Vietnam

Market Overview
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Political capital: Hanoi.

Major cities: Ho Chi Minh City, Hanoi, Hai Phong, Da Nang, Can Tho.

Official language: Vietnamese (for business purposes English, French, Mandarin, Cantonese and Japanese are also spoken).

Currency: Vietnamese Dong (VND). VND22,840.00 = approx. US$1 as at January 2022.

Per capita income: Approximately US$2,786 in 2020.

Foreign investment: The accumulated capital of Vietnam`s foreign direct investment (FDI) is estimated at US$247 billion, equal to 61.1% of the total registered capital (US$404 billion), with South Korea, Japan, Singapore, Taiwan and Hong Kong as the top investors.

Foreign invested projects in 2021 by sector: Manufacturing (59.16%); Production, Electricity, Gas, Steam & Air Conditioning Supply (15.2%); Real Estate (8.35%), Accommodation & Food Service Activities (3.1%); Construction (2.65%); Wholesale, Retail & Repair (2.17%); Transportation & Storage (1.43%); Mining & Quarrying (1.21%); Education & Training (1.1%); ICT (1%).

Top foreign investors for 2021: South Korea, Japan Singapore, Taiwan, Hong Kong (in terms of: (i) total number of projects; (ii) total registered investment capital.

Main exports: Cashew, nuts, pepper, rice, coffee, tea, marine products, textiles, footwear, garments and other light manufactured goods, crude oil.

Main imports: Consumer goods, textiles, oil and gas products and other intermediate goods, capital goods including machinery and equipment.

VIETNAM’S POLITICAL SYSTEM

The core document providing the political and institutional framework for Vietnam is the Constitution passed by the National Assembly in 2013. This is the fifth version of the constitution since 1945 and the third version since reunification in 1975.

The General Secretary of the Communist Party, the President of Vietnam and the Prime Minister are regarded as being the three most important members of the Vietnamese hierarchy.

The Government consists of the Prime Minister, the Deputy Prime Ministers, the Cabinet Ministers and the persons of State bodies who have ministerial status. All are appointed by the National Assembly for a period corresponding to the five-year term of the National Assembly.

VIETNAM’S LEGAL FRAMEWORK

Vietnam is a country of civil law tradition and was strongly influenced by French civil law. The legislative function in Vietnam belongs to the National Assembly, which is the highest State authority in Vietnam and the only body vested with constitutional and legislative powers. Most members of the National Assembly and members of the Government are members of the Party.

The information below summarises the hierarchy and types of legislative instruments in Vietnam, as well as the relevant State bodies empowered to issue them.

Hierarchy Issuing body

Laws/Codes National Assembly

Ordinances Standing Committee of National Assembly

Resolutions National Assembly/Standing Committee

Orders President

Decrees Government

Regulations Government/Prime Minister/Ministries

Directives Government/Prime Minister/Ministries

Circulars Ministries

Decisions Prime Minister/Ministries

Notices Ministries/Government Departments

WTO AND FREE TRADE AGREEMENTS

Vietnam’s relations with the rest of the world have undergone a rapid transformation since 1989, with Vietnam adopting an “open door” policy to foreigners and encouraging the development of political and economic ties with all countries, regardless of their past or present political affiliations.

A major milestone was achieved in 2007 with Vietnam’s accession to the World Trade Organization (WTO). Since then, Vietnam has continued to change and ameliorate its legislation in order to meet international standards and expectations, and to progressively open up its markets to foreign investors.

International treaties have also been used by Vietnam as a crucial tool for bolstering its integration into the global economy, and ultimately have a huge impact on any proposed foreign investment. They include some major regional and international free trade agreements, all of which provide for substantial tariff reductions and the removal of investment barriers. The most important free trade agreements, to which Vietnam is a party, include:

  1. the ASEAN Economic Community (AEC), which was formally established on 31 December 2015;
  2. the EU-Vietnam Free Trade Agreement (EVFTA), which came into force in Vietnam on 1 August 2020;
  3. the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which came into force in Vietnam on 14 January 2019;
  4. the Regional Comprehensive Economic Partnership (RCEP), which came into force in Vietnam on 1 January 2022;
  5. the ASEAN – Hong Kong Free Trade Agreement (AHKFTA), which came into force in Vietnam on 11 June 2019; and
  6. the United Kingdom - Vietnam Free Trade Agreement (UKVFTA), which came into force in Vietnam on 1 May 2021.

CISG (UNITED NATIONS CONVENTION ON CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS)

On 1 January 2017, the United Nations Convention on Contracts for the International Sale of Goods (also known as Vienna Convention or CISG) entered into force in Vietnam. The CISG provides a uniform set of rules governing cross-border sales of movable goods. There are currently 85 CISG’s contracting States (including the United States of America, People’s Republic of China, Japan, South Korea, Australia, most EU countries and, now, Vietnam), and it is calculated that its provisions govern over two-thirds of international trade in goods worldwide. Vietnam’s ratification of the CISG is undoubtedly contributing to further integrate Vietnam into the global trade system.

FORMS OF DOING BUSINESS

OVERVIEW

According to the WTO Commitments, the Law on Enterprises 2020 and the Law on Investment 2020 (which together constitute the legal backbone regulating foreign investment activities in Vietnam), the commercial presence of a foreign investor in Vietnam may be established in accordance with the following forms:

  1. establishment of an enterprise with foreign owned capital;
  2. capital contribution or purchase of shares in a domestic enterprise;
  3. establishment of a representative office or branch of a foreign business entity.

In addition, certain foreign investments can be carried out in the form of a public private partnership (PPP) or in the form of a business cooperation contract (BCC).

Depending on the specific business activities which the foreign investor wishes to engage in, the establishment of an enterprise with foreign owned capital is often the most common market entry strategy in Vietnam. Subject to the commercial strategy of a foreign investor, a newly established company can be either (a) in the form of a joint venture enterprise between the investor and a Vietnamese entity/individual or (b) in the form of an enterprise with 100% foreign capital (100% FOE). Please note however that the establishment of a foreign invested company in certain key sectors is either prohibited or subject to specific restrictions.

ESTABLISHMENT OF AN ENTERPRISE WITH 100% FOREIGN CAPITAL

The establishment and operations of enterprises in Vietnam are regulated by the Law on Enterprises 2020 and related implementing legislation. According to the Law on Enterprises, enterprises (including 100% FOEs) can be established pursuant to one of the following forms:

  1. a limited liability company with one member (LLC1);
  2. a limited liability company with two or more members (LLC2); or
  3. a joint stock company (JSC).

Other forms of enterprise (such as partnership companies, private companies, etc.) are also available, but they are rarely used by foreign investors for a number of reasons, and are therefore not analysed here.

Depending on the specific circumstances, in the case where a foreign investor wishes to establish an enterprise under its sole management control, a LLC1 is often considered the most suitable and straightforward form. There are however several ownership, management, corporate and governance factors to consider when deciding whether to structure a 100% FOE in the form of an LLC1, LLC2 or JSC.

GOVERNMENT APPROVALS

REGULATORY PROCEDURES

There are two separate and distinct regulatory applications which need to be filed for establishing a 100% FOE, namely:

  1. an application for the issuance of an Investment Registration Certificate (an IRC), which, once issued, will authorise the implementation in Vietnam by the investor of an “investment project with foreign capital” in the form of the establishment and ongoing operation of the 100% FOE (the Investment Project); and
  2. an application for the issuance of an Enterprise Registration Certificate (an ERC), which, once issued, will evidence the due and proper establishment and existence of the 100% FOE.
  3. In addition, once duly established, the 100% FOE could then be able to register one or more branches in other locations in Vietnam.

It should be noted that, while the government approvals listed above are required for every 100% FOE to be established in Vietnam, foreign invested companies may have to obtain additional licences or specific permits for operating in certain specific sectors or for undertaking particular business activities (e.g. telecommunications licences, real estate brokerage certificates, etc.). The relevant licensing requirements, and the conditions and procedures for obtaining them, are usually provided for under the applicable laws, ordinances and decrees regulating the specific investment sector.

CONDITIONAL INVESTMENT SECTORS FOR FOREIGN INVESTORS

As part of its WTO Commitments, starting from 2007, Vietnam has removed most (but not all) of the foreign ownership restrictions previously applicable to many industries and service sectors.

As a general rule, while under the WTO Commitments there are no limitations on market access concerning the commercial presence of foreign investors with respect to certain specific services, it means that a foreign investor from a WTO member country is allowed to establish a 100% FOE or to acquire shares in an existing company in Vietnam.

However, certain key sectors (such as telecommunications, transportation, financial services, press and publishing, etc.) are still restricted to foreign investors, and are subject to full or partial foreign ownership caps (therefore requiring foreign investors to form a joint venture with local companies and to maintain their ownership in a joint venture within the limits permissible under the relevant laws).

In addition, a number of other limitations remain in place with respect to sectors and businesses in which investment is qualified as ‘conditional’. A specific list of 227 industries and trades in which investment is conditional is set out in Appendix 4 to the new Law on Investment 2020. The applicable investment conditions are to be stipulated in applicable laws, ordinances, decrees, and international treaties regulating that particular business sector.

OTHER FORMS OF DOING BUSINESS

Establishing a 100% FOE is not the only form of doing business in Vietnam. Depending on the specific circumstances and on the business activities intended to be carried out, other forms of market entry might be advisable or, in certain cases, required.

INVESTMENT IN A DOMESTIC ENTERPRISE

ACQUISITION OF A VIETNAMESE COMPANY

Foreign investors intending to establish a presence in the Vietnamese market often will do so by acquiring an interest in (or, where permitted under the applicable laws, the entire ownership of) an existing Vietnamese company.

Vietnam law expressly recognises the rights of investors (both domestic and foreign) to purchase from existing:

  1. shareholders of JSCs, fully paid-up shares; or
  2. members of LLCs, fully contributed charter capital.

When a foreign investor purchases a percentage, but not the totality, of the ownership of the target company, the jointly owned JSC or LLC is often referred to as a “joint venture” between the foreign investor and the Vietnamese partner.

It is common for the shareholders of existing and new entities to enter into contractual arrangements between themselves regulating their respective roles, rights and obligations in relation to the company.

These shareholders’ agreements (together with the company charter) play a crucial role in determining the management structure of the target company and in protecting the interests of the foreign investor (especially when the foreign investor is only a minority shareholder).

In addition, once a foreign investor has acquired or otherwise established a domestic company in Vietnam, purchasing the assets of other Vietnamese companies can also be a useful way for increasing its market presence.

DUE DILIGENCE

Conducting an accurate due diligence exercise over the target company is naturally the first step for any foreign investor considering an investment in a domestic enterprise. Despite some systemic challenges, conducting legal due diligence investigations, to a degree of detail similar to what is customary in more developed jurisdictions, is now commonplace.

M&A APPROVAL AND PROCESS

Domestic target companies are often required to obtain the issuance of an “M&A Approval” from the relevant licensing authority as a condition precedent to an M&A transaction involving a foreign purchaser, subject to the regulatory requirements under the Law on Investment 2020 in certain cases.

The statutory processing time for an M&A approval is 15 business days, but in practice it may often take longer.

In addition, the changes in the corporate structure connected with an M&A transaction may require the amendment of the enterprise registration certificate and/or investment registration certificate held by the target company or its investors (which are normally completed as a condition subsequent to the M&A transaction).

Finally, depending on the industry in which the target company operates and on the particular business activities being carried out, there might be further sector-specific regulatory approvals that must be obtained. A careful case-by-case analysis of the necessary approvals is therefore of paramount importance.

ALTERNATIVE STRUCTURES

An alternative option, to be considered when the relevant target company is already held by an offshore entity, is for the foreign investor to purchase the shares of the offshore entity rather than those of the Vietnamese company. In this case the M&A transaction would be consummated entirely offshore. A careful analysis should be conducted in order to determine which deal structure could be more advantageous for the foreign investor.

REPRESENTATIVE OFFICE

It is possible for foreign investors to set up a representative office in Vietnam as an alternative to incorporating or acquiring a Vietnamese company. However, the scope of activities that can be performed by a representative office (RO) on behalf of the foreign entity that it represents is limited to the following:

  1. acting as a liaison office;
  2. conducting market research; and
  3. promoting business investment opportunities for the foreign entity.

The Commercial Law expressly stipulates that a RO is not allowed to conduct business activities for profit-making purposes. Setting up a RO is therefore most suitable for a foreign entity seeking to simply establish a presence in Vietnam to survey and monitor the Vietnamese market and promote its brand name.

Notwithstanding the above limitations, a RO is able to open a local bank account, purchase office equipment and enter into labour contracts with both Vietnamese and foreign employees. Further, the RO is not subject to corporate income tax since it does not generate any income in Vietnam.

PUBLIC PRIVATE PARTNERSHIP (PPP)

The term ‘public-private partnerships’ (PPP) describes a form of investment conducted on the basis of a contract between an authorised State body and an investor and/or project company in order to implement, manage and operate an infrastructure project or to provide public services.

On 29 March 2021, the Government of Vietnam officially promulgated Decree No. 35/2021/ND-CP (Decree 35) on PPP, which came into force on the same day, in an attempt to address Vietnam’s contemporary infrastructure challenges and provide an enabling business environment that promotes private sector participation in long-term strategic public infrastructure development.

Decree 35 provides a clear and consistent framework for all kinds of PPP projects in Vietnam. It also expanded the sectors and types of public infrastructure in respect of which PPP concessions may be granted, which now include:

  1. transportation;
  2. transmission lines and power generation plants;
  3. irrigation; clear water supply, water drainage and wastewater treatment; waste treatment ;
  4. healthcare;
  5. education – training; and;
  6. information technology (IT) infrastructure.

Decree 35 also provides a legal framework for “unsolicited projects”, in which foreign investors may propose to the relevant ministries and local authorities the implementation of a project for their consideration.

BUSINESS CO-OPERATION CONTRACT (BCC)

A business cooperation contract (BCC) is a form of investment in which the parties (being foreign investors and/or domestic investors) enter into an agreement for the purpose of cooperating to operate one or more specific business activities. In a BCC investment, the foreign investor shall operate in accordance with the contract and does not set up a new business entity.

CROSS-BORDER SUPPLY OF SERVICES

Under Vietnam’s WTO Commitments, foreign service providers in most sectors (including architectural services, engineering services, computer services, legal services, accounting services, advertising services, etc.) are allowed to supply their services to customers in Vietnam even without establishing a commercial presence. This mode of supplying services is known as “cross-border supply”, because in this case only the service crosses the national frontiers.

Prior to establishing a legal presence in Vietnam, foreign investors should therefore carefully consider whether such establishment is actually required under Vietnamese law with respect to the business activities they intend to carry out, and whether other options (such as cross-border supply) might be preferable from a commercial perspective.

FOREIGN CONTRACTORS

Under Vietnamese law, a foreign-domiciled company supplying goods or services into Vietnam, or deriving income from Vietnam as a result of contracts or agreements with organisations or individuals in Vietnam, is defined as a “foreign contractor”. Compliance with Vietnamese law is mandatory, in connection with all supplies of goods or services within Vietnam.

Withholding tax (known as foreign contractor’s tax) is payable (generally) on services fees at various rates according to the nature of the activities performed (and is generally withheld by the customer and remitted to the State by the customer before payment to the foreign contractor is remitted out of Vietnam) – but, this is subject to double taxation avoidance treaties and other possible exemptions.

Special rules apply for foreign contractors in the construction industry, according to which the foreign contractor (which can be a general contractor, a main contractor, a partnership contractor or a sub-contractor) may conduct construction activities in Vietnam only after being issued with a construction activities licence (also known as a foreign contractor’s licence) by the State administrative agency for construction.

FRANCHISING

Under Article 284 of the Commercial Law, “franchise” is a commercial activity, whereby the franchisor permits and requests the franchisee to sell and purchase goods or supply services on his/her own, on the condition that:

  1. such sale and purchase of goods and/or supply of services must follow the method of business organisation indicated by the franchisor and be associated with the trademark, trade name, business know-how, business mission statements, business logo and advertising of the franchisor; and
  2. the franchisor is entitled to control and offer assistance to the franchisee in the conduct of the business.

Franchise activities are governed by the Commercial Law and its implementing legislation, including Decree 35/2006/ND-CP regarding Franchising (Decree 35). The IP Law is relevant as well when the franchisor also transfers to the franchisee the right to use certain industrial property during the franchise period.

Under Article 17 of Decree 35, a foreign service provider intending to enter into a franchising agreement in Vietnam is required to first register with the Ministry of Industry and Trade (MOIT) before undertaking any such franchising activities with a franchisee in Vietnam.

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FINANCIAL ISSUES

TAXATION

Vietnam has numerous kinds of taxes and duties, including (without limitation): (i) corporate income tax (CIT), (ii) personal income tax (PIT), (iii) value-added tax (VAT), (iv) foreign contractor withholding tax (FCT), (v) import-export duties, (vi) special consumption tax, (vii) property tax, (viii) environmental protection tax, (ix) tax on use of agricultural land and (x) tax on use of non-agricultural land.

Projects located in industrial zones (IZ), export-processing zones (EPZ), economic zones (EZ), or high-tech zones (HTZ) may enjoy preferential tax treatment.

REPATRIATION OF PROFITS

Vietnamese laws allow a foreign invested enterprise to remit abroad the profits gained from its business activities in Vietnam.

The remittance of the profits may be in cash or in kind, and may be made annually or at the termination of the investment project. If it is in cash, it is allowed to be made in a freely convertible currency at the exchange rate at the commercial bank of the investor’s choice. However, there are some restrictions on the remittance of profits out of Vietnam:

  1. first, the foreign investor has to discharge fully its financial obligations to the State of Vietnam prior to the remittance, i.e. subsequent to the discharge of all taxation or other sums due to the State including social insurance, contributions, penalties or other sums; and
  2. secondly, the amount of profits shall be determined based on the audited financial statements of the company. Therefore, the company may only remit its profits overseas subsequent to the submission of the audited financial statements and the declaration of finalisation of CIT for the relevant financial year to the tax authorities.

Another important point to note is that a foreign investor is not permitted to remit overseas profits distributed or received from direct investment activities in Vietnam for the year in which such profit arises if the financial statements of the foreign invested enterprise for the year in which the profit arises still includes accumulated losses, after carrying forward losses in accordance with the Law on Corporate Income Tax.

In addition to profits, Vietnamese laws allow the foreign investor to remit abroad the payments received from the provision of technology, services and intellectual property; the principal of, and interest on, foreign loans; invested capital and proceeds from the liquidation of investments; and other sums of money and assets lawfully owned by the investor.

FOREIGN EXCHANGE CONTROLS

As a general principle, all transactions, payments, listings, advertising, quotations, setting prices and recording prices in contracts and agreements and other similar forms within the territory of Vietnam must be carried out in the domestic currency being the Vietnam Dong.

Exceptions to the above rule include, among others, capital contributions for the purpose of foreign investment projects in Vietnam; price quotations in contracts of import and export entrustments, and hotel and tourism services, salary packages and payments to foreign employees; transfers between non-residents.

The law further allows the purchase of foreign currency from licensed credit institutions for certain permitted transactions for specific purposes, such as payments for imports and services abroad, repayment of certain loans and the payment of interest accrued thereon and repatriation of investments from Vietnam.

TRANSFER PRICING RULES

According to current Vietnamese laws, transfer pricing is governed by the regulations relating to business transactions between associated parties (Associated Transactions). If a taxation authority determines that an Associated Transaction was not conducted on an arm’s length basis resulting in the transfer price being less than the fair market price it may determine prices to be used for tax declaration and calculation and impose additional taxes.

Enterprises are responsible for declaring their Associated Transactions at the time of making settlement for CIT. The deadline for making this declaration is also the same time as for CIT finalisation. Under the current regulations, enterprises shall select random transaction(s) to compare with its Associated Transactions for the purposes of determining taxation.

INTELLECTUAL PROPERTY

Protection for IP (including trademarks and inventions) is provided under the Law on IP as well as under various international treaties entered into by Vietnam such as the Paris Convention for the Protection of Industrial Property.

Once they have been registered with the National Office of Intellectual Property (NOIP), trademarks and inventions will be protected in Vietnam. Contracts for the assignment of industrial property rights (including trademarks and inventions) must also be registered with NOIP. Licences of industrial property are not required to be registered, but will only be enforceable against third parties if registered.

Inventions may be protected by way of a patent, granted by the NOIP. The term of patent protection is 20 years from the filing date with no extension upon the expiration of protection. Meanwhile, the term of trademark protection is 10 years from the filing date with the possibility to be extended for further periods of 10 years.

The law provides intellectual property right holders whose rights are infringed with a variety of remedies: civil (preliminary injunctions to seize, collect and preserve evidence of infringement as well as compensation for damages caused by infringement), administrative (including confiscation, warnings or fines), criminal (including imprisonment in case of serious cases) and customs remedies (provisional suspension of customs procedures for imported or exported goods suspected of infringing intellectual property rights).

STATE OWNED ENTERPRISES AND EQUITISATION

Equitisation means the conversion of a State-owned enterprise (SOE) into a joint stock company having more than one owner. It is a form of corporatisation and often leads to what are, known as privatisations in other jurisdictions. The Vietnamese government is planning to intensify its programme of equitisation of SOEs and to accelerate the divestment of State capital from businesses in the next few years, with a view to increasing the efficiency and competitiveness of the Vietnam economy. In order for an equitisation to be implemented, however, the SOE must not fall within the category of enterprises in which it is “necessary for the State to hold 100% of the charter capital”, as determined by the Prime Minister from time to time.

STOCK MARKET

There are two stock exchanges in Vietnam: the Ho Chi Minh City Stock Exchange (HOSE) and the Hanoi Stock Exchange (HSX). Foreigners are allowed to invest in both the HOSE and the HSX, although several restrictions apply in certain sectors with respect to foreign shareholdings.

The State Securities Commission is the government body under the Ministry of Finance with the responsibility to administer and supervise the operation of the stock exchanges, securities trading centres, security depository centres, and other subsidiary institutions, and to issue, extend and withdraw licences and certificates relating to securities activities and the securities market.

COMPETITION

Vietnamese Law on Competition (LOC) applies to every organisation and individual conducting business in Vietnam, including enterprises engaged in production or supply of public utility products or services, enterprises conducting business in State monopoly industries and sectors and overseas enterprises operating in Vietnam. The LOC covers two main aspects: competition restraint practices and unfair competition practices. Competition restraint practices include (i) agreements restraining competition; (ii) abuse of dominant market position/monopoly position; and (iii) economic concentrations.

COURT SYSTEM AND JUDICIAL RECOURSE

COURT SYSTEM

Vietnamese law provides for a court system, which comprises:

  1. Supreme People’s Court;
  2. Superior People’s Court;
  3. Provincial People’s Courts;
  4. District People’s Courts.

The Vietnamese court system is based on a two-tier system to guarantee that the rulings of a lower court can be appealed to a higher court. The higher court then may either uphold or reverse the ruling from the lower court. Usually cases are initially brought to the district or provincial court level, and may then be appealed to the higher court level.

A dispute may, depending on the type and the value of the dispute, either be heard at the district court or the provincial court at the first instance. The recognition of foreign judgments and foreign arbitral awards falls within the jurisdiction of the provincial court.

ARBITRATION

Arbitration as a method of dispute settlement in the commercial sector is becoming increasingly common in Vietnam. Both domestic and foreign arbitration are recognised in Vietnam. As a general rule, however, a foreign arbitral award is only capable of being enforced in Vietnam following the recognition and issuance of an enforcement order by a Vietnamese Court.

For arbitration to take place there must be a clause in a contract or a separate arbitration agreement in which the parties agree to resolve a certain dispute through arbitration. The arbitration agreement must be in writing and entered into by the parties prior to, or after, the dispute occurs.

RECOGNITION AND ENFORCEMENT OF FOREIGN ARBITRAL AWARDS

Vietnam is a member of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention), and therefore the recognition and enforcement of foreign arbitral awards in Vietnam shall happen in conformity with the rules of the New York Convention. Accordingly, a foreign arbitral award, which is recognised and enforced by a Vietnamese Court, has the same legal effect as a legally valid decision made by a Vietnamese Court.

Vietnam recently adopted the Civil Procedures Code No. 92/2015/QH13 (Civil Procedures Code), which entered into force on 1 July 2016 and replaced the former Civil Procedures Code 2004. The Civil Procedures Code introduced several positive changes aiming to make the recognition and enforcement of foreign arbitral awards in Vietnam become more effective.

First and foremost, the Civil Procedures Code clarifies that the party opposing the recognition and enforcement of a foreign arbitral award has an obligation to prove the grounds for refusal. This is a key principle, because it means that the burden of proof for obtaining the recognition does not lie on the petitioner. Petitioners only need to submit the originals or certified true copies of the foreign arbitrator’s award and of the relevant arbitration agreements.

Secondly, the Civil Procedures Code provides for additional clarifications with respect to the suspension of examination of the petition. In particular, during the suspension period, the judges are responsible for supervising and speeding up the elimination of all suspension causes and, when the suspension causes no longer exist, the judges shall issue a decision to continue the examination proceeding.

Finally, the decision to recognise or refuse to recognize the arbitral award can now be appealed. The Civil Procedures Code also expanded the authority of the appeal panel, which is now entitled to cancel the decision of the first-instance court and to forward

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At the seminar to announce the Report “Flow of business law in Vietnam 2024 and the Assessment Report on standards and technical regulations” of Vietnam Chamber of Commerce and Industry (VCCI) on April 22, 2025 LLM., Lawyer Nguyen Thanh Ha Vice Director – Vietthink Law Firm & IP Agent Vietnam aims to attract investment in waste-to-energy (WTE) projects to simultaneously solve urgent issues in environmental protection, combat climate change, promote sustainable development and enhance the circular economy [1], in which it is necessary to improve management efficiency,  urban waste treatment in the direction of promoting new technologies to replace outdated and adversely affecting incineration and landfill technologies, promoting energy regeneration and recycled products and fuels [2],[3]. For developing countries, shifting public investment towards private-sector participation presents an opportunity to leverage technological expertise, financial resources, and international experience in waste-to-energy project development. However, in Vietnam, investment attraction in this sector remains largely ineffective due to unresolved legal barriers. These obstacles stem from overlapping regulations, systemic inadequacies, and the absence of detailed legal guidance on bidding, environmental compliance, and related processes. Even in somes provinces where the National Assembly has approved specialized mechanisms to facilitate such investments, the effectiveness has been limited, and the framework has not been widely replicable across other regions [4],[5]. Since 2018, the expert team of Vietthink Law Firm has provided legal advisory services for numerous municipal solid waste (MSW) treatment projects (WTE projects) in Vietnam. Through this experience, it has become evident that most WTE projects face significant “deadlocks” affecting both investors and local authorities. These challenges hinder project implementation, resulting in delays and the failure to meet expected investment progress [6]. Drawing from practical consulting experience, as well as policy and legal research in the WTE sector, this research summarizes key legal barriers and proposes solutions to eliminate obstacles. The objective is to enhance investment effectiveness and accelerate the development of WTE projects in Vietnam. Legal barriers restraining investors and challenging local authorities Regulations on bidding for investor selection and bidding for procurement of MSW treatment facilities In accordance with the provisions of the Law on Investment 2020 and the Law on Bidding 2023, guided by Decree No. 23/2024/ND-CP dated February 27, 2024, an investment project on the construction of MSW plant is subject to the bidding of investor selection. Furthermore, pursuant to Article 78 of the Law on Environmental Protection 2020 (Law on Environmental Protection), the selection of MSW treatment facilities must be conducted by the provincial-level People’s Committee through bidding process in accordance with the law on bidding, and selection in the form of ordering and task assignment is permissible only when selection through bidding is not feasible. Under the above provisions, the investor of a new investment MSW treatment plant project must undergo two bidding procedures: (i) Bidding for investor selection to implement the project in accordance with the law on investment,  bidding and specialized laws; and (ii) Bidding for selection of MSW treatment facilities in accordance with the law on bidding and regulations on ordering public non-business services funded by the State budget. However, practical application of Article 78 of the Law on Environmental Protection reveals the following shortcomings: First, many local authorities struggle to distinguish these two bidding procedures: Bidding for investor selection to implement land-use projects is typically applied to newly invested WTE projects or those under the public-private partnership (PPP) model. However, it does not apply to existing projects that undergo technological conversion (e.g., transitioning from traditional incineration and landfill methods to incineration with power generation). The investor selection bidding process is conducted once for the entire project implementation period and must be completed before the investor begins project execution and investment. In contrast, bidding for the selection of MSW treatment facilities is a procedure for identifying establishments that provide public non-business services funded by the State budget. This process is organized annually or periodically in accordance with budget management regulations. Generally, investors are only eligible to participate in bidding for the selection of MSW treatment facilities once they have completed the investment and construction of the plant. In consulting practice, our expert team has observed inconsistent understandings and views on the aforementioned regulations in certain localities. This has resulted in local management agencies offering conflicting opinions and guidance to investors regarding procedures and requirements for project implementation and provision of MSW treatment at the provincial level. Second, Article 78 of the Law on Environmental Protection outlines general regulations for bidding in the selection of MSW treatment facilities. However, it lacks specific provisions for power generation MSW treatment projects (WTE project), failing to account for the distinct characteristics of these projects compared to conventional MSW treatment projects. WTE projects utilize modern technology and require substantial investment, necessitating a commitment or guarantee regarding project inputs. Specifically, the input MSW for these projects is managed by the State, not under the autonomy of the investor. The stability and sufficiency of input waste volume throughout the project’s term are essential to ensuring its output and financial viability. Key revenue streams include electricity sales, fuel, recycled products derived from waste, and income from MSW treatment services. Consequently, the requirement for investors to dedicate significant capital and resources to a project while simultaneously participating in annual bidding processes for the selection of MSW treatment facilities poses substantial financial risks. A key prerequisite for investors to commit capital and for banks and credit institutions to finance the project is the assurance from local management agencies regarding a stable supply of input waste. However, under the provisions of Article 78 of the Law on Environmental Protection, local Authorities are restricted from making commitments to guarantee input waste supply or from deciding to order long-term MSW treatment services for investors. Some localities, such as Da Nang City and Ho Chi Minh City, have implemented specific mechanisms for ordering MSW treatment services for projects involving technological conversion with energy recovery. Nevertheless, these mechanisms remain limited in scope, have not been fully institutionalized, and are not uniformly applicable across other localities nationwide. As a result, since the Law on Environmental Protection 2020 took effect, nearly all WTE projects have stagnated, unable to progress due to the lack of viable solutions to overcome these regulatory obstacles faced by both investors and local authorities. Third, in terms of purpose, bidding for investor selection in MSW treatment projects and bidding for the selection of MSW treatment facilities are intended to uphold competitiveness, fairness, transparency, and economic efficiency in MSW investment and treatment. However, the rigid application of Article 78 of the Law on Environmental Protection creates contradictions and overlaps with planning, investment, and waste management regulations. Specifically, for both new investment projects and technology transformation projects, when assessing and approving an investor’s implementation of a project, the competent Authorities have already evaluated its alignment with various planning frameworks, including the local general plan and the MSW management plan. Pursuant to the Law on Planning and the Law on Environmental Protection, MSW treatment areas and WTE projects are incorporated into provincial planning or inter-regional and inter-provincial waste management planning. Therefore, in principle, competent Authorities have already allocated and determined the volume of input waste assigned to each solid waste treatment area within the planning framework before granting investment approval. As a result, organizing bidding for MSW treatment services in areas that have already been designated within the planning framework may no longer be necessary to ensure competition, fairness, and transparency. Fourth, regarding the need for bidding to ensure economic efficiency and competitiveness in solid waste treatment service pricing, we believe that these objectives can still be achieved through mechanisms and principles governing price adjustments and service quality regulations, in accordance with the Law on the State Budget and its guiding documents. Moreover, our consulting experience indicates that many localities remain concerned about the need to conduct bidding to ensure competitive pricing, often by comparing outdated MSW treatment technology costs with those of modern WTE technologies. We find these concerns to be misplaced, as the inevitable increase in costs associated with adopting new technologies is a necessary step toward achieving the broader goal of gradually phasing out (and ultimately eliminating) MSW treatment plants relying on outdated technologies. The transition to modern technologies aligns with strategic objectives related to environmental protection, climate change mitigation, and the advancement of a circular economy ranging from the national level to regional, inter-regional, and provincial levels. Lack of regulations and mechanisms enabling competent Authorities to commit to the volume of input waste for WTE projects As analyzed above, MSW treatment services fall under public non-business services funded by the State budget. As a result, competent Authorities cannot commit to ensuring the supply of input waste for the entire project implementation period without first conducting a bidding process, due to the absence of a specific mechanism or any legal document providing clear guidance on this matter. Although local Authorities recognize the legitimate needs of investors and the distinct characteristics of waste-to-energy projects compared to conventional MSW treatment projects, Article 78 of the Law on Environmental Protection and its guiding documents fail to specify what constitutes “impossible cases for selection through bidding” to justify applying the ordering mechanism as prescribed. Meanwhile, when evaluating the conditions for applying the ordering mechanism under Clause 2, Article 12 of Decree No. 32/2019/ND-CP dated April 10, 2019 - which governs the assignment of tasks, ordering, or bidding for the provision of public products and services using State budget funds from recurrent expenditures - two of the three conditions are challenging to fulfill before an investor completes the construction of the facility. These include: (i) demonstrating specificity related to intellectual property or proving that only one supplier has registered to provide the service; and (ii) requiring economic and technical norms, unit prices, and pricing for public non-business services to be issued by competent authorities as a basis for placing orders. In order to support investors but still ensure that there is a basis to apply the form of ordering MSW treatment services for WTE plants, some localities also consider organizing bidding to have a basis to prove the case of “only one supplier registering to implement” according to Clause 2, Article 12 of Decree No. 32/2019/ND-CP or in cases where it is impossible organize bidding according to Article 78 of the Law on Environmental Protection. However, after that, local management agencies also faced difficulties in developing the conditions and criteria of the bidding package because there were no detailed guidelines for bidding for the selection of MSW treatment facilities for waste-to-energy projects, and there were no economic-technical norms and unit prices and public service prices are promulgated [7]. If approached in the above way, then even if the bidding is successfully organized, the order cannot be carried out for the entire operation time of the project. The Investor may propose various forms of guarantee regarding the volume of input waste to the local management agency, including: (i) A long-term contract between the Authority and the Investor, stipulating the volume of waste that the locality will provide to the Plant throughout the project implementation period. This volume is typically based on the Investment Policy Approval. The contract may also outline the unit price for solid waste treatment services, temporarily calculated according to the pricing principles set forth in Circular No. 02/2022/TT-BTNMT dated January 10, 2022, issued by the Ministry of Natural Resources and Environment. Additionally, the contract should define the rights and obligations of the parties at each stage of project implementation; (ii) An administrative document or decision issued by the Authority, committing to provide a sufficient volume of input waste for the entire project duration and specifying the temporarily calculated unit price for MSW treatment services. From the perspective of credit institutions and banks providing capital, a long-term contract between the Authority and the Investor offers a stronger legal basis for financial appraisal and mitigates risks associated with policy changes compared to administrative documents. However, as previously analyzed, both methods face challenges. Local management agencies struggle to find legal documents detailing these provisions and lack standardized long-term contract templates issued by specialized ministries. Consequently, localities remain hesitant to implement these approaches. Some may refer to long-term contracts previously signed between Investors and other localities, such as Hanoi City and Phu Tho Province, as potential models. Proposed Solutions to Address Legal Barriers and Enhance Investment Efficiency in Waste-to-Energy Projects in Vietnam Based on practical experience in providing investment consulting for waste-to-energy projects in Vietnam and in-depth research into relevant policies and legal regulations in this field, we propose several solutions to eliminate legal barriers and enhance the investment efficiency of WTE projects in Vietnam: First, it is necessary to introduce specific mechanisms and normative documents permitting the application of the ordering mechanism for MSW treatment services for WTE projects. To ensure transparency and economic efficiency in the selection and payment of MSW treatment services in accordance with budget management regulations, detailed conditions could be added regarding the application of the ordering mechanism, the timing and duration of orders, and principles for price adjustments, specifically tailored for WTE projects. Second, there should be specific mechanisms and normative documents outlining the forms through which local management agencies can commit to providing the volume of input waste for WTE projects that have been approved in alignment with relevant planning frameworks and MSW management plans. Consideration could be given to issuing a model contract for MSW treatment services with power generation, specifically applicable to WTE projects. Third, it is essential to review and refine waste management planning at the provincial, regional, and inter-regional levels to ensure the appropriate allocation of waste treatment facilities and the streamlined flow of waste collection, transportation, and treatment to centralized facilities. If WTE projects and centralized MSW treatment facilities are appropriately allocated within provincial, regional, inter-regional, and local waste management plans, the obstacles related to ensuring the volume of input waste for waste-to-energy projects can be resolved. Fourth, there is an urgent need to issue detailed guiding regulations and model contracts for waste-to-energy projects, particularly those aimed at attracting and selecting investors under the public-private partnership (PPP) model. List of References Central Committee (2022). Resolution No. 24-NQ/TW of the Politburo on Socio-Economic Development and Ensuring National Defense and Security in the Southeast Region until 2030, with a Vision to 2045. Prime Minister (2021). Decision No. 1658/QD-TTg Approving the National Green Growth Strategy for 2021–2030, with a Vision to 2050. Prime Minister (2022). Decision No. 896/QD-TTg Approving the National Climate Change Strategy until 2050. National Assembly of the Socialist Republic of Vietnam (2024). Resolution No. 136/2024/QH15 on Urban Governance and Pilot Implementation of Specific Mechanisms and Policies for the Development of Da Nang City. National Assembly of the Socialist Republic of Vietnam (2023). Resolution No. 98/2023/QH15 on Pilot Implementation of Specific Mechanisms and Policies for the Development of Ho Chi Minh City. Dau Anh Tuan, Pham Ngoc Thach, Pham Van Hung (2024). Investment Procedures for Waste-to-Energy Plants: Barriers and Solutions, Report, Vietnam Chamber of Commerce and Industry (VCCI). Pham Thieu (2025). Challenges in Determining Unit Pricing for Domestic Waste Treatment in Ninh Binh. Agriculture & Environment Newspaper, https://nongnghiepmoitruong.vn/vuong-mac-trong-xac-dinh-don-gia-xu-ly-rac-sinh-hoat-o-ninh-binh-d747118.html, accessed: April 21, 2025. Linh Dan (2025). Da Nang Proposes Canceling Investment Policy for 1,000-Ton/Day Waste Treatment Plant Project. Investment Newspaper Online, https://baodautu.vn/da-nang-de-xuat-bo-chu-truong-dau-tu-du-an-nha-may-xu-ly-rac-1000-tanngay-d247025.html, accessed: April 21, 2025. Tam An (2025). Waste-to-Energy Faces Mounting Challenges, with Projects Taking 5–8 Years to Complete. Vietnamnet, https://vietnamnet.vn/dien-rac-gap-kho-chong-chat-mot-du-an-mat-5-8-nam-moi-hoan-thanh-2387083.html, accessed: April 21, 2025. Tam An (2024). Waste-to-Energy Already Difficult, Made Harder by Electricity Price Negotiations. Vietnamnet, https://vietnamnet.vn/dien-rac-da-kho-cang-kho-them-neu-phai-dam-phan-gia-dien-2241653.html, accessed: April 21, 2025.  
Vietthink Law Firm - 05 June 2025