Franchising has always been considered one of the business models having high socio-economic value. This activity not only brings enormous benefits to franchising owners, but also provides a way to effectively share a business opportunity with many others, especially in developing countries such as Vietnam, helping individuals and organizations who are insufficient sources to self-build a business from zero.
In addition to the reputation of their service and product’s quality to build a truly effective franchise system, franchisors must also keep in mind legal issues involved in this activity. In fact, franchising covers a wide range of issues such as entering a contract, franchise contract registration, intellectual property, technology transfer, confidential information, raw materials supply, and operating franchise stores… Especially when franchisors want to expand their business worldwide, this activity will be governed by at least two different legal systems.
Therefore, Apolat Legal, with lawyers and associates advised and assisedt in the implementation of many complicated franchise transactions, will help customers orient and understand the legal issues surrounding this operating model thoroughly. Specifically, the scope of our services includes:
- General consulting in relevant legal policies;
- Drafting or reviewing exclusive franchise and sub-franchise agreements;
- Drafting or reviewing other documents and agreements related to the system’s operation to ensure consistency with franchise agreements and regulatory compliance;
- Consulting the compliance with laws and contracts during the franchising term;
- On behalf of the franchisor or the franchisee to negotiate and enter into a franchise agreement;
- Registering the Franchise system to competent authorities;
- Other relevant legal services upon clients’ request;
- On behalf of the franchisor or franchisee resolves disputes related to franchise activities.
Apolat Legal believes that the range of services we provide will fulfil all the requirements of our customers and act as a support link to help clients keep up with the development in the field of franchising.
Despite not being themselves comprehensive contracts or the applicable law, Incoterms have been a short and convenient way to refer agreements on important legal issues, namely delivery method, insurance, cost allocation and the passing of risk. Therefore, it is necessary to investigate the approach of Incoterm toward the issues of the passing of risk in international sale contracts.
There are eleven terms in the Incoterms 2010. In this version, the terms are divided into two groups. Firstly, it is the group containing terms used for all modes of transport, namely FCA, CPT, CIP, DAT, DAP, DDP and EXW. The terms for transport by sea or waterway including FAS, FOB, CFR and CIF are in the second group. Differently, the trade terms were grouped in the C-terms, the D-terms, the F-terms and E-term in the previous versions of the Incoterms.
Similar to the CISG Convention, Incoterms only mentions the price risk. The Incoterms thus traditionally does not resolve the ‘risk’ in other cases such as the consequences of non-performance of parties. Besides, the notion of ‘risk’ under the Incoterms is also referred to as any accidentally physical loss or damage occurred to goods. That means such the loss or damage must be an ‘act of God’ or omissions of third parties.
The main rule under the Incoterms 2010 is that the passage of risk is connected with the delivery of goods as an obligation of the seller. In other words, the seller will bear the risk of loss or damage until the time the goods are delivered in compliance with the specific trade term. After that, the risk occurring to the goods will be in the responsibility of the buyer. Thus, it can be argued that the risk rules under the Incoterms 2010 and the CISG share the same theory.
Regarding the terms of FCA, FAS and FOB, the seller must deliver the contract goods to a carrier who is nominated and paid by the buyer. In FCA term, the passing of risk will occur from the time when the contract goods have been loaded on the transportation means at the seller’s premises or placed at the disposal of the carrier in the case the delivery place is different from the seller’s premises. Under the terms of FAS and FOB, the seller is obliged to respectively place the goods alongside a ship and on board of a ship. Consequently, the risk will pass at those moments.
In terms of the FOB term, it is necessary to further discuss this term which is considered one of the oldest and most popular trade terms utilized in foreign trade. In the previous version of Incoterms, this instrument takes the ship’s rail as a decisive line where the risk is passed from the seller to the buyer. However, this consideration has been significantly changed from Incoterms 2010. In this version, the risk passing line has been moved from passing the ship’s rail to placing the goods on the board ship. This change has been resulted from the fact that ship’s rail approach is apparently inefficient and uncertain. The new risk passing line is thus seemed to be more accurate and clearer. The same changes can be also observed in the CIF and CFR rules below.
In the group of terms including CPT, CIP, CFR and CIF, the seller has the contractual obligation to conclude and pay for the contract of carriage. Similar to the above F-terms, the risk is transferred from the seller to the buyer at the moment of loading. In more detail, in CIP and CPT term, the risk is passed from the time the goods have been handed over to the carrier. This approach is sooner than the ‘maritime’ terms of CIF and CFR in which the risk of loss and damage occurred to the goods will transfer when such the goods are placed on board of the ship by the seller.
Under the D-terms consisting of DAT, DAP and DDP, the contract goods have to be delivered at the point of destination by the seller. Generally, it means the seller will bear the risk during transit. In the first term of DAT, the seller completes their delivery obligation by placing the goods at the named terminal. Consequently, the risk will transfer to the buyer when seller unloads the goods from the transportation means at the named place. By contrast, the sellers in DAP and DDP contracts have to bear the risk of loss of or damage to goods until the moment the goods are available in the means of transport for the either party to unload them. These terms are comparable with the situations regulated in Article 69(2) CISG. Finally, the obligation of the seller under EXW is to deliver and place the goods at the agreed disposal of the seller rather than loading on any collecting vehicle. Thus, when the delivery obligation of the seller is completed at the said moment, the risk will subsequently transfer to the buyer.
Nonetheless, those aforementioned rules are not absolute. Accordingly, in several cases, the risk passing might be occurred even before the time when the goods are delivered. Indeed, these are the situations in which the risk is transferred from the seller to the buyer at a previous moment such as the agreed date or the end moment of an agreed period providing that (i) there is non-performance of the buyer to conduct steps to enable the seller to implement his delivery or (ii) the buyer fails to timely take delivery of the goods.
Temporary residence card for investors
In July 2020; The Law amending and supplementing a number of articles of the Law on entry, exit, transit and residence of foreigners in Vietnam officially takes effect. Accordingly, the policy of granting temporary residence cards to foreign investors in Vietnam has been changed. Now, foreign investors are no longer automatically granted temporary residence cards when they have an investment project in Vietnam, instead, the law of Vietnam requires the investor to meet one of the following conditions to be available to obtain a temporary residence card:
- Foreign investors with contributed capital with a value of between VND 03 billion and under VND 50 billion will be issued a temporary residence card valid for no more than 03 years
- Foreign investors with contributed capital with a value of between VND 50 billion and less than 100 billion will be issued a temporary residence card valid for no more than 5 years.
- Foreign investors with contributed capital with a value of 100 billion VND or more will be issued a temporary residence card valid for no more than 10 years.
Thus, according to the new regulation, foreign investors can be granted temporary residence cards for up to 10 years, which is a relatively large change compared to the previous regulation. This can be seen as a great advantage for foreign investors.
However, in addition to increasing the maximum duration of the temporary residence card, the new regulations also set the minimum investment capital that an investor must achieve to be granted a temporary residence card is 3 billion VND. In case an investor with an investment capital of less than VND 3 billion, he / she will not be able to apply for a temporary residence card as previously prescribed, but only be granted a visa with a maximum term of 12 months. This regulation actually aims to limit the use of investment by foreign individuals to gain long-term residency in Vietnam as well as to ensure that foreign investors are serious when investing in Vietnam. However, this leads to investors who previously invested in Vietnam for a long time but with an investment capital of less than 3 billion VND will not be allowed to continue to receive temporary residence cards. In this case, if an investor wants to be granted a temporary residence card, he/she is required to increase the investment capital in Vietnam to 3 billion or more. This inadvertently creates additional administrative costs as well as causes some difficulties for investors when doing business in Vietnam.
Exemption of work permits for investors
In addition to the revised Law on entry, exit, transit, and residence of foreigners in Vietnam; Decree 152/2020/ND-CP regulating foreign workers working in Vietnam and recruiting and managing Vietnamese employees working for foreign organizations and individuals in Vietnam also comes into effect from February 15, 2021, completely replacing Decree 11/2016/ND-CP.
According to Decree 152/2020/ND-CP, foreign investors are exempt from work permits for the following cases:
- Be the owner or equity member of a limited liability company with a capital contribution of 3 billion VND or more;
- Be the Chairman of the Board of Directors or member of the Board of Directors of a joint-stock company with capital contribution of 3 billion VND or more.
For the above cases, as stipulated in Decree 152/2020/ND-CP, enterprises will not need to perform the procedures for determining the demand for foreign workers. This can be considered as a big advantage for foreign investors since the procedures for determining the demand for foreign workers may take a lot of time to complete.
However, not all cases of foreign investors are exempt from work permits. Foreign investors with a capital contribution of less than VND 3 billion will not be eligible for a work permit exemption and must apply for a work permit if they participate in operating the business in Vietnam. This can be seen as a big difference between Decree 152/2020/ND-CP and Decree 11/2016/ND-CP, according to the previous regulations, foreign investors are exempt from work permits to differentiate the value of the capital contribution. This may cause many difficulties for foreign investors investing in Vietnam whose registered investment capital is less than 3 billion VND because when they are not exempt from work permits if investors want to work in Vietnam, they are required to make the application for a work permit much more complicated.
It can be seen that Vietnamese policies on visas and labour for foreign investors have changed significantly. Therefore, foreign investors, especially those with an investment value of less than 3 billion VND, will need to pay attention to carry out the procedures for applying for work permits and temporary residence cards in accordance with new regulations.
In the global business environment and increasingly crowded markets, businesses often have to improve and apply new methods of production, sales and product marketing to maintain and enhance their competitiveness in the international market. In parallel with the innovation and creativity of business entities, a series of tools are created by the legal system of intellectual property rights (IP) to provide owners with the management options to protect their innovation, knowledge and creativity. IP rights motivate companies to differentiate their products from those of their competitors, as well as enjoy equal monopolies that reduce the risks and uncertainties involve in introducing new or improved products to the market. However, in reality, we still often encounter some cases of ideas accidentally being duplicated or confusing are both submitted to the registrar. However, with the rule of “first to file” (filing priority), the law only protects intellectual property rights for a single owner who is the first person to file a registration application.
The rule of “first to file” in Vietnam’s intellectual property law
The first to file principle in Vietnam’s intellectual property law had been derived from the “priority principle” in the 1883 Paris Convention on the protection of industrial property rights, of which Vietnam is a member. This is one of the two filing principles being used by almost all countries on over the world when registering for protection of intellectual property objects: the “first to file” and the “first to use”. According to the first to file principle specified in Article 90 of the Intellectual Property Law, in case there are many different application owners filing identical or indistinguishable patents/ industrial designs or trademarks that are identical or similar for the same group of identical or similar products or services, the approved application for protection is the application with the priority date or the first filing date. In cases where many applications of different applicants are filed with the same subject and same priority date or first filing date, the protection title shall be granted only to one applicant among all applications. If the applicants cannot reach an agreement, all the applications of that subject will be denied protection.
In addition to the first to file, in the case of the applicant of the invention, the industrial design and trademark wish to extend the scope of protection to other countries. They can apply the principle of priority to enhance the protection ability of their IP assets. This principle will be applied when at least two applications are filed together to protect the same invention, industrial design, or trademark and the applicant has claimed the priority right and pay the fee to get the priority right. The priority principle is regulated in Article 4 of the Paris Convention on protecting industrial property and specified in Article 91 of the Law on Intellectual Property of Vietnam (specifically guided in Article 10 of Decree 103/2006 / ND-CP). However, the right to claim priority for the object in the first application in Vietnam or in countries that are members of the Paris Convention on industrial property, PCT Convention on invention protection only applies within a limited time, specifically (1) for an invention, the priority period is 12 months from the date of the first application, (2) for an industrial design and mark, period of Priority entitlement is 6 months from the first filing date.
The relationship between the first-to-file and priority rule
When considering the relationship between the first-to-file and the priority rule, some people usually consider that the priority rule is an exception of the first to file principle. However, in the author’s opinion, the first to file and the priority principle are two independent but complementary principles that assist the applicant to take advantage in protecting their intellectual property rights in another country. Namely, priority rule is the applicant ‘s right based on having the first valid application filed in a country being a member of a treaty that has a priority rule agreement. An application may file to protect the invention, industrial design or trademark in another Member State, and the subsequent application is deemed filed on the same day as the first application within a particular time. The priority date is the filing date of the first application, while the first filing rule determines the first application’s filing date. Therefore the priority rule is not an exception to the first-to-file rule.
Industrial property objects are entitled to the first to file and priority principle
There are two methods to be granted rights on intellectual property objects: (1) automatic (through creating works or using without registration), which is applicable to copyrights, rights to well-known trademarks, trade names, business secrets; (2) the method for generating the right to grant protection titles such as inventions, industrial designs, trademarks (except well-known trademarks); design and layout of semiconductor integrated circuits and geographical indication. However, the first to file principle and the priority principle only apply to inventions, industrial designs and trademarks according to Articles 90 and 91 of the Law on Intellectual Property. Accordingly, Vietnamese laws do not prescribe the first to file and the priority principle for geographical indications and layout design of semiconductor integrated circuits. This provision is quite appropriate to the Paris convention and practical situation, because the right to register geographical indications belongs to the State. Organizations and individuals to produce products bearing geographical indications, collective organizations representing such organizations or individuals or the local administrative state management agency where the geographical indication exercises the right of registration when having the State’s permission and the State is the owner of the geographical indication (Article 88 Intellectual Property Law). Disputes in the registration of geographical indications are very unlikely. For the layout design of semiconductor integrated circuits, reality shows very few cases of identical subjects filing together for this object.
Through the analysis above, we can see that the first – to – file principle is the basic and most important principle in the legal system to protect the nation’s industrial property. This rule does not allow delays in applying if the applicant wishes to be granted a protection title. From which, “First to file” is also considered a powerful tool to promote the protection of the IP assets. The first to file principle also helps to raise the awareness of the right holders of industrial property objects to protect their rights better.
Besides the rapid development of the economy, the tourism and the outstanding features on geography and cultural conditions, Vietnam is the famous, familiar tourism destination for tourists all over the world. The rapid increase in the number of tourists to Viet Nam has significantly impacted on the resorting property demand in Vietnam during the last time. According to the report of the Ministry of Construction on the home and real estate market in Vietnam, until the fourth quarter of 2020, there is one new project with 3,300 granted condotels; 93 projects with 19,128 condotels and 6,759 tourist villas which are being constructed; 18 projects with 62 completed condotels and 370 finished tourist villas. Although the increasing amount of condotels, the law of Vietnam still has not had sufficient legal basis for regulating the business, management of this type of apartment yet, which leads to many difficulties in practices.
Condotel, also called as condotel or hotel apartment, is the name abbreviated by two words condominimum (apartment) and hotel (hotel). If this type is called condotel, it is because it can be used as both hotel and home. Condotel is considered to be a type of hotel but is constructed as an apartment with dining room, kitchen, bedroom, bathroom, living room,…The owner of the condotel is entitled to lease, sell or use it as an apartment. Almost all condotel projects are located at tourist cities, having beaches such as Da Nang, Thanh Hoa, Ba Ria –Vung Tau,… and are controlled and used as hotel type.
The current market has three primary types of condotel, including: (i) The profit commitment model: in this model, the investor commits a proportional gain account for the first 5 – 10 years and after the commitment term, the profit shall be separated based on real business gains on renting apartments; (ii) Vacation ownership Model: Towards this model, clients do not buy the apartment from the owner, they buy from the international system. After purchasing the vacation from an investor, clients have rights to relax at projects, tourism site of this investor in the world, or make a profit from transferring the holiday; and (iii) Non-profit commitment model: With this model, clients can be free to exploit, use their flat for living, business or consign to the investor and receive gain in accordance with the apartment’s actual business profit.
2. The regulation of Vietnamese law on condotel:
At present, despite the fact that condotels are promoted they are swiftly profitable, the quantity of unsold condotels is up to 18,000 apartments. Investors are afraid of this type of property because condotels have not been prescribed particularly in Vietnam’s legal documents. The absence of the legal framework for adjustment contains much risk for the investors in transactions, transferring this apartment type.
Realizing this factual situation, on February 12th, 2020, The Ministry of Natural Resources and Environment promulgated the Dispatch No. 703/BTNMT-TCQLDD (hereinafter referred to as “Dispatch 703”) on guiding the land use regime and certification the non-residential construction ownership such as condotels and tourist villas. The Dispatch 703 specifies resort tourism projects using land for business, service activities are classified as commercial, service land. Organizations renting land to use for trade, service purposes shall be considered, determined by the Government based on investment projects or application for renting land with the leasing term is not exceeds 50, and 70 years in exceptional cases; when the term for leasing expires, they shall be considered to renew if needing. At the same time, Dispatch 703 also mentioned the issuance of the Certificate (red book) for qualified condotels, resort villas construction projects for transferring, and the order, procedure, dossier to issue the Certificate are implemented under the law on land. However, many comments show that Dispatch 703’s content is not new and do not resolve problems concerning condotels, particularly, according to Mr. Mai Van Phan, Deputy Director General of the General Department of Land Administration, said that: “Documents of the General Department is guidance for localities based on available regulations in the law” and sent documents: “are only guiding documents, not legislative documents” .
In practices, the Real Estate Association of Ho Chi Minh City (hereinafter referred to as “HoREA”) still has three noticeable difficulties on condotel that are not settled by Dispatch 703, specifically:
- Firstly, there have not been specific provisions on operation, management regime of condotel when this type project is put into the exploitation.
- Secondly, there have not been particular regulations guiding to determine the common ownership part, the separate ownership, the general land use right to serve as the basis to issue the pink book to condotel apartments.
- Lastly, problems on determination maintenance liability, maintaining charges, management, use maintaining fees for the common ownership part in condotel projects are not still prescribed.
Thus, the most noticeable and urgent issue is the requirement to have legal regulations to solve these above difficulties, contribute to creating conditions of the issuance of pink books to condotel apartments and relieve mind for investors intending to invest in this type of apartment.