NOTABLE CHANGES IN FOREIGN LOAN BOROWING AND REPAYMENT REGULATIONS

Pending the issuance of a new Circular to replace existing Circular 12/2014 on borrowing and repayment of foreign loans of enterprises, on 30 September 2022 (New Foreign Loan Circular), the State Bank of Vietnam (SBV) issued Circular 12/2022/TT-NHNN guiding the management of foreign exchange in respect of the borrowing and repayment of foreign loans by enterprises (Circular 12/2022) which replaced Circular 03/2016/TT-NHNN from 15 November 2022 (as amended) (Circular 03/2016).

Circular 12/2022 is expected to improve the legal framework on enterprises’ borrowing and payment of foreign loans not guaranteed by the Government, simplify the administrative formalities, and provide guidance for certain matters which may be addressed in the New Foreign Loan Circular.

We discuss below some key changes introduced by Circular 12/2022.

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Written by Lawyers VNLaw On In

Certain Questions Regarding Refinancing Of Onshore And Offshore Loans In Vietnam

1. Is it permitted for an onshore loan to be refinanced by another onshore loan?

Short answer: Yes.

1.1. Under Article 8.6 of Circular 39 of the State Bank of Vietnam dated 30 December 2016 on lending by credit institutions and foreign bank branches to clients, as amended (Circular 39/2016), a new onshore loan (New Loan) can be used to refinance an existing loan (either onshore or offshore) (Existing Loan) if all the following conditions are satisfied:

1.1.1. the purpose of the Existing Loan is for business activities;

1.1.2. the term of the New Loan must not exceed the remaining term of the Existing Loan; and

1.1.3. the Existing Loan has not been restructured.

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Written by Nguyen Quang Vu On In

Supreme Court’s Precedent 55/2022 recognising validity of an unnotarised contract for transfer of land use right

In October 2022, the Supreme Court issued Precedent 55/2022 which recognises the validity of an unnotarised contract for transfer of land use right on the basis that two thirds of the contract have been performed and accordingly the contract becomes valid in accordance with Article 129 of the Civil Code 2015. The background of the case is as follows:

· In 2009, the parties signed a contract for transfer of land use right over a piece of land which would be allocated by the Government to the seller in accordance with a land compensation scheme. The contract was not notarised.

· In 2016, the Seller received the land use right certificate for the transferred land. The Buyer also paid around 90% of the sale price. The Buyer also leased the land to a third party.

· However, the Seller later on refused to register the transfer with the authority and claimed that the transfer contract was invalid since it has not been notarised.

In the Precedent 55/2022, the Supreme Court accepts the judgement of the lower court which recognises the validity of the transfer contract on the ground that the parties have performed two-thirds of the contract. Under Article 129.2 of the Civil Code 2015, where the civil transaction established in writing is in breach of compulsory provisions on notarization or certification, and one or more parties have performed at least two-thirds of the obligations in the transaction, the court will, at the request of one or more parties, recognize the validity of such transaction.

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Written by Nguyen Quang Vu On In ,

The case for a new law for offshore wind development in Vietnam

To realize the potential of offshore wind development in Vietnam, the National Assembly of Vietnam will likely need to issue a new law which provides for a more comprehensive and consistent legal framework supporting an offshore wind project. This is because (1) the existing legal framework is not adequate for an offshore wind development, and (2) the issues under the existing legal framework need to be addressed by the National Assembly being the highest law-making authority in Vietnam. In particular,

· The existing legal framework does not confer any property right relating the sea area required for an offshore wind development. Decree 11/2021 deals with the allocation of sea areas to investors to implement offshore investment projects including offshore wind development. However, under Decree 11/2021, the investor is not allowed to transfer the allocated sea area, and does not have exclusive right to use the sea area. In other words, the Government may allocate the same sea area to other investors to develop other projects as long as such projects do not “conflict” with the offshore wind projects. The allocation of sea area is made via an administrative decision which could technically be revoked by the Government.

· Investors will likely be extremely reluctant to invest significant sum of money in a sea area which they cannot transfer, mortgage, or prevent others from using. To address this issue, the National Assembly will need to issue a law establishing property right over sea area granted to investors in an offshore wind development. The new law could follow the provisions of Land Law which confer “land use right” to investors of onshore investment projects. Under the Land Law, investors of onshore investor projects could lease land from the relevant provincial People’s Committee. The investors will then have land use right over the relevant land area which, in many cases, can be transferred or mortgaged.

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Written by Nguyen Quang Vu On In