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THE MARKET ACCESS CONDITIONS FOR FOREIGN INVESTORS UNDER THE LAW ON INVESTMENT 2020 AND DECREE 31/2021/ND-CP



One of the important reforms of the Law on Investment 2020 (or the Investment Law 2020) in order to attract foreign investment according to Resolution No. 50-NQ/TW of the Political Bureau is the appearance of a new regulation group related to market access conditions of the foreign investors with the opt-out approach (Article 9 Law on Investment 2020). Accordingly, the foreign investors will be able to apply the same market access conditions as prescribed for the domestic investors, except for cases where the investment field falls into: (i) the prohibited business lines; or (ii) the restricted business lines. This is a long-awaited new regulation of the Investment Law 2020 since before such regulation when the foreign investors invest in sectors and business lines in which Vietnam has not yet committed to opening the market, the local Departments of Planning and Investment will not have the discretion in deciding whether or not to approve the foreign investor's registration of such business line but will have to send a written request for guidance/approval of the Ministry of Planning and Investment.

However, it was only until Decree No. 31/2021/ND-CP came into effect on March 26, 2021 (“Decree 31”) that the foreign investors had a clear basis to adopt this new policy.

In Decree 31, the Government has officially issued 02 lists: (1) the prohibited business lines and (2) the restricted business lines. Also, the decree clearly states that:
  • Foreign investors must not invest in the prohibited business lines specified in Section A of Appendix I of Decree 31;
  • For restricted business lines specified in Section B of Appendix I of Decree 31: foreign investors shall fulfill the conditions that are published on the National Investment Information System; and
  • For business lines without market-access commitment of Vietnam: foreign investors have the same market access as that of Vietnamese investors (if the laws of Vietnam do not restrict market access in those business lines).


The specific provisions are as follows:

A. FOR BUSINESS LINES WITHOUT MARKET-ACCESS COMMITMENT OF VIETNAM
Article 9 of the Investment Law 2020 is specified in Clause 1, Article 17 of Decree 31 as follows: Except the business lines on the Negative List for Market Access in Appendix I of Decree 31, foreign investors have the same market access as that of domestic investors. 
The principles of applying regulations and market access conditions where Vietnam has not been committed are as follows:
(1) In case the Laws and Resolutions of the National Assembly, Ordinances and Resolutions of Standing committee of the National Assembly, Decrees of the Government (hereinafter referred to as “the law of Vietnam”) do not restrict market access in those business lines, foreign investors have the same market access as that of Vietnamese investors;
(2) In case the law of Vietnam has restrictions on market access by foreign investors in those business lines, the law of Vietnam shall apply;
(3) In case new Law or Resolution of the National Assembly, Ordinance or Resolution of Standing committee of the National Assembly, or Decree of the Government (hereinafter referred to as “new legislative document”) contains regulations on market access by foreign investors in the business lines without market-access commitment of Vietnam, then:
*If the foreign investors have applied the conditions for market access before the new legislative document takes effect, the said conditions will continue to apply. Except: In the following cases, the conditions of the new legislative document shall apply: 
(i) establishment of a new business organization
(ii) implementation of new investment projects
(iii) receiving investment project transfer
(iv) purchase of stakes/shares of another business organization under a contract
(v) investment by means of contract;
(vi) adjusting and supplementing objectives or business lines
In this case, the competent authority shall not reconsider the conditions for market access in the business lines that have been granted to the investor previously.
* If foreign investors carry out investment activities after the effective date of the new legislative document, they must meet the market access conditions prescribed by such document.

B.  BUSINESS LINES WITH PROHIBITED AND RESTRICTED MARKET ACCESS:
Business lines with prohibited and restricted market access for foreign investors according to Clause 10, Article 3 and Clause 2, Article 9 of the Law on Investment 2020 include: (i) the prohibited business lines; and (ii) the restricted business lines.
The market access conditions for foreign investors include: 
(1) the foreign investor’s charter capital ratio in a business organization. In which, the conditions on capital ownership ratio are specified in detail as follows: 
  • In case multiple foreign investors contribute capital to, purchase shares or stakes in a business organization that is regulated by one or some investment-related international treaties, the total holdings of the foreign investors in the business organization must not exceed the highest limit imposed by one of those international treaties on holdings of foreign investors in a specific business line;
  • In case multiple foreign investors from the same country contribute capital to, purchase shares or stakes in a business organization, the total holdings of these investors must not exceed the limit prescribed by the international treaty applied to these investors;
  • Securities laws that provide for foreign investors’ holdings differently shall apply to public companies, securities companies, securities investment fund management companies, securities investment funds or securities investment companies;
  • In case a business organization has multiple business lines that are regulated by investment-related international treaties that provide for foreign investors’ holdings differently, the foreign investors’ holdings in such business organization must not exceed the limit on foreign investors' holding in the business line with the lowest limit.  
(2) Investment form;
(3) Scope of investment activities;
(4) Capacity of investors and partners participating in investment activities;
(5) Use of land, labor, natural resources, and minerals; 
(6) Producing and supplying public goods/services or goods and services that are monopolistic in the state;
(7) Owning and trading-in houses and real estate;
(8) Applying forms of support and subsidies from the State to several industries, fields, developing regions or territories;
(9) Participating in programs and plans for equitization of state-owned enterprises;
(10) Other conditions prescribed in-laws, resolutions of the National Assembly, ordinances, resolutions of the Standing Committee of the National Assembly, Government decrees, and international treaties on investment that do not allow or restrict market access for foreign-invested economic organizations.

Subjects of application: Decree 31 provides detailed guidance on subjects to be applied to the list of business lines with prohibited and restricted market access, including:
(i) Foreign investors as prescribed in Clause 19, Article 3 of the Law on Investment 2020;
(ii) Business organizations as prescribed at Points a, b and c, Clause 1, Article 23 of the Law on Investment 2020 when investing to establish other economic organizations; contribute capital, purchase shares, purchase capital contribution portion of other economic organizations; investment in the form of BCC contract.

Conditions of application: Decree 31 stipulates the right to choose to apply market access conditions and investment procedures as prescribed for domestic or foreign investors as follows:
(1) The right of choice is reserved for the Investor who is a Vietnamese citizen and has foreign nationality when this Investor has investment and business activities in Vietnam, then he has the right to choose to apply the following conditions: market access and investment procedures as applicable to domestic or foreign investors.
In case of choosing to apply market access conditions and investment procedures as prescribed for domestic investors, the Investor (who is a Vietnamese citizen and has foreign nationality at the same time) is not allowed to exercise the rights and obligations of foreign investors.
(2) Foreign investors subject to international treaties on investment which provide for more favorable market access conditions for such investors than those provided for by Vietnamese law may apply such conditions under that treaty;
(3) Foreign investors subject to the application of international treaties on investment with different provisions on market access conditions may choose a treaty applicable to themselves. If the investor has chosen to apply market access conditions under an international treaty on investment (including a treaty which is newly signed or amended or supplemented after the effective date of such treaty that the investor is subject), foreign investors shall exercise their rights and perform their obligations in accordance with the entire provisions of that treaty. 
Currently, the Ministry of Planning and Investment is presiding over and coordinating with ministries and ministerial-level agencies to review and gather market access conditions for foreign investors in the industries and trades specified in Appendix I of Decree 31 to post on the National Investment Portal. Submissions will include:
(1) Industries and trades with restrictions on market access for foreign investors as prescribed in Appendix I of Decree 31;
(2) Basis for application of market access conditions for foreign investors as prescribed in Clause 1, Article 15 of Decree 31; and
(3) Conditions for market access for foreign investors as prescribed in Clause 3, Article 9 of the Law on Investment.

Vietthink is currently advising, assisting many foreign investors in carrying out investment registration procedures for investment projects in uncommitted industries and trades (1) and with limited market access (2) under the provisions of the Investment Law 2020 and Decree 31/2021/ND-CP. We are always ready to advise and support customers and investors on investment conditions and procedures in accordance with these regulations.

LLM., Lawyer. Nguyen Thanh Ha 
Permanent Vice Director of Vietthink Law Firm./.


Last updated: 06/25/2021
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