Market access

Vietnam – Mines and Mineral Resources – Market access and legal certainty for foreign investment projects under the foreign direct investment chapter of CPTPP and EUVNFTA: what you need to know

Vietnam has a favorable geological and geographical position for the formation and development of minerals; certain types of minerals have significant reserves. According to statistics from the Ministry of Natural Resources and Environment, Vietnam’s mineral resources are quite diverse and rich with more than 5,000 mines and deposits of about 60 different types of minerals. Some localities have mineral reserves of various types that are authorized to exploit such as: Thai Nguyen (with 19 types of solid minerals), Son La (14 types), Quang Binh, Quang Tri, Gia Lai, Hai Phong, Yen Bai… In addition, there are 18 areas with minerals scattered over a total area of ​​182.7 ha distributed in the provinces of Lao Cai, Cao Bang, Bac Kan, Lang Son, Phu Tho, Hai Duong, Nghe An, Quang Nam. However, only a fraction of Vietnam’s rich mineral resources have been discovered to date, as the country has never been systematically explored using up-to-date technologies and methods.

Investors considering the mining sphere in Vietnam should take advantage of the benefits due to them under the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP) and the EU-Vietnam Free Trade Agreement (EVFTA). The CPTPP entered into force on January 14, 2019 for Vietnam and, in March 2022, the United Kingdom submitted its application to join this agreement. The EVFTA entered into force on August 1, 2020 and its sibling – the EU-Vietnam Investment Protection Agreement is expected to enter into force in 2023.

CPTPP, Chapter 9 – Investment:

1. Vietnam mining requirements:

Foreign investment in mineral exploitation will not be accepted unless the relevant Vietnamese authorities inform the applicant that the investment is likely to be of net benefit to Viet Nam. In making this determination, the competent authority may consider the following factors:

(a) the effect of the investment on the level and nature of economic activity in Viet Nam, including the effect on employment, on the use of parts, components and services produced in Viet Nam and on exports from Viet Nam;

(b) the degree and extent of Vietnamese participation in the investment;

(c) the effect of the investment on productivity, industrial efficiency, technological development and product innovation in Viet Nam;

(d) the effect of the investment on competition within an industry or industries in Viet Nam;

(e) the compatibility of the investment with national industrial, economic and cultural policies, taking into account the industrial, economic and cultural policy objectives set forth by the government or the legislature of any province likely to be significantly affected by the investment ; and

(f) contribution of the investment to Viet Nam’s ability to compete in world markets. Foreign investors do not have to comply with all of the above criteria to obtain the mining license.

2. Eligibility:

CPTPP investor means an investor (State, company or citizen) from another CPTPP country who is or has made an investment in the territory of Vietnam. However, CPTPP investors who fall into the following cases will be excluded from the enjoyment of rights under the CPTPP:

+ is owned or controlled by a state, organization or individual of a country that is not a member of the CPTPP

+ owned or controlled by Vietnamese organizations or individuals

+ does not engage in any significant business activity in any of the CPTPP countries except Vietnam

A CPTPP Investor’s investment means any asset that a CPTPP Investor owns or controls, directly or indirectly, of an investment nature (including features such as a commitment to capital, for the purposes of profit and presumption of risk) in Vietnam.

3. Forms of investment:

• a company;

• stocks, shares and other forms of participation in the capital of a company;

• bonds, debentures, other debt securities and borrowings;

• futures, options and other derivatives;

• turnkey, construction, management, production, concession, revenue sharing and other similar contracts;

• intellectual property rights;

• licenses, authorizations, permits and similar rights conferred under the law of the Party; and

• other tangible or intangible, movable or immovable property, and related property rights, such as leases, mortgages, privileges and pledges.

4. Market Access Principles

1. National treatment: trading partners must not discriminate against each other’s investors to favor their own investors.

2. Most-Favoured-Nation Treatment: Trading partners must not discriminate against each other’s investors to favor investors from any other country.

3. Performance requirements: Vietnam shall not promulgate requirements on establishment, acquisition, expansion, management, operation of investment (e.g. requirement to ensure proper reporting between the value of exports and the foreign currency transferred) or use it to decide whether to grant licenses to foreigners. investors. Vietnam has the right to enact requirements on the use of domestic labor.

4. General management and boards of directors: foreign investors have the freedom to appoint management positions, regardless of their nationality, and prevent any party from demanding the same, which could significantly affect the ability of the investor to exercise control over his investment.

EVFTA – Chapter 8: Investment and Trade Liberation

1. The principle of most-favoured-nation treatment does not apply to the mining sector

2. For EU investors: unbound (no requirement) for legal persons controlled by natural or legal persons from a third country which accounts for more than 5% of EU oil or natural gas imports . Unbound for direct branching (incorporation is required). Unbound for crude oil and natural gas extraction.

Investor-State Dispute Settlement (ISDS)

To protect the interests of foreign investors, the CPTPP allows foreign investors to initiate legal action at the international arbitration center in the event of violation of the interests of foreign investors by a member country (for example, expropriation, nationalization, minimum standard treatment…), except in the event of a dispute. arising from the implementation of commitments or obligations of investment agreements and investment authorization.

This is also covered by the EU-Vietnam Investment Protection Agreement. EVIPA is awaiting ratification by EU member states before it can enter into force, normally by 2023. In investment disputes (e.g. expropriation without compensation or investment discrimination) , an investor is entitled to take the dispute to the Investment Court for settlement. To ensure fairness and independence in resolving disputes, a permanent tribunal will consist of nine members: three designated nationals each from the EU and Vietnam, as well as three designated third-country nationals. Cases will be heard by a tribunal of three members chosen by the presiding judge at random. It is also about ensuring consistent decisions in similar cases, thereby making dispute resolution more predictable. EVIPA also allows for a single member of the tribunal when the plaintiff is a small or medium-sized business, or when compensation for damaged claims is relatively low. This is a flexible approach given that Vietnam is still a developing country.

If either of the disputing parties disagrees with the Tribunal’s decision, they may appeal to the Appeals Tribunal. Although this is different from the common arbitration procedure, it is quite similar to the WTO’s two-tier dispute settlement mechanism (Panel and Appellate Body). We believe that this mechanism could save time and money for the whole procedure.

The Final Settlement is binding and enforceable in local courts as to its validity, except for a period of five years following the entry into force of EVIPA.