Trần Nguyên Hạnh – Junior Associate – Indochine Counsel
For years, Việt Nam, as a developing country, has tried to reform its legal framework for investment to make it consistent with a market economy.
In this regard, various new laws and regulations have been adopted by the Vietnamese government, and as a consequence, it is also more concerned with the investment guarantee system for investors in Việt Nam. In response to this, in 2005, Việt Nam adopted an (unified) investment law (2005 Investment Law) and the enterprise law to put all foreign and domestic investors on a more equal footing and stipulated therein a separate chapter to address investment guarantees, including the protection of asset ownership, overseas remittance of foreign investors’ assets and investment incentives in the event of changes in law.
In the amended investment law adopted in 2014 (2014 Investment Law), effective from July 1, 2015, the government further updated and strengthened its regulations of investment guarantees. Notably, regarding investment incentives in the event of changes in law, the 2014 Investment Law and its guiding regulations warrant that existing investors will be able to benefit from whichever provisions are most favourable during the remaining time in which the project is entitled to incentives.
Of note, where a new legal instrument provides lower investment incentives than those the investor has previously enjoyed, such warrants shall be applicable to not only incentives stated in the investment certificate of the investor in accordance with the 2005 Investment Law but also other incentives to which the investors are entitled under previous regulations. However, these regulations may not be applied in certain special cases required by the law, including changes in law due to national defence and security, social order and safety, social morals, community health or environmental protection. In such exceptional cases and upon a written request lodged by the investor within a period of three years from the effective date of the new legal instrument, the disadvantages stemming from a change in law may be compensated by one or more of the following alternative measures: (i) deduction of actual loss and damage from taxable income; (ii) permission to amend operations; and/or (iii) other means of compensation for any damages.
Foreign investors, on the other hand, in case of a dispute arising against the competent authorities of Việt Nam related to the entitlement of "more favourable" incentives, can bring the case before the Vietnamese court or any of the arbitration bodies (Vietnamese arbitration body, foreign arbitration body, international arbitration body or arbitration tribunal agreed on by all parties) to protect their legitimate rights and interests.
From the above, it may be concluded that, in cases of changes in legislation from the State, the general rule being implemented is an assurance of the maximum interests of the investors, showing the State’s efforts to maintain and strengthen the trust of investors in the investment environment of Việt Nam. — INDOCHINE COUNSEL