Category: MONTHLY LEGAL UPDATE

New Labour Code taking effect on January 1, 2021

By Nguyen Thu Huyen – Partner, Attorney at law

The participation in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the EU-Vietnam Free Trade Agreement (EVFTA) poses numerous requirements on the reform of laws, including labour laws.

Specifically, the members of the CPTPP and EVFTA are requested to adopt and maintain the rights as set out in the 1998 International Labour Organisation (ILO) Declaration, however, Vietnam is yet to ratify the remaining two core conventions of the ILO, which are Convention No. 87 regarding freedom of association and protection of the right to organise, and Convention No. 105 regarding abolition of forced labour. On that basis, Vietnam’s National Assembly ratified the new Labour Code on November 20, 2019 to replace the Labour Code 2012 and pave the way for the full implementation of the 1998 ILO Declaration. The new Labour Code will officially take effect from January 1, 2021 with the following notable provisions.

Employee representative organizations

The new Labour Code provides regulations on the establishment of employee’s organisations which are not under the system of Vietnam trade unions. Together with trade unions, these organisations are recognised as representing labour collectives at the grassroots level and have the equal rights and obligations as trade unions. In another way, the new Labour Code now recognises the right of employees to set up their own representative organisations to promote and improve the representative efficiency and protection of the rights and interests of the employees in labour relations, to comply with the core Conventions of the ILO as the new provision shows Vietnam’s effort tend to ILO’s Convention No. 87 which is not ratified by Vietnam’s National Assembly and to facilitate the process of international integration.

Nevertheless, this new regulation may place trade unions at a disadvantage due to a decrease in the number of members, especially in the non-state sector, and the role of trade unions may be limited.

Retirement age

The retirement age was a controversial topic in the process of preparing the draft of the new Labour Code 2019 for the National Assembly to ratify. People in favour of retaining the current retirement age argued that the increase of the retirement age might lead to growth in unemployment. Eventually, the retirement age has been amended to increase gradually.

In particular, age of retirement of employees working in normal working conditions is increased from 60 to 62 for males in 2028 and from 55 to 60 for females in 2035. Starting from 2021, the retirement age of employees working in normal working conditions is at 60 years and three months of age for males and 55 years and four months of age for females, then the retirement age shall increase by three months per year for males and by four months per year for females.

This roadmap for increasing the retirement age is considered reasonable as the current retirement age is still low compared to many countries in the world such as Singapore, Japan, Germany, etc. Moreover, the current retirement age was set more than 60 years ago when the average life expectancy of Vietnamese was 45 while it has now grown to 76.6 years.

Overtime cap

One of the remarkable amendments in the new Labour Code is the adjustment in the overtime cap. It has risen to 40 hours per month as compared to 30 hours per month as stated in the Labour Code 2012.

This amendment is for the purpose of meeting business needs and increasing the competitiveness of Vietnamese employees in the context of Vietnam joining CPTPP and EVFTA. In addition, the Labour Code newly stipulates cases for employees to work overtime for no more than 300 hours per year to ensure long-term benefits for employees.

Other noteworthy regulations

Other than the above-mentioned provisions, some noteworthy regulations of the new Labour Code are as follows: (i) an additional one full paid leave day adjacent to National Day raises the number of public holidays to 11; (ii) employees are allowed to unilaterally terminate labour contracts without reasons by notifying in advance within the timeline specified by law; (iii) employers are allowed to unilaterally terminate labour contracts of employees who are absent from work without permission for a total of five consecutive working days or more without requiring the employers to dismiss the employees for termination of labour contracts; (iv) and instead of conducting dialogue at workplaces every three months, the new Labour Code adjusts this regulation to once a year.

https://www.inhousecommunity.com/article/vietnam-new-labour-code-taking-effect-january-1-2021/

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LEGAL UPDATE – DECEMBER 2019 – NEW REGULATION ON ELECTRONIC INVOICES FOR SALE OF GOODS AND PROVISION OF SERVICES

By Ha Tuan Viet
Legal Assistant

On 14 November 2019, Circular No. 68/2019/TT-BTC guiding on implementation of several articles of Decree No. 119/2018/NĐ-CP issued by the Government on 12 September 2018 regarding electronic invoices for sale of goods and provision of services (“Circular No.68”) was officially took effect. This Circular No.68 has guided and clarified the important provisions of Decree No. 119/2018/NĐ-CP which are included several noteworthy points as follows:

1. Regulations regarding the time that the application of electronic invoices must be registed

Pursuant to Clause 3 Article 26 Circular No.68, from 01 November 2020, enterprises, business organizations, other organizations, household businesses and individual businesses shall conduct the registration on application of electronic invoices in accordance with the guidance stated in Circular No.68. Hence, from 1 November 2020, enterprises shall be responsible for conducting the registration on application of electronic invoices instead of paper invoices (self-printed invoices, order-printed invoices or purchased from tax authorities).

2. Contents and issuance time of electronic invoices

Pursuant to regulations stipulated in Article 3 Circular No.68, contents of electronic invoices was amended on invoice code and invoice symbol, simultaneously, contents of electronic invoices was clearly specified on the cases and specifically fields in which electronic invoices are not required to contain the digital or electronic signatures of the buyers and sellers.

In addition, Circular No.68 has also guided and specifically certified on issuance time of electronic invoices regarding difference activities and fields, such as the sale of goods, provision of services, supplication of electricity, water, telecommunications service, television services, IT services, construction and installation, real estate business, infrastructure construction and construction of  house for sales… which are in line with Article 7, Decree 119/2018/NĐ-CP.

3. Condition of organization who provide electronic invoices services

In order to become the organizations which provide electronic invoices services, Article 23 Circular No.68 prescribes that the organizations must satisfied specific conditions regarding subjects, finance, personnel and technology, these are provisions that Decree No. 119/2018/NĐ-CP has not given in details, as follows:

a. Regarding the subjects: Having experience of creating IT solution and electronic data exchange between organizations, specifically as follows:

  • Have been operating in the IT field for at least 05 years.
  • Have deployed IT applications and systems for at least 10 organizations.
  • Have deployed electronic data exchange systems between branches of an enterprise or between organizations.

b. Regarding the finance: Having obtained the guarantee of over VND 5 billion from a credit institution legally operating in Vietnam to resolve risks and compensate damages during the period of providing services.

c. Regarding personnel:

  • There are at least 20 technicians having bachelor’s degrees in IT, of which there are staffs who have practical experience in network administration and database administration.
  • There are technicians who are employed to monitor the electronic data exchange systems and support its users 24/7.

d. Regarding technology:

  • There are processes and equipment for backing up data at the main datacenter according to Clause 1d Article 32 of Decree No. 119/2018/NĐ-CP.
  • There is a backup equipment and technical center which is located at least 20 km away from the main data center and ready to operateonce the main system occurs incident.
  • The connection for exchanging the data of electronic invoice with tax authorities must comply with the technical requirements under the Article 23 Circular No.68.

4. Transition provisions

From 1 November 2018 to 31 October 2020, the units still can apply invoices in accordance with provisions stated in Decree No. 51/2010/NĐ-CP, Decree No. 04/2014/NĐ-CP and guidance documents in case that tax authorities has not issued any notices on switching to application of electronic invoice under Decree 119/2018/NĐ-CP.

From the time of utilizing electronic invoices in accordance with Circular No.68, in case of detecting the issued invoices contains errors, an agreement in written shall be made by sellers, in which clearly states the error, then the sellers shall have to notify to tax authorities under the form No. 04 the Appendixes attached to Decree No. 119/2018/NĐ-CP and issue new invoices for replacing the invoices that contain errors.

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LEGAL UPDATE – DECEMBER 2019 – NEW REGULATION ON PENALTIES FOR LAND-RELATED ADMINISTRATIVE VIOLATIONS


By Pham Quoc Kien
Legal Assistant

On 19 November 2019, the Government has promulgated Decree No. 91/2019/ND-CP on the penalties for land-related administrative violations (“Decree 91”). This decree shall come into effect on 05 January 2020 and replace Decree No. 102/2014/ND-CP dated 10 November 2014 (“Decree 102”). Decree 91 not only instructs in more detail than Decree 102 but also supplement some notable features as follows:

1. Adding definition and penalties with respect to the act of “land destruction”

The term “land destruction” is defined in Law on Land 2013, however such term is not mentioned in Decree 102 and thus causing difficulties in applying penalties on the violation of land destruction. Acknowledging this limitation, Decree 91 has clearly defined the term “land destruction” and corresponding penalties for this violation.

Specifically, Clause 1 Article 15 Decree 91 regulates the action of deforming the land or reducing land quality, the monetary penalties are ranged from VND 2,000,000 to VND 150,000,000 based on the deformed area. The monetary penalties amount is applicable to individuals and shall be double in case the violation is committed by organizations. Furthermore, violating individual/organization is obliged to restore the land to condition prior the violation and the land shall be revoked in case such violator fails to abide the penalties.

2. Supplementing the remedial measures:

In Decree 102, the remedial measures are regulated scatteredly throughout the documents and mainly consisted of 03 (three) measures: obliged to restore the land condition prior to the violations; obliged to return the unlawful gain; and obliged to return the received land. However, Decree 91 has elaborated in detail the remedial measures, specifically there are 17 (seventeen) remedial measures mentioned in Clause 3 Article 5 of this Decree (e.g. obliged to implement land-related administrative procedures, obliged to fulfil land-related financial duty, obliged to complete the construction investment according to the prevail regulation). Furthermore, Article 7 of Decree 91 has also specified the corresponding methods to calculate the amount of unlawful gain for each violation.

3. Supplementing the statute of limitation

Currently, the statute of limitation on land-related administrative violation is in accordance with regulations of Laws on administrative violation 2012. Decree 91 has clearly regulated that the statute of limitation on land-related administrative violation is 02 years, and also specified the method to determine the beginning and ending of each violation.

4. Supplementing the violation of organization investing in real-estate trading project (“Investor”) for not implementing the application procedure for Certificate of Land use rights, Ownership of house and other properties associated with land

Previously, this violation and its penalties is regulated in Decree 139/2017/ND-CP dated 27 November 2017 (“Decree 139”). This regulation is replaced by Article 31 Decree 91, consequently, with respect to the Investor’s violation for not implementing the application procedure for Certificate of Land use rights, Ownership of house and other properties associated with land for the purchaser and/or lessee of house, construction works, the assignee of land use rights, or not provide or insufficiently provide documents to the before-mentioned individuals for self-implementation, depend on the violation duration (from 50 days to more than 12 months) and violation degree (from under 30 to more than 100 apartments, construction works, land lots), the monetary penalty maybe up to 1,000,000,000 per project.

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Legal issues on peer-to-peer lending business In Vietnam

By Ha Thi Hai.

Peer-to-peer (P2P) lending has been growing rapidly in Vietnam, along with the develop­ment of financial technology. There are a number of such enterprises using online platforms to con­nect borrowers and lenders, including Tima.vn, Vaymuon.vn, Fungo.vn and Lendbiz.

What is the principal legal framework of Vietnam for P2P lending business?

As a general principle under the Law on Investment of Vietnam, P2P lending is neither a prohibited nor a conditional business line. This is probably the most favourable legal basis for P2P lending to be conducted in Vietnam in the current context.

With no specific regulation promulgating P2P lending, it may be considered as an e-commerce trading platform, with the “buyer, seller” being the borrower and lender, and “goods, services” being lending activity. However, continuous lending for profit is deemed banking activity and is restricted to credit institutions pursuant to Vietnamese laws. On the other hand, it is prohibited by law to take advantage of the name of e-commerce business activities for illegal capital raising from other traders, organisations and individuals. This is probably the reason why almost all P2P lending businesses fail to register as an e-commerce trading platform in Vietnam.

In practice, because P2P lending companies and all other companies in Vietnam have to register their business activities, P2P lending companies in Vietnam mostly register as investment consultancy, information search services via contracts, financial consultancy supporting services, brokerage activities, etc.

In the current context, what legal issues may a P2P lending company in Vietnam be faced with?

First of all, regarding business activities that are not governed by laws and imply potential risks to the society that may not be managed by state agencies, there is a possibility that the Vietnamese state agencies will consider risk-mitigating measures or enact a regulatory framework for the purpose of management. In fact, the State Bank of Vietnam is currently developing a plan to allow a number of companies that have good financial capacity to pilot P2P lending businesses. After that, the State Bank of Vietnam may add P2P lending to the group of conditional business lines to tighten its management.

The second issue relates to loan interest. As there is no governing regulation, the lending interest rate in civil transactions through P2P lending under the Civil Code 2015 shall be agreed by the parties, but must not exceed 20 percent per year of the loan. It is noted that if the interest rate in a civil transaction is five times higher than the maximum interest rate specified in the Civil Code, earns an illegal profit of from VND30 million to under VND100 million or recommits this offence despite the fact that he/she has incurred an administrative penalty or has an unspent conviction for the same offence, it may constitute a crime of usury in civil transactions under the Criminal Code.

The third matter is responsibilities of P2P lending business to the loan. Due to the absence of legal provisions governing the P2P lending business and responsibilities of P2P lending companies, in the current context, the responsibilities of P2P lending company in case the borrower fails to pay the debt based on the civil laws and the agreements signed between the parties, as well as the rules and regulations of the P2P lending platform which are developed and published on their websites. Therefore, if the agreements, rules and regulations are not well prepared, loans are not well managed, KYC appraisal procedure is absent or not reliable enough, it shall easily lead to an increase of bad debts and complaints about the responsibilities of P2P lending companies when bad debts arise.

The fourth is the issue of payment. A number of P2P lending businesses act as payment intermediaries between borrower and lender for the purpose of controlling information of the loan and fee collection. This activity may face the risk of being considered as a payment intermediary business, which must be licensed by the State Bank of Vietnam. The provision of payment intermediary services without a licence of the State Bank of Vietnam may be subject to administrative fines and confiscation of proceeds.

Fifth, regarding anti-money laundering, organisations conducting financial activities are currently required to comply with very strict anti-money laundering regulations by the Law on Anti- Money Laundering. P2P lending activities that have not been governed by anti-money laundering regulations may lead to the risk that the P2P lending business is unable to control money laundering activities that may arise in loan transactions and potential risks from these money laundering activities.

Learning from the lesson of the explosion of uncontrolled P2P lending in China, leading to the collapse of hundreds of P2P platforms in 2018 and the recent trend of redirection of some P2P lending platforms to Vietnam, the Government will issue legal regulations in the coming time to manage, control, prevent risks and other forms of corruption from P2P lending in Vietnam. Therefore, during this time, P2P lending investors need to do research on relevant Vietnamese regulations carefully to orient their business activities and to avoid the risks of violating the laws. Investors may also consider proactively submitting their business plans to the SBV for consideration and approval to legally pilot this business activity.

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LEGAL UPDATE – NOVEMBER 2019 – INSURANCE BUSINESS LAWS

NEW REGULATIONS ON INSURANCE BUSINESS LAWS

By Nguyen Thu Trang

Legal Assistant

Law on Insurance Business, after nearly 20 years of implementation, has brought positive effects to the development of economy and society in Vietnam. In order to meet the commitments in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), Law No. 42/2019/QH14 dated 14 June 2019 on amendment and supplement of a number of articles of Law on Insurance Business and Law on Intellectual Property (“Law No. 42”) was ratified by the National Assembly. Law No. 42 will officially take effect from 1 November 2019, in which some notable provisions on insurance business are as follows:

1. Supplement of regulations on insurance auxiliary service

This type of insurance business is newly stated by laws, in particular, insurance auxiliary service is an integral part of insurance business activities, implemented by insurance enterprise, insurance brokerage enterprise, other organizations and individuals for profit purpose. This service consists of 5 activities: insurance consultancy, insurance risk assessment, actuarial analysis, insurance loss assessment and insurance claim assistance.

According to Clause 2, Article 3 of Law No. 42, insurance auxiliary service is supplemented to List of conditional business lines specified in Annex 4 of the amended Law on Investment.

2. Supplement of regulations on provision of insurance auxiliary service

Insurance consultancy as an independent insurance auxiliary service is different from insurance products sale consultancy implemented by insurance agents and insurance brokerage enterprise under current Law on Insurance business, therefore, Law No. 42 supplements definition and provides conditions for qualifications of individual who provides insurance consultancy service in of Clause 4, Article 1 Law No. 42 (Clause 1, Article 93b). Accordingly, in addition to conditions for legal capacity, individual who provides insurance auxiliary service is required to have bachelor’s degree or higher majoring in insurance or bachelor’s degree or higher in another major and a certificate of training in insurance consultancy.

Moreover, organization providing insurance auxiliary services is required to fulfill the conditions for legal status of entity and conditions for individual providing insurance auxiliary service as stated in of Clause 4, Article 1 Law No. 42 (Clause 2, Article 93b) above.

In order to create conditions for organizations and individuals currently engaging in insurance auxiliary service to have time to fulfill the conditions for provision of that service and to ensure the sanctions, Clause 1, Article 4 of Law No. 42 states that such organizations and individuals shall have 1 year to meet the above conditions.

3. Professional liability insurance to be mandatory when providing insurance auxiliary service

Clause 4, Article 1 Law No. 42 (Clause 3, Article 93a) states that individuals providing insurance consultancy service is obliged to purchase professional liability insurance for provision of insurance consultancy service; insurance auxiliary service providers shall also purchase professional liability insurance in accordance with each type of insurance auxiliary service.

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MONTHLY LEGAL UPDATE – NOVEMBER 2019 – DECREE 75/2019

NEW REGULATIONS ON THE PENALTIES FOR ADMINISTRATIVE VIOLATIONS AGAINST COMPETITION LAWS

By Nguyen Tu Oanh
Legal Assistant

On 26 September 2019, the Government has promulgated the Decree No. 75/2019/ND-CP (the “Decree 75/2019”) on the penalties for administrative violations against regulations on competition which shall take effect from 01 December 2019 and replace the Decree No. 71/2014/NĐ-CP dated 21 July 2014 (the “Decree 71/2014”).

In general, the Decree 75/2019 has met the demand on and been consistent with the changes and new points in the Law on competition 2018 as follows:

The applicable subject of the Decree 75/2019 is similar to that one in the Law on competition 2018. Accordingly, Decree 75/2019 is applied for any relevant domestic and foreign authorities, organizations and individuals. It means that if a foreign organization violates the Law on competition 2018, the organization may be imposed a penalty under the Decree 75/2019.

The provisions in Decree 75/2019 on administrative violations against regulations of the competition law are more detailed than the same in Decree 71/2014. Particularly, the administrative violations against regulations of the competition law under the Decree 75/2019 including: (i) Violations against regulations on anti-competitive agreements; (ii) Violations against regulations on the abuse of dominant position or exclusive position; (iii) Violations against regulations on economic concentrations; (iv) Violations against regulations on unfair competition; (v) Violations against other provisions in the competition law.

Besides detailing violations against regulations of the competition law, Decree 75/2019 also sets forth the mitigating and aggravating circumstances into particulars (as stipulated previously in Article 85 of the Decree No. 116/2005/ND-CP). In which the mitigating circumstances mainly come from the voluntary in declaration, remedy for violations, the violations due to coercion or dependence on others, first-time violations. In contrary, the aggravating circumstances are applied for the organized violations, violation which has been committed for more than once or repeated, the deliberate concealment of violations…

The Decree 75/2019 has amended, supplemented the regulations on fines which are consistent with the changed provisions in the Law on competition 2018. Particularly, Decree 75/2019 stipulates separate maximum fines for each violation against regulations on anti-competitive agreements; regulations on the abuse of dominant position or exclusive position; and regulations on economic concentrations and the fine is calculated based on total turnover of the violating enterprise earned from the relevant market in the preceding fiscal year in which the violations are made. This provision helps competent authorities to define the fine amount to each violation accurately on its nature as well as to be easier for the application of fines to violations.

Another noteworthy point is the maximum fine to the violations against regulations on unfair competition under the Decree 75/2015 is increased ten times in comparison with the same in the Decree 71/2014, specifically it grew from VND 200,000,000 to VND 2,000,000,000. Such change shows the attention of the legislators to violations against regulations on unfair competition and their intention in controlling/restricting these violations on the market.

To satisfy new regulations of the Law on competition 2018, Decree 75/2019 has added provisions on the violations and fines to actions of providing information for or mobilizing, inciting, coercing or enabling enterprises to engage in anti-competition or unfair competition activities. Accordingly, the main penalty to the violations could be up to VND 50,000,000, additionally the violating entities may be imposed other additional penalties and remedies such as the public correction of information.

The competent authorities for deciding penalties to violations are National Competition Committee, Inspections or the chief Inspector of the Ministry of Industry and Trade, of which National Competition Committee is a new authority established by the mergence between Competition and Consumer Authority and Competition Committee.

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Use of public property as payment in build-transfer projects

By Huynh Hoang Sang.

The Government recently promulgated Decree No.69/2019/ND-CP on the utilisation of public property for making payment to investors upon execution of construction projects in the form of build-transfer contracts (BT Contract) (Decree 69/2019). Decree 69/2019 replaced Decision No. 23/2015/QD-TTg (Decision 23) and takes effect from October 1, 2019.

In the past, Decision 23 allowed the State to make payment only by land funds to investors executing construction investment projects in the form of build-transfer (BT Project). Otherwise, Decree 69/2019 provides that the State could expend the public property including (i) land funds; (ii) land, houses and other assets on land; (iii) infrastructure assets used for the national interest, public interest; and (iv) other types of public properties (according to the Law on management and use of public property). The expansion of the extent of public properties under Decree 69/2019 is reasonable and in line with the Law on management and use of public property 2017 and further adaptable to the need of BT Projects. Besides that, proceeds from public properties auctions could also be used to pay investors for execution of BT Projects in accordance with the Law on Public Investment and Law on State Budget. The expansion of subject of properties used for payment to investors undertaking BT Projects will provide more tools for payment in such projects and encourage the development of BT Projects in the future.

The use of public property for payments to investors undertaking BT Projects is implemented under the principle of parity — the value of the BT Project is equivalent to the value of public properties expenditure. Accordingly, the value of public property shall be determined based on market price as per the regulations at the time of payment and the value of the BT Project shall be determined based on the result of the auction. In case the value of the paid land funds is larger than the value of the BT Project, investors shall pay the difference to the State budget. Otherwise, if the value of the paid land funds is smaller than the value of the BT Project, the State shall choose to pay the difference in cash or through land funds at the time of finalisation of the BT Project.

Decree 69/2019 provides the valuation method and payment schedule for each type of public properties. However, payment made from the public properties as mentioned above always requires an approval from the Prime Minister.
One noteworthy point in Decree 69/2019 is that the payment through land funds for investors shall be enforced in two methods as follows: (i) allocating land with collection of land use fees or (ii) leasing land with collection of a one-off lump sum payment of rent for the entire lease term. The land fund paid for investors includes non-clearance lands or land with completion of clearance. Noting that the use of land with completion of clearance for making payment to investors must be reported by Provincial People Committee (PC) to the Prime Minister for considering and deciding before the issuance of the decision on in-principal approval of the BT Project.

In contrast, in terms of non-clearance lands, based on (i) approved plan 1/500 or 1/2000 and (ii) request from competent authorities who signed the BT Contract, the Provincial PC shall commit with investors in writing on the use of land funds for the payment to the BT Project. In such case, investors should pay attention to the advance payment for compensation, clearance expenses under the approved plan on compensation and clearance, and such advance payment amount shall be put in the price of the BT Contract. One critical thing to note is that the advance payment amount shall not be accounted for loan interest charges in capital mobilisation of the BT Project. After receiving the deposit, the State shall implement compensation and clearance works as per the approved plan. In this situation, investors should expect that the compensation and clearance works may take a long time and, in the worst case, may be long-term delayed, hence the capital cost of the BT Project may be materially affected due to the non-interest in loan of capital mobilisation of the BT Project from the advance payment amount.

The time of payment for the BT Project shall be calculated from the date the authorities issue a decision on land allocation, land lease or property transfer to the investor. The handing-over of public properties for payment to the investor shall be enforced after the BT Project is completed or under the schedule determined by the authorities in accordance with the Law on investment and construction.

Under this new and favourable regulation, we think that BT Projects in Vietnam will not only be developed steadily but also attract more investor interest from across the region.

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MONTHLY LEGAL UPDATE – OCTOBER 2019

NEW REGULATIONS ON FOREIGN EXCHANGE MANAGEMENT OF FOREIGN DIRECT INVESTMENT ACTIVITIES IN VIETNAM

 

By Phan Thi Minh

Legal Assistant

 

On 26 June 2019, The State Bank of Vietnam issued Circular No. 06/2016/TT-NHNN (“Circular No.06”) guiding on foreign exchange management to foreign direct investment in Vietnam, which was officially effective as of 06 September 2019 and replaced Circular No.19/2014/TT-NHNN dated 11 August 2018 (“Circular No.19”).

In general, Circular No. 06 fixed a number of provisions of Circular No.19 which are ambiguous and incompliant with Law on Investment 2014 and Law on Enterprise 2014 as follows:

1. Supplement of entities to be required to open direct investment capital account (“DICA”)

Previously, Circular No.19 regulated merely two (02) entities which are required to open DICA, including: foreign invested enterprise (“FDI Enterprise”) and foreign investor (“FI”) entering into business cooperation contract (“BCC”).

Circular No. 06 supplements a new subject which is a FI entering into public private partnership (“PPP”) in case of not establishing project enterprise.

2. Clarification of definition of FDI Enterprise

According to Circular No.06, FDI Enterprise refers to:

  • An enterprise established by FI and FI is required to implement procedure for issuance of Investment Registration Certificate (IRC).
  • An enterprise with FI(s) holding at least 51% charter capital of such enterprise as a result of (i) shares acquisition/capital contribution of FI; or (ii) being established upon split, de-merger, merger or consolidation; or (iii) being newly established in accordance with specialized laws.
  • Project Enterprise established by FI(s) to implement PPP project.

3. Expansion of supporting documents usable to open DICA other than Investment Certificate/Investment Registration Certificate

Apart from Investment Certificate/Investment Registration Certificate as prescribed in Circular No.19, FDI Enterprise and FI may use one of the following supporting documents to open DICA:

  • Incorporation and operation certificate;
  • Notice on satisfaction of conditions for share acquisition, capital contribution of FI;
  • Signed PPP with competent authority;
  • Other documentation certifying the capital contribution of FI in line with laws.

4. Clear provision on capital transfer transactions to be conducted via DICA

Circular No.19 has no detailed guidance on capital transfer transactions which are subject to conduct via DICA. According to Circular No.06, account which is used to pay transfer price in FDI Enterprise is regulated as follows:

  • The capital transfer transaction between a non-resident and a resident must be coursed through DICA. Currency for payment must be Vietnamese Dong.
  • The capital transfer transaction between two residents is not required to make through DICA. Currency for payment must be Vietnamese Dong.
  • The capital transfer transaction between two non-residents is not required to make through DICA. Currency for payment is either Vietnamese dong or foreign currency.

5. Payment of pre-investment costs of FI can be remitted directly from oversea

According to Circular No.06, FI is permitted to remit funds directly from foreign country to settle the payment of lawful costs in the course of implementation of pre-investment activities in Vietnam, which has no longer been required to make via operating account in foreign currency at a domestic bank as stated in Circular No.19.

6. Supplement of regulation on cases of closing opened DICA

According to Circular No. 06, FDI Enterprise (except enterprise established by FI and subject to issuance of IRC) is required to close its opened DICA in the following cases: (i) Upon conducting share acquisition, capital contribution or additional shares issuance, foreign capital ownership ratio falls below 51% on (ii) FDI Enterprise become public JSC whose shares are listed or registered at the Stock Exchange. In those cases, non-resident FI owning shares/contribution capital in the FDI Enterprise must open an indirect investment capital account to conduct receivable and payable transactions.

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LEGAL UPDATE – SEPTEMBER 2019

NEW REGULATIONS ON INTELLECTUAL PROPERTY LAW

On June 14th, 2019, the National Assembly enacted Law No. 42/2019/QH14 on amendment and supplement of a number of articles of Law on Insurance Business and Law on Intellectual Property (“Law No. 42”) to comply with the Intellectual Property regulations set forth in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). Law No. 42 will officially take effect from November 1st, 2019 with points related to Intellectual Property noted as follows:
1. Novelty and inventive step of patent

A patent shall not lose its novelty if the patent application is submitted within 12 months in Vietnam from the date that:

i. The patent is directly or indirectly disclosed by the person who is entitled to registry or the person who has information about it.

ii. The disclosure of the patent by the State administrative agency of industrial property rights is inconsistent with the laws;

iii. The patent application is submitted by the person who is ineligible for registration.

The patent shall not be considered losing its novelty as new regulation of Law No. 42 extends the time limit for submission of patent application from 6 months to 12 months. Besides, Law No. 42 provides wider range of the applicants than the former regulations of Law on Intellectual Property.

In addition, Law No. 42 supplements the regulations that a technical solution which is a patent disclosed in the above cases shall not be used as a basis for evaluating the inventive step of such patent.

2. Validity of the Trademark Licensing Agreement (“TLA”)

The TLA between the parties is legally binding upon third parties without being registered at the National Office of Intellectual Property.

3. Obligation to use the trademarks

In the event that a dispute arises due to a request for termination of validity of Trademark Certificate of Registration of the third party as the trademark has not been used for five (05) consecutive years, the use of licensed trademark by a licensee is still considered the use of the trademark owner.

4. Self-defense right

According to Law No. 42, an organization/individual that is abused by intellectual property defense procedures (intentionally exceeding the scope or purpose of the procedure) is entitled to request the Court to compel the abusing party of compensation for damages caused by abusive procedures (including reasonable fees for hiring a lawyer).

Moreover, there are additional amendments as follows:

1. Names and indications, which are the common name of goods and widely accepted by consumers in Vietnam, are ineligible for protection as geographical indications;

2. Refusal or cancellation of geographical indications due to “potentially confusing” instead of “will cause confusion” with protected trademark in Vietnam;

3. An application for registration of industrial property rights shall be submitted in paper or electronic form according to the online filing system;

4. Supplementing provisions on International proposals and processing of International proposals for protection of geographical indications;

5. Material losses caused by intellectual property’s infringement can be determined by the intellectual property right’s holder in accordance with provisions of laws.

MONTHLY LEGAL UPDATE – FEB 2018

New regulations on foreign investment conditions in logistics services

On 30 December 2017, the Vietnamese Government issued the Decree No. 163/2017/ND-CP (“Decree 163”) replacing the Decree No. 140/2007/ND-CP (“Decree 140”) on the logistics service. Decree 163 shall take effect from 20 February 2018.

1.Classification of logistics service

Previously, Decree 140 classified logistics services into three groups with a range of services. Under Decree 163, logistics services are divided into 17 service categories with clearer and more consistent regulations comparing to Vietnam’s commitments in the Schedule of Specific Commitments in Services of Vietnam when access to the World Trade Organization (WTO). Such classification does not limit the form of logistics service since it recognizes “Other services agreed by logistics service providers and customers which are in compliance with the basic principles of Law on Commerce”.

2.Conditions of foreign investors for investment in logistics service business

In comparison with Decree 140, Decree 163 does not provide the conditions of foreign investors for investment in logistics service businesses which are already allowed 100% market access such as: Warehouse services; Transportation agency services but regulates the conditions of foreign investors for investment in other logistics service business pursuant to the Schedule of Specific Commitments in Services of Vietnam to WTO. Accordingly, the maximum foreign ownership in some logistics services are regulated as follows:

  • For cargo transport services classified as sea transport services (except for inland transport) (excluding sea transport company), cargo transport services classified as inland waterway transport services or cargo transport services classified as rail transport services (does not exceed 49%);
  • For container handling services classified as auxiliary services for sea transport and multimodal transport, except for services provided at airports (does not exceed 50%);
  • For cargo transport services classified as road transport services (does not exceed 51%);
  • For customs clearance services classified as auxiliary services for sea transport and for other services (does not exceed 100%);
  • For technical inspection and analysis services which are  provided in order to exercise authority of the Government (does not exceed 100% after three years or 100% after five years, as from the date on which the private enterprise is permitted to conduct business in such services)

Noteworthy, Decree 163 acknowledges foreign investment by way of capital contribution and share purchase and business cooperation contract beside the establishment of enterprises as prescribed in Decree 140.

Moreover, foreign invested organizations providing the unbound logistic services must obtain the business license under regulations of Decree No. 09/2018/ND-CP.

 

New Decree amending certain decrees related to business investment conditions under the State management scope of the Ministry of Industry and Trade

 

On January 15th, 2018, the Government issued Decree No. 08/2018/ND-CP amending certain decrees related to business investment conditions under the State management scope of the Ministry of Industry and Trade (“MOIT”) (“Decree 08”). According to this Decree, the Government has eliminated a total of 675 conditions among 1216 business conditions managed by MOIT. Accordingly, the following areas are mainly focused:

1.PETROL AND OIL

Decree 08 completely repeals Article 5 on the master plans on development of the petrol and oil trading system and Article 10 on the conditions for petroleum production. The planning conditions related to production location, production scale has been reduced to facilitate the enterprises in freely selecting suitable petroleum production and business models.

Decree 08 abolishes the conditions related to the storage system, transport vehicles. Accordingly, a petrol and oil trader is no longer required to own or co-own (with a capital contribution of at least 51%) regarding the storage system and to be able to satisfy at least one-third of the trader’s reserve demand. This article also applies to the local petrol transport vehicles having capacity of 3,000m3 after being granted the Business License for import and export of petrol and oil.

In addition, Decree 08 abrogates the conditions for scale expansion by requiring petrol and oil traders to own or co-own at least four (04) retail stations each year until they reach at least one hundred (100) petrol retail stations belonging to the distribution network of the trader after being granted the Business license for import and export of petrol and oil.

However, this abrogation may lead to the situation of disorder, inappropriate distribution of petrol stations, only focus on urban areas, large roads, not satisfy the demand of people in rural and remote areas.

2.FRANCHISING

The only condition applied to franchisor is the business system intended for franchising has been operating for at least one (01) year. Although it is not explicitly stated yet, it may be construed that the removal conditions applicable to both the original franchisor and the sub-franchisor. In addition, the conditions for the franchisee and the goods and services allowed to be franchised have also been abolished.

3.E-COMMERCE

Decree 08 abolishes unclear regulations related to conditions of individuals, organizations when they want to set up sales e-commerce websites, e-commerce service provision websites and credit rating of e-commerce websites.

In particular, in relation to evaluation and certification of protection of private information policy in e-commerce activity, Decree 08 annuls the conditions on having business registration or establishment decision specifying the field of operation as evaluation and certification of protection of private information policy in e-commerce; independence in organization and finance from traders, organizations and individuals who are assessed and certified for their privacy policy; having detailed activity plan approved by the MOIT; having criteria and procedures for assessing privacy policies in compliance with the regulations of the MOIT.

Moreover, Decree 08 also eliminates the conditions related to valid domain name or request for financial and technical evidence in the certification of e-contracts.

4.CHEMICALS

 Decree 08 abolishes the conditions of locations, workshops, machinery, equipment, technological processes, warehouses and conditions for testing and analyzing chemicals related to Table 1 chemical production conditions.

This relaxation seems to be a bold move as the production of chemicals is highly dangerous while safety conditions are minimized. However, if based on the provisions of Decree 113/2017/ND-CP detailing and guiding the implementation of certain articles of the Chemicals Law dated October 9th, 2017 (“Decree 113”), the abolition of these regulations is only formalistic when more stringent conditions are already stipulated in Decree 113.

5.FOOD BUSINESS UNDER THE MANAGEMENT OF THE MOIT

Decree 08 amends, supplements a number of articles and clauses of Decree No. 77/2016/ND-CP dated July 1st, 2016 of the Government on amendment and supplementation of certain regulations on investment and trading conditions on international trade in goods, chemicals, industrial explosive material, fertilizer, gas business and food business under the state management of MOIT. In particular, the Decree 08 focuses on reducing regulations related to general conditions to ensure food safety for food production and trading establishments. There are remarkable points including the abolition of conditions on business registration certificates, household business registration certificates or equivalent documents. In addition, the regulations related to production facilities, business facilities and equipment for production and business activities are also reduced, such as the conditions of ventilation, lighting, water supply systems; warehouse conditions such as full nameplate, having temperature and humidity monitoring equipment, and warehouse conditions monitoring records, etc.; unclear conditions of the conformity of equipment; conditions for the prevention of animals, insects and harmful microorganisms are also more appropriately regulated.

 

In addition, Decree 08 also abolishes some conditions related to production facilities, equipment and tools for processed milk, beer and vegetable oil production. Particularly, all provisions related to food safety conditions specifically provided for small food production and retail facilities were abolished.

Aside from the above-mentioned areas, Decree 08 also reduces the business conditions in the areas of tobacco, electricity, industrial explosive material. This Decree takes effect from the signing date.

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