New Decree on registration of mortgages and other security interests in Vietnam

On 15 October 2017, Decree 102 of the Government dated 1 September 2017 on registration of secured transactions (Decree 102/2017) has taken effect. Decree 102 replaces Decree 83 of the Government dated 23 July 2010 (Decree 83/2010) on the same subject matter. Decree 102/2017 introduces the following new points:

• A mortgage over assets attached to land has to be registered if such assets have been recorded in a land use right certificate. Before Decree 102/2007, registration of mortgage over assets attached to land is not compulsory.
• Procedures for registration of retention of title (a new form of security interest under the Civil Code 2015) are introduced.
• The effective date of the registration is amended. Notably, the registration of security interest over land use right or asset attached to land will only be effective after the registrar recorded such registration into the book of registry. On the other hand, Decree 102/2017 expressly recognizes several cases in which, the original effective date of a registration will not change after an amendment to the original registration.
• A security interest created over investment project for construction of residential house and works has to be published on the website of the Department of Natural Resources and Environment within five days from the date of registration.
• Adding additional secured obligation to a registered security interest will have to be registered, unless (i) the original security agreement has a provision covering future obligations, (ii) there is no addition to security asset, and (iii) the parties only sign supplement agreement rather than new agreement.
• Decree 102/2017 also provides a new process for ensuring the continuity of a registration of mortgage of contractual right under a residential house sale and purchase agreement at National Registration Agency of Secured Transactions when it becomes a mortgage of a future residential house at the land registration office. This process will retain the effective date of the original registration.
• Decree 102/2017 supplements several cases of rejection of a security registration, including (i) land use right or residential house is not qualified to be mortgaged, (ii) there is accepted dispute regarding land use right or residential house, (iii) the securing party is a judgment debtor or (iv) the security asset had been seized for the enforcement of judgment.
• Regarding an application for registration of security interest, the registrar is not allowed to request any document that not required by law or to request the contractual parties to amend the name of the security contract or its contents, except for mistake due to a wrong declaration by the applicant. However, it is not clear what would constitute “a mistake due to a wrong declaration by the applicant”.

This post is contributed by Nguyen Hoang Duy, an associate at Venture North Law Limited.

CAN AN EMPLOYER UNILATERALLY TERMINATE AN EMPLOYMENT CONTRACT BASED ON A RESTRUCTURING REASON WITHOUT AN ADVANCE NOTICE?

The Labour Code 2012 does not expressly require an employer, who intends to terminate an employment contract on the grounds of companies restructuring, change of technology or economic reasons (Company Restructuring), to give advance notice to the relevant employees.

The advance notice requirement is provided in Article 38.2 of the Labour Code 2012. Article 38.2 follows Article 38.1 which only covers termination of an employment contract on other grounds such as poor performance, prolonged illness, or force majuere events. Therefore, one can argue that Article 38.2 only applies to the scenarios contemplated under Article 38.1 of the Labour Code 2012 but not a Company Restructuring.

On the other hand, the above view may be not reasonable since:

• Although in terms of presentation, Article 38.2 follows Article 38.1, the wording of Article 38.2 can cover any termination of an employment contract by the employer including termination on the ground of Company Restructuring.
• An advance notice period may give the terminated employee an opportunity to (1) look for a new job before leaving his/her current job; or (2) make a complaint against the employer’s decision in case of wrongful termination. Therefore, there is no reason why a termination due to Company Restructuring should be treated differently from other cases.
• This interpretation has been adopted by the courts in certain cases.

This post is contributed in parts by Nguyen Hoang Duong, a trainee at Venture North Law Limited.

Processing activities by an foreign invested enterprises (FIE) in Vietnam

It is not clear under Vietnamese law if an FIE needs to obtain a Trading Licence (Giấy phép kinh doanh) to provide commercial processing services (gia công thương mại) to other companies. Under Decree 23/2007 on goods purchase and sale activities and other related activities of FIEs, commercial processing is regarded as an activity relating to sale and purchase of goods. Accordingly, technically, if an FIE wishes to involve in commercial processing, such FIE should obtain a Trading Licence.

On the other hand, after Decree 23/2007, Ministry of Trade issued Circular 4/2007 under which, an FIE can process goods if (i) the processing activity is consistent with the objectives set out in the Investment Certificate of this FIE; (ii) the processed goods are not banned or suspended from import and export or if the processed goods are subject to import and export licence, the FIE can enter into the processing contract only when the import and export licence is obtained; and (iii) FIE has completed its capital construction investment and has commenced production and business activities. It appears that a Trading Licence is not required under Circular 4/2007.

Two regulations regarding processing activities of an FIE may cause certain confusion. Although Decree 23/2007 is a higher legislation, in practice, it appears that Circular 4/2007 still applies and FIEs do not obtain Trading Licence for their processing activities.

This post is contributed by Le Minh Thuy, a trainee lawyer at Venture North Law.