Some inadequacies of the Investment Law 2014 have not been overcome by the Investment Law 2020

Some inadequacies of the Investment Law 2014 have not been overcome by the Investment Law 2020

The Investment Law 2020 and guiding documents were born with one of the wishes to “create more favorable conditions for investment registration; reducing costs and administrative procedures in investment and business activities”1. However, not all inadequacies of the Investment Law 2014 have been overcome, on the contrary, there are still some inadequacies that have been raised by many scholars, jurists, lawyers, … but have not yet been resolved. Specifically, some inadequacies in investment procedures still exist from the Investment Law 2014 as follows: 

a. Inadequacies in carrying out procedures related to proposing land use needs 

Article 33 of the Investment Law 2014 stipulates that, when making an application for approval of the investment policy of the People’s Committee of the province, it is necessary to present the proposed land use demand (if any) to the People’s Committee of the province assessment of land use needs. Meanwhile, Article 68, Clause 1 of Decree 43/2014/ND-CP guiding the implementation of the Land Law (“Decree 43”) on the appraisal of land use needs, stipulates that only investment projects that have been If the investment policy is approved by the National Assembly or the Prime Minister, new are not required to carry out this procedure. 

That means, in case the investment project has been approved by the provincial People’s Committee, the investor still has to continue to carry out the procedure for assessing the need for land use. The same project must be appraised twice, and at the same time, it leads to the risk that even if the policy has been approved by the People’s Committee of the province, the investment project is still at risk of not being allocated, leased or transferred. land use purposes as permitted in the investment policy decision.2 

Article 33 of the Investment Law 2020 continues to maintain the provisions of Article 33 of the Law on Investment 2014. Should be the position of a major law on investment, the Law on Investment 2020 should have more transparent provisions, for example, “if the investor has approved the investment policy by the People’s Committee of the province, there is no need to carry out the procedures for land allocation, land lease, change of land use purpose according to the provisions of the law on land.” Waiting for Decree 43 to be amended, it is unclear when it will be corrected. 

b. Requirements for a compulsion to carry out procedures for granting investment registration certificates to foreign investors when establishing economic organizations 

The Investment Law 2014 and even the current Investment Law 2020 continue to stipulate that foreign investors who want to establish economic organizations must have an investment project by applying for an Investment Registration Certificate. There have been many controversial views on this issue. 

The above regulation was created to control foreign direct investment (FDI) flows of foreign investors investing in Vietnam, and to control activities and conditions for industries that restrict market access for foreign investors. However, in the case that foreign investors do not focus too much on investing through the establishment of a company, the investor can completely carry out the procedures/form of capital contribution, share purchase, and purchase capital contribution to an existing company. Or even, the investor can completely agree with a Vietnamese partner, let the Vietnamese partner establish a company first, and then the foreign investor will buy shares and buy contributed capital to the newly established company. 

Meanwhile, the procedure for establishing an investment project through the issuance of an Investment Registration Certificate requires more documents, providing more information and explanations from the investor than the procedures for capital contribution, shares purchase, and purchase of contributed capital, and thus investors have little reason to carry out the procedures for issuance of an Investment Registration Certificate. 

Thus, the state management objective of the regulation that required foreign investors to apply for an Investment Registration Certificate was not achieved. The solution may be to completely remove the mandatory requirement for an initial investment registration certificate for foreign investors when establishing an economic organization, foreign investors only apply for an Investment Registration Certificate according to their own needs (such as the need for investment incentives). Just ask the foreign investor to declare in another form of a document with the same content as the document on registration of capital contribution, share purchase, and purchase of contributed capital when establishing an economic organization. Thus, the level of complexity of investment procedures when entering the market of foreign investors will be similar, whether it is choosing to establish an economic organization by themselves or choosing to contribute capital, buy shares or purchase capital contribution to another economic organization. 

c. The list of conditional business lines according to Appendix IV of the Investment Law 2020 still does not have much meaning in reducing the burden of administrative procedures

The list of industries and trades with conditional business investment according to Appendix IV of the Investment Law 2020 has appeared in Appendix 4 of the 2014 Investment Law. The meaning of this List is to ensure the clarity of conditional business lines so that investors and state agencies can carry out relevant investment procedures based on that. to somewhat limit the issuance of new business conditions uncontrollably. 

However, the problem with this List is that it exists but almost does not solve any problems and does not help investors in reducing the burden of administrative procedures. Because first, this List is not more effective than the provisions of other legal documents, so if other legal documents have different business conditions than this List, it will be required by those laws. Second, according to regulations, the Government will review and amend this list from time to time to “update” and submit it to the National Assembly for approval to amend Appendix IV (Appendix 4) of the Investment Law, so if new regulations on conditions appear but it is not time to issue the revised Appendix to Appendix IV, then this list will not be a reliable document for investors and relevant state agencies to find, but they still have to use specialized documents issued later. 

This situation is called by some lawyers and jurists “indirectly invalidating” the List of conditional investment and business lines3. The Investment Law 2020 still does not have any breakthrough regulations to ensure the meaning of conditional business and investment industries. 

According to the comments of the Vietnam Chamber of Commerce and Industry (VCCI) since the date, the draft Investment Law 2014 is being offered for comment, the separate regulations on conditional business investment lines are not necessary, for the same reasons mentioned above. The Investment Law, if any, should only refer to specialized laws on investment conditions.

See more: Risks relating to “sham” nominee transactions under 2020 law on investment.

Disclaimer: This article is for general information only and is not a substitute for legal advice. Apolat Legal is a Vietnamese law firm with experience and capacity to advise on matters related to Business and Investment. Please click here to learn more about our services and contact our lawyers in Vietnam for advice via email info@apolatlegal.com.

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