Legal development of the investment dispute settlement system in vietnam issues on the investor state dispute settlement

With regard to these disputing parties, A rt.l defines "nationals." The BIT with the Netherlands, however, does not define "a Contracting Party." It is only noted "The Government o f the

is im portant for foreign investors, because the ISD S m echanism perm its th e direct invocation o f arbitration claim s by foreign investors them selves against the host State3.

In case o f Vietnam, the Bilateral Trade Agreem ent (BTA) with the U.S w as signed in 2000 and became effective in 2001, which included a set o f rules to facilitate cross-border investment between the two countries In addition, Vietnam has concluded 58 BITs, and 42 o f them have entry into force by 1st June 201 24 These BTA and BITs provide a dispute settlement clause stipulating ISDS, and by

* Associate Professor, University o f Hyogo, Japan.

LEGAL DEVELOPMENT OF THE INVESTMENT DISPUTE SETTLEMENT.

the end o f 2011 Vietnam has been sued for arbitration in 3 cases based on IIA s1 The Investment Law o f 2005, legal framework for foreign investm ent in Vietnam,

also p ro v id e s IS D S U n d e r this Law , foreign inv estors w ill b e a b le to su e " V ietn am ese State M a n a g e m e n t A g en cie s'' for arb itratio n o r litig atio n o th e r th a n in V ie tn a m based

on treat 'S co n c lu d e d by V ietnam as w ell as co n tra c ts w ith re p re se n ta tiv e s o f

A u th o rize d S tate A g en cie s F u rtherm ore, in d raftin g th e C o m m e r c ia l A rb itra tio n L a w

o f 2010, it was considered that the right o f foreign investors to resolve disputes by

a rb itra tio n w o u ld e x te n d to c o n tra c tu a l d is p u te s b e tw e e n fo re ig n in v e sto rs a n d

V ie tn a m e s e S ta te a g e n c ie s re la tin g to in v e s tm e n t a c tiv itie s b a s e d o n th e In v e s tm e n t

Law o f 20052

Here considering economic system in many Asian countries including Vietnam, "‘state-owned entities’ and/or ‘state-owned enterprises’ (SOEs)" represent both a m ajor part o f the economy and a not in s ig n ific a n t pari o f fiscal revenues The SOEs have specific legal forms and are different from the other companies There

ev e n still a r c s o m e d ep a rtm e n ta l a n d /o r m in is te ria l e n titie s w h ic h a rc c o n s id e re d as

SOEs Foreign investors frequently enter agreements with the SOEs When a SOE

b r e a c h e s t h e a g r e e m e n t , f o r e ig n i n v e s t o r s o f t e n s e e k t o a d d r e s s t h e i r c l a i m d i r e c t l y

against the host State under the application of bilateral or multilateral IIAs In

Vietnam SOEs have been used as a tool for the government to regulate the national economy, and such role has aroused controversy at present

This article analyzes development o f legal systems on ISDS in Vietnam, focusing on both the IIAs concludcd by Vietnam with the Netherlands, France and the U.S respectively, and Vietnam’s municipal laws dealing with foreign investment dispute settlement, such as laws on investment, BOT and commercial arbitration Through this analysis, I examine issues on settlement o f disputes between foreign investors and the Vietnamese government and/or SOEs

1 UNCTAD (2012), p i 7 There is no government’s official opinions on the cases in Vietnam, but according to various unofficial source, websites, papers and so on, they are as follows: (1) "Dialasie SAS V, Vietnam (UNCITRAL arbitration rules, adm inistered by the PCA)" which w as initiated in 2011, home country o f Dialasie SAS is France (UNCTAD (2012),

pi 5) (2) "Trinh Vinh Binh and Binh Chau Joint stock Com pany V Socialist Republic o f Viet Nam UNCITRAL, administered at SCC)" which was initiated in 2004, and was settled

on confidential terms following an award rendered in 2007 Home country o f the investors is the N etherlands (UNCTAD, UNCTAD DATABASE OF TR E A T Y -B A SED INVESTOR- STATE DISPUTE SETTLEMENT CASES.) (3)"South Fork Company V People’s Comm ittee o f Bình Thuận Province, home country o f the investor is the United State o f America (PHƯƠNG NAM (2011).).

2.Vilaf I long Due (2008).

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2 Investor-State dispute settlement under legal system in Vietnam: Status and the concept o f "a State"

2.1 Bilateral Investment Treaties

Concerning BITs that Vietnam has signed, all negotiated recently and concuưently BITs tend to follow a reasonably standard pattern, and typically provide for "recourse to international arbitration." W ith regard to "recourse to international arbitration," it is available at the initiative o f either party to the dispute after a period o f usually three to six months, during which an amicable settlement must be sought The outcom e o f the arbitration procedure is final and binding Vietnam is not currently a m em ber o f the International Centre for Settlement o f Investment Disputes (ICSID), although it has applied for m em bership Short o f Vietnam being a m em ber o f the ICSID Convention, m ost BITs provide for international arbitration to take place under the United N ations Commission on International Trade Law (ƯNCITRAL), or under the ICSID once Vietnam becomes

a m em ber1 BITs concluded with the N etherlands2, France3 and a BTA with the

investors and the State

2.1.1 Definition o f "Disputingparties"

Both BITs with the Netherlands and France stipulate the provisions on disputes between investor and a host State The BIT with the Netherlands provides disputes between "a Contracting Party" and "a national o f the other Contracting Party" (Art.9(l)) With regard to these disputing parties, A rt.l defines "nationals." The BIT with the Netherlands, however, does not define "a Contracting Party." It is only noted

"The Government o f the Kingdom o f the Netherlands and the Government o f the Socialist Republic o f Vietnam (hereinafter referred to as "the Contracting Parties")" in the Preamble, and there is no definition on "the Contracting Parties."

The BIT with France also provides investment dispute betw een "a Contracting Party" and "a national or company o f the other Contracting Party" (A rt.8(l)) With

4 Agreement between the United States o f America and the Socialist Republic o f Vietnam on Trade Relations, concluded on 13 July 2000.

524

LEGAL DEVELOPMENT OF THE INVESTMENT DISPUTE SETTLEMENT.

re g a rd to th e s e d isp u tirm p arties, A r t.l d e fin e s " n a tio n a l" a n d " c o m p a n y "

respectively The BIT with France also does not define "a Contracting Party," and

ju s t d e s c rib e s th a t "th e G o v e m m c n t o f th e S o c ia list R e p u b lic o f V ie tn a m a n d th e

G o v e rn m e n t o f th e R e p u b lic o f F rench, re fe rre d to as ‘th e C o n tr a c tin g P a r tie s ’" in

the Preamble

In b o th B IT s w ith th e N e th e rla n d s an d F ra n c e , th e re w a s n o s p e c if ic p ro v is io n

on the concept o f "a Contracting Party" as a disputing parties o f ISDS As to SOEs,

b a s e d on th e d e fin itio n c la u se s on "legal p e rs o n s (th e N e th e rla n d s )" o r " c o m p a n y (F ra n c e )," it m ig h t b e c o n s tru e d th at a S O E e s ta b lis h e d in a Contracting State (home State) would be treated as "a investor" when it invests in the other Contracting State (host State) A SOE corresponds to neither "a Contracting Party" nor "a investor o f the other Contracting Party" under the BITs

Similar to the BITs with Netherlands and France, "Chapter IV Development o f Investment Relations" o f a BTA with the U.S provides disputes between investors and a host State (Art.4) In Chapter IV, "an investment dispute" is defined as a dispute between "a Party" and "a national or company o f the other Party" arising out

o f or relating to "an investment authorization," "an investment agreement" or an alleged breach o f any right conferred, creatcd or recognized by Chapter IV ( ) with respcct to a covered investment (Art 1(10)) In addition, "an investment authorization" is an authorization granted by "the foreign investment authority o f a Party" to a covered investment or a national or company o f the other Party (Art 1(6)), and "an investment agreement" is a written agreem ent between "the national authorities o f a Party" and "a covered investment or a national or company

o f the other Party" (Art 1(7)) In the BTA, therefore, disputing parties are "a Party," which includes "the foreign investment authority" and "the national authority," and

"a national or company o f the other Party." As these disputing parties, Article 1 defines "company," "company of a Party" and "national" o f a Party With regard to

"a Parly," the Preamble in the BTA states that "The Government o f the United States o f America and the Government o f the Socialist Republic o f Vietnam (hereinafter referred to collectively as "Parties" and individually as "Party")." In contrast to the BITs with the Netherlands and France, the BTA, furthermore, stipulates "a state enterprise" with respect to a covcred investment (Art 1(5)), and a

P a rty ’s o b lig a tio n s sh a ll a p p ly to a state e n te rp ris e in th e e x e r c is e o f a n y re g u la to ry ,

administrative or other governmental authority delegated to it by that Party (Art 12)

As to these provisions o f Chapter IV, it is reported that "Chapter IV establishes detailed obligations regarding ISDS and provides the consent o f both Parties to

re s o lv e su c h d is p u te s th ro u g h a rb itra tio n C h a p te r IV a p p lie s to a s ta te e n te rp ris e to the e x te n t th a t th e e n te rp ris e e x erc ises an y re g u la to ry , a d m in is tr a tiv e o r o th e r

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Governmental authority delegated to it by the G overnm ent"1 Therefore, "state-own enterprises" which have regulatory functions are treated as "a State" when the enterprise exercises its power In this case, investors could file directly for irbitration against "state-owned enterprises" based on ISDS provision

2.1.2 The scope o f "a Contracting Party" in Investor-State Dispute Settlement

In BITs with the N etherlands and France and a BTA w ith the U.S., the disputes ịgainst "a Contracting Party" and/or "a Party" need at first be settled amicably iĩĩiong the parties involved I f the disputes cannot be settled by this mean, the lisputes will be subm itted to the procedure provided by the respective BITs and iTA, such as national courts in a host State, arbitration and/or conciliation based on

he agreement, UN CITRA L rules or ICSID

In the field o f foreign investment, SOEs have been established for the purpose )f dealing with foreign investors in the host State This has raised issues o f ittribution o f acts o f SOEs to the States In principle, SOEs are separate status and heir acts will not be attributed to the state However, several exceptions qualify this principle: the separation w ill not be respected if the corporate veil has been created

IS a means for fraud and evasion Conduct w ill be attributed to the state in cases

■vhere the corporation exercises public power A nother exception concerns a ỉituation o f ownership by the State where control is exercised in order to achieve a

^articular result2 Concerning this issue, investment treaties on the whole generally

jo not contain special rules o f attribution, so they are to be read in the lights o f general international law in that respect3 As m entioned above, the BITs with the Netherlands and France have also no definite provision on attribution o f acts by SOEs, and have no provisions on the scope o f "a Contracting Party." On the other hand, the France model B IT o f 2006 has a special provision on "attribution" in Article 2, dealing w ith federated states o f federal unions, regions, local authorities

or any other entities for whose international relations a Contracting Party is responsible4 Com paring this provision in the France m odel,B IT with the BITs,

will apply to SOEs established in a Contracting State (host State) when the disputes with investors have occurred in the host State under the BITs themselves In

co ntrast to th e m , a B T A w ith th e U S s p e c ifie s " a ttrib u tio n " in A rtic le 12 an d

1.The U.S - Vietnam Trade Council Education Forum (2004), p 38.

4.Georgios Petrochilos (2010), p.288, note 7.

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LEGAL DEVELOPMENT OF THE INVESTMENT DISPUTE SETTLEMENT

C la u s e 5 o f A rtic le 1 U n d er th e B T A , a c ts by "sta te e n te rp ris e s " o f a h o s t S ta te

would be attributed to the host State when investment disputes arise between the

s ta te e n te r p ris e s a n d in v e sto rs S O E s, e sp e c ia lly s p e c ific " s ta te -o w n e d e n te rp ris e s "

would be treated as "a Contracting Party" under a BTA with U.S

In addition, under the ICSID, a constituent subdivision or agency o f a state

m a y b e c o m e a p a rty to a rb itra tio n p ro c e e d in g s p ro v id e d it h a s b e e n d e s ig n a te d to

th e IC S ID a n d i f th e c o n se n t o f th a t e n tity h a s b e e n a p p ro v e d b y th e s ta te s ( A r t 2 5 ( l ) a n d (3 )) A rtic le 25 d o es n ot se t forth a n y p rin c ip le o f a ttrib u tio n to th e

State, but merely opens the possibility for the host State to delegate party status to its teưitorial subdivision or entity for jurisdictional and procedural purposes Under the ICSID, the question whether a particular constituent subdivision or entity is eligible for this purpose is left to the relevant domestic law 1

2.2 Investment Law

Until 2005, foreign investors were subject to a specific foreign investment law

in 19872 and 19993 respectively In 2005 Vietnam promulgated the Law on Investment, which provides a unified operational framework for foreign and domestic investors as well as for private and public enterprises The Law on Investment o f 2005 unifies the legal and regulatory framework for investment and corporate structure for all types o f investors4

2.2.1 D efinition o f "Disputing p a rtie s”

The Law on Foreign Investment in Vietnam o f 1987 provided disputes between (1) "the two parties" o f a business co-operation contract or a joint venture contract, (2) "a joint venture or an enterprise with 100% foreign capital" and

"Vietnamese economic organisations" and (3) "foreign invested enterprises" themselves (Art.25) With regard to these disputing parties, Art.2 defined "a

V ie tn a m e s e p a rly ," " th e tw o p a rtie s ," " B u s in e s s c o -o p e ra tio n c o n tra c t," " Jo in t

venture contract" and "Joint venture" respectively Based on the definition, a

d is p u tin g p a rty is a V ie tn a m e s e p a rty a n d a fo reig n p arty A s to "a V ie tn a m e s e "

p a rly , it c o n s titu te s o f o n e o r m o re " V ie tn a m e s e e c o n o m ic o rg a n is a tio n s ," e n jo y in g

the status o f legal person Therefore, a SOE, especially "state-owned enterprise."

m ig h t b e c o n s tru e d to b e in c lu d e d in "a V ie tn a m e s e p a rty " b e c a u s e " a sta te -o w n e d

1 R udolf Dozer & Christoph Schreuer (2008), pp 198-199 See also, Christoph H Schreutr (2009), pp 149-160, paras.230-267, pp.338-341, paras.903-920.

2 Law on Foreign Investment in Vietnam dated 29 December 1987.

3 Law on Foreign Investment in Vietnam dated 12 November 1996.

4 U NCTAD (2008), p 4 1 See also, ISHIDA (2006).

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enterprise" w a s defin ed as "a business organization established, invested and

managed by the State as a owner," and "an eco n o m ic legal person" w hich "operates under the law and is equal before the law" in D ecree N o 3 8 8 /H D B T o f 1 9 9 1 Wi th regard to a party o f "a jo in t venture," the case "a jo in t venture" is established based

on an agreem ent b etw een V ietnam ese and foreign govern m ents, the governm ents might be construed as a "in-direct" party o f "the jo in t venture" contract On the other hand, disputes arising b etw een contracting parties o f a jo in t venture, it m ight

be im possible that the governm ent is treated as one o f parties o f the jo in t venture In addition, there w as no d efin ite provision on a SO E, so the L aw o f 1987 m ight be

construed to have no clear IS D S provision2.

The Law on Foreign Investm ent in V ietnam o f 1996 provided alm ost identical but more detailed dispute settlem ent clause as the L aw o f 1987 The L aw o f 1996

provided disputes b etw een (1 ) "parties" o f a b u sin ess co-operation contract or a joint venture contract, (2 ) "‘foreign invested enterprises’ and/or ‘the parties o f a business co-operation contract’" and "Vietnam ese enterprises" (A rt.24) W ith regard

to these disputing parties, A rt.2 defined "a Foreign investor," "a Foreign party," "a

V i e t n a m e s e party," "‘the tw o parties’ and ‘a M ulti-party’,'' "a Foreign invested enterprises," "a jo in t venture enterprise," "an Enterprises w ith 100% foreign invested capital," "a B u sin ess cooperation contract" and "a jo in t venture contract"

respectively B ased on the definition, "a party" o f a b u sin ess co-operation contract

is both "a V ietnam ese party (on e or more V ietnam ese enterprises from all econ om ic sectors)" and "a foreign party (on e or m ore foreign investors)." W ith regard to "a party" o f a join t venture contract, they are "a foreign in vested enterprise" and a different "joint venture" as w e ll as "the V ietn am ese party" and "the foreign party."

V ie tn a m e s e d i s p u t i n g p a r t i e s s p e c i f i e d i n t h e L aw o f 1996 m i g h t b e c o n s t r u e d t o

include SOEs, esp ecia lly "state-owned enterprises," b ecause a state-ow ned

Decree No 388/HDBT dated 20 N ovem ber 1991 o f the Council o f M inisters) See also, Viện Khoa họg Pháp lý - Bộ T ư pháp (2006), pp 219-220.

2 On the other hand, Decree N0 I8-CP dated 16 April o f the G overnm ent Detailing the Implementation o f the Law on Foreign Investm ent in V ietnam stipulated that "Disputes between foreign-invested Enterprises, foreign parties to business cooperation contracts with Vietnamese State A gencies shall be resolved through the m eans o f conciliation When there

is no conciliation with each other, the parties to the dispute shall subm it the dispute to the Slate competent agency for settlement." in Article 102 W ith the com ing into effect o f this decree, ISDI was specified in legal document in Vietnam With regard to the concept o f

’Vietnamese State A gencies," there also had no provision See, Đỗ Văn Đại, Mai n ồ n g Quỳ 2006) pp.447-448.

LEGAL DEVELOPMENT OF THE INVESTMENT DISPUTE SETTLEMENT.

enterprise is one o f the constituent o f "V ietnam ese enterprises"1 A s to "a S tate" o r

"a State entity," the Law o f 1996 had also no definite provision

In contrast to the Laws o f 1987 and 1996, the Law on Investm ent o f 2 0 0 5 clearly stipulates a provision on disputes betw een investor and a host State It

p ro v id e s d is p u te s beween (1) "domestic in v e sto rs" themselves, (2) "a dom estic

in v e sto r" an d "V ietn am ese State M an ag em en t A g en cie s", (3 ) " ‘a fo re ig n in v e s to r ’

a n d /o r ‘a fo reig n in v ested en terp rise’" and oth ers, (4 ) "foreign in v e sto rs" themselves and (5) "a foreign investor" and "Vietnamese State M anagement A gencies" (Art 12) With regard to these disputing parties, Article 3 defines "Investor," "Foreign investor" and "Enterprises with foreign owned capital" respectively Based on the d efin itio n "a state-ow ned enterprise" o f Vietnam m ight becom e a disputing party as "a d o m estic

in v e s to r" w h e n th e e n te rp ris e ca rrie s o u t in v e s tm e n t a c tiv itie s in a c c o r d a n c e w ith

the law o f V ietnam (Art.3(4)(e))2 On the other hand, as to "V ietnam ese S tate

M anagement Agencies," there is no definite provision In addition there is also no specific provision on "a state-owned enterprise" such as Article 12 o f a BTA w ith

the U.S in the Law o f 2005 Disputes between foreign investors and "state-owned

enterprises" shall, therefore, fall under ones between (3) "‘a foreign investor’ and/or

‘a foreign in v e s te d enterprise’" and others, not under ones betw een (5) "a foreign investor" and "Vietnamese State Management Agencies."

1 A ccording to the Law on State-owned Enterprise o f 1995, which w as valid at that time, a state-owned enterprise was defined as "an economic organization which is capitalized,

established, organized and managed by the State, and carries out business or public utility operations aimed at achieving the socio-economic objectives assigned by the State." (Art.l) The

Law on State-owned Enterprises (NO.14/2003/QH11 dated 26 November 2003), which replaced the I-aw o f 1995, also defined a state-owned enterprise as "economic organizations where the State owns the entire charter capital or holds dominant shares or contributed capital, which are organized in the form o f State companies, joint-stock companies or limited liability companies." (A rt.l) In addition, the Law on Enterprises (NO.13/1999/QH10 dated 12 June 1999), which replaced the Law on Companies, the 1XỈW on Private Enterprises dated 12 December 1990, the Law on Amendments and Supplements to a Number o f Articles o f the Law on Companies and the Law on Amendments and Supplements to a Number of Articles o f the I^ w on Private Enterprises dated 22 June 1994, was applied to "state-owned enterprises and enterprises of political organizations or socio-political organizations which converted in to limited liability com panies or joint-stock companies" (A rt.2(l)), and defined "enterprises" as "an economic organization having its own name, assets and a fixed transaction office, and having business registration as prescribed by law in order to conduct business operations." (Art.3( 1)) Sec also, Phạm Duy N ghĩa (2002), pp.79-124.

2 As noted above, according to the Law on State-owned Enterprise o f 2003, state-owned enterprises are "economic organizations, organized in the form o f State companies, joint- stock com panies or limited liability companies (A rt.l).

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2.2.2 The scope o f "a State" in ISID under the Investment Laws

As mentioned above, unlike the Law on Foreign Investm ent in Vietnam, the Law on Investment o f 2005 clearly stipulates ISDS In the process o f drafting laws both on investment and enterprises o f 2005, the draft laws were circulated for comments from dom estic and foreign entrepreneurs as w ell as from members o f the international donor community After that, the draft laws w ere submitted to the National Assembly for review and approval in October 2005 In the meantime, the

G o v e r n m e n t h a d s t u d i e d p o l i c i e s t o a t t r a c t p r i v a t e i n v e s t m e n t i n i n f r a s t r u c t u r e development in order to respond to the needs for econom ic development, cutting business costs and raising com petitiveness1

In the drafting process, the Vietnam B usiness Forum (V B F)2 had presented the various com m ents and issues on the laws, and one o f them was about the updating o f the dispute resolution m echanism 3 W ith regard to disputing settlement, the VBF expressed concerns on the dispute resolution m echanism in Article 12 Being undergoing consideration in the N ational A ssem bly, the unclear term "foreign elem ents" has been removed from A rticle 124 and disputes betw een foreign investors and state authorities could be resolved by international arbitration provided such rights are agreed "in a relevant contract"5 as well as "in

an international treaty o f which Vietnam is a member" in the final draft6

1 D eputy P rim e M in ister V u K h o a n ’s Speech, at th e V ietnam B u siness Forum H o Chi M inh City, June 2005, in V B F (2005b); V B F (2005a).

2 The V B F is an o n -g o in g structured dialogue betw een the V ietn am ese G o v ernm ent and the business com m unity T h e V B F aim s to d evelop o f a favorable b u sin ess environm ent that attracts foreign in v estm ent and stim ulates d o m estic eco n o m ic grow th See also, V B F

w ebsite.

3 M inutes o f the P re-m eeting on C onversion o f FD I, in V B F (2005a).

4 In the 8th draft o f the Law on Investment, the dispute resolution provisions were moved from Article 127 (the 7th draft) to Article 12 The VBF considered that the new Article 12 was more com prehensive than the old Article 127 However, use o f term "foreign elements" could lead to confusion or misinterpretation Ideally, the article should make clear that disputes with "foreign elements" included disputes w here at least one party to the dispute was a foreign-invested enterprise or a foreign investor or foreign organization See, Comments on the Draft Com m on Investment Law (cil) and the Draft Unified Enterprise Law (UEL), in VBF (2005b).

5 Comments on the Com m on Investm ent Law, in VBF (2005a).

6 The first draft presented to the National Assembly stated that disputes with the G overnment had to be resolved in V ietnam ese courts or arbitration, absent a treaty See, Private Sector Participation in Power, in VBF (2005a).

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LEGAL DEVELOPMENT OF THE INVESTMENT DISPUTE SETTLEMENT

C o n c e r n in g th e fin al d ra ft, th e S ta n d in g C o m m itte e o f t h e N a tio n a l A s s e m b ly

re p o rte d th a t th e m a jo rity o f th e N a tio n a l A ss e m b ly a g r e e d w ith th e p r o v is io n s o f

the draft, w hile there w ere opinions to propose to transfer A rtic le 12 in C hapter II into "C hapter IX State m anagem ent o f investm ent," b ecau se the dispute

on ISDS might not apply to SOEs in principle The disputes betw een investors and SOEs would be treated ones stipulated in Article 12(3)

2.3 BOT Law

During the early 1990s, it was impossible to implement build operate transfer projects (B O T Project) in Vietnam because the governm ent preferred to avoid foreign control and private influence o f the infrastructure H ow ever, the "Doi M oi" (renew al), the poor state o f infrastructure in Vietnam and the realization that it was beyond the m eans o f the governm ent to build all the necessary infrastructure based

on state financing, led to amendments to the Foreign Investment Law in late 1992, which reversed the form er policy2

In 1993 the governm ent promulgated Decree N o 8 7 /C P 3, the first BOT

re g u la tio n s in V ie tn a m In 1998 th e g o v e rn m e n t re le a se d D e c r e e N 0 6 2 /1 9 9 8 /N D -

CP4, which reworked Decrec No.87/CP, and amended D ecree No.62/1998/ND-CP

1 ủ y ban Thường vụ Quốc hội (2005a).

2 Sara Lindgren & H elena Varga (2005), p.31.

3 Decree No.87/CP dated 23 November 1993 o f the G overnm ent providing investmeni regulations on BOT contracts.

4 Decree N0.62/1998/ND-CP dated 15 August 1998 o f the (k n e rn m e n t on promulgating investment regulations under BOX, BTO, BT contracts applied for foreign investment in Vietnam.

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by Decree NO.02/1999/ND-CP1 in 1998 Decree NO.78/2007/ND-CP2 was released

by the governm ent in 2007, which replaced obsolete Decree N0.87/CP, Decree N0.62/1988/ND-CP and Decree NO.02/1999/ND-CP Decree NO.78/2007/ND-CP perpetuated contents o f the BOT regulations applicable to foreign and domestic investment in those Decrees,3 there was no substantial difference in terms o f the nature

o f the BOT, BTO or BT contracts in comparison to the old Decrees.4 However, Decree NO.78/2007/ND-CP set forth a number o f different provisions that apply specifically to investments under the form o f the these contracts rather than other forms o f investment,5 and institutionalized new ideas about BOT contracts in the spirit o f the unified investment law, thereby creating a uniform and equitable legal mechanism for all investors.6 D ecree NO.78/2007/ND-CP reflected the Com m unist Party’s and the State’s major policies on non-discrimination against investors and sources o f capital as manifested in the promulgation o f both Law on Investm ent and Law on Enterprises in 2005.7 A t present, BO T projects are regulated by Decree No 108/2009/ND-CP,8 am ended by Decree No.24/2011/ND -CP9 in 2010

2.3.1 Definition o f "Disputingparties"

Decree N0.87/CP provided disputes between (1) "a BO T company" and "a sub-contractor" and (2) "an Authorized State Agency" and "‘an investment owner’ and/or ‘a BOT com pany’" (A rt.l5 (l) and (2)).10 W ith regard to these disputing

1 D ecree 02 /1 9 9 9 -N D -C P d a te d 27 January 1999 o f th e Government on A m endm ents o f and

Additions to a Number of Articles of Decree 62/1998-ND-CP of the Government dated 15 August 1998 on on investment in forms of build-operate-transfer contracts, build-transfer- operate contracts and build-transfer contracts applicable to foreign investment in Vietnam

2 DECREE NO.78/2007/ND-CP dated on 11 May 2007 of Government on investment in the form of Build-Operate-Transfer, Build-Transfer-Operate or Build-Transfer contracts

4 Nguyen Dang V iet (2007).

5 Nguyen Dang V iet (2007).

the form o f Build-O perate-Transfer, Build-Transfer- Operate or Build-Transfer Contract.

9 Decree N o.24/2011/N D -CP on Amendm ents and Supplem ents to a N um ber o f Articles o f

am ending some articles o f Decree NO.108/2009/ND-CP dated 27 N ovem ber 2009 o f the

G o v ern m en t, on investm ent in the form o f Build-Operate-Transfer, Build-Transfer- Operate

or Build-Transfer Contract This Decree amended Articles 4 and A rticle 12.

10 See also, Đỗ Văn Đại, Mai n ồ n g Quỳ (2010), pp.447-448.

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LEGAL DEVELOPMENT OF THE INVESTMENT DISPUTE SETTLEMENT.

p a r tie s , A rtic lc 1 d e fin e d "a B O T co m p a n y ," "an A u th o riz e d S ta te A g e n c y " a n d "a

sub-contractor" respectively Decree No.87/CP had no definition on "an owner- investor," which was just refeưed in definition clause o f "a BOT contract" as one

p a r ty o f th e c o n tr a c t (A rt 1(4)) A c c o r d in g to th is d e f in itio n , it w a s n o t c le a r

w h e th e r "an in v e s tm e n t o w n er" in clu d ed V ie tn a m e s e e n titie s o r n o t T h e r e w a s a lso

n o s p e c if ic p ro v is io n on "a s ta te -o w n e d e n te rp rise ," so w h e n "a s ta te -o w n e d

enterprise" participated in a BOT project, it might be construed that its legal status

is as same as other Vietnamese entities, that would implement a BOT project as "a sub-contractor."

A s c o n tra s te d w ith D e c re e N 0 8 7 /C P , D e c re e N 0 6 2 /1 9 9 8 /N D - C P h a d m o re

detailed provisions N0.62/1998/ND-CP provided the disputes arising between (1)

"an Authorized State Agency" and "a foreign investor," (2) "the parties" in a BOT enterprise, (3) "BOX enterprises" and "foreign organizations or individuals" and (4)

"BOT enterprises" and "Vietnamese economic organizations" (Art.25) With regard

to these disputing parties, Article 1 defined "‘BOT enterprise,’ ‘BTO enterprise’ or

‘BT enterprise ("BOT enterprise")’," "State Agency authorized to enter into a BOT, BTO, or BT contract ("Authorized State Agency")" and "Foreign investor to enter into a BOT, BTO, or BT contract ("a foreign investor11)" respectively Based on the definition, "Authorized State Agencies" would be limited to Ministries, Ministerial- level agencies, Government-attached agencies and People’s Committees o f provinces and/or centrally-run Cities All BOT, BTO and BT contracts would be signed between

"the Authorized State Agency o f Vietnam and a foreign investor" (Art 1(1), (2) and (3)), and Vietnamese and/or foreigners might enter into a subcontract with a BOT enterprise as sub-conừactors(Art.l(7)) A Vietnamese disputing party clearly stipulated

in Article 25 was only "a Vietnamese economic organization," however it was not clear whether "a party in a BOT enterprise" included "a Vietnamese organization and/or

in d iv id u al" o r not C o n sid erin g w o rd in g an d literal in te rp re ta tio n o f A rtic le 2 5 (3 ), "a

Vietnamese economic organization" would be treated as a disputing party in Decree

No Decree No.62/1998/ND-CP

Decree NO.02/1999/ND-CP amended Article 25(1) and (3) o f Decree

N o 6 2 /1 9 9 8 /N D -C P an d added th e d isp u te s a risin g b e tw e e n (1 ) "an A u th o riz e d

S ta te A g e n c y " a n d "a B O T c o m p an y " d u rin g im p le m e n tin g a c o n tra c t g u a ra n te e d

b y an A u th o riz e d S ta te A g e n c y (A rt 1(1)) an d (2 ) "a B O T e n te r p r is e " an d "any

V ie tn a m e s e e c o n o m ic o rg a n iz a tio n " w h o se o b lig a tio n s to p e rfo rm th e p ro je c t arc

g u a r a n te e d b y an A u th o riz e d S tate A g en cy o f V ie tn a m (A rt 1(3)) H o w e v e r D e c re e

N o - 0 2 / 1 9 9 9 /N D - C P d id n o t a m e n d e d th e d e f in itio n c la u s e in A r t ic l e 1 its e lf S o th e

r e q u i r e m e n ts o f d is p u t i n g p a r tie s a rc s a m e a s in D c c r e e N o 6 2 / 1 9 9 8 / N D - C P

VIỆT NAM HỌC - KỶ YẾU HỘI THÀO QUỐC TẾ LẢN THỨ TƯ

Decree NO.78/2007/ND-CP divided disputes into tw o categories according to capital o f BOT project, first is disputes arising from projects with domestic investment capital and second with foreign invested capital (Art.42) The disputes related to the domestic were between (1) "the Authorized State Agency" and "a investor or a project enterprise" and (2) "the project enterprise" and "economic organizations" participating

in implementing the project with contractual obligations guaranteed by the Authorized State Agency (Art.42(l)) The disputes related to the foreign were between (1) "the Authorized State Agency" and "a foreign investor or a project enterprise," (2) "a project enterprise" and "‘a foreign organization or individual’ or ‘Vietnamese economic organization’" and (3) foreign investors themselves (Art.42(2)) With regard to these parties, Article 2 defined "State Agencies authorized to conclude project conừacts ("Authorized State Agencies")," "Investors" and "‘BOT enterprise,’ ‘BTO enterprise’

or "BT enterprise ("project enterprise")" respectively

As mentioned above, in Decree N 0.62/1998/N D-CP, only Ministries, Ministerial-level agencies, Government-attached agencies and People’s Committees

o f provinces and/or centrally-run Cities could be authorized to conclude project contracts In contrast to that, Decree NO.78/2007/ND-CP added "attached agencies"

as one o f "the Authorized State Agencies." As to this "attached agencies,", it had been indicated that the definition o f the Authorized State Agencies might be construed in tw o ways First, they would include (1) M inistries, Ministerial-level agencies, Government-attached agencies, (2) Provincial and/or Centrally-run C ity’s People’s Committees, and (3) entities attached to the agencies mentioned in both (1) and (2) which were authorized by these agencies to conclude BOT contracts Second, they would include (1) Ministries, M inisterial-level agencies, Government- attached agencies, (2) Provincial and/or Centrally-run C ity’s People’s Committees, and (3) entities attached to the agencies mentioned in both (1) and (2), and all three types o f agencies m ust be authorized by the Prime M inister to conclude BOX contracts Therefore it had been criticized that there should be a uniform interpretation o f the D ecree’s provision on contractual parties1

Decree No 108/2009/ND-CP provided 5 kinds o f disputes between (1)

"Authorized State Agencies" and "investors or project enterprises," (2) "project enterprises" and "economic entities participating in project implementation," (3)

"Authorized State Agencies" and "‘foreign investors’ or ‘project enterprises’" arising in the perform ance o f project contracts and guarantee contracts, (4) "project enterprises" and "‘foreign organizations or individuals’ or ‘V ietnam ese economic

1 Nguyen Thi Lang (2007), p 18

5 3 4

LEGAL DEVELOPMENT OF THE INVESTMENT DISPUTE SETTLEMENT.

institutions’" and (5) investors themselves (Art.44) With regard to these parties,

A rtic le 2 d e fin e s "In v esto rs" an d " B O T , B T O o r B T e n te rp r is e (" p ro je c t

e n te rp ris e " )" re s p e c tiv e ly In ad d itio n , A rtic le 3 p r o v id e s th a t S ta te a g e n c ie s

a u th o riz e d to sig n an d p erfo rm p ro je c t c o n tra c ts ( " M in is tr ie s , D e p a rtm e n ts a n d

P ro v in c ia l-le v e l P e o p le ’s C o m m ittees") a re M in is trie s , M in is te r ia l-le v e l a g e n c ie s ,

G o v e rn m e n t-a tta c h e d a g e n c ie s and P e o p le 's C o m m itte e s o f P r o v in c e s o r C e n tra lly -

ru n C itie s D u e to A rtic le 3, p ro v isio n s on d is p u tin g p a rtie s b e c o m e m o re s im p lifie d

and definite than ones o f Decree NO.78/2007/ND-CP, which arose unclear interpretation In Decree No 108/2009/ND-CP, not only "Agencies attached to a Provincial-level People’s Committee" are not included in "the Authorized State Agencies," but also the term "authorized to conclude project contracts" is deleted

2.3.2 The scope o f "Authorized State A gencies"

All BOT Laws have specified disputes against "Authorized State Agencies" so far Under the cuưent Decree NO.108/2009/ND-CP has prescribed specific administrative authorities at both central and provincial level, which are treated as

"Authorized State Agencies." Furthermore, agencies attached to local government, which are considered to be equivalent to "state entities" at local revel, are clearly exempted from "Authorized State Agencies." As to "state-owned enterprises," they might be "domestic investors" or subjects involved in BOT projects, but would not

be treated as "Authorized State Agencies."

2.4 Arbitration Law

Commercial arbitration appears in Vietnam later than the economic tribunal, together with the emergence and development o f economic contracts Vietnam had

in tro d u c e d th e sy ste m o f S tate F x o n o m ic A rb itra tio n s in c e 1 9 6 0 , b u t a f te r a d o p tin g

the "Doi Moi" in 1986, this system was disbanded when the Econom ic Tribunals were established within the systems o f the People’s Court to settle economic disputes in 1993 In 1994 the Government promulgated Decree N o.116/C P,1 under

w h ic h E c o n o m ic A rb itra tio n C en ters w e re e sta b lish e d in P r o v in c e s a n d C e n tra lly -

ru n C itie s .

W ith re g a rd to se ttlin g d isp u te s re la tin g to fo re ig n tra d e , V ie tn a m e s ta b lis h e d

th e F o re ig n T ra d e A rb itra tio n C o un cil in 1 9 6 3 3 an d th e M a ritim e A rb itra tio n

activities o f Economic Arbitration.

2 Pham Diem (2009), pp.27-28 See also, Le Hong Hanh (2009), pp 1-2.

3 Decree No.59/CP dated 30 April 1963 o f the Council o f G overnm ent on the establishment o f Foreign Trade Arbitration Council.

VIỆT NAM HỌC - KỶ YẾU HỘI THẢO QUỐC TÉ LẦN THỨ TƯ

Council in 19641 respectively During early 1960s econom ic activities in Vietnam required to set up a non-govem m ental arbitration organisation to resolve disputes from international econom ic relations including not only the economic relations between Vietnam, the former Soviet Union and the eastern block but also the economic relations betw een Vietnam and developed m arket econom ies2 In 1993 these Councils were merged into the Vietnam International Arbitration Centre (VIAC), which was established under Decision N o.204/TTg3 by the Prime Minister

In 1996 the Prime M inister legislated Decision N o.l 14/TTg4 in order to expand the jurisdiction over disputes from "international economic relations"5 into ones from

"domestic business relations"6

Since 1993 in Vietnam, together with the economic courts as the only State dispute settlement body, there have been tw o non-govem m ental dispute resolution bodies in parallel existence, namely the VIAC affiliated to the Vietnam Chamber o f Commerce and Industry (VCCI) and provincial Econom ic Arbitration Centres These institutions w ere regulated by different legislation that made it a special characteristic during the evolution o f economic laws in Vietnam over the past years.7

In 2003, the Standing Committee o f the National Assembly adopted Ordinance NO.08/2003/PL-ƯBTVQH on Commercial Arbitration,8 which replaced Decree

N o.l 16/CP, Decision No.204/TTg and Decision N o ll4 /T T g The Ordinance was regarded as big step forward in development o f arbitration in Vietnam as compared

to the previous Decree N o 116/CP The Ordinance provided dispute resolution mechanism with many principles that w ere commonly accepted in solving international trade disputes in most arbitration centers in the world Such principles

1 Decree No 153/CP dated 5 O ctober 1964 o f the Council o f G overnm ent on the establishment

o f M aritime A rbitration Council.

2 Institute o f State and Law, National Centre for Social Scicnces and Humanities Vietnam, (2002), pp.33-34.

3 Decision N o.204/TTg dated 28 April 1993 o f the Prime M inister on the organization o f Vietnam International A rbitration Center.

4 Decision No.l 14/1996/QD-TTg dated 16 February 1996 o f the Prime Minister on Expanding the Jurisdiction o f the Vietnam International Arbitration Center in Settling Disputes.

5 Article 2 o f the Statute o f the VIAC attached to Decision N o.204/TTg.

7 Institute o f State and Law, National Centre for Social Sciences and Humanities Vietnam, (2002), p.34.

o f the National Assem bly on Commercial Arbitration.

536