1. What role will the government of Vietnam play in approving and regulating foreign direct investment?

The Ministry of Planning and Investment (MPI) is the central administrative body that oversees all investment activities, including foreign investment. The MPI is responsible for drafting legislation, developing policies, providing guidance and consultation, and coordinating with other authorities. The MPI also serves as the contact point for foreign invested enterprises (FIEs) should problems or questions arise.

However, it is important to understand that the local Department of Planning and Investment (DPI), under provincial/city People's Committees, directly administers foreign investment activities and issues investment registration certificates (IRCs) for almost every type of foreign investment within their province/city. An IRC is required for most foreign-invested investment projects (except for small and medium-sized creative start-up projects1 or a creative start-up investment fund). Some projects, especially those that are termed "conditional," important projects, or projects that are very large, require in-principle approval, sometimes by the National Assembly, sometimes by the Prime Minister, or more often by the provincial/city People's Committees, prior to issuance of an IRC.

The Prime Minister establishes management boards to administer FIEs that are located in an industrial zone, high-tech zone, economic zone, or export processing zone (generally IZ). An FIE in an IZ is subject to the IZ's rules on import/export, environment, labor, etc., in addition to the general rules of the government and the MPI. An IZ management board is authorized to issue an IRC for a project within its administrative area.

After the IRC is issued, the foreign investor will apply for and obtain an Enterprise Registration Certificate (ERC) from the DPI. The IRC approves the investment project, and the ERC permits the foreign investor to establish and operate the company. The foreign investor can conduct business only after obtaining both the IRC and the ERC.

Other more specialized ministries may be involved in foreign investment. For example, in high-tech projects, the Ministry of Science and Technology has an administrative role. It develops industry-specific policies for foreign investment and assures that the application of foreign investment regulations is in harmony with the industry's own rules.

2. Is it possible for foreign investors to conduct business in Vietnam without a local partner? What corporate structure is most commonly used and best for foreign investors?

In general, for many businesses, foreign investors and domestic investors are treated equally in the choice of direct investment forms and in the percentage of ownership. Conditions on certain forms of investment apply to every investor. However, there are some businesses for which conditions are imposed only on foreign investors. For example, in certain limited fields and industries a cap is placed on the percentage of foreign shareholding. Investment conditions are now more relaxed. Currently, the cap on foreign capital contribution is as follows:

  • In commercial services, the cap is determined in accordance with Vietnam's international undertakings. For example, under Vietnam's WTO commitments:
    • In telecommunications services, the cap is 49% for facilities-based telecommunications services, 50% for internet access services, 70% for certain virtual private networks and value-added services, and 65% for other non-facilities-based telecommunications services;
    • In container-handling services (except services provided at airports), the cap is 50%;
    • In commercial advertising services, there is no cap, but the foreign investor needs to establish a joint venture with a local stakeholder that has already registered for advertising under its business registration.
  • The cap may be different in certain specialized regulations, such as the legislation on civil aviation and the legislation on publications and the press.

In fields and industries that are not subject to any cap (which includes most fields and industries), foreign investors can conduct business without a local partner. The corporate structures available for a wholly foreign-owned enterprise are as follows:

  • For a single investor, a sole proprietorship or a one-member limited liability company;
  • For two or more investors, a two- to 50-member limited liability company, partnership, or joint stock company.

The limited liability company is the corporate structure most commonly used by foreign investors.

3. What laws influence the commercial relationship between local agents/distributors and foreign companies?

All civil transactions, including trading and business activities, are generally governed by the Civil Code. The relationship between a local agent and a foreign company is mainly governed by the Commercial Law and its implementing regulations. There are no specific regulations that govern the relationship between a local distributor and a foreign company. Generally, "distribution" and "trading" by an FIE are permitted, except for a list of specific products that are restricted to foreign investors (e.g., tobacco, pharmaceutical products, books, rice). The process to obtain a distribution license does not always go smoothly, because the government's concern is that foreign companies will only set up distribution companies in Vietnam rather than develop or invest in manufacturing activities, which bring more economic and social benefit to the country.

4. In what manner does the government of Vietnam regulate merger and acquisition activities by foreign investors? Are there any specific areas or industries that are heavily restricted or completely prohibited to foreign investors?

All civil transactions, including trading and business activities, are generally governed by the Civil Code. The relationship between a local agent and a foreign company is mainly governed by the Commercial Law and its implementing regulations.

There are no specific regulations that govern the relationship between a local distributor and a foreign company.

As stated above, generally, "distribution" and "trading" by an FIE are permitted.

5. How do local labor laws regulate the treatment of employees and expatriate workers in Vietnam?

The Labor Code sets forth rules for the employment of both Vietnamese and expatriate employees who are working in Vietnam. In general, working conditions under the law and rights and obligations under a labor contract are the same for both Vietnamese and expatriate employees. Furthermore, an expatriate can work in Vietnam while he/she is employed by a foreign company located offshore.

There are several distinctions between the employment of an expatriate and the employment of a Vietnamese citizen.

Work Permits for Expatriate Employees

With limited exceptions, most expatriates who work in Vietnam are required to have a work permit. An expatriate is exempt from the work permit requirement in specific circumstances, such as:

  1. He/she is an owner or a capital contributing member of a limited liability company established in Vietnam, or a chairman or a member of a management board of a joint stock company established in Vietnam, with a level of capital contribution currently fixed at at least VND3,000,000,0002;
  2. He/she is head of either the representative office or a project or is the person mainly responsible for the operation in Vietnam of an international organization or a foreign NGO. This exemption does not include the chief representative of a foreign trader's representative office;
  3. He/she enters and stays in Vietnam for less than three consecutive months to provide services or handle complicated technical or technological problems that affect or could affect production/business and these problems cannot be adequately addressed within Vietnam. However, if the situation requires the expatriate to stay in Vietnam for three months or more, a work permit is necessary;
  4. He/she is a foreign lawyer with a Certificate of Law Practice in Vietnam granted by the Ministry of Justice, or has a media license issued by the Ministry of Foreign Affairs, or is approved by the Ministry of Education to carry out research and teaching in Vietnam;
  5. He/she is married to a Vietnamese and living in Vietnam;
  6. He/she is seconded to Vietnam as permitted under Vietnam's WTO Commitments. Under Appendices 1 and 2 of Circular 35, the 11 permitted services include: business services (such as: professional services, computer and related services, research and development services, rental services without operator), communication services, construction and related engineering services, distribution services, educational services, environmental services, financial services, medical and social services, tourism and related travel services, recreational, cultural and sporting services, and transport services;
  7. He/she provides expert and technical consultancy services or undertakes other tasks with respect to research, formulation, evaluation, monitoring and assessment, or management and implementation of a program or project using official development aid (ODA) in accordance with an international treaty on ODA signed by both Vietnam and the foreign country;
  8. He/she is appointed by a competent authority in a foreign country to teach at an international school that is managed by a foreign diplomatic office or an international organization in Vietnam or is permitted by the Ministry of Education and Training to teach and research in Vietnam's education and training institutions;
  9. He/she works as an expert, manager, executive director, or technician for less than 30 days each visit and does so no more than three times in one year;
  10. He/she implements an international treaty to which a Vietnamese government authority, provincial body, or central socio-political organization is a signatory;
  11. He/she is a student studying in a foreign school or institution having an agreement on internship in agencies, organizations, and enterprises in Vietnam;
  12. He/she is a relative of a member of a foreign representative agency in Vietnam who is exempt from obtaining a work permit under an international treaty of which Vietnam is a party;
  13. He/she is preparing to establish a commercial presence.

Vietnam made a strong commitment with respect to employee immigration in the tourism industry in 2009: the ASEAN Mutual Recognition Arrangement on Tourism Professionals (MRA-TP). The MRA-TP took effect in ASEAN in 2015. Under the MRA-TP, Vietnamese may work in ASEAN member countries and vice versa. It is likely that a meaningful number of tourism industry employees have entered Vietnam to work under the MRA-TP. Other industries may follow.

In order for an expatriate to be issued a work permit, an employer must first prepare a plan to recruit an expatriate for each job for which a sufficient number of Vietnamese do not qualify, and file such plan 30 calendar days or more prior to the proposed recruitment. The plan must be filed with and approved by the Chairman of the provincial People's Committee.

To receive a work permit, an expatriate employee is required to present a health certificate, police record, certificates of professional expertise, and an education certificate, among other documents. The maximum duration of a work permit is two years, and a work permit is extended one time only. Once the extended work permit expires, a new dossier for a new work permit must be made.

Compulsory Social, Unemployment, and Health Insurance for Vietnamese and Expatriate Employees

Social insurance (SI) is compulsory for Vietnamese employees who work pursuant to indefinite term contracts or contracts with a term of one month or more. Compulsory SI also practically applies to a foreign employee who is licensed to work in Vietnam and enters into an indefinite-term labor contract or a definite-term labor contract with a term of at least one year with an employer based in Vietnam. Both the employer and the employee are required to contribute to the state social security fund. Contributions are based on the gross monthly salary that is actually payable to the employee. It is capped at 20 times the basic minimum salary (currently VND1,490,000). Currently the employer contributes 32% and the Vietnamese employee contributes 10.5% of the employee's salary. An expatriate is exempt from social insurance contributions until January 1, 2022.

Unemployment insurance only applies to a Vietnamese employee who has a labor contract either of indefinite term or a term of three months or more. The employer and the employee each contribute 1% of the employee's gross monthly salary calculated up to the salary cap mentioned above. Contributions are based on the employee's gross monthly salary and are also capped at 20 times regional minimum salary. Expatriate employees are not subject to unemployment insurance.

Both expatriate and Vietnamese employees are subject to mandatory health insurance coverage if they work under a labor contract of an indefinite term or a term of three months or more. Contributions are based on the employee's gross monthly salary and are also capped at 20 times the basic minimum salary. The employee contributes 1.5% while the employer contributes 3% of the employee's gross monthly salary.

There are other differences in the working conditions between Vietnamese and expatriate employees. For instance, an employer and a Vietnamese employee are allowed to sign a maximum of two labor contracts that are definite term contracts with a term of up to 36 months, while there are no limitations on the number of definite term contracts that an employer can sign with an expatriate employee. As discussed, an expatriate employee is required to have a work permit to work in Vietnam and a work permit and employment are co-terminus.

Internal Labor Regulations

Internal Labor Regulations (ILRs) are mandatory for an employer that has more than 10 employees (Vietnamese and expatriate). An employer must register its ILRs with the labor authorities and post them in the workplace.

The ILRs must include the following major components:

  • Working hours and rest breaks;
  • Rules and discipline in the company;
  • Occupational safety and hygiene in the workplace;
  • Protection of assets and confidentiality of technology and business secrets of the company; and
  • Conduct that is in breach of labor regulations, penalties imposed for those breaches, and responsibility for damages.

Carefully worded ILRs will enable the employer to take disciplinary action against an employee or unilaterally terminate a labor contract in the case of poor performance by an employee. If an offense is not specified in a company's ILRs, or if the company does not have duly registered ILRs, it will be difficult to dismiss an employee. Attention should be paid to contents and registration.

6. What role do local banks and government agencies play in regulating the treatment and conversion of local currency, repatriation of funds overseas, letters of credit, and other basic financial transactions?

Opening Bank Accounts

A foreign investor can transfer capital or foreign currencies into Vietnam via foreign currency accounts opened at licensed credit institutions, and then it can convert such foreign currency into Vietnamese dong. Depending on the investment purpose, a foreign investor is required to open an indirect investment capital account (IICA) or a direct investment capital account (DICA). The IICA must be a Vietnamese dong (VND) account and it can be used only for indirect investment purposes: (i) capital injection, purchase and sale of shares, stakes in Vietnamese companies that are not "foreign direct invested enterprises" and not listed on the stock exchange; (ii) capital injection, purchase, and sale of shares or stakes in Vietnamese companies that are listed on the stock exchange; (iii) purchase and sale of bonds and other types of securities on the Vietnamese securities markets; (iv) purchase of VND-valuable papers issued by Vietnamese entities; (v) entrustment of investment in VND via a fund management company, securities company, or other entities that are licensed to conduct investment entrustment; (vi) capital injection or transfer of stakes in securities management fund or a fund management company; and (vii) other indirect investment forms permitted by law.

If a foreign investor invests in a "foreign direct invested enterprise" (FIE) that fits one of the categories below, the FIE (not the foreign investor) is required to open the DICA (not an IICA) either in US dollars or in both US dollars and Vietnamese dong. The categories of such "foreign direct investment enterprises" include:

  • newly established FIE by a foreign investor; the foreign investor is required to obtain an investment registration certificate (IRC) under the Law on Investment;
  • other enterprises that are 51% or more foreign-owned, including (i) enterprises in which foreign investors contribute capital or purchase shares, (ii) enterprises that are established based on separation, split, merger, or consolidation, and (iii) new enterprises that are established in accordance with specialized laws; and
  • project companies established by foreign investors to carry out public private partnership (PPP) projects.

Apart from FIEs, foreign investors participating in business cooperation contracts (BCCs), and foreign investors directly implementing PPP projects (if not establishing project companies in Vietnam), are also required to open DICAs.

A DICA in US dollars can be used for the following purposes:

  • Receiving an amount of direct-invested capital in foreign currency from foreign and Vietnamese investors contributing to FIEs;
  • Receiving drawdowns and loans in foreign currency from domestic and overseas term loans of an FIE;
  • Receiving proceeds generated from the transfer of the value of invested capital and investment projects;
  • Receiving amounts of foreign currency from foreign currency payment accounts of FIEs and foreign investors participating in BCCs and implementing PPP projects opened at licensed banks;
  • Receiving other lawful amounts in foreign currency generated from foreign direct investment activities in Vietnam;
  • Repaying principal and paying interest and charges for FIEs' term loans in foreign currency;
  • Transmission of foreign currency amounts to foreign currency payment accounts of FIEs and foreign investors participating in BCCs and implementing PPP projects opened at licensed banks;
  • Selling foreign currency to licensed banks in order to deposit into Vietnamese dong accounts of FIEs and foreign investors;
  • Paying for the transfer of invested capital and investment projects;
  • Paying for the remittance of profits and other legal receipts in foreign currency, generated from their foreign direct investment activities, out of Vietnam;
  • Paying for the transfer of foreign investors' direct-invested capital in foreign currency out of Vietnam in case of FIEs' dissolution or termination; transfer of the ownership of invested capital and investment projects; and reduction in invested capital or completion, liquidation and termination of investment projects as stipulated by investment laws; and
  • Paying other legal receipts in foreign currency regarding foreign direct investment activities in Vietnam.

Remittance of Profits/Loans

Profits that may be remitted abroad include (i) profits distributed or received in a fiscal year as recorded in the audited financial statements and annual tax return, and (ii) retained earnings minus investment capital that the foreign investor has used or has committed to reinvest in Vietnam. The law imposes an obligation on the foreign investor to inform the local tax authority of its intention to remit profits abroad at least seven (7) working days prior to the proposed date of remittance. Below are notable conditions and requirements to remit profits abroad:

  • A foreign investor is entitled to remit its profits abroad once the fiscal year ends and after the FIE has fulfilled its financial and tax obligations. This occurs after the FIE has filed its audited financial statement and its annual tax return with the tax authorities.
  • A foreign investor is not allowed to remit its profits abroad if there are any accumulated losses in the audited financial statements, even if the FIE has profits in the relevant fiscal year, or make any interim dividend payment.

Any offshore loans (long-term and medium-term) must be registered with the State Bank of Vietnam (SBV). A drawdown of offshore loans can be conducted only after the borrower has registered such offshore loans with the Central Bank. Furthermore, the borrower is not allowed to repay its offshore loan if it fails to register it with the Central Bank.

Purchase of Foreign Currencies

Generally, access to foreign exchange is not difficult. Foreign investors have the right to purchase foreign currency. Foreign employees who have foreign currencies may make bank transfers or carry foreign currencies abroad. If foreign employees have lawful income in Vietnamese dong, they are entitled to convert Vietnamese dong into foreign currencies to transfer or carry abroad. Proof of payment of tax may be required. In the case of an indirect investment offshore, such as the purchase of foreign shares, both Vietnamese and foreign investors must meet conditions set by the SBVN. The SBVN approves such indirect investment on a case-by-case basis.

7. What types of taxes, duties, and levies should a foreign investor expect to encounter in negotiating an inbound investment in Vietnam?

The main taxes that may affect a foreign-invested enterprise are:

  • Corporate income tax
  • Value-added tax
  • Personal income tax
  • Import/export duties
  • Foreign contractor tax
  • Special consumption tax

We will not analyze each of them in detail. Briefly, Vietnam will gradually reduce import duties according to its international commitments and agreements. Vietnam applies the same VAT and CIT rates to both local and foreign entities.

Corporate Income Tax (CIT)

CIT Rate. The common CIT rate for foreign invested enterprises and local enterprises is 20%. If a project meets specific conditions and criteria as set out in the Law on CIT and in the Investment Law, an investor may enjoy a lower tax rate (10%, 15%, or 17%). Subject to location, sectors, and industries, the maximum period to enjoy a preferential CIT rate will vary. The CIT rate applicable to exploration and exploitation activities of oil, gas, and other rare natural resources ranges from 32% to 50%.

Tax Holidays. Subject to the nature, location, and scale of a project, an enterprise may be entitled to a full tax holiday ranging from two to four years.

Tax Reduction. A further 50% tax reduction applies to certain projects. The period of reduction can be from four years to nine years from the year in which the full tax holiday ceases.

Value Added Tax (VAT)

There are three rates: 0%, 5%, and 10%. In most cases, the rate is 10%. The 0% rate applies to: (i) international transportation; (ii) exported goods and services; (iii) construction activities and installation of work in a foreign country or within duty-free zones; or goods/services provided to foreign customers pursuant to Government regulations; and (iv) goods and services that are not subject to VAT once these goods and services are exported.

Personal Income Tax (PIT)

For tax purposes, a Vietnamese tax resident is a person who:

  • Stays in Vietnam for 183 days or more in a calendar year or within a period of 12 consecutive months or has a house lease contract with an aggregate term of 183 days or more within a tax-assessable year;
  • Has registered his/her residential address in Vietnam; or
  • Has a temporary residence card.

A Vietnamese tax resident must pay income tax on his/her worldwide income. The tax brackets are progressive and the top bracket, which applies to monthly income over VND80,000,000 (US$1.00 = VND23,500), is 35%.

If a person is not a Vietnamese tax resident as defined above, his/her income is taxed on the basis of gross income generated in Vietnam at rates varying depending on the type of income.

Import/Export Tariff

Vietnam applies both an ad valorem and a specific rate system. Depending on the kind of goods as identified in the Harmonized System (HS) code, the preferred tariff rate and the specific tax amount may vary. Import duties are subject to frequent change. In addition to the preferred tariff, Vietnam also accords a better tariff to certain goods that originate from a country that has a trade agreement with Vietnam (e.g., ASEAN Free Trade Agreement, China-ASEAN Agreement, Korea-ASEAN Agreement, India-ASEAN Agreement, Bilateral Trade Agreement with the US, Vietnam-EU FTA, Vietnam-UK FTA, Vietnam-Japan FTA, Comprehensive and Progressive Agreement for Trans-Pacific Partnership, etc.).

Export duties are charged only on a few items, basically natural resources such as minerals, forest products, and scrap metal. Rates range from 0% to 45%.

Foreign Contractor Tax (FCT)

The FCT is a type of withholding tax that is comprised of two taxes: Value Added Tax (VAT) and Income Tax. For an entity, the FCT is comprised of Corporate Income Tax (CIT) and VAT. VAT and Personal Income Tax (PIT) apply to an individual foreign contractor. Depending on the nature of a transaction, VAT may be exempt, and the CIT rate may vary. Despite the variations, FCT is generally 10%

The FCT is generally a tax imposed on a foreign entity that provides services in Vietnam and does not generally apply to a foreign contractor that sells its goods in Vietnam or provides certain services.

A foreign institutional contractor can pay the FCT tax by one of three methods: the declaration method, the hybrid method, or the direct method.

If a foreign contractor fails to meet conditions to apply the declaration or the hybrid methods, it must apply the direct method. This is the most frequent situation. In such case, the Vietnamese party must withhold the FCT before paying the foreign institutional contractor. Depending on the nature of the transaction and services, each component of the FCT-VAT and CIT may vary.

As mentioned above, generally, the combined FCT rate is about 10%.

Special Consumption Tax (SCT)

There are 10 goods (e.g., cigarettes, beer, alcohol, automobiles, airplanes, yachts, etc.) and six services (karaoke bars and massage parlors, casinos and gaming with prizes, betting businesses, golf businesses, lottery businesses, etc.) that are subject to the SCT. The SCT rates range from 7% to 150%.

8. Do comprehensive intellectual property laws exist in Vietnam and do they provide the same levels of protection for foreign investors as local companies? Will local courts and tribunals enforce IP laws uniformly, regardless of the nationality of the parties?

Vietnamese law on the registration of intellectual property rights (IPRs) conforms to international norms.

The IPRs recognized in Vietnam are as follows:

  • Copyright of literary, artistic, and scientific works; copyright-related rights of performers, audio and visual fixation, broadcasts, and encrypted program-carrying satellite signals;
  • Industrial property rights comprised of inventions, industrial designs, layout designs of integrated circuits, trade secrets, trademarks, trade names, and geographical indications;
  • Plant varieties and plant reproductive materials.

Domestic Laws and International Agreements

Vietnam has a number of comprehensive and modern laws on the administration and regulation of IPRs. Vietnam is a member of most international conventions and treaties, including the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS).

Vietnam entered the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) in 2018.

Enforcement of IPRs in Vietnam

When the intellectual property rights of an entity are infringed, the entity can follow either administrative or judicial procedures to enforce its rights. However, Vietnam's protection of IPRs may not satisfy the expectations of some manufacturers and IPR holders. Enforcement often needs to be conducted promptly; however, delays frequently occur because there are time-consuming procedures and the lack of human resources within enforcement bodies. Those factors interfere with the effort to stop counterfeiting, especially against small counterfeiters.

One matter that remains unresolved is the lack of a mechanism to recognize well-known (or famous) marks in Vietnam. When an application for registration of a mark by the owner of a well-known trademark is rejected because it has already been applied for or registered, the owner may attempt to have its trademark recognized by filing a complaint with Vietnam's National Office of Industrial Property (NOIP). The complaint must be accompanied by certain required documents and other evidence. If the complaint is successful, the owner's mark will be recognized as well-known. In such cases, the prior application or registration will be rejected or cancelled. However, there is no certificate granted to the owner to certify that its mark is a well-known mark, which leaves the mark open to future challenge.

While there is no legal difference in the enforcement of IPRs on behalf of foreign or domestic holders, far more foreign IPR holders than domestic IPR holders seek enforcement of their IPRs. Regardless of the IPR holder's nationality, enforcement is weak. However, greater numbers of domestic IPR holders are seeking to enforce their rights. Monetary fines have recently increased but are still not adequate to prevent initial and recurring violations.

9. If a commercial dispute arises, given the choice between local courts or an international arbitration venue, which would offer a more beneficial forum for fair dispute resolution for foreign investors?

In Vietnam, there are two types of arbitration: foreign and domestic. Foreign arbitration is an arbitration process that is governed by a foreign law (e.g., arbitration at the Singapore International Arbitration Centre, whose rules of arbitration are governed by Singapore law). On the other hand, domestic arbitration is arbitration governed under Vietnam's Law on Commercial Arbitration (e.g., at the Vietnamese International Arbitrator Center [VIAC]), whose rules of arbitration are governed by Vietnamese law. In this question, we understand "international arbitration venue" means a foreign arbitration not located in Vietnam.

We provide our brief comparison between a local court and an international arbitration venue through the following criteria (there are still other criteria; however, to the extent of this section, we only present some of them):

Probability of Enforcement in Vietnam

Generally speaking, a commercial dispute that is settled through a local court will have a higher probability of enforcement in Vietnam in comparison with a foreign arbitral award.

A first-instance judgment of a local court, as the main authority to settle disputes (including commercial disputes) in Vietnam, will be enforced by the enforcement authorities of Vietnam, if the judgment is not disputed. If the judgment is disputed, there will be an appeal process. After an appellate proceeding, a local court renders a judgment of appeal and this judgment comes into force (voluntarily by the parties or through the involvement of an enforcement authority) when it is issued, without any need to be recognized.

An award rendered by an international arbitration venue, on the other hand, will need to be recognized by a Vietnamese court before it can be enforced in Vietnam. Foreign arbitral awards require a filing with the Ministry of Justice (MOJ). This is the first step toward recognition. Within several days the MOJ will send the foreign award to the appropriate local court, which will determine whether it will be recognized and enforced in Vietnam. Decisions made by a local court regarding recognition and enforcement of the foreign award are final and cannot be appealed. Reviews in Vietnam of foreign arbitral awards are generally intended not to relate to the merits, but revolve around whether procedural and provisional requirements have been met. Even so, local courts may sometimes apply broader, more restrictive conditions when they review a foreign arbitral award.

Time and Costs

The settlement of a commercial dispute by a local court is time-consuming. Proceedings at a local court need to follow several steps and local courts are mostly not flexible in these steps. Even when a first-instance judgment is rendered by a local court, the parties may have to deal with an appeal or a retrial. This also increases costs incurred by the parties.

Meanwhile, the time required for settlement of a commercial dispute at an international arbitration venue seems to be faster due to the flexibility of the international arbitration venue. Also, an award rendered by an international arbitration venue is final and cannot be appealed, so the case may not be brought to different levels of proceedings. However, as discussed, an award rendered by an international arbitration venue will need to be recognized by a Vietnamese court before it can be enforced in Vietnam. The recognition procedure may be time-consuming. On the other hand, administrative fees, costs of arbitrators, travel costs, expert consultation, and other necessary services for arbitration can run much higher in an international setting. For disputes of smaller value, the benefits of domestic arbitration will easily outweigh those of foreign arbitration.

Range of Options

Generally, the parties have more choices for how their dispute will be resolved if the dispute is settled in an international arbitration venue. For example, the parties can select a sole arbitrator or an arbitration tribunal to settle their dispute. The parties can also select the seat of arbitration, language of arbitration, etc., to the extent permitted by applicable arbitration rules. To the contrary, if the dispute is settled by a local court, the parties, of course, cannot select a judge to handle their case, and are restricted in other ways


In general, a local court has the advantage of enforcement of its judgments/decisions. However, an international arbitration has the advantage of time, range of options (place of hearings, language, etc.), and sometimes cost. Parties must look at the parties to the dispute, the amount in question, time and cost, availability of qualified arbitrators, and the ease of enforcement in Vietnam, to conclude which is the better option.

10. Does Vietnam currently have any data privacy laws or regulations? how do they affect business activities?

Various regulations govern the collection, receipt, transmission, and use of personal data. General rules on protection of personal data can be found in the Law on Cyberinformation Security No. 86/2015/QH13 (November 19, 2015). Large changes in privacy regulation are expected to be launched in 2022.

The Law on Cybersecurity No. 24/2018/QH14 (June 12, 2018) regulates cyber activities that impact national security and social order and safety. Article 26 of the Cybersecurity Law requires establishment of a physical presence in Vietnam and the storage of certain data in Vietnam. However, these requirements are yet to be enforced as guidance is missing. Various sector-specific regulations also apply.

Notably, Vietnam's Ministry of Public Security has released the full text of a new draft decree on personal data protection expected to take effect on December 1, 2021. The draft decree, in its current iteration, regulates the cross-border transfer of data, processing of sensitive personal data, and the rights of individuals.

The new rules are based on the European General Data Protection Regulation. As such, this transition could be a means for Vietnam to integrate into a circle of countries that have already adopted fairly sophisticated rules for dealing with privacy. But for Vietnam, considering its current level of protection, the new rules will be a fairly large step.

The draft decree would introduce a number of new and material changes to the existing regime on data privacy protection. As more enterprises embrace new technologies and increase their digital footprint, they naturally collect, receive, transmit, and use ever-increasing amounts of data from their customers, employees, and various other subjects.

11. What practical advice can you share with investors who decide to do business in Vietnam?

Impatience is a factor in some unsuccessful deals. As in other parts of Asia, the personal connection with a counterpart or important customer is important. This process of establishing a good working relationship can be slightly time-consuming, but certainly worthwhile in the long run.

The character of the business and commercial environment is more and more Vietnamese. There are several local companies with high-level commercial and industrial capability, and many are interested in teaming up with foreign investors. As usual, care is important, but opportunities are large.

12. Are there any recently passed laws or regulations in Vietnam, including COVID-related, that are expected to affect the activities of foreign investors in the future?

To date, there is no COVID-related law in Vietnam that directly targets the activities of foreign investors.

As COVID waxes and wanes and moves around the country, national and local temporary regulations have been issued to govern types of business, physical interaction, traffic and road checks, testing, vaccinations, quarantine, and more.

Currently, Vietnam has allowed the re-opening of many businesses. The regulatory environment is restrictive and is responsive to the prevalence of actual and projected cases. The expectation is that the physical environment will be responsive to the current and projected COVID landscape.

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This publication was originally prepared for use by Meritas, an association of independent law firms". It also appeared in Lexology on 31 December 2021.


1. Under the EL, a creative start-up project is defined as an investment project that implements ideas on the basis of exploiting intellectual property, technologies and new business models and is able to grow quickly.

2. US$1 = VND23,500

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.