This month alert, we set out below a brief update on the new Decree on Public Private Partnerships, a recent regulation on financial transactions in Vietnam, and a new decree guiding the implementation of provisions of the Labor Code..

Enhanced legal framework  for investment via PPPs

Decree No. 15/2015/ND-CP was promulgated on 14 February 2015 on the types of Public Private Partnership (“PPP”) arrangements in Vietnam (“Decree 15”).  Decree 15 will become effective from 9 April 2015 and replaces Decree No. 108/2009/ND-CP (as amended) and Decision No. 71/2010/QD-TTg on PPPs. Decree 15 is seen as a deliberate step by Vietnam’s Government towards more bankable PPP projects and an attempt to further develop its infrastructure system.

Some of the basic changes in Decree 15 are:

  • More forms of PPP projects are now available (e.g., BOO, BTL, BLT and O&M);
  • Incentives in the tendering process to investors with approved feasibility studies / project proposals;
  • Ability to choose foreign law as the governing law in certain circumstances and international dispute resolution mechanisms; and
  • Government guarantees and other incentives.

Restrictions on the use of cash for the payment or transfer of capital contributions

The Ministry of Finance of Vietnam issued Circular No. 09/2015/TT-BTC dated 29 January 2015 (“Circular 09which prescribes the forms of payment which are permitted for capital contributions or the transfer of capital contributions of  enterprises. Circular 09 became effective on 17 March 2015.

In accordance with Circular 09 enterprises are prohibited from using cash as payment for capital contributions or for the transfer of capital contributions. When carrying out such transactions, enterprises are required to use one of the following payment methods:

  • cheque;
  • payment orders or authorized transfer; or
  • other non-cash payments as permitted from time to time by Vietnamese laws (such as online payments).

In-kind capital contributions must still be in accordance with the Law on Enterprises.

Guidance on certain provisions of the Labor Code

The Government of Vietnam issued Decree No. 05/2015/ND-CP (“Decree 05”) dated 12 January 2015 which provides guidance on a number of articles in the Labor Code of Vietnam. Decree 05 became effective on 1 March 2015 and replaced Decree No. 196/CP guiding the Labor code on collective bargaining labor agreements, Decree No. 93/2002/ND-CP amending Decree No. 196/CP, Decree No. 41/CP guiding the Labor Code on labor discipline and material liabilities, and Decree No. 33/2003/ND-CP amending Decree No. 41/CP, Decree No. 11/2008/ND-CP on compensation for illegal strikes detrimental to employers.

Mandatory contents of a labor contract

Decree 05 specifies the mandatory contents of a labor contract must include details of the employer and employee, job description, location, term, salary, working and rest times, personal protective equipment and  social insurances. These requirements are not totally new as the 2012 Labor Code already provides broadly similar terms.

Notification by the employer prior to the completion of the probation period

An employer is now required to notify an employee at least 3 days prior to the completion date of the probation period about the employee’s performance during the probation period, and the parties are required to execute a labor contract if the employee has satisfied the probation requirements.

Unilateral termination of labor contract by the employer

Decree 05 provides further guidance relating to an employer’s right to unilaterally terminate a labor contract.  An employer is permitted to unilaterally terminate a labor contract where there is a company restructuring, technology changes or due to “economic reasons”. Economic reasons may include an “economic crisis or recession” and “implementation of the State’s policies when restructuring the economy or implementation of commitments to international treaties”. Despite the attempt at clarification as to what will form a valid “economic reason” for termination, it remains unclear and it is difficult to anticipate how the labor authorities and courts will interpret this provision.

If a labor contract is terminated by the employer on the grounds of restructuring, technological change or economic reasons, the employer is only required to pay the retrenchment allowance rather than both the severance allowance and retrenchment allowance (the amounts of which are set out in the Labor Code). This clarification is welcome as the point has been debated in light of the previous ambiguous provisions of the Labor Code. The Decree also provides detailed guidance for the determination of the working period to calculate the severance and retrenchment allowances.

Where a company’s assets are transferred to any third party the employees have the right to have their labor contracts transferred to the new owner or the former employer is required to pay a retrenchment allowance to the employees whose labor contracts are terminated.

Content of Internal Labor Rules

Decree 05 sets out specific matters that must be included in an company’s internal labor rules, including working hours, rest breaks, workplace orders, occupational health and safety, protection of assets, confidentiality obligations, and what conduct would constitute a breach of the internal rules and be subject to disciplinary procedures.  

Procedures for disciplinary hearings

Decree 05 also sets out the procedures for handling labor disciplines. Disciplinary hearings can only be organized by an employer when all the required participants are present, including the enterprise’s trade union representative, or the federal labor representative at the district level in cases where an enterprise does not have trade union. If any of the required attendants fails to attend the disciplinary hearing after three summons, the meeting shall proceed without their attendance and the reason for the absence shall be recorded in the minutes of the meeting.