Public-Private Partnership (PPP) has been the cornerstone for infrastructure development and has been utilized in the past in Vietnam with varying degrees of success. Those agreements were often legally cumbersome and were put together largely on faith that both the government and investor would live up to their end of the agreement. With the implementation of the CPTPP and EVFTA/IPA and the new Law on Investment in the form of PPP 2020, the regulatory environment has shifted towards favorable conditions for PPP to become a bedrock of Vietnam's development.
The Comprehensive and Progressive Trans-Pacific Partnership (CPTPP) came into force on 14 January 2019 for Vietnam and currently include the following signatories: Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam. In addition, China, Ecuador, Taiwan and United Kingdom applied and awaiting result on their accession to the CPTPP. The EU-Vietnam Free Trade Agreement (EVFTA) came into force on 1 August 2020 between the European Union countries and Vietnam.
Public Procurement:
Vietnam has one of the highest ratios of public investment-to-GDP
in the world (39 per cent annually from 1995). However, Vietnam did
not agree to its Government procurement being covered by the
Government Procurement Agreement (GPA) of the WTO until the
EVFTA
The FTA commitments on Government Procurement mainly deal with the
requirement to treat EU bidders, or domestic bidders with EU
investment capital, equally with Vietnamese bidders when the
Government purchases goods or requests a service worth over the
specified threshold. Vietnam undertakes to follow the general
principles of National Treatment and Non-discrimination. It will
publish information on intended procurement and post-award
information in Bao Dau Thau (Public Procurement Newspaper) and
information on the procurement system at muasamcong.mpi.gov.vn and
the official gazette in a timely manner. It will also allow
sufficient time for suppliers to prepare and submit requests for
participation in responsive tenders and maintain the
confidentiality of bidders
The FTA also requires its parties to assess bids based on fair and
objective principles, evaluate and award bids only based on
criteria set out in notices and tender documentation, and create an
effective regime for complaints and settling disputes. These rules
require parties to ensure that their bidding procedures match the
commitments and protect their own interests, thus helping Vietnam
to solve its problem of bids being won by cheap but low-quality
service providers.
Dispute Resolution:
An often overlooked but critical aspect from the investor's
perspective has been the dispute resolution process before these
trade agreements were in-force. Generally speaking, before CPTPP
and EVFTA/IPA, most foreign investors only had the Vietnamese
courts to address any dispute.
To protect interests of foreign investors, CPTPP allows foreign
investors to initiate a lawsuit in International Arbitration center
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 (EVIPA). The EVIPA is a sister agreement of the EVFTA and
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 (please refer to
further comments in the Legal Sector Committee's chapter on
Judicial and Arbitral Recourse).
Vietnam's other specific commitments under the CPTPP:
Regarding telecommunication services: Allow CPTPP countries to set
up joint ventures with a capital contribution of not more than 49%
for basic telecommunications services attached to the network
infrastructure. With value-added telecommunication services
attached to the network infrastructure, we agree to allow the
establishment of a joint venture with a capital contribution not
exceeding 65% after 5 years after the date of entry into force of
the Agreement. With services not attached to the network
infrastructure, open to CPTPP countries to invest and set up
enterprises with 100% foreign capital after 5 years from the date
of entry into force of the Agreement.
Vietnam's other specific commitments under the EVFTA:
Regarding Engineering services (CPC 8672) and Integrated
Engineering Services (CPC 8673): for commercial presence, the
supply of services related to topo¬ graphical, geotechnical,
hydro geological and environmental surveys and technical surveys
for urban-rural development planning, sectoral development planning
are subject to the authorization of the Government of Viet Nam.
Regarding Construction and related engineering services (CPC 514-518): cross border supply of services is fully open and foreign investors can open their branched in Vietnam, though the chief the each branch must be a resident in Vietnam.
Please do not hesitate to contact Dr. Oliver Massmann under omassmann@duanemorris.com if you have any questions or want to know more details on the above. Dr. Oliver Massmann is the General Director of Duane Morris Vietnam LLC.
Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.