VIETNAM Law and Practice Contributed by: Adam Moncrieff and Thuy Huynh, Orrick
to invest is only the beginning. The real constraints lie in project approvals, planning permissions, land use right or sea-area access, licensing, competition review, grid availability and the terms on which a gen- eration project can sell electricity. The approval process depends on the project type, scale and location. A foreign investor will usually need to confirm that the project is included in the relevant power planning documents (such as the Revised PDP8 and regional development plans) or implemen- tation lists, then obtain the necessary investment approvals, enterprise registrations, relevant land and marine access rights, environmental approvals, con- struction approvals and sector operating licences. For strategic or politically sensitive assets, the practical review can also include national security and infra- structure sensitivity considerations, especially where the asset touches coastal or border areas, critical grid infrastructure or large data flows. Offshore wind and other marine projects raise these sensitivities more apparently than solar power or onshore wind projects. Vietnam does offer customary investor protections under its investment framework, including protection against unlawful expropriation, access to the Vietnam- ese courts and, depending on treaty coverage and contract structure, the possibility of international arbi- tration. Whilst these protections are broadly afforded under Vietnamese laws, local laws can always be changed, and a more important question is whether such protections can be afforded under enforceable contracts or investment treaties. For projects involv- ing large investment amounts, foreign investors pay particular attention to whether those protections are reinforced through project agreements, government support arrangements or international treaties. Out- right expropriation has to date been less of an issue in Vietnam. More important for project feasibility is whether the project developers can rely on a stable enough tariff income stream, payment and foreign exchange availability to finance the project on accept- able terms. Commercial, tax and other investment incentives are available, but they should not be overstated. Investors may access tax, land and import-related incentives if the project qualifies under the broader investment
regime, and strategic energy projects continue to receive policy support. That said, the issues inter- national investors talk about most often are not tax incentives. They are EVN creditworthiness and pay- ment reliability, curtailment or non-dispatch, reliable and continued payments during relevant risk events, termination compensation, foreign exchange convert- ibility, allocation of project risk and change in law risk, fair and transparent dispute resolution, and contract Sales of power industry assets or businesses and mergers involving power companies are governed less by a single sector-specific transfer code and more by a layered set of general laws. The main regu- lations are Vietnam’s investment and enterprise laws, competition regime, land laws and regulations regime governing land use, the electricity licensing framework and the contract package for the project itself. A share sale in a project company will usually be simpler than an asset sale, but both transactions require care- ful planning because a project’s key rights are often embedded in licences, approvals, land arrangements, and electricity sale and concession agreements rather than in the physical asset alone. enforcement against SOEs in Vietnam. 1.4 Sale of Power Industry Assets In practice, buyers may focus on a short list of thresh- old questions. They want to know whether the pro- ject remains validly included in the applicable power development plan, whether the project company still satisfies licensing conditions and is legally compli- ant, whether land use rights or lease rights are stable, whether the power purchase agreement (PPA) can remain in place after the transaction, and whether any change-of-control consent is required from EVN, the Ministry of Industry and Trade (MOIT) and the ministry responsible for the sector, provincial authorities other counterparties. In short, all of this means the Govern- ment of Vietnam. Competition clearance can be relevant for larger deals, although Vietnam does not impose a power- sector-specific concentration cap of the sort seen in some other countries. Instead, transactions are test- ed under Vietnam’s general merger control regime. That means the review is driven by turnover, asset, transaction value or market share criteria rather than
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