Although a large number of authorities can issue legal instruments in Vietnam, the Law on Legal Instruments 2008 contains only a few rules of interpretation as follows:
- A legal instrument is applicable to events or actions, which occur when the legal instrument is effective;
- In case two legal instruments are “different” on the same issue, then the legal instrument issued by a higher issuing authority will prevail; and
- In case two legal instruments issued by the same authority are “different” on the same issue then the more recent legal instrument will prevail.
There is serious deficiency in how a legal instrument should be interpreted in Vietnam. For example, it is difficult to determine whether a “difference” exists between two legal instruments. For example, the Labour Code of the National Assembly provides that an employee with an indefinite employment contract must give a 45 “days” prior notice when he/she resigns. However, Circular 21 of the Ministry of Labour, War, Invalids and Social Affairs (MOLISA) requires the employee to give 45 “business days” prior notice when he/she resigns. One can challenge the validity of Circular 21 by arguing that there is a difference between the Labour Code 1994 issued by the National Assembly and Circular 21 issued by the MOLISA and that the National Assembly is a higher issuing authority. On the other hand, as the MOLISA is empowered to issue implementing regulation and clarify the law of the National Assembly, one can counter-argue that in Circular 21 the MOLISA only “further clarifies” what “days” in the Labour Code means in the relevant context.
In addition, Vietnamese law is not clear when a law or decree is issued to repeal an existing law or decree then whether or not the implementing legal instruments of the repealed law or decree will continue to be effective after the new law or decree is issued. Under Article 78.4 of the Law on Legal Instruments 1996, implementing regulations of a repealed legal instrument will also be repealed unless otherwise permitted. Unfortunately, the Law on Legal Instruments 2008 does not contain the same provision.
In practice, Government authorities still tend to apply implementing legal instruments of a repealed legal instrument until a new implementing legal instrument on the same issue is issued. However, there is nothing at law to prevent a Government authority from choosing not to apply implementing legal instruments of a repealed legal instrument on the basis that such implementing legal instruments is “different” from the new law.
The risk of adverse or unpredictable interpretation is high when there is a significant time lag between the issuance of new law and the issuance of its implementing legal instruments. For example, Decree 160/2006 on foreign exchange was issued to replace Decree 63/1998 in 2006. However, it has been nearly 6 years and the State Bank of Vietnam has not issued all necessary implementing circulars for Decree 160/2006. During this 6-year period, it is not always clear whether the circulars implementing Decree 63/1998 are still effective and if so, how they are implemented or interpreted in light of Decree 160/2006.
Finally, Vietnamese law is not clear on how to deal with the situation when there are two conflicting legal provisions issued by two different authorities who are at the same level. To address this situation, some laws contain a provision that in case there is a conflict between such laws and other “special” (đặc thù) laws then “special” laws will prevail. However, this gives rise to two other problems:
- Except in case of Enterprise Law, it is usually not clear which laws are considered as “special laws”; and
- It is not clear whether an implementing regulation of a special law which is issued by a lower authority will prevail the “general” law issued by a higher authority.
Decree 163 of the Government on logistics services was issued on 30 December 2017 (Decree 163/2017). It is going to take effect on 20 February 2018 and replace Decree 140 of the Government on logistics services dated 5 September 2007 (Decree 140/2007). Below are salient changes in Decree 163/2017.
Decree 163/2017 no longer requires the logistics services providers to meet the condition of adequate equipment and personnel. That condition was applied to some logistics services, but under Decree 163/2017, the logistics services providers have only to meet conditions specific to the logistics service that they provide.
Decree 163/2017 allows foreign investors to apply, at their discretion, investment conditions regarding logistics services under an international treaty where multiple treaties are applicable.
Decree 163/2017 classifies logistics services in accordance with Vietnam’s commitments to the WTO. By contrast, Decree 140/2007 has its own classification of logistics services which is not consistent with the description of logistics services under the WTO Commitments. And the investment conditions and foreign ownership limit provided in Decree 163/2017 are generally consistent with the WTO Commitments. Therefore, it is easier to compare the Decree 163/2017 with the WTO Commitments.
The table below sets out the applicable foreign ownership limit under Decree 163/2017, to the extent possible, in comparison with Decree 140/2007:
On 15 January 2018, the Government issued Decree 9/2018 on sale and purchase of goods and other directly-related activities by FIEs. Decree 9/2018 took effect immediately and replaces the outdated Decree 23/2007. Several issues arise from this Decree 9/2018. Unfortunately, most of these issues will likely make the operation and investment by FIEs in the sectors covered by Decree 9/2018 more (sometimes much more) challenging. In particular,
In November 2017, the National Assembly passed various amendments to the Law on Credit Institutions 2010 (LCI Amendments). About two-thirds of the LCI Amendments focus on restructuring, rescue, and liquidation of a credit institution. This probably explains the relatively short period between the issuance of the LCI Amendment and its effective date. The LCI Amendments will take effect from 15 January 2018, less than two months after issuance. The National Assembly usually give a new law six months to one year to take effect. This seems to indicate a sense of urgency by the State Bank of Vietnam (SBV) in dealing with various banks which have been rescued by the SBV for the last couple of years.
In addition to the provisions on restructuring, rescue, and liquidation of a credit institution, the LCI Amendments contain a host of other amendments which aim to improve the governance and operation of a credit institution. These amendments include:
Decree 126/2017 replacing Decree 59/2011 on equitisation of State-owned enterprises introduces various new requirements for a strategic investor who invests during the equitisation of a State-owned enterprise (equitised SOE). These new requirements (especially the pricing requirement) are more difficult for a strategic investor to satisfy. In particular,
- The equitized SOE must decide to select the strategic investor and the strategic investor must commit to invest before publication of the public offering document for the public auction. Under Decree 59/2011, the strategic investor may decide to invest either before or after the public auction;
- Despite being required to commit to invest before the public auction, in most cases, the strategic investor must pay a price not lower than the average bidding price at the public auction. Under Decree 59/2011, there is no such requirement and the minimum price is the lowest successful bidding price. This requirement under Decree 126/201 seems to repeat the mistake under Decree 109/2007. There is unlikely any sensible investor who will commit to invest without knowing the price that it has to pay first;
The Sabeco – ThaiBev transaction announced on Monday is no doubt the biggest equity deal in Vietnam so far. The deal structure (see below) as reported by newspaper involves Vietnam Beverage acquiring 53.59% shares in Sabeco. Vietnam Beverage is wholly owned by Vietnam F&B Alliance Investment. Thai Bev, in turn, owns 49% of Vietnam F&B Alliance Investment. From the look of it, it appears that ThaiBev is investing in Sabeco by setting up a “non-foreign” investor through various corporate layering.
Under the Labour Code 2012, a labour contract means an agreement between an employee and an employer on a paid job, working conditions, and rights and obligations of each party to the labour relationship. A labour contract between an employer and its employee can fall into one of the following types:
- Seasonal Contract: a seasonal contract (or contract for a specific job) is a labour contract with the duration of less than 12 months;
- Definite Term Contract: a definite term contract means a labour contract with the duration of between 12 months and 36 months. The term of a definite term contract can be extended one time only. Thereafter, the employer must enter into an Indefinite Term Contract (see below); and
- Indefinite Term Contract: an indefinite term contract means a labour contract in which the two parties do not fix the term nor the time of termination of the contract.
In Vietnam, private ownership over land is not recognised under the Constitution and Land Law 2013. Instead, one may acquire certain rights which are close to the ownership rights over the land (land use rights) in accordance with the land regulations. A foreign investor does not fall under the scope of subjects that are entitled to obtain land use rights in Vietnam, but a local company (Local Co) wholly or partly owned by such foreign investor may acquire land use rights to conduct its investment projects.
1.1. Article 354 of the Criminal Code 2015 imposes criminal liability on the act of receiving bribes (tội nhận hối lộ), which is defined as an act, among others, of a person who holds an official position or “power” and directly or indirectly has received or will receive any of the following benefit for himself/herself or for other person/organisation:
1.1.1. money, properties or other “material benefit” in any form, which has a value of VND 2,000,000 (approx. USD100) or more; and
1.1.2. non-material benefit
with the intent of taking advantage of his/her official position or power in order to perform or refrain from performing certain acts for the benefit of, or as requested by, the person who offers the bribe. The Criminal Code 1999 considers only monies, properties or other material interest as bribes.
On 22 September 2017, the Ministry of Finance issued a model charter of public companies under Circular 95/2017 following the new governance regulations of Decree 71/2017. This model charter (New Model Charter) is to replace the old one (Old Model Charter) provided under Circular 12/2012, which is based on the now-defunct Enterprise Law 2005. These charters are not legally compulsory, thus should be read with reference purpose only.
Most changes to the New Model Charter reflect changes in the Enterprise Law 2014 and Decree 71/2017 (find out more here). Besides, the New Model Charter introduces the following notable changes:
Under Article 22.2 of the Labour Code 2012, where a definite term labour contract or seasonal labour contract (Old Contracts) expires, and the employee continues to work, then within 30 days from the expiry date of such Old Contracts (Expiry Date) the parties must enter into a new one; if the new labour contracts is not established, then the Old Contracts will become an indefinite term contract or a definite term contract with term of 24 months collectively (New Contracts). This provision has been interpreted in different manners as follows:
The Shareholder Meeting of a joint stock company (JSC) must convene a meeting at least once a year during the first four months or, if permitted by the Business Registration Authority and the Board, six months after the end of a financial year. Such meeting is called the annual meeting (cuộc họp thường niên) and other meetings of the Shareholder Meeting are called irregular meetings (cuộc họp bất thường). The Enterprise Law 2014 is not clear if there are two or more meetings of the Shareholder Meeting of a JSC in the first four months after the end of a financial year, then whether the first meeting among these meetings is regarded as the annual meeting or the JSC may have flexibility in deciding which meeting is the annual meeting.
A Vietnamese court does not have clear authority to remove a Board director from the Board of a Vietnamese joint stock company like other more developed jurisdictions. Under Article 156.1 of the Enterprise Law 2014, a Board director may be dismissed (miễn nhiệm) if he/she:
- fails to maintain the qualifications of a Board director including not having full capacity for civil acts or belonging to the types of persons who are not allowed to manage an enterprise in Vietnam;
- fails to participate in activities of the Board for six consecutive months, except in the case of an event of force majeure; and
- tenders a written resignation.
Under the Penal Code 2015, only “commercial legal person” (pháp nhân thương mại) could be subject to criminal liability. A commercial legal person is a legal person with the main objective of “seeking profit” which is distributed to its members. However, the concept of commercial legal person may raise several issues as follows:
- The Criminal Proceedings Code 2015 only refers generally to “legal person”. It is not clear why the Criminal Proceedings Code 2015 does not use the term commercial legal person despite being drafted and passed at the same time as in the Penal Code 2015.
- A commercial legal person’s main objective is “seeking profit” (tìm kiếm lợi nhuận). With the exception of “social enterprise” (doanh nghiệp xã hội), an enterprise in Vietnam is established for “the purpose of doing business” (mục đích kinh doanh). And “doing is business” has the purpose of “generating benefit” (sinh lợi). There is a slight difference between the use of words in the Enterprise Law 2014 and the Civil Code 2015. However, presumably, “generating benefit” under the Enterprise Law 2014 is intended to have the same meaning as “seeking profit” under the Civil Code 2015.
- The Civil Code 2015 considers social enterprises to be non-commercial legal person. Under the Enterprise Law 2014, a social enterprise is set up to solve social or environment issues for public benefit. However, a social enterprise still has the objective of making profit and still distributes profit to its members as long as it retains at least 51% of its profit for its social purpose. In practice, a social enterprise can still commit the crimes which apply to other enterprises (e.g. polluting the environment or tax evasion). Therefore, in the author’s opinion, the classification of social enterprises being non-commercial legal person under the Civil Code 2015 is a mistake and social enterprises should still be subject to criminal liability under the Penal Code 2015.
A draft Decree on logistics services in Vietnam (Draft Logistics Decree) has been circulated by the Ministry of Industry and Trade (MOIT) recently. The Draft Logistics Decree, which appears to be a near final draft, will replace Decree 140/2007 on the same topic. The salient points of the Draft Logistics Decree include:
- The Draft Logistics Decree classifies logistics services in accordance with Vietnam’s commitment to the WTO. On the other hand, Decree 140/2007 has its own classification of logistics services which are not consistent with the description of logistics services under the WTO Commitments. So it is not easier to compare the Draft Logistics Decree with the WTO Commitments;
- The Draft Logistics Decree does not include certain logistics services which were provided in Decree 140/2007 (see the table below). Accordingly, it is not clear of these services are permitted or not permitted under the Draft Logistics Decree;
Under the Penal Code 2015, only a commercial legal person commits a crime listed in Article 76 of the Code could be subject to criminal liability. The table below lists out these crimes and the main penalties which may apply to them. Notably, the list does not include bribery and accounting frauds which usually happen to companies in Vietnam. The list is compiled by Ha Kieu Anh and Ha Thanh Phuc, legal trainees at Venture North Law Limited.