I would like to start my paper with a crèche opening statement. As we hear many times over this recent years, we are living in the rapidly changing circumstance. All the countries are connected and such agreements (like WTO, TPP, FTA, etc.) make the border of countries blurrier, triggering more transactions between countries. In addition, thanks to the internet, information in a country is no longer stayed in the country but, it is known to everyone in other countries. Thus, we need to keep in mind that a business should keep its steps with this rapid changing circumstance.
It is not a different situation in legal market. One of my uncle has been running a law firm in Korea. The business was going well. However, in 2007, he built branches in China and Vietnam. This is because of to keep steps with other businesses. As other business entities expend its business areas into other countries on purpose of taking advantage of local countries, the law firms have to make decisions whether it needs expand of its business fields. According to KOTRA (Korea Trade-Investment Promotion Agency), in 2017, there are over 5,400 Korean business entities in Vietnam. This number does not include indirect investment which uses borrowed Vietnamese name but capital of Korean or which investment is occurred by transitions of fund through online.
As you appreciated already, this paper is focused on Foreign investments and law firms’ roles in Vietnam. Why Vietnam? Firstly, Vietnam is a fast-growing county. Its economy is the 47th-largest economy in the world based on GDP and its GDP grown is 6.81%. According to a forecast by PricewaterhouseCoopers in Feb 2017, Vietnam may be the fastest-growing of the world’s economies. Second, Vietnam has plenty of low cost labors with young population. Due to Vietnam war (1955-1975), many people died in the war. Thus, young populations have less duty of supporting senior citizens comparing to other countries but they are able to invest on their personal educations or developments which can be interpreted as Vietnamese labor is low cost but better quality. Third, Vietnam has abundance of natural produce. Most of Vietnamese occupations are engaged primary and secondary industries. Beside labors resources, Vietnam is one of the biggest rice and coffee export. In addition, Vietnam’s oil reserves are in the rage of 270-500 million tons. Petroleum and coal are the main mineral exports. Furthermore, in Vietnam territories, there are Antimony, bauxite, chromium, gold, iron, natural phosphates, tin and zinc. Forth, its government has been trying to open its market. Vietnam government declares itself to be “a friend and reliable partner of all countries in the international community, actively taking part in international and regional cooperation processes.” Moreover, Vietnam is a member of 63 international organizations including United Nations, ASEAN, APEC, WTO, and TPP. According to Goldman Sachs, the Vietnamese economy will become the world’s 21st-largest by 2025, with an estimated nominal GDP of $436 billion and a $4,357. These advantages have been luring many foreign businesses and investors into Vietnam. As many foreigner’s funds are invested on Vietnam, many international law firms place its branches in Vietnam as well such as Baker & McKenzie, Allen & Overy, and Mayer Brown, Philips Fox, and etc. Most of foreign law firms work is commercial area and they deal with the deals. However, foreign law firm’s liability and legal services of foreign law firms can be varied depended upon its form and who it employs respectively.
II. How a foreign law firm practices in Vietnam
How the foreign law firms or legal organizations operate its business in Vietnam? According to Decree 87-2003-ND-CP (replacement of the former Degree 92-1998-ND-CP of the government dated 10 November 1998 (“Decree 92”)) of the government dated 22 July 2003 on Practice by Foreign Lawyer Organizations and Foreign Lawyers in Vietnam, a foreign lawyer organization lawfully established and currently operating overseas may be permitted to operate in Vietnam on condition that a foreign lawyer organization has goodwill towards the state of Vietnam. The degree 87 provides for offshore foreign law firms to operate in Vietnam in 3 forms: Branch, Foreign law firm, and foreign-Vietnamese law partnership. Branch: a branch is established as a subsidiary of an offshore foreign law firm. Under the Decree 87, the branch has unlimited liability for its activities in Vietnam. The managing lawyer of a branch is legal representative of a branch and may be a foreign lawyer or a Vietnamese lawyer. Foreign law firm: a foreign law firm is established by one or more offshore foreign law firms. Same as foreign law firm branch, it has unlimited liability for its activities in Vietnam and the head of a foreign law firm may be a foreign lawyer or Vietnamese lawyer. Foreign-Vietnamese law partnership: a foreign-Vietnamese law partnership is established between one or more offshore foreign law firms and one or more Vietnamese partnership law firms based on a partnership agreement. The partners of the partnership jointly bear unlimited liabilities for its activities. A head of the partnership may be a foreign lawyer or a Vietnamese lawyer.
According to Decree 87, above 3 entities has limited operational duration of foreign law practice not by law but as proposed by the applicant and approved by Ministry of Justice (“MoJ”). The scope of law practice of foreign lawyer has been substantially broadened under Decree 87. Now foreign law practices are allowed to provide legal consultancy service and other legal services. A foreign law firm can provide consultancy for advising Vietnamese law where a foreign law firm hires a Vietnamese lawyer or hires a foreign lawyer with Vietnamese law degree and qualifying all requirements as applied to a Vietnamese lawyer. It means a foreign lawyer cannot advice Vietnamese law under article 29, Decree 87. On the other hand, Vietnamese lawyer who is employed by foreign law practice is able to provide unrestricted and may extend to foreign and international law as well as Vietnamese law.
To acquire a law practice license in Vietnam, a foreign lawyer is required to satisfy 3 conditions: a foreign lawyer 1. Has a current practicing certificate issued by a competent foreign agency or organization; 2. Has goodwill towards the State of Vietnam; 3. Is employed by a foreign law practice in Vietnam or a Vietnamese lawyer organization. A practicing licenses for a foreign lawyer is valid for 5 years only, but is extendable for successive 5 years. Under the Vietnamese labor law for foreigners working in Vietnam requires work permit, but the practicing license replaces the working permit. Under article 2 of the Ordinance on Lawyer, it requires Foreign lawyers practicing law in Vietnam are obliged to abide the principles of legal practice.
However, it is important to know that under article 32, Decree 87, a foreign law firm where employs Vietnamese lawyers or foreign lawyers who has law degree in Vietnam and qualified as other Vietnamese lawyers cannot practice law in litigation field in Vietnam. Only local entities who are not employed by foreign law firm can do litigation in Vietnam. Thus, if a foreign law firm’s client has a matter of litigation, the law firm usually enter into outsourcing agreement with a Vietnamese law practice for the matter of litigation. Yet, In Vietnam, litigation is not a good option for foreign entities Vietnam’s legal system is based on communist legal theory and it is not transparent. Therefore, most of foreign entities choose dispute resolution as an alternative way of litigation.
III. Arbitration in Vietnam
Before I discuss arbitration in Vietnam, I would like to talk about Vietnam legal system in a viewpoint of foreign law firm as a background. Unlike United States jurisdiction, Vietnam is a civil law jurisdiction based on communist legal theory. Its legal system is influenced by French civil law system. In 1992, the National Assembly(NA), which is highest legislative authority, adopted a new constitution formally admitting private ownership and guaranteeing non-nationalization, non-requisition and non-confiscation of private, including foreign owned, assets. In addition to the constitution, in 2001, the new constitution was amended specifically to recognize the existence of foreign invested businesses as well as the right over fund and assets of foreign individuals and organization in Vietnam.
In terms of Legal profession as a Vietnamese lawyer, one has to be admitted by a bar association in Vietnam. A candidate applying for the bar association must have Vietnamese citizenship and residence in Vietnam. This is a policy protection of Vietnamese lawyer. A foreign lawyer who does not have Vietnamese citizenship cannot be a Vietnamese lawyer and who is not a Vietnamese lawyer cannot practice litigation. In addition, a foreign lawyer can practice in Vietnam only after acquiring a permit (law practice license as a foreign lawyer) from the MOJ. A foreign lawyer is allowed to provide legal advice on international laws, foreign laws and etc., but not Vietnamese laws, unless a foreign lawyer has law degree in Vietnam and qualified as other Vietnamese lawyers (except the nationality requirement). Moreover, a foreign lawyer is not allowed to participate in legal proceedings1.
The new Law on Commercial Arbitration2 took effect on January 1, 2011 and replaced the 2003 Ordinance on Commercial Arbitration. Though Vietnam joined the New Your Convention of 1958, Vietnam is not a member of the 1965 Convention by the International Center for Settlement of Investment Disputes (“ICSID Convention”). Yet, Vietnam has entered into a Bilateral Trade Agreement (“BTA”) with United States furnishing that in disputes between nationals or entities of either countries against the other, thus, the company or national concerned of any of Vietnam or the United States may submit the dispute for settlement by binding arbitration: “1) to the International Center for Settlement of Investment Dispute (the “Center”) established by the ICSID Convention, if both Vietnam and United States are member of the ICSID Convention and the Center is available; 2) to the additional Facility of the Center, if it is available; 3) in accordance with the United Nations Commission on Internal Trade Law (UNCITRAL) Arbitration Rule or any recognized international arbitration rules, if agreed; or 4) to any other arbitration institution or in accordance with any other arbitration rules, if agreed by both Vietnam and United States to the dispute.3″ The arbitration is only available if the national or entity concerned has not claimed for the resolution to the competent courts or administrative tribunals. In addition, the remedies above is available, after 90 days have been elapsed from the date of the dispute arose. When investment disputes between United States company and the State of Vietnam was involved, Vietnam is bind to the arbitration by ICSID in the BTA.
In regard to role of courts in arbitration, in cases of parties to contracts have agreed that any dispute will be solved by arbitration, under the Vietnamese law, the court does not have jurisdiction upon the dispute. Parties has right to request interim relief from the arbitration panel or a court. Moreover, courts may exclude a domestic arbitration decision or award in certain situations at the request of one of the parties.
1 Article 76 of the Law on Lawyers.
2 Article 354.1 of the Civil Procedure Code(CPC).
3 P. 19, http://www.bakermckenzie.com/-/media/files/insight/publications/2016/10/dratw/dratw_vietnam_2013.pdf?la=en