As Vietnam’s trade and investment ties with the global economy continue to deepen, it is normal and inevitable that a small minority of projects will end up in disputes, as recent cases highlighted by the press illustrate. It is a positive step, therefore, that on 14 January 2014, the Prime Minister of Vietnamese Government issued Decision No. 04/2014/QD-TTg (“Decision 04” or “Decision”) regulating the coordination between the Vietnamese States bodies in international investment disputes settlement. This Decision shall enter into force on 03 March 2014 and it will help Vietnam respond more effectively to lawsuits and reduce the losses that can come from ignoring or mishandling such cases.

Decision 04 defines international investment disputes as those in which foreign investors sue the State, the Government, the State bodies of Vietnam or authorized State agencies and organizations. The grounds for such disputes may either be (i) agreements or international treaties on investment encouragement and protection, of which Vietnam is a signatory or member, or (ii) contracts and agreements between the State, the Government, the State bodies of Vietnam and foreign investors; which provide for the resolution of the disputes by international arbitration or competent foreign tribunals.

Decision 04 also provides for a specific managing authority (“Managing Body“) to be assigned to each dispute. Such authority shall be determined according to its involvement in the act giving rise to the dispute. More specifically, the Vietnamese State bodies that led the negotiations or represented the Vietnamese Government in the signature of contracts or agreements between the Vietnamese Government and foreign investors shall be the Managing Body handling the dispute arising out of these contracts or agreements. Therefore, the Ministry of Justice shall be the Managing Body in disputes based on investment protection agreements and the Ministry of Finance shall manage the settlement of disputes in respect to the Government’s loans, debts or the Government’s secured loans, debts in accordance with Decree No. 15/2011/ND-CP and Decree No. 01/2011/ND-CP. The Prime Minister, where necessary, may decide to appoint or replace the Managing Body after having considered the recommendation of the Minister of Justice.

The Ministry of Justice shall also represent the Government in determination of strategies pertaining to the settlement of disputes and it shall liaise with relevant parties and lawyers along with the Managing Body. When needed, a joint committee will be established among members of the Managing Body and other relevant parties.

During the period from 2010 to 2013, the Ministry of Justice, in coordination with local State agencies, has managed many international investment disputes involving State agencies and State owned companies. In one of these cases, a US firm sued the People’s Committee of Binh Thuan province, in central Vietnam, seeking for a US$3.75 billion compensation. The US firm based its claim on the ground that its project in Vietnam was revoked. Even though Vietnam won the case, this shows that Vietnam may be involved in more international investment disputes in the future. Decision 04 reflects the determination of the Government to react promptly to international investment disputes and minimize losses arising from such cases and it will help Vietnam fulfil its commitments under the investment protection agreements it has and those that it is currently negotiating.

 

By Frederick Burke and Van Thuy Duong.

 

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