Implementation of international investment treaties in Vietnam

Under Decree 118/2015, if a foreign investor is subject to multiple international treaties on the same industry or business line then the foreign investor is entitled to select one of the applicable international treaty. And if the foreign investor has selected to follow one international treaty then the investor will need to comply the provisions of such international treaty as a whole. In other words, under Decree 118/2015, a foreign investor may not be able to cherry pick the most favourable provisions of different international treaties in its favour.

For example, a Japanese investor may be entitled to various investment treaties with Vietnam including Vietnam-Japan BIT, WTO Commitments, ASEAN-Japan Free Trade Agreement, and, potentially, the Trans Pacific Partnership Agreement. However, under Decree 118/2015, the Japanese investor must select one of these treaties to follow. And if a Japanese investor has relied on the Vietnam-Japan BIT for market access then the investor may not rely on the dispute settlement mechanism under the TPP in the future.

The limitation of choice for foreign investor under Decree 118/2015 make it more difficult for a foreign investor to make an investment decision in Vietnam. Such limitation may be contrary to the term of the investment treaties that Vietnam has entered into. It is not clear how such limitation can be enforced as there is no mechanism for a foreign investor to notify the licensing authorities of its selection. It is also not clear whether a foreign investor may decide to change its selection if the selected treaty becomes undesirable or there is a new and better treaty coming into force.