Vietnam has been working hard to improve its social-economic legal system with a view to creating an environment and level-playing field conducive for the development of a market economy and in compliance with WTO rules.
Apart from the amendment to the constitution recognizing a multi-sector economic system and a new Civil Code which recognizes individual ownership, the National Assembly has also passed many other laws and ordinances governing the functioning of a market economy. These include, among others, the Labor Code, the Law on Enterprises, the Law on Investment, banking laws, tax laws, the Trade Law, the Law on Export and Import Duties, the Bankruptcy Law, the Law on Insurance Business, the Law on Accounting, the Customs Law, the Law on Intellectual Property Rights, the Ordinance on National and MFN Treatment, the Anti-Dumping Ordinance, Ordinance on Measures Against Subsidized Imports, the Ordinance on Advertising, the Ordinance on Foreign Exchange Control, as well as others. The Government has also issued many decrees elaborating the laws and ordinances as well as regulating business activities where laws are still absent.
Despite the significant advances the country has made toward establishing a more comprehensive and sophisticated legal system, problems remain. Legislation is still incomplete, and sometimes vague and/or subject to different interpretations. However, these problems are not insurmountable obstacles.
Problem: The lack of clear legislation and proper legal framework for a market economy can leave critical areas — including certain aspects of taxation, dispute resolution, etc. — uncertain.
Possible solution: Although a great number of laws and regulations have been enacted in recent years, Vietnam remains years away from developing the full legal framework necessary for a smoothly functioning market economy. Nevertheless, the potential investor can take a number of steps to avoid the problems that might result from this situation.
Careful research into existing laws, ordinances, regulations and circulars (laws and ordinances are enacted by the National Assembly and its Standing Committee respectively; degrees elaborating and detailing laws and ordinances are issued by the government; and circulars guiding the implementation of regulations are issued by relevant ministries) can identify the gaps or even discrepancies in existing rules. This research should include meetings with the relevant officials for clarification, if necessary, prior to the investment. The investor should also seek legal advice on the project to uncover any potentially “hidden costs.”
Meticulous documentation associated with obtaining the investment license, which receives the stamp of approval from the licensing body, provides some security as well, since it can bridge gaps left by legislation.
In terms of potential disputes between joint venture partners, some investors choose to designate a third country for arbitration. Foreign arbitration awards are now enforceable in Vietnam. However, a better approach is to try to anticipate potential problems and agree on their solutions (including the bearing of costs, etc.) during the joint venture negotiation process and then to carefully negotiate and outline the procedures for settling disputes in the joint venture contract. This in turn will be presented to and approved by the licensing body in your license application.
There are many foreign and Vietnamese law firms operating in the country. They can be a good source of legal advice for foreign investors.