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1 July 2012 edition contents New advertising laws to 1 reflect modern developments An update for the Law 3 on Trade Unions Protection of copyright 5 and related rights in the internet and telecommunications environments New price control 8 regulations Corruption crime: 9 regulations and practice Changes to guidelines 13 to securities investment activities of foreign investors Case Commentary 15 New legal instruments 17 The material contained in Vietnam Legal Update is intended to inform readers of recent legal developments in Vietnam. It is not intended, and should not be relied upon, as legal advice. In brief: In this edition we cover new laws on advertising, trade unions and pricing. We also discuss updates to laws protecting copyright in the telecommunications and internet sectors, potential changes to securities investment activities of foreign investors and practical considerations of laws on corruption. Our case commentary this month addresses the importance of following correct procedures in Vietnam's court system. Visit subscribe to (or take a free tour of) Vietnam Laws online database a searchable database of over 3,500 of our English translations of Vietnamese laws regulating investment and business access free translations of a selection of Vietnamese laws read the Vietnam Legal Update from 2012 back to complete with index of contents and search function find out more about our practice in Vietnam Visit find out more about the Allens network and our international practice Allens is a leading international law firm in South East Asia, China, and Australia. Allens offers one of the most comprehensive legal networks in Asia and Australia with offices in Beijing, Brisbane, Hanoi, Ho Chi Minh City, Hong Kong, Jakarta, Melbourne, Perth, Port Moresby, Shanghai, Singapore, Sydney and Ulaanbaatar and, via our integrated global alliance with Linklaters, we have access to lawyers in 27 offices across 19 countries. Allens' Vietnam practice is led by resident partners Bill Magennis, Hop Dang and Robert Fish. Our in-country team consists of international and local lawyers and legal translators. We encourage feedback from our readers regarding the Vietnam Legal Update. Please direct all enquiries, comments and suggestions to us via at VLU@allens.com.au. Should readers wish further information in relation to any legal instrument or matter mentioned in this issue, they are encouraged to contact one of our Vietnam offices (details at the end of this issue) Allens Arthur Robinson- Vietnam Laws July 2012

2 1 New advertising laws to reflect modern developments Law No. 16/2012/QH13 on Advertising dated 21 June 2012 (Law on Advertising) As Vietnam's economy develops, advertising practices have undergone significant changes in terms of the form adopted, the expenses invested and the technology used. Due to these developments, the Ordinance on Advertising issued in 2001 (the 2001 Ordinance) is no longer suitable for governing today's advertising activities and, in some cases, conflicts with later regulations. As such, a new Law on Advertising was passed by the National Assembly on 21 June 2012 to replace the 2001 Ordinance. The Law on Advertising will take effect from 1 January Significant changes to the regulations on advertising under the Law on Advertising are discussed below. Products prohibited from advertising The 2001 Ordinance does not contain any specific provision on products prohibited from advertising. Advertising prohibitions are currently provided for under other regulations, for example the Commercial Law, regulations on advertising medicines and regulations on nutritional products for infants. The Law on Advertising now has a separate and comprehensive provision setting out products for which advertising is prohibited. Certain types of products included in this list have not previously been the subject of advertising prohibition. For example, alcoholic beverages with an alcoholic content of 15 degrees or more, milk products replacing breast milk for children less than 24 months, supplemental nutritional products for infants younger than 6 months, sporting guns and their cartridges, sporting weapons and products which simulate violence. The Law on Advertising also gives the Government the authority to issue advertising prohibitions for further products and services. Prohibited advertising practices Like the 2001 Ordinance, the Law on Advertising sets out a number of prohibited advertising practices (eg. advertising for products prohibited from trading and advertising which offends the reputation or honour of organisations and individuals). The Law on Advertising expands this list of practices to include advertising which: discriminates on the basis of ethnicity or race; violates religion or the freedom of religious belief; breaches the law on intellectual property; or has a negative effect on the health, safety or development of children, including advertising targeted at children which is contrary to ethics and customs. Unlike the 2001 Ordinance, the Law on Advertising provides details on the prohibited practice of advertising by comparison. Under the new law, a trader is prohibited from using the method of directly comparing the price, quality or effectiveness of its products, goods or services with the price, quality or effectiveness of the same type of products, goods or services of another organisation or individual. The Law on Advertising also prohibits advertising using a superlative form such as 'number one', 'sole', 'best', 'first' or words with a similar meaning without any lawful supporting documentation in accordance with the regulations of the Ministry of Culture, Sports

3 2 and Tourism (MCST). More detailed guidance on using superlative words and supporting documents will be issued by the MCST. Appraisal council for advertising products The Law on Advertising creates a legal basis for the establishment of the appraisal council for advertising products under the MCST. The function of this council is to help the MCST to consider whether an advertising product complies with Vietnamese law where an organization or individual requests an appraisal of an advertising product. The MCST is assigned to issue detailed regulations on the organisation and operation of the appraisal council. With the establishment of the appraisal council, it is expected that businesses will be able to seek the unbiased opinion of the appraisal council if their advertising products are prohibited on the basis that they contravene the advertising regulations. The new Law on Advertising has been modernised in terms of the forms of advertising contemplated and now addresses various forms of discrimination in advertising, as well as establishing an independent appraisal council to hear disputes regarding compliance with the new Law. Conditions for advertising To maintain a high quality of advertised products and services and to avoid misleading advertisements, the Law on Advertising specifies conditions for advertising special products and services, such as medicine, cosmetics, nutritional products for infants, health services and foodstuffs. For example, to advertise nutritional products for infants (that are not prohibited from being advertised), a business must have a certificate of goods standards and a certificate of satisfaction of conditions on food safety and hygiene (for locally manufactured products), or a goods quality certificate issued by a competent foreign authority and a free sale certificate (for imported nutritional products). To advertise health treatment services, a business must have all certificates required under Vietnamese law for satisfaction of business conditions in the health sector. The Law on Advertising also gives the Government the rights to set out the conditions for advertising other special products.

4 3 Advertising means Apart from traditional means of advertising provided for under the 2001 Ordinance, the Law on Advertising provides for advertising means which have been recently developed and used by businesses in practice, such as electronic equipment, terminals and other telecommunications equipment, persons conveying advertising products and advertising objects. In respect of each form of advertising, the Law on Advertising contains specific provisions on the conditions and procedures required. For example, advertisements shall not be exposed on the front cover or on the first page of a newspaper or magazine, and the period of exposure for advertisements on a pay TV channel must not exceed 5% of the total duration of a program broadcast on one day (except specialised advertising channels or programs). The advertising products for advertisements on billboards and banners must be notified to the competent authority 15 days before the advertisement is published. So as not to annoy subscribers, the Law on Advertising requires that advertising by sending messages or s must be subject to the prior consent of the recipients. The Law on Advertising also sets out restrictions on timing and amount of advertising messages or s that may be sent by electronic information or telecommunications service providers. The advertising businesses must ensure that recipients are able to refuse any advertisement and must immediately cease sending advertising messages or s upon any such refusal. Foreign investment in advertising Under the 2001 Ordinance, in addition to investing in Vietnam in the form of a joint venture or business cooperation contract with a Vietnamese advertising enterprise, a foreign advertising enterprise may establish its own branch in Vietnam. However, since Vietnam's accession to the WTO, this option has conflicted with Vietnam's WTO commitments. As such, the Law on Advertising has removed the right of a foreign advertising enterprise to establish its own branch in Vietnam. Accordingly, a foreign advertising company may only invest in Vietnam via the establishment of a joint venture company or by entering into a business cooperation contract with a Vietnamese advertising company. An update for the Law on Trade Unions Law QH13 of the National Assembly on Trade Unions dated 20 June 2012 (Law on Trade Unions) The new Law on Trade Unions, effective from 1 January 2013, was passed by the National Assembly on 20 June It replaces the former Law on trade unions dated 7 July Vietnam has had a turbulent history of trade unionism in modern times; the Vietnam General Confederation of Labour (VGCL) was founded on 29 July 1929 as the 'Red Workers' General Union' in Northern Vietnam and, following the liberation of Southern Vietnam in 1976, its jurisdiction over trade unions was extended to the whole country. The VGCL is affiliated with the World Federation of Trade Unions.

5 4 Given Vietnam's socialist orientation, it is interesting to note that membership of a trade union is not compulsory for Vietnamese workers employers are only obliged to facilitate the formation of a trade union within their companies if so requested by their employees. Although statistics may not be entirely accurate, in 2012 there are 'more than 7 million labour union members in Vietnam'. 1 However, the same source puts the total Vietnamese workforce at only 9.5 million. This figure is for workers who work for enterprises and, as such, probably excludes most agricultural workers (who often form local cooperatives). Trade unions in Vietnam are not profession based as they are in some other countries, although some professions do form professional associations. Rather, trade unions in Vietnam are formed within the company at the grass roots level. The Law on Trade Unions imposes a 2% trade union levy based on the total payroll of the employer (to be paid by the employer). Although the former Law contained no such levy, a 2% levy was introduced for local Vietnamese companies under Joint- Circular 119/2004 dated 8 December 2004 of the Ministry of Finance (MOF) and the VCGL and Circular 17/2009 of the MOF dated 22 January 2009 (Circular 17). Circular 17 introduced a 1% levy for foreign invested enterprises. Although Circular 17 did not provide that this levy was applicable only to foreign invested companies which had trade unions, most foreign invested companies have taken the position that if there is no trade union within the company, the levy was not applicable to them. This view appears to be reinforced by the introduction to the new Law which states that it is applicable to entities 'involved in the organisation and activities' of trade unions. Although the new Law does not introduce any major or substantial changes to the organisation and activities of the Vietnamese trade union movement, it reflects subtle changes in policy orientation. For example, while the former Law referred to workers' roles as 'masters of the country' the new Law makes no such reference. Unlike its predecessor, the new Law expressly provides that one of the responsibilities of trade unions is to disseminate information to workers on, and 'persuade and arrange' workers to, practice thrift, combat waste and fight corruption. Ownership of assets of trade unions also appears to have been centralised under the new law in the VGCL the old Law provided that such ownership vested in the individual trade unions. 1 Resolution of the 9 th Standing Committee Meeting of the IXth VGCL.

6 5 Protection of copyright and related rights in internet and telecommunications environments Joint Circular 07/2012/TTLT-BTTTT-BVHTTDL dated 19 June 2012 on Obligations of Enterprises Providing Intermediary Services in the Protection of Copyright and Related Rights in Internet and Telecommunications Environments (Joint Circular 07) Protection of copyright and related rights in the digital age is not a simple task. There have always been competing interests of stakeholders in the internet content industry intermediaries, content providers, rights-holders and public users. It is difficult to predict the extent of the potential liability of enterprises providing intermediary services in protecting copyright and related rights of works uploaded and transmitted via the internet. In other parts of the world, legal regimes for regulating online intermediary liability range from a 'total liability approach' to a 'total immunity approach', with some regimes preferring a 'limitation approach' which lies in between. Joint Circular 07 adopts a total liability approach, requiring enterprises providing intermediary services to be responsible for content hosted and transmitted via the Internet. This approach seems necessary in Vietnam where the infringement of copyright and related rights on the internet is becoming rampant. In the digital music sector alone, more than 150 websites in Vietnam provide the service of uploading music, however only a handful have contracted with Recording Industry Association of Vietnam and seek the consent of composers and audio producers. Subjects of Joint Circular 07 Joint Circular 07 applies to enterprises providing intermediary services, including: enterprises providing internet services; telecommunications enterprises; enterprises leasing digital information storage space; enterprises providing online social network services; and enterprises providing digital information searching services. Responsibilities of enterprises providing intermediary services Responsibilities of enterprises which provide intermediary services include (i) establishing a system of checking, supervising, and dealing with information inserted, stored and transmitted in Internet and telecommunication network in order to prevent breaches of copyright and related rights; and (ii) unilaterally refusing provision of services which are against the laws on copyright and related rights. It is unclear how enterprises can comply with these responsibilities in practice with respect to checking and supervising the vast volume of information transmitted on the internet and telecommunication networks. Obligations of Enterprises providing intermediary services Joint Circular 07 provides a set of additional obligations applicable to enterprises

7 6 which provide intermediary services. These are: 1. to only store digital information in systems of a transitory, temporary and automatic nature and for a fixed period, so as to satisfy the technical requirements on digital transmission; 2. to comply with the inspection and examination work of the competent State body in accordance with the provisions on copyright and related rights; 3. to remove and delete digital information in breach of copyright and/or related rights and to cut off, cease or temporarily cease internet transmission lines and/or telecom transmission lines upon receipt of a written request from the Inspectorate of the Ministry of Information and Communications or the Inspectorate of the Ministry of Culture, Sports and Tourism or other competent State bodies in accordance with law; 4. to provide information about customers leasing digital information storage space and/or websites and customers using other intermediary services as requested by the Inspectorate of the Ministry of Information and Communications or the Inspectorate of the Ministry of Culture, Sports and Tourism or other competent State bodies; Joint Circular 07 holds internet, telecommunications and intermediary service providers responsible for violations of copyright which originate from the platform they provide, but it appears this is only applies when that platform is the 'initial source' of the publication. 5. to take responsibility for directly paying compensation for loss and damage resulting from a breach of copyright or related rights as stipulated by the Law on Intellectual Property and other related laws in cases where the enterprise has: (a) (b) (c) (d) acted as the initial source of publishing, transmitting or providing digital information via telecom networks and internet without permission of right holders; amended or copied digital information in any way without the permission of intellectual property rights holders; intentionally rescinded or invalidated technical measures taken by right holders to protect copyright or related rights; and acted as the secondary distribution source of digital information obtained as a result of a breach of copyright or related rights; and

8 7 6. in addition to the implementation of paragraphs from 1 to 5, an enterprise providing online social network services shall also: (a) (b) request service users to undertake to comply with their responsibilities for ensuring the legal use of digital information published on the internet system and telecom networks; and warn users about the civil responsibility for compensation for loss and damage, and the possibility of being subject to penalties for administrative offences or criminal prosecution with respect to individuals using online social networks in breach of copyright or related rights. Certain aspects of these obligations are unclear. First, Article 5.5 of Joint Circular 07 provides that enterprises providing intermediary services should take responsibility for direct compensation for loss and damage resulting from a breach of copyright and related rights if they act as the initial source of publishing, transmitting or providing digital information via telecom networks and the internet without the permission of intellectual property rights holders. Under Joint Circular 07, it seems that these enterprises would not be regarded as liable for copyright infringement posted on the internet if they were not the initial source of publishing these materials, however it remains to be seen how this obligation is interpreted in practice. Second, enterprises acting as the secondary distribution sources of digital information obtained as a result of a breach of copyright or related rights should also be liable. However, there is no definition of 'secondary distribution source of digital information'. As such, it is not clear whether, for example, a telecommunication enterprise would be responsible for the content in breach of copyright uploaded onto the internet but transmitted via a mobile phone which was not the initial distribution source of information. Third, on the face of Article 5.3, it is understood that the removal of information in breach of copyright and related rights or the block of the transmission requires a written request from the Inspectorate of the Ministry of Information and Communications or the Inspectorate of the Ministry of Culture, Sports and Tourism or other competent State bodies in accordance with law. An intellectual property rights holder cannot request an internet service provider to remove information infringing that person's rights. Although the Deputy Head of the Vietnam Copyright Office recently indicated that an intellectual property rights holder could submit a written request to that office or the Inspectorate, 2 it would be helpful if this position were clarified in future regulations, including details on the actions that should be taken by rights holders in order to report any infringements they may discover. Joint Circular 07 takes effect from 6 August

9 8 New price control regulations Law 11/2012/QH-13 of the National Assembly on Pricing dated 20 June 2012 (Law on Pricing) With a double digit inflation rate in Vietnam each year, price control by the State in relation to goods and services, especially essential goods and services, is an important issue to many Vietnamese people. The National Assembly recently issued the Law on Pricing to replace, and to address the present limitations of, Ordinance 40/2002/PL-UBTVQH on Pricing issued in 2002 (Ordinance on Pricing). On the one hand, the Law on Pricing emphasised that the State will administer pricing using market mechanisms and will respect the rights of enterprises to independently set prices, but on the other hand, it widens the scope of goods and services subject to price controls and provides for more measures for price stabilisation in order to protect the interests of vulnerable people. In this article, we focus on the main changes introduced by the Law on Pricing in relation to price stabilisation and price controls. Price stabilisation The criteria for determining goods and services subject to price stabilisation under the Law on Pricing continue to capture essential goods and services. However, there have been small changes to the list of specific goods and services subject to price stabilization; under the Law on Pricing, electricity has been added to the list while cement, steel and coffee have been removed. The Ordinance on Pricing provided that the State will apply price stabilisation measures in cases where the prices of goods and services see abnormal fluctuations. The Law on Pricing provides for one further case, where price fluctuations affect socio-economic stability. The Law on Pricing does not, however, explain what effect to the socio-economic stability the price fluctuations must have in order for the State to intervene it is left to the Government to provide further guidance. Compared to the Ordinance on Pricing, the Law on Pricing provides for a wider range of measures by which the State may stabilise prices, including by applying financial and monetary measures, establishing price stabilisation funds for certain types of goods and services and requiring organisations and individuals to register prices during the period of application of the price stabilisation measures. However, the Law on Pricing has abolished the subsidising of agricultural products. This change is said to be for the purpose of complying with the rules of the WTO prohibiting any subsidising of agricultural products for export. Price control The Ordinance on Pricing does not specifically list the goods and services that will be subject to price control by the State, rather it specifies criteria to be used to determine these types of goods and services as well as measures for setting prices. Under the Ordinance on Pricing, the Government shall have the right to announce goods and services subject to price controls from time to time.

10 9 The Law on Pricing, however, provides in detail the goods and services whose price will be controlled and how these prices will be controlled by the State. Specifically, the Law on Pricing provides for three types of measures for controlling prices: fixed price; price range; and maximum or minimum price. Fixed prices, for example, will be applicable to various types of airline services, telecommunication connection services, electricity transmission and power grid accessorial services while a fixed price range will be applicable to electricity prices and airline transportation fees on monopoly routes. The Government may not alter the list of goods and services subject to price control, however if the Government feels that a change needs to be made, it can request a specific decision from the Standing Committee of National Assembly. Corruption crime: regulations and practice Although crimes of corruption in Vietnam have been legislated against for many years, they remain relevant today. In this article we revisit the main provisions on corruption law in Vietnam and the various ways in which they have been applied. We also examine recent cases involving corruption which indicate that it is still a live issue, and one in which the application of current laws remains unclear. Corruption crimes under the Penal Code 3 The Penal Code has a separate chapter regulating position-related crimes. It sets out seven kinds of corruption crimes, being embezzling assets; receiving bribes; abusing a position or powers to appropriate property; taking advantage of a position or powers during performance of public duties; misusing power on performance of public duties; misusing position for personal benefits; and forging in performance of duties. In addition to these corruption crimes this chapter also regulates seven other positionrelated crimes. The Penal Code defines a 'position-related crime in relation to positions' as the 'act of infringing upon the legitimate activities of agencies and/or organizations, which are carried out by persons holding such positions whilst they are on official duties.' The persons holding positions are those who are engaged through appointment, election, contract or other arrangements, with or without salaries, to perform certain official duties and have certain powers while performing such official duties. 3 Code QH10 of the National Assembly dated 21 December 1999, as amended by Law QH12 dated 19 June 2009.

11 10 However, the Penal Code contains no specific definition of 'official duties'. Acts of corruption under the Law on Anti-Corruption (LOAC) 4 The LOAC defines corruption to mean an act of a person with a position and/or powers abusing his/her position and/or powers for self-seeking purposes. The corruption acts under the LOAC comprise: embezzling assets; receiving bribes; abusing a position or powers to appropriate property; taking advantage of a position or powers during performance of a task or official duties for self-seeking purposes; abusing powers during performance of a task or official duties for self-seeking purposes; taking advantage of a position or powers to influence another person for selfseeking purposes; passing oneself off whilst working, for self-seeking purposes; giving a bribe or bribe brokerage conducted by a person with a position and/or powers to resolve affairs of a body, organization, entity or a locality for self-seeking purposes; taking advantage of a position or powers to illegally use State property for self-seeking purposes; conducting harassment for self-seeking purposes; failing to perform tasks or official duties for self-seeking purposes; and taking advantage of a position or powers to cover up a law offender for selfseeking purposes; hindering or intervening illegally in examination, inspection, auditing, investigation, prosecution, hearing or judgment execution for self-seeking purposes. Unlike the Penal Code, the LOAC provides more specific guidance on the meaning of 'persons having position and/or power'. In particular, these may include: State employees and officials; officers, professional soldiers, defence workers in bodies or units of the People s Army; specialized officers or non-commissioned officers, and professional or technical officers or non-commissioned officers in bodies or units of the People s Police; heads and managers of State owned enterprises; heads and managers being 4 Law QH11 of the National Assembly dated 29 November 2005, as amended on 4 August 2007.

12 11 representatives of the share of State owned capital contribution in enterprises; or persons who are assigned tasks or official duties and who have powers during performance of such tasks or official duties. While corruption acts under the LOAC are also associated with 'official duties', the LOAC does not provide any further clarification on the meaning of this term. In practice, 'official duties' are understood to be duties of government/state officers/public servants. There is some inconsistency between the Penal Code and the LOAC in the definition of subjects of corruption crime/acts. While the LOAC applies to persons with position and/or power who are performing tasks or official duties, the Penal Code applies only to persons performing official duties. Although there is no definition of 'task' in the LOAC, it appears that the scope of actions caught by the LOAC is wider than that of the Penal Code. In addition, only the first seven corruption acts regulated under the LOAC may be subject to criminal sentences under the Penal Code. The others do not constitute crimes and are subject to other disciplinary measures. It is clear that criminal penalties apply where violations of the LOAC are committed by public officials, however some recent cases indicate that the reach of criminal penalties could stretch further than this, into the actions of board members of private enterprises. Corruption-related property The LOAC defines corruption-related property to mean property acquired by a corrupt act or property originating from a corrupt act. A further decision issued by the Prime Minister in provides that agencies are only permitted to receive gifts in accordance with law and gifts must be declared and submitted to the management of agencies. A public servant is not required to notify his or her agency about receipt of a gift given by such public servant's relative or family member provided that such gifts are not related to the official duty of the recipient, or if the gifts is valued at less than VND500,000 and it is related to a special 5 Decision 64/2007 of the Prime Minister dated 10 May 2007 issuing regulations on State Funded Agencies and Public Servants Giving, Receiving and Handling in Gifts.

13 12 occasion, such as a wedding or holiday celebration. The recipient must declare income gained from such gifts if required by law. Gifts other than those permitted as set out above may be considered to be 'corruption-related property' and a person receiving such gifts may have participated in a corrupt act and be subject to penalties under the Penal Code. What happens in practice? Given the lack of legal definition of 'official duties' and the inconsistency between the Penal Code and the LOAC above, different authorities have different views and have applied the relevant provisions of the Penal Code and the LOAC in different ways. This has, in some cases, resulted in different answers to the same question. The following two examples involve recent cases which each address the question of whether a general director of a private company (without the State's ownership) will be subject to criminal sentence which applies to receiving bribes under the Penal Code if he/she receives a large sum of money from a third party to give benefits to that third party, and such act causes serious damage to his/her company. Example 1 The Law Magazine issue dated 28 May 2012 reported on a case of corruption by a private company s director. 6 According to the article, Mr K. was a director of a private real estate company. He appropriated money from funds for land clearance compensation of his company. Owners of the company claimed that he abused his position and powers as the company s director to appropriate property and that he should be subject to criminal responsibility. By contrast, the relevant local police s view was that Mr K. should not be subject to a criminal sentence because he did not appropriate the company s assets during performance of his official duties, therefore the criminal provisions of the Penal Code did not apply. The police suggested that he should be responsible to the company s owners for the damage caused by his act. The article expressed the points of view of some lawyers, prosecutors and judges who agreed that there is no legal basis to apply a criminal sentence to Mr K. in this case and that the hurdle here is the lack of definition of official duties. The article also reported on different opinions of the Supreme Criminal Court on corruption crime in relation to a company with the State-owned capital, based on various general comments that have previously been made by the Court. These opinions were: 6 "How to deal with corruption act of a private enterprise's director?" Authors: Hoang Yen and Hong Tu - Phap Luat Magazine 28 May "A chairman of BOM received "gift" of VND10 billion" Author: Minh Ha Online An Ninh Thu Do newspaper 27 June Regulation 31/2012/QD-TTg dated 26 July 2012.

14 13 (a) (b) (c) regardless of the ratio of the State-owned capital in a company, anyone appropriating assets of the company shall be subject to criminal sentences for corruption crime; a corruption crime is deemed to be conducted only in relation to a company established in accordance with the Law on State Owned Enterprises of 2003; and a person abusing a position and/or powers to appropriate assets of a company with majority State owned capital shall be subject to a criminal sentence for 2 crimes, being: (i) asset embezzlement in relation to the State owned capital contribution; and (ii) asset stealing or swindling or appropriating assets in relation of the non-state owned capital contribution. Example 2 Many newspapers recently reported on a case where a chairman of a listed company conducting real estate business was arrested and investigated for a corruption crime being 'taking advantage of a position or powers during performance of official duties'. 7 According to the newspaper reports, this chairman had approved the sale of shares in his company's subsidiary at a price which was 40% lower than the price agreed by the target and the purchaser. In return, he received a large sum of money from the purchaser. This caused significant loss to the company and its shareholders. We understand from the information available so far that the company involved in this case did not have a majority State ownership. If the chairman is convicted in this case, then it would appear that the relevant local body has taken the view expressed in paragraph (a) of the Supreme Criminal Court mentioned above, giving the criminal law a wide application in instances of corruption in both public and private companies. Although decisions in Vietnam do not carry the force of law, it is certainly relevant for persons in positions of power within private companies to bear in mind that any corrupt activity undertaken in this capacity could attract criminal punishment. It is hoped that this area of Vietnamese law will be clarified through the implementation of the recently issued Regulations of the Prime Minister on co-operation to execute the UN Convention Against Corruption, 8 which will require the domestic laws to be checked and improved to ensure compatibility between the laws and the Convention. Changes to guidelines to securities investment activities of foreign investors A draft Circular was released by Vietnam's Ministry of Finance (MOF) on 8 May 2012 which will replace MOF's Decision QD-BTC dated 24 December 2008 regulating securities investment activities of foreign investors on the securities market in Vietnam (the Draft Circular). In addition to reducing the timeframes for registration of securities trading codes with the Vietnam Securities Depository (VSD)

15 14 and simplifying the process for lodging changes to a foreign investor's depository bank or change of transaction representative, the Draft Circular sets out a number of other key clarifications and changes. First of all, the scope of application of the Draft Circular specifically excludes all forms of direct investment including establishment of enterprises with 100% foreign owned capital, investment in forms of Business Co-operation Contracts and Build-Operate- Transfer contracts and investment to carry out a consolidation, merger or acquisition of an enterprise. Second, whereas 'foreign investors' are defined under Decision 121 to include organisations or investment funds established and operating pursuant to the laws of Vietnam with 100% foreign capital contribution, the Draft Circular broadens the scope of the concept of a 'foreign investor' to such organisations or investment funds with a capital contribution ratio of foreign parties above 49%. That said, permitted investment activities of foreign investors in unlisted companies for which a securities trading account is required under the Draft Circular are limited to unlisted 'public companies' (ie. companies which have made a public offer or share or have shares owned by at least one hundred investors excluding professional securities investors, and which have paid-up charter capital of VND 10 billion or more). In contrast, the scope of permitted activities regulated under Decision 121 extends to all unlisted companies (regardless of number of shareholders). It is not clear from the Draft Circular whether the intention of the change is to prohibit foreign investment in unlisted non-public companies or whether it is just intended that a securities trading account is only required with respect to a more limited group of investment activities. The Draft Circular also increases the reporting obligations in the case of major shareholdings, including obligations: on the foreign investor to disclose information about major shareholders in accordance with MOF regulations when the total number of shares held by the foreign investor via either direct purchase or indirect purchase (via a fund management company) reaches 5% or more of the total voting shares of the issuing organisation; and on the transaction representative or a securities business organisation providing investment services pursuant to instructions of a foreign investor to report to the SSC, the Hanoi or HCMC stock exchange (as the case may be) and to disclose information in accordance with MOF regulations when: the total number of shares of all investors to which such representative or organisation provides services is 5% or more of the number of voting shares of the issuing organisation; of the foreign investors to which such representative or organisation provides services, there are investors who are 'affiliated' or 'related' as those terms are understood under the Law on Securities; and in the total number of foreign investors to which such representative

16 15 or organisation provides services, there are investors who are 'people with inside information' as that term is understood under the Law on Securities. The Draft Circular will not be issued until the draft Decree of the Government providing detailed regulations on implementation of a number of articles of the Law on Securities and the Law on Amendments of and Additions to a Number of Articles of the Law on Securities has been issued. This is expected to take place some time this year, however this particular Decree has been in draft form for a number of years, so it remains to be seen whether the Draft Circular will have any impact on foreign investors in the near future. Watch this space for further updates in future editions of VLU. Case Commentary: Hau Giang Branch of BIDV v Thai Duong JSC Judgment 01/2010/KDTM-GDT dated 20 January 2010 This month's case commentary considers a 2010 decision of the Judges Council of the People's Supreme Court setting aside a trial court's decision recognising the conciliation agreement of the parties. The Judges Council of the People's Supreme Court take a strict view of what constitutes compliance with law in the case of decisions issued by lower Courts. The Facts This case deals with a dispute arising out of a credit contract between the Hau Giang Branch of the Bank of Investment and Development (the Branch) as the Claimant and Thai Duong Biology Joint Stock Company (Thai Duong JSC) as the Respondent. At first instance, the Claimant and the Respondent agreed on an amicable settlement. Following a successful conciliation between the parties, the People's Court of Hau Giang Province (the Court), as the court of the first instance, issued Decision No. 01/2007/QDST-KDTM dated 09 August 2007 recognising the

17 16 conciliation agreement between the parties (the Decision). Unfortunately, the Decision of the Court contained a number of errors. Firstly, there were differences between the names of the disputing parties in the minutes of conciliation meeting and those in the Decision. Secondly, the Court mistakenly accepted the Branch as the Claimant of the case rather than the company itself (in this case, the Bank for Investment and Development of Vietnam) as Vietnamese law requires. These two grounds formed the basis for the Respondent to ask the Inspectorate to request a judicial review of both the Decision and the determination of the Claimant. Although the Court had already issued a notification correcting the mistakes, ultimately, the Director of the People's Inspectorate General of Vietnam nevertheless appealed to the Judges Council of the People's Supreme Court of Vietnam (the Supreme Court) to conduct a judicial review to set aside the Decision and to assign the People's Court of Hau Giang Province to conduct a retrial of the case. The Decision The Supreme Court accepted the Inspectorate's appeal and, based on the two grounds mentioned above, set aside the Decision recognising the conciliation agreement between the parties. The Decision was set aside despite the Court's subsequent notification correcting the errors identified by the Respondent, which appeared to be due to the fact that the notification itself attempted to impose terms that were not authorised by Vietnamese law to be included in such notification, although this was not made clear in the Supreme Court's decision. Commentary There are two particularly noteworthy aspects of this case. First, it reflects the fact that the judicial branch of Vietnam tends to take a strict view of compliance with the formalities of documents in the settlement process. A decision of the court or any document in connection with the State bodies might be set aside or considered illegal due to the formalities or technicalities of such decision or documents. Second, it emphasises the principle that a branch of a company is not authorised to be a separate party in any case. This is clear under Vietnamese law. The reason for this appears to be that the determination of a branch as a disputing party may lead to a potential scenario in which a company is not aware of a case involving one of its branches. Accordingly, any document during the settlement process which is entered into by such branches is likely to be considered null and void.

18 17 Legal instruments recently uploaded on to the Vietnam Laws online database Vietnam Laws online database (available at is an online searchable database containing English translations of more than 3,500 Vietnamese laws. Legislation recently uploaded includes: Resolution 23 on the Legislative Program for Year 2013, 12 June 2012 Law 10, Labour Code, 18 June 2012 Law 12 on Trade Unions, 20 June 2012 Resolution 29 on tax relief for year 2012, 21 June 2012 Law 16 on Advertising, 21 June 2012 Decision 1289 reducing State Bank interest rates to 10% (refinancing), 8% (discount) and 11% (repo interest rate), 29 June 2012 Beijing Brisbane Hanoi Ho Chi Minh City Hong Kong Jakarta Melbourne Perth Port Moresby Shanghai Singapore Sydney Ulaanbaatar Hanoi Suite 401, Hanoi Towers 49 Hai Ba Trung Street, Hoan Kiem District Hanoi, Vietnam T F Bill.Magennis@allens.com.au Hop.Dang@allens.com.au Ho Chi Minh City Suite 605, Saigon Tower 29 Le Duan Boulevard, District 1 Hi Chi Minh City, Vietnam T F Robert.Fish@allens.com.au