Vietnam has a favourable geological and geographical position for the formation and development of minerals; some types of minerals have significant reserves. According to statistics of the Ministry of Natural Resources and Environment, Vietnam’s mineral resources are quite diverse and rich with over 5,000 mines and ore points of about 60 different types of minerals. Some localities have mineral reserves of various types that are licensed to exploit such as: Thai Nguyen (with 19 types of solid minerals), Son La (14 types), Quang Binh, Quang Tri, Gia Lai, Hai Phong , Yen Bai… In addition, there are 18 areas with scattered minerals on a total area of 182.7 ha distributed in the provinces of Lao Cai, Cao Bang, Bac Kan, Lang Son, Phu Tho, Hai Duong, Nghe An, Quang Nam. However, only a fraction of Vietnam’s rich mineral resources has been discovered to date, due to the country having never been systematically explored using updated technologies and methods.
Investors eyeing the mining sphere in Vietnam must make use of its entitled benefits under the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP) and the EU-Vietnam Free Trade Agreement (EVFTA). The CPTPP came into force on 14 January 2019 for Vietnam, and as of March 2022, the UK has submitted its application to join this agreement. The EVFTA came into force on 1 August 2020 and its sister – the EU-Vietnam Investment Protection Agreement is expected to come into force in 2023.
CPTPP, Chapter 9 – Investment:
1. Vietnam’s requirements on mining:
Foreign investment in exploitation of minerals shall not be accepted unless the Vietnamese competent authorities advise the applicant that the investment is likely to be of net benefit to Viet Nam. In making this determination, the competent authority may consider the following factors:
(a) the effect of the investment on the level and nature of economic activity in Viet Nam, including the effect on employment, on the use of parts, components and services produced in Viet Nam and on exports from Viet Nam;
(b) the degree and significance of participation by Vietnamese in the investment;
(c) the effect of the investment on productivity, industrial efficiency, technological development and product innovation in Viet Nam;
(d) the effect of the investment on competition within an industry or industries in Viet Nam;
(e) the compatibility of the investment with national industrial, economic and cultural policies, taking into consideration industrial, economic and cultural policy objectives enunciated by the government or legislature of any province likely to be significantly affected by the investment; and
(f) the contribution of the investment to Viet Nam’s ability to compete in world markets. Foreign investors do not have to comply with all the above criteria to obtain the mining licence.
CPTPP investor is understood as an investor (State, enterprise or citizen) of another CPTPP country that is or has made an investment in the territory of Vietnam. However, CPTPP investors who fall into the following cases will be excluded from enjoying the rights under CPTPP:
+ is owned or controlled by a State, organization or individual of a country that is not a member of the CPTPP
+ owned or controlled by Vietnamese organizations or individuals
+ has no significant business activity in any of the CPTPP countries except Vietnam
Investment of a CPTPP investor is understood as any asset that a CPTPP investor owns or controls, directly or indirectly, of an investment nature (including characteristics such as a commitment to a capital, for the purpose of profit and presumption of risk) in Vietnam.
3. Forms of investment:
• an enterprise;
• shares, stock and other forms of equity participation in an enterprise;
• bonds, debentures, other debt instruments and loans;
• futures, options and other derivatives;
• turnkey, construction, management, production, concession, revenue-sharing and other similar contracts;
• intellectual property rights;
• licenses, authorizations, permits and similar rights conferred pursuant to the Party’s law; and
• other tangible or intangible, movable or immovable property, and related property rights, such as leases, mortgages, liens and pledges.
4. Market access principles
1. National Treatment: trading partners shall not discriminate against each other’s investors to favor their own investors.
2. Most-Favored-Nation Treatment: trading partners should not discriminate against each other’s investors to favor investors from any other country.
3. Performance Requirements: Vietnam must not promulgate requirements on the establishment, acquisition, expansion, management, operation of the investment (e.g. requirement to ensure a specific rario between export value and transferred foreign currency) or use it to decide to grant licenses to foreign investors. Vietnam has the right to promulgate requirement on the use of domestic labor.
4. Senior Management and Boards of Directors: Foreign investors have the freedom to appoint senior management positions regardless of nationality and prevent a party from a requirement of the same which might materially impair the ability of the investor to exercise control over its investment.
EVFTA – Chapter 8: Liberation of Investment and Trade
1. The principle of Most-Favoured-Nation Treatment does not apply to mining
2. For EU investors: Unbound (no requirements) for juridical persons controlled by natural or juridical persons of a non-Union country which accounts for more than 5 % of the Union’s oil or natural gas imports. Unbound for direct branching (incorporation is required). Unbound for extraction of crude petroleum and natural gas.
Investor-State Dispute Settlement (ISDS)
To protect interests of foreign investors, CPTPP allows foreign investors to initiate a lawsuit in International Arbitration centre in case interests of foreign investors are infringed by one member country (for example, expropriation, nationalization, minimum standard of treatment…), except in case disputes arising from the implementation of commitments or obligations of investment agreements and investment authorization.
This is also covered in the EU-Vietnam Investment Protection Agreement. The EVIPA is pending ratification by EU member states before it can come to force, expectedly by 2023. In disputes regarding investment (for example, expropriation without compensation or discrimination of investment), an investor is allowed to bring the dispute to the Investment Tribunal for settlement. To ensure the fairness and independence of the dispute settlement, a permanent Tribunal will be comprised of nine members: three nationals each appointed from the EU and Vietnam, together with three nationals appointed from third countries. Cases will be heard by a three-member Tribunal selected by the Chairman of the Tribunal in a random manner. This is also to ensure consistent rulings in similar cases, thus making the dispute settlement more predictable. The EVIPA also allows a sole Tribunal member where the claimant is a small or medium-sized enterprise, or the compensation of damaged claims is relatively low. This is a flexible approach considering that Vietnam is still a developing country.
In case either of the disputing parties disagrees with the decision of the Tribunal, it can appeal to the Appeal Tribunal. While this is different from the common arbitration proceeding, it is quite similar to the two-level dispute settlement mechanism in the WTO (Panel and Appellate Body). We believe that this mechanism could save time and costs for the whole proceedings.
The final settlement is binding and enforceable from the local courts regarding its validity, except for a five-year period following the entry into force of the EVIPA.