Foreign investment issues

Investment restrictions

What restrictions, fees and taxes exist on foreign investment in or ownership of a project and related companies? Do the restrictions also apply to foreign investors or creditors in the event of foreclosure on the project and related companies? Are there any bilateral investment treaties with key nation states or other international treaties that may afford relief from such restrictions? Would such activities require registration with any government authority?

Under Vietnamese law, there may be statutory restrictions on foreign ownership of a project and related companies depending on the business sectors. However, with the accession of Vietnam to the World Trade Organization (WTO), foreign investors in several services sectors have been benefited from the uplifting of such restriction pursuant to the Schedule of Specific Commitments in Services of Vietnam to WTO. There are also certain restrictions; for example, foreign lenders cannot take security over land use rights in Vietnam. Such restrictions remain upon foreclosure on the project.

To date, Vietnam has signed over 80 bilateral investment treaties, with 47 treaties still in force. Some key nations are Australia, China, Germany and Japan. However, we understand that there is no bilateral investment treaty that may afford relief from such statutory restrictions.

Insurance restrictions

What restrictions, fees and taxes exist on insurance policies over project assets provided or guaranteed by foreign insurance companies? May such policies be payable to foreign secured creditors?

A project company established in Vietnam having foreign shareholders’ equity of less than 49 per cent of the charter capital of the enterprise can only obtain insurance policies from a duly licensed insurance company operating in Vietnam.

A project company established in Vietnam having foreign shareholders’ equity of more than 49 per cent of the charter capital of the enterprise may obtain insurance policies from either local or foreign insurance company. To provide cross-border insurance services in Vietnam, foreign insurance companies must meet certain conditions such as credit rating, total assets and required deposit; and having headquarters in a country with which Vietnam has entered into an international trade treaty, enabling the provision of cross-border insurance services in Vietnam.

Regarding reinsurance, cut-through clauses are customary, whereby proceeds from such policies will be paid to foreign insurance companies that agree to enter into a reinsurance agreement with a local insurance company. The law requires such foreign insurance company to satisfy some conditions such as credit ratings, total assets and other conditions, such as paying capacity required in the country of its headquarters.

Worker restrictions

What restrictions exist on bringing in foreign workers, technicians or executives to work on a project?

For foreign workers, technicians or executives to work on a project, there are several requirements applicable to both a foreign employer and a domestic employer and a foreign employee.

Requirements for employer

The domestic employer may only recruit a foreign employee if Vietnamese employees do not meet the requirements of the proposed position.

The domestic and foreign employers must decide on the number of foreign employees needed in each position and submit a report to the competent authority. They also need to report to the competent authority if there are changes on the number of foreign employees required.

The employer must report regularly to the competent authority on the employment of foreign employees.

Requirements for employee

Except for some cases provided by the Labour Code and Decree 11, foreign employees are required to have a work permit issued by competent authority. If foreign employees are not required to have a work permit, then the employer must seek confirmation from the competent authority.

Equipment restrictions

What restrictions exist on the importation of project equipment?

The importation of used equipment is subject to certain conditions; for example, such equipment must meet safety, energy saving and environmental protection requirements prescribed by the applicable law.

Certain equipment is prohibited by law from being imported. The importation of equipment must comply with the Law on Customs.

Nationalisation laws

What laws exist regarding the nationalisation or expropriation of project companies and assets? Are any forms of investment specially protected (from nationalisation or expropriation)?

The Law on Investment 2014 is the main legislation governing nationalisation or expropriation, which expressly states that:

lawful assets of investors shall not be nationalised or confiscated by administrative measures. Where an asset is bought or commandeered by the state on account of national defence and security, national interests, a state of emergency, prevention or recovery of a natural disaster, the investor shall be reimbursed or compensated in accordance with regulations of the law on property commandeering and relevant legal regulations.

In practice, sponsors will typically negotiate to include a contractual provision in a government guarantee or a project agreement to assure no nationalisation or expropriation of any assets of the investors, or for a stabilisation of the agreed rights and benefits conferred upon the investors throughout the duration of the project.