Legal Guide for Vietnam

The Socialist Republic of Vietnam, commonly referred to as Vietnam, is a country in Southeast Asia, that borders the Gulf of Thailand, Gulf of Tonkin, and the East Sea, alongside China, Laos, and Cambodia. Vietnam is a rapidly developing socialist-oriented market economy. Over the past twenty odd years, Vietnam has made a shift from a centrally planned economy to a socialist-oriented market economy. The economy has experienced rapid growth during the period of transition and today, Vietnam is in the process of integrating into the world’s economy.


In 1802, Prince Nguyen Anh united the northern, central and southern regions of the country and called it Vietnam. The prince and the emperors who followed established programs to build new bridges and castles and restore old structures. Angered by Vietnam's positions against business deals and Catholic missionaries, the French launched their first major attack against Vietnam in 1847. They fired upon the Vietnamese at the port of Da Nang, a city in central Vietnam. France took control of Vietnam, and in 1887 Vietnam became a French colony. The French took charge of Vietnam's farmlands, minerals and other natural resources. They also introduced the Vietnamese to European schooling and customs.


Vietnam is one of the fastest growing economies in Asia. It weathered the 2008 global financial crisis quite well with signs of recovery observed in 2009. Vietnam’s membership in the ASEAN Free Trade Area (“AFTA”) in 1995 and entry into force of the US-Vietnam Bilateral Trade Agreement in December 2001 has led to rapid changes in Vietnam’s trade and economic regime. US-Vietnam bilateral trade has grown from about USD220 million in 1994 to USD45.1 billion in 2015, transforming Vietnam into the 13th-largest source for US imports and 37th-largest destination for US exports.


The politics of the Socialist Republic of Vietnam are defined by a single-party socialist republic framework, where the President of Vietnam is the head of state and the Prime Minister of Vietnam is the head of government, in a one-party system led by the Communist Party of Vietnam.


The Vietnamese court system includes the Supreme People’s Court, the Superior People’s Court (first introduced by the new Law on Organization of People’s Court in 2014), the Provincial People’s Courts in cities and provinces, and the District People’s Courts.


The current legal system is similar to civil law jurisdictions in that its sources of law comprise only written legislation commonly referred to as legal instruments. These are laws and regulations enacted by state bodies which are binding on citizens and enforceable by the state. Court judgments are not officially considered a source of law as judges do not have the power to interpret the law and court judgments are not binding in subsequent cases.


Vietnam has embarked on a vast program to reform its legal and regulatory framework for investment to make it consistent with a market economy. A number of reforms were undertaken as prerequisite conditions for Vietnam’s formal accession to the WTO. Recent improvements in the legal and regulatory framework have affected numerous areas, including taxation, intellectual property, trade, price controls, accounting and foreign exchange controls. As far as foreign investors are concerned, a fundamental shift occurred in 2005, when Vietnam adopted the Law on Investment (the “2005 Investment Law”) and a new Law on Enterprises (the “2005 Enterprise Law”). One of the key purposes of these two laws is to put all investors, regardless of their nationality, on a more equal footing. Breaking away from past practice, all investors are now subject to the same key laws, even though in practice differences in treatment remain.


The banking and financial system in Vietnam is made of various credit and financial institutions, including bank, non-bank credit institutions, microfinance institutions and people’s credit funds. Non-banking credit institutions include finance companies, finance-leasing companies and other non-banking credit institutions. The scope and contents of permitted activities of each credit institution are subject to the form of credit institution and specified in the license granted to it.


Vietnamese capital markets are divided into two categories: the primary market, where newly issued securities are bought and sold; and the secondary market, where securities are bought or sold after initial sale in the primary market.


In Vietnam, all land belongs to the people and is uniformly managed by the State. As such, the private ownership of land is not permitted. Organizations and individuals only have land use rights (“LUR”), which are presented and proved on LUR Certificates granted by the State (the local Department of Natural Resources and Environment). The LUR may be used only for the specific purpose for which it was granted. Failure to meet such condition can lead to withdrawal of the LUR.


Vietnam’s labour legislation and its implementation in practice are well developed. In comparison to some other countries in the region, the position of employees is well protected. Vietnamese labour law is mandatory in a one-sided way: Employer and employee may not agree on terms that are less favourable to the employee than the conditions set out in labour legislation. They may, however, agree on terms that are more favourable.


As in the area of general investment and company regulation, Vietnam has embarked on a process to harmonize taxation for domestic and foreign companies as well as foreign individuals. It has also initiated a number of institutional and administrative reforms in order to improve the administration of taxation.


Vietnam has been a member of the World Intellectual Property Organization (“WIPO”) since 1976. It is a contracting party to eight WIPO-related treaties or conventions, including the Bern, Brussels and Paris Conventions, the Madrid Agreement and the Patent Cooperation Treaty. The legal and regulatory framework for IPRs was overhauled and greatly improved in preparation for WTO accession. Most importantly, it adopted the first Law on Intellectual Property in 2005 (as revised in 2009) (the “IP Law”). The Law is comprehensive in coverage and raises the legal IP framework to modern standards. The adoption of the IP Law was necessary in order to make Vietnam compliant with the WTO’s TRIPS agreement, to which Vietnam is a party. It was also needed for Vietnam to fulfil its commitments under the bilateral trade agreement with the US.


With its large population, Vietnam is recognized as a potential market offering many opportunities for foreign investors in the health sector. However, in comparison with finance, securities and real estate, the health sector remains less lively in the panorama of foreign investment in Vietnam.


Any disputes to which one disputing party is a foreign investor and any disputes as between foreign investors can be referred either to a Vietnamese court, Vietnamese arbitration or foreign or international arbitration.

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