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or decree is issued to repeal an existing law or decree then whether or not the implementing legal instruments of the repealed law or decree will continue to be effective after the new law or decree is issued. Under Article 78.4 of the Law on Legal Instruments 1996, implementing regulations of a repealed legal instrument will also be repealed unless otherwise permitted.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In practice, Government authorities still tend to apply implementing legal instruments of a repealed legal instrument until a new implementing legal instrument on the same issue is issued.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is nothing at law to prevent a Government authority from choosing not to apply implementing legal instruments of a repealed legal instrument on the basis that such implementing legal instruments is “different” from the new law.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.
It is not clear whether voting rights of members of the Member’s Council of a Single LLC is based on (1) the amount of charter capital that such member represents, or (2) principle one person-one vote. Article 75.5 of the Enterprises 2014 provides that unless otherwise provided in the charter, each member of the Members’ Council of a Single LLC has one vote. This provision suggests that in the charter of the Single LLC, the owner of a Single LLC can allocate different voting rights to members of the Members’ Council who are usually the representatives of the owner in the Single LLC. The most common criteria is based on the amount of charter capital of the Single LLC represented by each member. The ability to allocate different voting rights to different members of a Single LLC is important since the owner of a Single LLC may have different shareholders who want to directly manage the Single LLC.
In the latest draft amendment to the Securities Law 2006, compared with the earlier draft, the following new points , among others, are introduced :
· “Indirect ownership” of securities is defined to mean holding securities through a “related person” or an entrustment arrangement.
· The criteria of a professional investor is reduced. A company with a paid-up charter capital of VND 100 billion (about US$ 4.5 million) instead of VND 1,000 billion can now qualify as a professional investor. An individual with a portfolio of VND 2 billion (instead of a trading volume of VND 2 billion per month) or annual taxable income of VND 1 billion can now qualify as a professional investor. Qualifying as a professional investor is important since only a professional investor or a strategic investor could participate in a private placement of shares by a public company.
· Major customers or counterparties are no longer considered as a related person of a public company.
· The latest draft amendment seems to allow for issuance of shares at a price below par value if the current trading price of the issuer is lower than par value.
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: