Law on Investment 2014 – Any benefit for investors?
As from 2012, the 13th National Assembly had planned to comprehensively amend the Law on Investment 2005 by issuing Resolution No. 23/2012/QH13. During the period of over two years of proceeding with amendment to the Law on Investment 2005 (June 12th, 2012 – November 26th, 2014), law makers has summarized and reviewed the implementation of the Law on Investment 2005, conducted researches and surveys of investment laws of other countries, as well as organized seminars and conferences for public comments from business communities, organizations, individuals and state agencies in different localities. On November 26th, 2014, at the 8th session, the 13th National Assembly passed the Law on Investment 2014 which contains 7 chapters, 76 articles (3 chapters, 13 articles in decrease compared to the Law on Investment 2005) and takes effect as from July 1st, 2015.
The Law on Investment 2014 is considered remarkable efforts of the law makers to realize the goal of completing mechanisms and policies to encourage investment, creating a more favorable and transparent investment environment, and confirming the freedom of investors to invest in business lines not prohibited by law. However, a very practical question arises as to what investors can benefit from the Law on Investment 2014. We have recorded some of the following provisions that investors can benefit from the Law on Investment 2014.
Investors are aware of business and investment sectors permitted by law
The freedom of business investment has been clarified and regulated in Constitution of 1992. The Constitution of 2013 continues to clarify in Article 33 that "Everyone has the right to freedom of business in industries where not prohibited by law." The Law on Investment 2005 and Law on Enterprises 2005 also have their rules on the freedom of investors and enterprises to invest and do business in fields not prohibited by law.
However, prevailing regulations are not clear in spelling out and referencing the relevant legal documents where particular fields and business lines are prohibited. In fact, both the investors and the State agencies are quite perplexed upon application of those rules.
The Law on Investment 2014 has accomplished two missions: first, narrow down the list of sectors in which business and investment are prohibited; secondly, clearly define this list. Article 5 of the Law on Investment 2014 stipulates that: "Investors are permitted to carry out business and investment activities in the sectors that this law does not prohibit". Article 6 of the Law on Investment 2014 clearly points out 6 prohibited business and investment sectors. Article 4 and Article 8 of the Law on Investment 2014 also clarify that if there should be discrepancies about the prohibited business and investment sectors between the Law on Investment 2014 and other laws, then regulations provided by the Law on Investment 2014 shall prevail and any supplements, amendments to these prohibited sectors are subject to approval by the National Assembly.
Therefore, pursuant to the Law on Investment 2014, investors can refer to the Article 6 for the sectors in which business and investment are prohibited without any reference to other laws.
The list of sectors in which business and investment are conditional is subject to tight control
The Law on Investment 2005 specifies 9 conditional investment sectors but keeps them rather broad, and has open-ended provisions such as "Some other sectors as prescribed by law", in the meantime, the Law on Enterprises 2005 fails to provide a specific list of conditional business lines and merely states that specialized laws shall prevail. Practically, conditional business lines are regulated in a number of different laws at different levels ranging from laws, ordinances, decrees to Prime Minister’s decision in document and they tend to grow in number and out of control.
After reviewing of all conditional business lines prevailing legislation, the Law of Investment 2014 has unified this list, including 267 business lines, specified in Article 7 and Annex 4 of the Law of Investment 2014. The amendments and supplements have to be approved by the National Assembly.
The list of the conditional business and investment sectors are applicable to both domestic and foreign investors. Regulating conditions for business and investment business lines have to be made publicly, transparently, objectively and only stipulated in Laws, Ordinances, Decrees, and Treaties which Vietnam is a member.
With the Law of Investment 2014, investors can be assured that the list of conditional business lines has been controlled closely, demanding to be increased in quantity.
Domestic investors have not to implement procedure for Investment Registration Certificate Issuance (“IRC”)
While the Law of Investment 2005 previously requires a domestic investor to perform the procedure for issuance of Investment Certificate for its investment project with 15 billion or more or included in the list of sectors of investment subject to conditions, the investor shall fail to perform this procedure for issuance of IRC in compliance with Article 36 of the Law on Investment 2014 as from July 1st 2015.
Foreign investors making investment in the forms of capital contribution, stock and share transfer are not required to implement procedures for issuance of the IRC
Pursuant to the regulations of the Law on Investment 2005 whereby foreign investors invest into Vietnam for the first time, must have an investment project and implement procedure for issuance of the IRC, the State authorities managing investment require investors to implement procedure for changing of members and shareholder in compliance with the laws of enterprise, after that investors continue to implement procedure for issuance of the IRC upon capital contribution, purchase of stocks, contribution capital in Vietnamese enterprises notwithstanding the percentage of charter capital of foreign investor in the enterprises they hold.
The upcoming the Law on Investment 2014 regulates clearly in Article 26 and Article 36 that foreign investors invest in the forms of capital contribution, purchase of stocks, and contribution of capital shall perform the procedure for change of shareholders, members under regulations on enterprise in lieu of the procedure for issuance of the IRC. If the capital contribution, purchase of stocks, contribution capital are subject to one of two following cases: (1) the capital contribution, purchase of stocks, contribution capital in enterprises of which business lines are conditional applicable to foreign investors; or (2) capital contribution, purchase of stocks, contribution capital result in foreign investors holding 51% or more of charter capital, then the investors shall implement the registration procedure for capital contribution, purchase of stocks and contribution capital preceding performance of procedure for changing of shareholders, members under the laws on enterprises.
Abrogating the evaluation procedure for the IRC
Apart from the regulation whereby the Department of Planning and Investment, in lieu of People’s Committee of Provincial Level as before, shall issue the IRC for the purposing of reducing administrative procedures, the Law of Investment 2014 also improves procedures for issuance of the IRC by abrogating the evaluation procedure for issuance of the IRC as provided by the Law of Investment 2005. Instead, a simple, transparent procedure for issuance of the IRC within 15 days shall be applied for an investment project unless the projects’ policy is subject to be a prior approval.
A delayed period of time for handing over land by the State shall be excluded from the duration of projects
Practically, with respect to investment projects which are allocated or leased land by State, it takes very a long time for handing over land by the State to an investor since the investor is granted an investment certificate due to several reasons, such as: prolonged compensation for ground clearance, delays in acceptance, approval. As a result, the actual time for project implementation by the investor as well as the duration recorded in the certificate of land use rights are often much shorter than those specified in the investment certificate, which obviously causes damage to the investor. Therefore, pursuant to the regulation provided by Article 43 of the Law on Investment 2014 that a delayed period of time for handing over land by the State shall be excluded from the duration of projects, investors may request the State authorities to consider, re-calculate the duration of their projects, the period of time for land allocation, land lease in order to ensure their rights, legitimate interests.
Expressly regulate the authorities which shall issue the IRC in case projects will be implemented across certain provinces, projects will be implemented both within and outside the industrial zone.
Article 38 of the Law on Investment 2014 clearly defines that the Department of Planning and Investment of the province where head office, executive office for project implementation are expected to be headquartered by investors shall receive, issue, amend and revoke the IRC with respect to the projects which are implemented across provinces or both within and outside an industrial zone, export processing zone, high-tech zone, economic zone. This regulation will tackle problems of the Investment Law 2005 on authority to issue the investment certificate in the practical case land-using investment projects are subject to the above situations.