Foreign investment in service sectors not included in the WTO Commitments

oreign investors interested in service sectors in Vietnam will first need to look at the commitments of Vietnam to the WTO on various sectors (WTO Commitments). If the relevant service falls into one of the service sectors committed in the WTO Commitments then the investors will more or less have an answer. If the relevant service does not fall into one of the service sectors committed in the WTO Commitments (Non-committed Services) then one would need to look at the relevant domestic laws to see if the market is open to foreign investors. Usually, if there is no express restriction on a Non-committed Services under domestic laws then a foreign investor should be able to invest in such sector. This position is reflected in Decree 108/2006 implementing the Investment Law.

Role of Joint venture agreements

The documentation for a joint venture company in Vietnam must at least include a joint venture agreement and a joint venture charter. If there is difference between the joint venture charter and the joint venture agreement, then one needs to decide which document will take precedent. Usually, in such case, the joint venture parties tend to favour the joint venture agreement for two reasons. First, the joint venture agreement is usually regarded as a private agreement between the joint venture parties and therefore needs to be respected. Second, before 2005, under the old Foreign Investment Law, a joint venture agreement has a clear legal status and would take precedent over a joint venture charter

Foreign ownership limit in a public-turned-private shareholding company.

Under the new Decree 58/2012, a company, which ceases to be a public company, will still be subject to the restrictions applicable to a public company for a period of one year after the date on which it is no longer a public company. This effectively means that a public-turned-private shareholding company is still subject to the 49% foreign ownership limit applicable to public companies for a period of one year after ceasing being a public company.

However, the restriction under the new Decree 58/2012 does not apply if the relevant company is turned private due to “consolidation, merger, bankruptcy, dissolution, change of form of enterprise or acquisition by another entity”. Among these exceptions, the “change of form of an enterprise” seems to be easier to implement. Under the Enterprise Law, a shareholding company can change its corporate form by turning it into a limited liability company. However, this will likely require the public shareholding company to reduce its number of shareholders from more than 100 to 50 or less.

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Comment

Actual implementation of the Vietnam Japan Bilateral Investment Treaty

T he Agreement between Japan and Vietnam for the Liberalisation, Promotion and Protection of Investment (the Vietnam-Japan BIT) has been signed for almost nine years ago and will in fact be terminated by November 2013, if either Vietnam or Japan has decided to terminate the agreement earlier month. But for the first time since the signing of the Vietnam-Japan BIT, it appears that Vietnamese licensing authorities have actively implemented the provisions of the Vietnam Japan BIT.

Vietnam Business Law