Vietnam appears to have great potential to develop offshore wind. And recently, many foreign investors are interested in developing large offshore wind farms in Vietnam. Unfortunately, except for regulations on offshore oil and gas development under the Petroleum Law, Vietnam does not have adequate regulations to develop a large offshore infrastructure project such as offshore wind farms. This starts with inadequate legal framework on the use of sea under the Law on Sea 2012 and Decree 11/2021. In particular,

The Law on Sea 2012 and Decree 11/2021 allow certain sea areas (khu vực biển) to be allocated for exploitation and use of “sea resources” (tài nguyên biển). While the term “sea resources” is not clear, it appears to include offshore wind farm development. Decree 11/2021 requires a project developer of an offshore wind farm to pay from US$ 125/ha/year to US$300/ha/year for the sea area allocated to the project. Payment for the allocated sea area could be a substantial amount since an offshore wind farm could require significant sea area for not only the wind turbines and the floating sub-station but also the sea area for the undersea transmission line and other protective area/corridor. On the other hand, sea area allocated to offshore oil development is exempt from payment under Decree 11/2021.
Although being required to pay substantial sum of monies, the project developer, which has been allocated a sea area, appears not to have ownership right over the allocated sea area. This is different from onshore wind development whereby the project developer has ownership over the “land use right” of the relevant land area. Decree 11/2021 only allows a project developer to use the allocated sea area in accordance with the allocation decision. This is very restrictive as it depends on the contents of the allocation decision which may be amended or cancelled by the authorities.
Without any property right over the allocated sea area, the project developer may not be able to mortgage the sea area (as part of the security package) to the project lenders. Decree 11/2021 expressly prohibits the project developer who has been allocated a sea area to transfer such sea area.
Since the seabed which is part of the sea area may not be considered as land under the Land Law 2013, it is not clear if the construction work attached to the seabed could be considered as immoveable property under the Civil Code 2015 or construction work under the Construction Law 2014. The Civil Code 2015 and the Construction Law 2014 define immovable property or construction works to be things which are attached to “land”.

To address the above legal uncertainties and enable the development of offshore wind farms, the National Assembly may need to amend various laws in order to confer property rights over the sea area allocated to a project developer. One way to achieve that is to treat the allocated sea area in the same manner as land allocated under the Land Law 2013. In addition, sea area allocated to offshore wind development, an activity which has no CO2 emission, should be treated better than offshore oil and gas development which increases CO2 emission.

This post is written by Nguyen Quang Vu.

Vietnam Business Law