It is quite common in Vietnam that a hotel is developed by a local sponsor but is managed by a reputable offshore manager.

However, Vietnamese law is not clear whether an offshore manager can provide real estate management services without setting up a company in Vietnam to do so. Although the better view seems to be that it is not necessary to set up a company in Vietnam, in order to have certainty, an offshore manager would have to obtain a confirmation on the point from the Ministry of Planning and Investment or the Ministry of Construction.

The problem stems from Article 8.2 of the Real Estate Law, which provides that: “An organisation … conducting real estate service business must establish an enterprise or cooperative, and obtain business registration regarding real estate services in accordance with law…”

The wording of this provision is not clear and there may be two possible interpretations:

First interpretation – an organisation providing real estate management services must establish an enterprise in Vietnam in accordance with the law of Vietnam. The use of the words “cooperative” (Hop Tac Xa) and “business registration” (Dang ky kinh doanh) suggest that the provision is intended to refer to Vietnamese enterprises, not foreign ones. 

Second interpretation – an organisation providing real estate management services needs to exist in the form of a corporate body, but it does not need to be a Vietnamese company. There are several arguments in favour of this view:

• The relevant legal provision does not expressly refer to the “law of Vietnam” but simply to the “law”.
• Article 10.1 of the Real Estate Law provides that a foreign organisation may provide real estate services in Vietnam, including real estate management, but does not mention the requirement that the foreign organisation must have an onshore investment vehicle to provide such services.
• In its WTO commitments, Vietnam undertook not to impose any conditions on the “cross-border supply” of advertising and management consultant services. The conditions in Article 8.2 of the Real Estate Law also apply to real estate advertising services and real estate consultancy services. In order to reconcile the Real Estate Law to Vietnam’s commitments to the WTO, Article 8.2 of the Real Estate Law should be interpreted to allow foreign companies to provide services.
• Under the old Foreign Investment Law, foreign hotel managers were permitted. Indeed, in practice many Vietnamese enterprises have entered into management contracts with foreign hotel managers.

While the first interpretation has support from a literal reading, the second interpretation appears to be more reasonable and more consistent with current practice.