the Official Letter that we find interesting or noteworthy:

1)       Q&A no. 34: If (i) a civil transaction is not in the required form for it to be legally effective, (ii) the obligation therein cannot be quantified, and (iii) the court cannot determine how many parts of the obligation has been performed by the obligor then (a) Articles 129.1 and 129.2 of the Civil Code 2015, which allow an otherwise invalid transaction to remain valid if two thirds of the relevant obligations have been performed, would not be applicable to recognize the validity of such transaction and (b) such civil transaction would be consider invalid.

Our comments: The Supreme Procuracy seems to have taken the view that a party (i.e., the obligor who has performed a certain amount of work under such transaction) may only seek for recognition of the validity of a civil transaction if their situation is captured under Articles 129.1 and 129.2 of the Civil Code 2015.

Although this might be an understandable deduction from the straightforward reading of Article 129’s wordings, we believe that the aforementioned party should be able to request the court to consider their claim according to Article 14.2 of the Civil Code 2015 (i.e., the court should seek to apply customary practice, analogous law, basic principles of civil law, case law, and equity law to the case if Article 129 is not applicable) instead of being rejected immediately.

Certain Unclear Issues Under The New Direct PPA Mechanisms in Vietnam

There have been numerous discussions about the new direct power purchase mechanisms (DPPA) introduced under Decree 80/2024 our own briefing note. In this post, we focus on issues which are unclear under Decree 80/2024 and require more clarification. Terms defined in our briefing note will have the same meaning when used herein.  These issues are:

  • Decree 80/2024 introduces the concept of “Authorised Electricity Retailer in Zones” (Đơn vị bán lẻ điện tại các mô hình khu, cụm được ủy quyền). However, it is not clear who will verify and determine whether an electricity retailer will qualify as an Authorised Electricity Retailer in Zones. Decree 80/2024 does not make clear if the parties to the DPPA mechanism can verify the qualification of an Authorised Electricity Retailer in Zones or will require a third party (even the authority) to do so.

  • To purchase power via a DPPA mechanism, a customer is required to consume an average 200,000 kWh per month. If a Consumer consumes less than 200,000 kWh per month then the DPPA relating to such Consumer may have to be terminated. However, it is not clear if the 200,000 kWh threshold includes the amount of power purchased from (1) both EVN and the RE Generator or (2) EVN only. In other words, it is not clear Decree 80/2024 requires a Consumer to purchase at least 200,000 kWh from EVN. This interpretation seems not logical but not impossible.

Significant Changes To Standard Form Contracts And General Trading Conditions In Vietnam

On 16 May 2024, the Government of Vietnam promulgated Decree 55/2024 to elaborate some articles of the Law on Protection of Consumers’ Rights (Decree 55/2024) which replaced the Decree 99/2011 from 1 July 2024. Decree 55/2024 introduces some noteworthy amendments on requirements applied to standard form contracts (Standard Contracts) and general trading conditions (T&Cs) as follows:

Multilingual Standard Contracts and T&Cs:

Decree 55/2024 allows additional languages to be used in the Standard Contracts and T&Cs as agreed by the parties alongside Vietnamese. Previously, Decree 99/2011 only allowed the use of Vietnamese. This change accommodates international trade practices and facilitates clearer communication between parties.

Brief Comments On Direct PPA Mechanism In Vietnam Under Decree 80/2024

Please download the pdf version here.

Decree 80/2024 outlining mechanisms for direct power purchase agreement (DPPA) between renewable energy generators and large electricity consumers (Decree 80/2024) was issued by Vietnamese Government and became effective 3 July 2024. This Decree is considered as a significant policy that aims to promote the development of renewable energy in Vietnam and enhance the competitiveness of Vietnam’s retail electricity market.

This briefing note discusses the significant highlights of DPPA mechanism to be applicable to renewable power developers, including rooftop solar power developers in Vietnam as introduced by Decree 80/2024. This post is written by Nguyen Thi Kim Anh and Ha Thanh Phuc and edited by Nguyen Quang Vu.

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Written by Nguyen Quang Vu On In

Foreign investment in house/office moving services in Vietnam

In an official letter issued in March 2014, the Ministry of Planning and Investment (MPI) took the view that foreign investment in house/office moving services in Vietnam is possible subject to approval by the Ministry of Transportation and the Ministry of Industry and Trade. In particular, the MPI considers that:

  • House/office moving services could fall under CPC 51590 under CPC Classification for construction services;
  • There is no specific commitment by Vietnam to open the services under CPC 51590 to foreign investors under the WTO Commitments of Vietnam. That being said, Vietnam has undertook to open services under CPC 515 to WTO members in its WTO Commitments. Therefore, it is not clear why the MPI takes the view that CPC 51590 is not within the WTO Commitments regarding CPC 515; and
  • House/office moving services do belong to the restricted or conditional services under Decree 59/2006. Therefore, if the Ministry of Transportation and the Ministry of Industry and Trade agree then a foreign investor may invest in house/office moving services in Vietnam.
Featured
Unclear Legal Capacity of Vietnamese Company’s Branches

Under Article 84.2 of the Civil Code 2015, a branch (chi nhánh) of a legal entity has the duties to perform all or parts of the legal entity’s functions. However, a branch is not allowed under the Civil Code 2015 to act as an authorized representative of a legal entity. Accordingly, it is not clear in what capacity a branch would perform the functions of a legal entity.

Logically, in order for a branch to perform all or parts of the legal entity’s functions, either

  • Option 1: a branch could be allowed to act as an authorized representative of a legal entity under another law; or

  • Option 2: a branch could perform the functions of a legal entity in its own name and capacity. In other words, a branch can perform the functions of a legal entity without needing an authorization from the parent entity and the action (or inaction) of a branch will be deemed an action or inaction of the parent entity.

The Ambiguous Definition of "Economic Organization" in the Land Law 2024

The term “economic organisation” (tổ chức kinh tế) was first introduced under the Investment Law 2014 and refers to, among other things, any company or organisation incorporated in Vietnam. Over time, the term “economic organisation” has been used consistently in other legislations and allows for a consistent application of the law. However, the Land Law 2024 has introduced significant confusion as to the meaning of the term “economic organisation”. In particular, it is not clear under the Land Law 2024, if the term “economic organisation” only refers to companies or organisations, which are not controlled by foreign investors and do not include companies or organisations which are controlled by foreign investors. The lack of clarity has important implication on how the Land Law 2024 is implemented. For example, if the term “economic organisations” under the Land Law 2024 includes organisations which are controlled by foreign investors then a foreign bank branch could have a clear legal basis to take mortgage over land use rights and assets attached to land.    

Rights Of Dissenting Bondholders Who Disagree With A Restructuring Proposal For Corporate Bonds Issued Before September 2022

The corporate bond crisis in Vietnam started in 2022 during which many corporate bonds issued before September 2022 under Decree 153/2020 were defaulted by the issuers (Pre-2022 Bonds). To facilitate the potential restructuring of Pre-2022 Bonds, in 2023, the Government issued Decree 8/2023 which allows for the bond issuers and the bondholders to agree to amend the terms of a Pre-2022 Bonds including the extension of the duration for the Pre-2022 Bonds to up to two years. However, the rights of a bondholder who disagrees with a restructuring proposal for a Pre-2022 Bond are not clear. 

Under Decree 8/2023, the duration and the repayment schedule of a Pre-2022 Bond could be extended if the proposed extension is approved by bondholders representing 65% or more of the total number of outstanding bonds. Decree 8/2023 further provides that for bondholders who do not agree to changes in the conditions and terms of a Pre-2022 Bond (dissenting bondholders), the issuer is required to negotiate with the dissenting bondholders. If a dissenting bondholder does not accept the proposed negotiation plan, the issuer must fully fulfill its obligations to that dissenting bondholder in accordance with the original bond issuance plan. This requirement holds even if the proposed changes have been approved by the other bondholders who hold 65% of the outstanding bonds.

Essential Watchlists For Compliance With Anti-Money Laundering Regulations In Vietnam

Under anti-money laundering (AML) regulations, reporting entities (e.g., credit institutions) are required to be aware of several key watchlists, maintained by relevant Vietnamese authorities, to ensure compliance with their AML obligations. This blog will introduce those watchlists and discuss specific requirements related to them.

Essential watchlists under AML regulations

Under AML regulations, the Vietnamese Government maintains the following watchlists:

(1)             A Blacklist (danh sách đen in Vietnamese): including (a) list of organizations and individuals involved in terrorism and terrorism financing compiled by the Ministry of Public Security (MPS), and (b) a list of organizations and individuals designated as being involved in the proliferation and financing of the proliferation of weapons of mass destruction, compiled by the Ministry of National Defense (MND);

(2)             A warning list/Grey list (danh sách cảnh báo in Vietnamese): A list of organizations and individuals compiled by the State Bank of Vietnam (SBV) to warn about those with a high risk of money laundering; and

(3)             A list of Foreign politically exposed person (PEP List) (danh sách cá nhân nước ngoài có ảnh hưởng chính trị in Vietnamese): A list of foreigners who hold a senior position in foreign agencies, organizations, and international organizations, notified by the SBV.

There are no specific guidelines on how to access these watchlists or the procedure for screening data against them. However, except for the Grey List, which has not yet been published by the SBV, the Blacklist ((1)(a) and (1)(b)) and PEP List can be found via the national portals of the MPS, MND, and SBV (see embedded links).

New Financing Regime For A Commercial Housing Project in Vietnam

Under the Housing Law 2023, a developer of a commercial housing project could raise financing from the following sources:

  • equity capital of the developer;

  • capital raised from joint venture, business cooperation, and contribution from other organizations or individuals (BCC Capital);

  • capital raised from issuance of corporate bonds, shares, and fund units;

  • pre-sale proceeds raised from sale and purchase agreements or hire and purchase agreements with regards to future houses signed with customers;

  • debt financing raised from credit institutions or finance organizations operating in Vietnam (bank loans).

In comparison with the Housing Law 2014, the Housing Law 2023 clearly includes capital raising from issuance of bonds and fund units but excludes pre-sale proceeds of leasing agreements for future houses. In this post, we will discuss each of the sources of financing for a commercial housing project. The Housing Law 2023 still does not allow a developer of a commercial housing project to raise debt financing from offshore lenders.

New Law on Credit Institutions 2024 (Part 2)

This post continues discussing some additional changes of the LCI 2024. For changes discussed in our Part 1, please see here.

1.         Lowering the limit on total credit balance

The LCI 2024 lowers aggregate credit limit over the CI’s equity capital for a customer, a customer and its related persons over different periods. Specifically:

The Supreme Procuracy’s Clarification On Various Legal Issues In Vietnam

On 26 March 2024, the Supreme People’s Procuracy of Vietnam (the Supreme Procuracy) issued Official Letter no. 1083/VKSTC-V9 (the Official Letter) to respond to inquiries from local procuracies regarding supervision in legal proceedings regarding civil, marriage and family matters. Although these clarification and interpretation are non-binding, they constitute an important source of interpretation for the procuracy system to rely on. However, one should note that interpretation by a procurator is not binding on the court and therefore is not as important as a guidance issued by the superme court.

In this post, we will discuss some statements of the Supreme Procuracy under the Official Letter that we find interesting or noteworthy:

1)       Q&A no. 34: If (i) a civil transaction is not in the required form for it to be legally effective, (ii) the obligation therein cannot be quantified, and (iii) the court cannot determine how many parts of the obligation has been performed by the obligor then (a) Articles 129.1 and 129.2 of the Civil Code 2015, which allow an otherwise invalid transaction to remain valid if two thirds of the relevant obligations have been performed, would not be applicable to recognize the validity of such transaction and (b) such civil transaction would be consider invalid.

Our comments: The Supreme Procuracy seems to have taken the view that a party (i.e., the obligor who has performed a certain amount of work under such transaction) may only seek for recognition of the validity of a civil transaction if their situation is captured under Articles 129.1 and 129.2 of the Civil Code 2015.

Although this might be an understandable deduction from the straightforward reading of Article 129’s wordings, we believe that the aforementioned party should be able to request the court to consider their claim according to Article 14.2 of the Civil Code 2015 (i.e., the court should seek to apply customary practice, analogous law, basic principles of civil law, case law, and equity law to the case if Article 129 is not applicable) instead of being rejected immediately.

Certain Unclear Issues Under The New Direct PPA Mechanisms in Vietnam

There have been numerous discussions about the new direct power purchase mechanisms (DPPA) introduced under Decree 80/2024 our own briefing note. In this post, we focus on issues which are unclear under Decree 80/2024 and require more clarification. Terms defined in our briefing note will have the same meaning when used herein.  These issues are:

  • Decree 80/2024 introduces the concept of “Authorised Electricity Retailer in Zones” (Đơn vị bán lẻ điện tại các mô hình khu, cụm được ủy quyền). However, it is not clear who will verify and determine whether an electricity retailer will qualify as an Authorised Electricity Retailer in Zones. Decree 80/2024 does not make clear if the parties to the DPPA mechanism can verify the qualification of an Authorised Electricity Retailer in Zones or will require a third party (even the authority) to do so.

  • To purchase power via a DPPA mechanism, a customer is required to consume an average 200,000 kWh per month. If a Consumer consumes less than 200,000 kWh per month then the DPPA relating to such Consumer may have to be terminated. However, it is not clear if the 200,000 kWh threshold includes the amount of power purchased from (1) both EVN and the RE Generator or (2) EVN only. In other words, it is not clear Decree 80/2024 requires a Consumer to purchase at least 200,000 kWh from EVN. This interpretation seems not logical but not impossible.

Significant Changes To Standard Form Contracts And General Trading Conditions In Vietnam

On 16 May 2024, the Government of Vietnam promulgated Decree 55/2024 to elaborate some articles of the Law on Protection of Consumers’ Rights (Decree 55/2024) which replaced the Decree 99/2011 from 1 July 2024. Decree 55/2024 introduces some noteworthy amendments on requirements applied to standard form contracts (Standard Contracts) and general trading conditions (T&Cs) as follows:

Multilingual Standard Contracts and T&Cs:

Decree 55/2024 allows additional languages to be used in the Standard Contracts and T&Cs as agreed by the parties alongside Vietnamese. Previously, Decree 99/2011 only allowed the use of Vietnamese. This change accommodates international trade practices and facilitates clearer communication between parties.

Brief Comments On Direct PPA Mechanism In Vietnam Under Decree 80/2024

Please download the pdf version here.

Decree 80/2024 outlining mechanisms for direct power purchase agreement (DPPA) between renewable energy generators and large electricity consumers (Decree 80/2024) was issued by Vietnamese Government and became effective 3 July 2024. This Decree is considered as a significant policy that aims to promote the development of renewable energy in Vietnam and enhance the competitiveness of Vietnam’s retail electricity market.

This briefing note discusses the significant highlights of DPPA mechanism to be applicable to renewable power developers, including rooftop solar power developers in Vietnam as introduced by Decree 80/2024. This post is written by Nguyen Thi Kim Anh and Ha Thanh Phuc and edited by Nguyen Quang Vu.

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Written by Nguyen Quang Vu On In ,