Fuel distribution network in Vietnam

It is reported that Vietnam’s fuel distribution network has 13 top level distributors, 300 general agencies and 10,000 retail agencies. Set out below are the key licensing conditions and key rights and obligations of each level of fuel distribution network in Vietnam.

1.             Top level distributor -     Fuel importers

1.1.         Key licensing conditions:

•             Having special berths at international ports of Vietnam which can receive oil tankers of at least DWT 7,000 tons;

•             Having fuel storage facility of at least 15,000 m3 which can directly receive fuels from tankers or other transportation means;

•             Having at least 10 filling retail stores and 40 retailing agents; and

•             Having a Fuel Import and Export Licence issued by the Ministry of Industry and Trade (“MOIT”).

1.2.         Key rights and obligations:

•             Import a minimum reserve amount of fuel as instructed by the MOIT;

•             Maintain a minimum reserve of 30 supply days according to its annual sale plan until 2025;

•             Directly selling fuel to industrial users and to qualified general agents or retail agents;

•             Registering its distribution network with the MOIT;

•             Distributing fuel through its controlled units such as affiliates, branches, storage facilities, retail stores or through the agency network;

•             Establishing a price stabilization fund according to Decree 84; and

•             Deciding fuel retailing price to be applied in its distribution network.

2.             Top level distributor -Fuel producer

2.1.         Key licensing conditions:

•             Having a fuel producing facility in compliance with approved master plan;

•             Having a qualified testing lap; and

•             Having a Fuel Producing Licence issued by the MOIT.

2.2.         Key rights and obligations:

•             Produce and maintain a minimum reserve amount of fuel as instructed by the MOIT;

•             Maintain a minimum reserve of 30 supply days according to its annual sale plan until 2025;

•             Importing material for producing fuels subject to approval by the MOIT;

•             Selling fuel through its distribution network or selling fuel to other top level distributors;

•             Distributing fuel through its controlled units such as affiliates, branches, storage facilities, retail stores or through the agency network;

•             Establishing a price stabilization fund according to Decree 84; and

•             Deciding fuel retailing price to be applied in its distribution network.

3.             Middle level distributor - General Agent

3.1.         Key licensing conditions:

•             Having a storage facility of at least 5000 m3;

•             Having at least 5 filling retail stores and 20 retailing agents which are under control of the General Agent; and

•             Having specialized transportation means.

3.2          Key rights and obligations:

•             Signing agency contract with only one top level distributor;

•             Purchasing fuel with distributors within its distribution networks;

•             Selling fuel to end-users at a price not exceeding the retail price decided by the top level distributor; and

•             Establishing a distribution network including fuel retail agent and filling retail stores and registering the same with the top level distributor and the relevant authority.

4.             Middle level distributor - Fuel Retail Agent

4.1.         Key licensing conditions:  Having filling retail stores.

4.2.         Key rights and obligations:

•             Signing agency contract with only one General Agent or one top-level distributor;

•             Purchasing fuel with distributors within its distribution networks; and

•             Selling fuel to end-users at a price not exceeding the retail price decided by the top level distributor.

5.             Bottom level - Filling retail store

5.1.         Key licensing conditions:

•             The location of the filling retail store must comply with approved master plan; and

•             Having a Certificate of Satisfaction of Business Conditions for Fuel Retailing Store by the relevant provincial Department of Industry and Trade.

5.2.         Key rights and obligations:

•             Being controlled by a middle level or top level distributor including retail price.

Vietnam Business Law Blog

Below is a list of key approvals and contracts required for a wind farm project in Vietnam (the Project):

  • Permission by provincial People’s Committee for the Project to carry out wind measurement;

  • Report on wind measurement result to the provincial People’s Committee;

  • Approval of the Pre-Feasibility Study of the Project;

  • Approval of the basic design part of the Feasibility Study of the Project;

  • In-principle Approval of the Project under the Investment Law 2014;

For a project financing or limited recourse financing in Vietnam, a mortgage over shares (or equity capital) of the project company usually forms part of the security package due to the ease of creating and perfecting a mortgage over shares. That said, when an enforcement event occurs and if the borrower or the project company does not cooperate, the lenders (usually foreign lenders), who wish to immediately taking over the mortgaged shares, may find it difficult to actually enforce the mortgage due to the need to complete various licensing procedures for the sale or transfer of the mortgaged shares.

Thanks to the flexibility offered by the Enterprises Law 2014 and the Investment Law 2014, lenders may now consider taking some extra measures to increase their ability to enforce the mortgaged over shares of a project company in Vietnam. In particular,

On 29 March 2019, the State Bank of Vietnam (SBV) issued Circular 3/2019 to amend and supplement some articles of Circular 32 of the SBV dated 26 December 2034 on restrictions in using foreign exchange within the territory of Vietnam (Circular 32/2013). Circular 3/2019 will take effect from 13 May 2019.

First, a bit of background, under the Foreign Exchange Ordinance, “in the territory of Vietnam” all transactions, payment, price denomination must not be made in foreign currencies except as permitted by the SBV. The SBV usually takes quite a restrictive (and, in our opinion, not reasonable) on what transactions are considered to occur “in the territory of Vietnam”.

The following is a non-exhaustive list of licenses, permits and requirements on environment which an industrial park in Vietnam need to comply with.

1. Environment impact assessment report (EIAR – Báo cáo đánh giá tác động môi trường) or environment protection plan (EPP – Kế hoạch bảo vệ môi trường).

2. Confirmation on completion of the environmental protection works (Xác nhận hoàn thành công trình bảo vệ môi trường).

The following is a non-exhaustive list of licenses, permits and requirements on firefighting and prevention applicable for an industrial park in Vietnam which are subject to the monitor of firefighting and prevention and may pose a risk of fire and explosion.

1)          Appraisal of firefighting and prevention design (Thẩm duyệt thiết kế về phòng cháy chữa cháy) by the competent authority before commencing the construction.

2)          Acceptance of firefighting and prevention (Nghiệm thu về phòng cháy và chữa cháy) by the competent authority before putting the construction works into operation.

3)          Compulsory fire and explosion insurance for the properties of the industrial park.

Foreign banks located outside of Vietnam extending cross-border loans to borrowers in Vietnam should be aware of the following:

  • Under WTO commitments, Vietnam gives an “unbound” commitment regarding cross-border lending services. The Comprehensive and Progressive Agreement for Trans-pacific Partnership (CPTPP) also does not open for cross-border lending services. This means that the Vietnamese Government has discretion to allow or disallow cross-border lending;

On 11 January 2019, the Supreme Court issued Resolution 1 guiding the application of several regulations on interest, interest rate and relevant penalty (Resolution 1/2019). Resolution 1/2019 will take effect from 15 March 2019. Below are some salient points of Resolution 1/2019

  • Resolution 1/2019 clearly states that the interest rate caps of the Civil Code 2005 and 2015 will not apply to credit contracts between banks and its customers. In the past, there has been long debate regarding whether the interest rate caps of the Civil Code 2005 and 2015 will apply to credit contracts.

  • If the interest rate, overdue interest on principal and overdue interest on interest are higher than the permitted cap, the exceeding interest which has been paid will be deducted from the principal of the loan.

Collective action mechanism among bondholders is one of the common features in terms and conditions of a corporate bond.  Two important features of collective action mechanism are:

·        the use of a bond trustee to act for the benefit of bondholders; and

·        the use of bondholders’ meeting to allow a decision of a majority (or super-majority) of bondholder regarding the bond (e.g. changing the terms of the bond) to bind minority bondholders who disagree with such decision.

Arguably, if the provisions of bondholders’ meeting are included in the terms of the bond and a bondholder agrees to such term then the provisions on a civil transaction under Civil Code 2015 may allow the use of bondholders’ meeting in Vietnam. However, the validity of a decision of a bondholders’ meeting which is not approved by all bondholders is still questionable under Vietnamese law. This is because:

Under the Law on E-Transactions, an e-signature (chữ ký điện tử) is defined as being created in the form of words, script, numerals, symbols, sounds or in other forms by electronic means, logically attached or associated with a data message, and being capable of identifying the person who has signed the data message, and being capable of identifying the consent of that signatory to the contents of the signed data message.

According to Article 24.1 of the Law on E-Transactions, an e-signature of an individual affixed to a data message will be legally equivalent to the signature of such individual affixed to a written document if:

·        the method of creating the e-signature permits to identify the signatory and to indicate his/her approval of the contents of the data message; and

·        such method is sufficiently reliable and appropriate to the purpose for which the data message was originated and sent.

Accordingly, if an user being an individual of an e-commerce website, who can be identified by his/her username, password, and other means of verification (e.g., OTP code), clicks on a confirmation button of an online order then such action can be regarded as creating and affixing an e-signature to the online order by the individual user. This is because:

On 28 December 2018, the State Bank of Vietnam (SBV) issued Circular 42 amending current foreign currency borrowing regulations (in Circular 24 of the SBV dated 8 December 2015, as amended from time to time (Circular 24/2015)) (Circular 42/2018). Circular 42/2018 will take effect from 1 January 2019.

Changes to permitted lending purpose

Vietnamese banks only lend in foreign currency for a few limited purposes. Circular 42/2018 has following changes to these purposes:

On 20 June 2018, the Ministry of Justice issued Circular 8 on the registration and provision of information on security interest and contracts (Circular 8/2018). Circular 8/2018 will replace Circular 5/2011 on the same subject from 4 August 2018.

Name of the object of the registration

The object of registration under Circular 5/2011 is secured transactions (giao dịch bảo đảm), which is in line with the Civil Code 2005. However, the term “secured transaction” is almost removed from the Civil Code 2015 and the registration is now the registration of security interest (biện pháp bảo đảm). Circular 8/2018 adopts such approach and determined the object of registration is security interest to be consistent with the new Civil Code 2015.

The Ministry of Finance has released a latest draft amendment to the Securities Law 2006 (https://tinyurl.com/ydc44zyd), which is scheduled to be passed in the second half of 2019. It looks like that any major law in Vietnam will need to undergo major changes in every 10 years whether or not the changes are necessary. The draft amendments include the following major changes regarding capital raising process: