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.

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Written by Nguyen Quang Vu On In

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.

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Written by Nguyen Quang Vu On In ,

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.

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Written by Nguyen Quang Vu On In