LAWYER IN VIETNAM DR. OLIVER MASSMANN KEY COMMENTS ON DRAFT PUBLIC PRIVATE PARTNERSHIP LAW DATED 5 MARCH 2020 (“PPP DRAFT”)

1. LAWYER IN VIETNAM DR. OLIVER MASSMANN KEY COMMENTS
ON DRAFT PUBLIC PRIVATE PARTNERSHIP LAW DATED 5 MARCH 2020
(“PPP DRAFT”)
1. Positive:
- Eligible Sectors (Art. 5): business sectors, which are qualified for investment in PPP form, have
been selectively considered and proposed, not as broad as the those under Decree 63/2018/ND-CP
(“Decree 63”). This would help to concentrate the valuable resources and finance on efficient and
necessary sectors. However, please refer to our notes on incompletion of this clause in the Negative
Section as below.
- Language (Art. 34): language for selection of international investor may be in both Vietnamese and
English.
- Step-in rights of lenders (Art. 55): Lenders have rights to take over the project and propose another
investor to continue the project. This provision has addressed the constraints that inhibit cross-border
financing will be essential for diversifying sources of funding for energy-sector investments.
International financing can provide for both the electricity and midstream gas sectors in terms of
longer tenors and fixed-interest rates, which domestic capital market cannot satisfy.
- Guarantee on Foreign Currency Conversion (Art. 82): it is positive that the PPP Draft still remains
this guarantee regime, as the one under Decree 63. However, the scope and conditions to enjoy this
are very limited and do not meet the expectation from the investors as discussed in the Negative
Section as below.
- Revenue risk sharing (Art. 83): it is indeed a very bold proposal in the PPP Draft that enabling the
State to share the revenue loss of investors, subject to certain conditions and qualifications. Though
we have few comments on the scope of this mechanism as below. We highly appreciate that the
drafter has tried to address one of current issues of PPP form, i.e., non bankability and high risk.
- Dispute Resolution (Art. 104): the relevant provision on dispute resolutions have been improved in
comparison with those of Decree 63. In brief, it is crystal clear now disputes between investors
involving at least a foreign investor and / or disputes between investors / PPP project company with
foreign parties could be resolved by either local courts / arbitration and / or foreign or international
arbitration. In terms of disputes between the state and investors / project company, the PPP Draft
has in-principle required local courts / arbitration but enabled other agreement between the parties
in the project contracts and / or otherwise provided by international treaties of Vietnam. This is a
significant improvement as Vietnam has signed several major international treaties such as CPTPP
and EVFTA. We give to your attention the advantage of some international treaties as below:
“The CPTPP and the EVFTA make it possible that foreign investors could sue Vietnam Government
for its decisions according to the dispute settlement by arbitration rules. The violating party must
take all necessary measures to promptly comply with the arbitral decision. In case of non-
compliance, as in the WTO, the CPTPP and the EVFTA allow temporary remedies (compensation)
at the request of the complaining party. The final arbitral award is binding and enforceable without
any question from the local courts regarding its validity. This is an advantage for investors
considering the fact that the percentage of annulled foreign arbitral awards in Vietnam remains
relatively high for different reasons. It is crucial that foreign investors now could take advantage of
the requirements under the CPTPP and the EVFTA (as also recognized by the PPP Draft) to enhance
functionality of their PPP projects in Vietnam. In case these entities make wrongful decisions,
foreign investors could take recourse to arbitration proceedings and have the arbitral awards fully
enforced in Vietnam.”

2. 2. Negative:
No. Relevant
Article
Key Issues Recommendation
1. Art. 5 The scope of sectors eligible for PPP
investment form is not crystal clear and need
further guidance from the Government and
Ministries. For example, in terms of power
projects, in practice some major profile thermal
power projects have been implemented in
cooperation with the Government under the
Build – Operate – Transfer (BOT) umbrella (a
form of public private partnership (PPP), it
appears that the Government would not offer
this kind of treatment for renewable energy
projects at large (except, perhaps in theory, for
very large and prominent ones).
Foreign investors (most of them engaging
small scale projects) do not prefer PPP
structure for their power plant projects, due to
complexity of this structure and the lack of
clear guidance, especially feed-in-tariff and
consequently bankability. However, on the
contrary, BOT seems to be suitable for larger
scale projects and often give investors a better
position to negotiate with the Government on
key project indicators at the outset, which may
not be available in other investment platforms.
Consider clarification on the
scope and scale of power
projects eligible for PPP form.
In addition, for large scale power
projects, it is crucial to enable all
sub-projects of a mega power
project could be together
invested in the PPP form. For
example, a LNG-to-power
project could only be efficiently
invested with other sub-projects
such as terminal, FSRU,
pipelines, etc.
2. Art. 47 Lack of clear and bankable terms of PPP
contract. It is critical that an international
form of bankable PPP contract is provided in
the PPP Draft. Other related transaction
agreements could be further developed as
agreed by the parties but bankable templates
should be drafted and attached to the guideline
for implementation of PPP Draft.
Terms and conditions of PPP
contract are too general and
vague.
Considering to provide a
bankable PPP contract template
in the PPP Draft or in the
guiding decree / circular for
PPP Draft.
3. Art. 57 It is not reasonable for forcing governing law to
be the Vietnamese law. Especially, Vietnam
has signed several international treaties and in
principle allowed rules of such international
treaties to be applied in PPP projects.
It is an international norm and feasible for a
foreign related transactions to be governed by
foreign law of a third country (not Vietnam or
investor’s country) to the extent certain
specific areas / agreements must be in
Considering for the parties to
agree on the governing law of
a third country (not Vietnam or
investor’s country, e.g.,
Singapore law) to the extent
certain specific areas /
agreements must be in
compliance with Vietnamese
law such as land regime, taxes,
etc.

3. compliance with Vietnamese law such as land
regime, taxes, etc.
4. Art. 80 The investment incentives are underdeveloped
and quite similar as those provided under
Decree 63. This is a safe approach but it would
confuse the investors on the incentives and how
to enjoy them under the PPP Draft.
Considering not referring to
other laws and regulations on
determination of investment,
land and tax incentives for PPP
forms.
For example, at least the PPP
Draft should determine whether
the PPP project could enjoy
incentives such as an
encouraged investment project
or special encouraged
investment project, etc.
5. Art.82 The conditions for foreign currency balance is
very limited. As discussed above, only large
scale projects prefer and may satisfy conditions
of PPP investment forms. Thus, the scope for
application of this foreign currency balance
would need to be extended to all PPP projects,
or at least for power projects and grid projects.
Foreign currency balance ensuring scheme is
only applicable to projects subject to
investment policy decision of the Nation
Assembly and Prime Minister. In addition,
there is a ceiling of 30% to be imposed.
In practice, several projects could not reach
financial closure as scheduled because they
cannot agree with the government about the
convertibility of profits earned in local currency
into foreign exchange for repatriation and
payment for input commodities (coal, gas).
The demand for foreign currency associated
with BOT projects and associated tariff
revenues to be covered in the energy sector
could escalate dramatically through 2030, up to
US$23 billion/annually by 2030.
Considering to extend the scope
eligible for foreign currency
balance.
Foreign exchange convertibility
has been a concern among
investors. In the absence of
such government convertibility
guarantees, there is limited
availability of currency hedging
instruments that would allow
private investors to cover
currency risks through the
market. The assurance on the
availability of foreign currency
shall definitely facilitate
investment procedures. The
ceiling of 30% should be
removed as well.
Government guarantees for
other obligations such as off-
taker obligations and
obligations towards
infrastructure, payment
obligations (including deemed
commissioning and termination
payments), etc. depending on
projects.
6. Art. 83 Revenue risk sharing mechanism: (i) the
investors, PPP project enterprises shall share
with the State 50% of the
increase between actual revenue and committed
revenue in the contract; and (ii) the State shall
The risk sharing mechanism
should be further developed to
cover all other risks that may
arise during the implementation
of the PPP project (e.g., force

4. share with the investors, the PPP project
enterprises 50% of the decrease between actual
revenue and committed revenue in the contract
if, inter alia, the project does not use state’s
budget and the cause of the loss is the change
of policies, laws.
majeure, change in law, price
fluctuation, low selling price,
etc.)
7. N/A Long negotiation process: it is due to several
issues: (i) no clear list of approvals for the
Project to be ready-to-build and / or operation,
(ii) land site clearance and compensation
process is still very challenging, (iii) not all
decisions / procedures having a clear time-
limit.
Recommending to provide all
time-limits for all decisions /
procedures and it is deemed to
be provided if the state
authority fails to issue such
decisions. In addition, it is
recommended to have a basic
ready-to-build approval list for
the investors to pursue and
operate the PPP projects.
***
Please do not hesitate to contact the author Dr. Oliver Massmann under omassmann@duanemorris.com.
Dr. Oliver Massmann is the General Director of Duane Morris Vietnam LLC, Member to the Supervisory
Board of PetroVietnam Insurance JSC and the only foreign lawyer presenting in Vietnamese language to
members of the NATIONAL ASSEMBLY OF VIETNAM.