Law on Guaranteeing Investment and Transaction Rights During the Business Process of Investors

- Indirect investment:

Indirect investment is a form of investment through the purchase of shares, stocks, bonds, other valuable papers, securities investment funds and through other intermediary financial institutions in which the investor does not directly participate in the management of investment activities. (Clause 3, Article 3 of the 2003 Law on Investment)

Indirect investment includes the following forms:

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- Purchase of shares, stocks, bonds and other valuable papers;

- Through securities investment funds;

- Through other intermediary financial institutions.

Investors have the right to establish a business if they wish. Investors can choose the form of business organization that suits their business purposes. The registration documents are different for each type of business organization. However, in some industries, the law controls the form of business organization. For example, for investors operating in the legal service industry, they can only be organized under the following models: limited liability law company, law partnership company and law office (equivalent to a private enterprise), and cannot register as a joint stock law company or law cooperative.

In fact, when choosing an investment form, investors still encounter many difficulties due to legal regulations. For example, investing through the method of buying and selling, merging and acquiring enterprises (M&A). The law does not restrict M&A between enterprises with different organizational forms, but in reality, enterprises with different organizational forms cannot directly merge or consolidate with each other but must go through an intermediate step of converting the enterprises participating in the merger/merger into companies of the same type. This issue is extremely complicated and cumbersome.

For example, a joint stock company wants to buy a private enterprise, the law does not prohibit it, but according to the provisions of the 2005 Enterprise Law, "A private enterprise is an enterprise owned by an individual who is personally responsible for all activities of the enterprise with all of his/her assets" (Article 141), so when an organization or legal entity buys a private enterprise, it cannot establish an operating mechanism.

Accordingly, a private enterprise must convert into a single-member limited liability company, then transition to a business model of the same type as the enterprise that needs to be merged or consolidated.

d) Freely choose location and scale of investment and business

Regarding investment and business locations, investors are allowed to invest in all locations and the State does not restrict them. If investing in areas with difficult or extremely difficult socio-economic conditions (listed in Appendix II of Decree 108), investors will receive additional investment incentives.

However, in reality, not all areas are free for investors to invest, but investment must be linked to the planning of the State planning agency (for Hanoi and Ho Chi Minh City and the provincial construction departments). If the investment project is not in accordance with the local planning, the investment license will be denied. The case of Nha Trang Bay - Khanh Hoa is an example:

In 2001, the Hon Mun Marine Protected Area (later renamed Nha Trang Bay Marine Protected Area) was established in Nha Trang Bay, the first marine protected area in Vietnam. In 2005, Nha Trang Bay was officially recognized as a member of the club of 29 most beautiful bays in the world. Also in this year, Nha Trang Bay was recognized as a national scenic spot.

Thus, in just a few years, Nha Trang Bay has continuously had new “titles”, bringing pride to the people. However, the regulations of these “titles” have made it difficult for the locality to carry out projects here.

As a marine protected area, the core area of the bay is prohibited from being “touched”, and projects in other areas must be approved by the Ministry of Agriculture and Rural Development. In particular, with the “role” of a national scenic spot, according to the Law on Cultural Heritage, all locations in Zone I are prohibited from being built. It is known that in the past, there was a “hasty” attempt to “zone” the entire Nha Trang Bay, nearly 250 km2 wide, to propose recognition as a national scenic spot without dividing into protected zones I, II…

As a result, all projects implemented in Nha Trang Bay are very difficult, to the point that the leaders of Khanh Hoa province had to speak up to request the removal of Nha Trang Bay from the list of national scenic spots. In September 2011, the master plan for conservation and

creating and promoting the value of Nha Trang Bay has been approved. Accordingly, there are areas that have been allowed to build projects. However, "according to" the Heritage Law, any project that wants to be implemented here must still implement the "ask-give" mechanism with the Ministry of Agriculture and Rural Development. [45]

In addition, the provisions of the 2003 Land Law have made it difficult for investors to lease land or request land allocation to carry out investment projects. This has greatly hindered investors' freedom of business.

Obviously, there is currently a lack of uniformity in legal documents, causing difficulties for investors. This has greatly limited the rights of investors in choosing investment locations. Therefore, lawmakers need to have specific regulations, both ensuring the conservation of nature and landscapes, and ensuring the rights of investors.

Regarding investment and business scale: LĐT 2005 and LDN 2005 do not limit the scale of investment and business capital of investors. Investors are free to register their capital level with the investment licensing authority. Corresponding to each investment capital level that investors register, LĐT 2005 stipulates the corresponding administrative procedures that investors must carry out. If investors do business in investment fields with regulations on legal capital levels, investors must register at least equal to the legal capital and demonstrate financial capacity.

The division of administrative procedures based on the registered capital of investors as it is currently is unreasonable, according to the author, because investors are responsible for their own business investment. The 2005 Investment Law stipulates that the higher the registered investment capital, the more complicated the investment licensing procedures. Obviously, this has affected the psychology of investors when they want to increase their investment capital. The Investment Law needs to amend this issue appropriately. Instead of prescribing complicated administrative procedures, the law needs to prescribe measures to control investment capital so that investors must comply with the registered capital level.

In contributing capital to establish a business as well as contributing capital to implement an investment project, investors can use any assets to contribute capital. However, for assets contributed that are not money, investors must self-evaluate or hire a valuation organization to conduct a valuation to record the value of the assets contributed in money.

2.1.2. Laws on ensuring investment and transaction rights during the business process of investors

During the operation, investors have the right to autonomy in managing the project and doing business. Article 7, Clause 7 of the 2005 Enterprise Law stipulates that enterprises have the right to "Autonomous decision on business activities and internal relations." For enterprises, this content is recorded in the company charter. If the investment does not lead to the establishment of an enterprise, these contents are recorded in the investment agreement between investors.

The law provides investors with many specific rights in this content, including the following rights:

- The right to freely hire and use labor, terminate contracts with employees;

In the relationship with employees, the investor is the employer. In the labor relationship, the right to freedom of business is expressed through the different powers of the employer, including the right to recruit workers. The right to recruit workers is expressed through the employer's choice of workers suitable to the needs and employment structure of the enterprise. The labor relationship between the employer and the employee is expressed through the legal form of the labor contract. The labor contract is the basis for the emergence of the labor relationship between the employer and the employee, but this labor relationship is not a relationship that lasts forever. In different stages of development of the enterprise, when the demand for labor is no longer there, the value of the labor commodity of the employee has changed, the employer has the right to find suitable workers. Therefore, in necessary cases, the employer has the right to terminate the labor contract with the employee and the right to terminate the labor contract is the legal basis for the employer to terminate the old labor contract and establish a new labor contract legally. In addition, the employer's right to terminate the labor contract is also one of the important powers of the employer, helping the employer to adjust the labor structure and production and business structure in accordance with the production and business plan and strategy.

To protect this right, the 2005 Labor Code, Clause 3, Article 14 stipulates that investors have the right to: "Hire domestic workers; hire foreign workers to do management work."

managers, technical workers, and experts according to production and business needs, except in cases where international treaties to which the Socialist Republic of Vietnam is a member have other provisions, in which case the provisions of such international treaties shall apply.”

LDN 2005 also stipulates that enterprises have the right to: "Recruit, hire and use labor according to business requirements." (Clause 5, Article 8)

At Point a, Clause 1, Article 6 of the 2012 Labor Code (2012 Labor Code), it is also stipulated that employers have the right to recruit, arrange, and manage labor according to production and business needs; reward and handle violations of labor discipline and the right to unilaterally terminate the labor contract of employers as prescribed in Article 38 of the 2012 Labor Code.

It can be seen that the investor has the right to freely recruit and arrange labor but is not free to terminate the employment of labor. This is reasonable because the law only protects the legitimate rights and interests of subjects when these rights and interests do not affect the legitimate rights and interests of other subjects. This issue is significant in ensuring labor security and preventing unemployment.

- Freedom to choose partners;

Vietnamese law also does not have any regulations that bind investors to choose their investment partners. Clause 1, Article 13 of the 2005 Investment Law also stipulates that investors are free to choose their investment partners. However, if the field of cooperation is not within the scope of the business line that the partner has registered to do business, the partner must be required to add a business line.

- The right to freely decide the duration of investment and business activities

Regarding the duration of an investment project, Vietnamese investors are not limited in the duration of the project, but for foreign investors, the duration of a foreign-invested project is consistent with the project's operational requirements and shall not exceed fifty years; if necessary, the Government shall decide on a longer duration for the project but shall not exceed seventy years. (Article 52 of the 2005 Law on Investment). The duration of a foreign-invested project is stipulated in accordance with the period during which foreign investors are allowed to lease land for business purposes in accordance with the provisions of the 2003 Land Law.

Such regulations on the duration of foreign-invested investment projects are unreasonable because in Vietnam, investment and business activities are often short, but in foreign countries, large companies and large corporations have a history of development of hundreds of years. They can invest in projects for decades to recover capital and make profits. The current limitation on the duration of foreign-invested projects is unreasonable and needs to be amended, aiming for true equality in investment regulations between domestic and foreign investors. Only then can we attract more and more foreign investment capital to develop the domestic economy.

Investors have the right to terminate or suspend operations at any time. Investors have the right to transfer the Investment Project if they wish. (Article 17 of the 2005 Investment Law).

- The freedom to decide to expand or contract the business;

Investors have the right to add or remove business lines, increase or decrease investment capital and charter capital of the enterprise.

- The right to freely decide on profit sharing and management rights;

This issue is agreed upon by investors and recorded in the investment agreement contract or the company charter. The company charter is the internal "law" of the company that all members must comply with.

- The right to freely decide to resolve internal disputes and resolve disputes with external parties;

The law on dispute resolution in investment and business is a part of economic law. It institutionalizes the right to freedom of business in the field of economic dispute resolution. Due to the nature of litigation relations, the right to freedom of business in the field of economic dispute resolution is expressed in the right to freedom of decision of the parties. Ensuring the right to freedom of business of business entities is to ensure that the parties have the right to freedom of decision on issues related to the protection of their rights.

The law on economic dispute resolution in our country has initially established a mechanism to ensure the parties' right to self-determination in resolving economic disputes. This is reflected in the following aspects:

Firstly, the law recognizes the right of self-determination of the litigant as one of the principles of civil proceedings: Article 5 of the 2004 Civil Procedure Code stipulates:

“Article 5. Right to decide and self-determination of the parties

1. The parties have the right to decide to initiate a lawsuit and request a competent Court to resolve the civil case.

2. During the process of resolving a civil case, the parties have the right to terminate, change their requests or reach an agreement with each other voluntarily, not contrary to the law and social ethics.”

This is the most basic and important principle, governing the entire economic procedural law system as well as the activities of agencies, persons conducting and participants in civil proceedings.

Second, the right to freely choose the form of dispute resolution

In economic relations between investors, Article 137 of the 2005 Commercial Law and Clause 1, Article 12 of the 2005 Commercial Law stipulate the following forms of dispute resolution:

- Negotiation: The two parties themselves reach an agreement to resolve the dispute.

- Mediation: The two parties proceed to resolve the dispute but with the intervention of a third party.

- Submitting to the court of law: The parties are free to agree on which court of law to choose to resolve the dispute: Court or arbitration.

Vietnamese courts only resolve economic disputes if they fall within the jurisdiction of the Court. The jurisdiction of the Court is determined by three factors: the content of the dispute, the place where the dispute arises, and the level of trial.

In the case of negotiation and mediation, the parties voluntarily implement the dispute resolution agreement, but when brought to a court of law, the court's decision is binding on the parties.

In labor relations, this is a special relationship because the "goods" exchanged are "labor power". Therefore, the 2012 Labor Code stipulates that, for individual labor disputes between investors and employees, the parties must go through mediation procedures at the facility before bringing the case to the Court for settlement (Article 201).

Third : The right to freely choose the law applicable to dispute resolution

This right only applies in cases where the dispute involves foreign elements and is not covered by Article 411 of the Civil Procedure Code. Accordingly, the parties are free to choose the law of any country or international practices or international legal documents as the basis for dispute resolution.

It can be seen that the current legal provisions on investment dispute resolution have initially created a legal framework that ensures the parties’ right to self-determination, in accordance with the basic principles of the market economy. However, through practical implementation, that legal framework has increasingly revealed its limitations.

First, the disadvantages of the concept of investment disputes.

Current law does not have criteria to determine what is an investment dispute relationship, but mainly relies on the content relationship to determine the nature of the dispute relationship. That is, if a dispute arises from an investment relationship, it is considered an investment dispute. However, in many cases, the content law does not provide precise legal grounds to determine the nature of a specific relationship. Because even the 2005 Commercial Law also defines investment as a commercial activity (although not all commercial activities are investments). Therefore, when resolving investment disputes, it is impossible not to apply commercial law in addition to the specialized law, the 2005 Commercial Law. If the provisions of the 2005 Commercial Law are applied, the dispute relationship is determined to be a commercial business dispute or an investment dispute. According to the provisions of Article 29 of the 2004 Civil Procedure Code, it is clear that investment disputes are only considered one of the commercial business disputes. Clearly this is a shortcoming that the law needs to remedy.

Second, there are no specific regulations on negotiation and mediation.

Although the current law has established many forms of jurisdiction, only the Court and arbitration have strict and relatively complete legal procedures. The law still lacks appropriate institutions and models to promote the role of negotiation and conciliation.

Third, limitations on the statute of limitations.

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