Legal Status of Build-Operate-Transfer (Bot) Contracts in Road Transport Projects in Vietnam

private sector to implement infrastructure projects. The legal framework for BOT projects needs to clearly define the roles, responsibilities, functions, powers, rights and obligations of relevant government agencies, including the agency responsible for supervision and the agency responsible for implementation throughout the project life cycle.

Second: Establish a specialized agency

The Government should consider establishing a specialized agency to conduct policy research as well as act as a focal point for state management, human resource training, and consulting and supporting parties in the implementation of BOT projects. This agency can be called the BOT Center with the main tasks of researching policies related to BOT, standardizing and providing guidance documents for projects implemented in the form of BOT, promoting investment projects in the form of BOT investment, training human resources to participate in and manage BOT projects...

At the same time, this agency is independent and responsible for supervising the process of appraising and approving BOT projects.

Third: Risk allocation policy

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There should be a policy to allocate project risks reasonably to both the State and investors with a process of monitoring, dividing, transferring and controlling risks by analyzing project risks before bidding, establishing specialized units or centers in the field of risk allocation to review, monitor and advise the subjects in the contract in the most objective way.

Fourth: Competitive bidding

Increase the application of competitive bidding in a public and transparent manner to select capable private investors; limit the form of designated bidding by setting out strict limits, conditions and criteria for cases where this form can be applied and the implementation procedures.

Thursday: Improve the quality of human resources

It is necessary to strengthen training and capacity building for cadres, civil servants and public employees assigned to tasks in the BOT field, especially in the stages of project appraisal, organizing bidding to select investors, negotiating and developing contracts, monitoring and evaluating the implementation process as well as project operation.

Sixth: Building a Price Stabilization Fund

The Government needs to consider, research, develop and apply a Price Stabilization Fund mechanism to ensure the harmony of interests for both investors and service users.

Seventh: The Government needs to create a favorable environment for investment in the form of BOT contracts to attract private investment capital, specifically:

The government needs to have a large enough support policy to attract the private sector to participate; Accumulate knowledge and experience to successfully organize BOT contracts;

Develop relationships with BOT stakeholders such as consultants, sponsors and multilateral agencies to avoid conflicts during cooperation;

Regularly and continuously monitor and evaluate BOT contracts to improve investment efficiency;

Develop a set of scientific standards to accurately evaluate BOT projects; Government commitments must ensure enforcement.

Chapter 2 Conclusion

In chapter 2 of the thesis, the author has studied, researched and systematized theoretical issues including the concept, formation, characteristics and role of road traffic BOT contracts. The thesis also studies aspects related to BOT contracts such as the nature of BOT contracts; Special features of the law governing BOT contracts; The role of the law on BOT contracts; The law on BOT contracts from a comparative perspective. The studies help the author have a multi-faceted view of BOT contracts in general.

In addition, to better understand BOT in road traffic projects, the thesis analyzed the public and private elements in BOT contracts, studied the characteristics of BOT contracts in road traffic projects under Vietnamese law; Forms of documents used to promulgate regulations on BOT contracts in road traffic projects; Contents and scope of regulation of the law on BOT contracts in road traffic projects in Vietnam.

The author has studied BOT contracts in road traffic projects in some countries in the world such as: Laws of Malaysia, Philippines, UK, China and experiences from some projects of these countries, from which lessons are drawn for Vietnam.

Chapter 3

STATUS OF LAW AND PRACTICE OF LAW IMPLEMENTATION ON BOT CONTRACTS IN ROAD TRAFFIC PROJECTS IN VIETNAM

3.1. Current legal status of Build-Operate-Transfer (BOT) contracts in road traffic projects in Vietnam

3.1.1. Overview of the process of building laws on investment in the form of BOT in Vietnam

Mobilizing investment capital for transport infrastructure in Vietnam has been carried out for a long time, but it only really became active in 2011 when a series of BOT projects were deployed on National Highway 1 and Ho Chi Minh Road through the Central Highlands.

Although it has developed, infrastructure, especially transport infrastructure in Vietnam, is still weak compared to development needs and is one of the factors hindering economic, cultural, social development and the ability to strengthen our country's national defense. The development of transport infrastructure faces many difficulties and challenges, especially the lack of investment capital. In the period of 2011-2015, total development investment capital increased slowly, and investment capital from the State budget for transport infrastructure development encountered many difficulties. In addition, Vietnam has become a middle-income country, while official development assistance (ODA) capital is decreasing. Therefore, mobilizing social resources is a correct policy to build a synchronous infrastructure system, ensuring socio-economic development goals, reducing pressure on the state budget, increasing the competitiveness of the economy and ensuring national defense and security.

In response to the practical requirements and project implementation, the Government and ministries have issued legal documents regulating, adjusting and perfecting activities related to investment in the form of PPP. The Ministry of Transport issued Decision 3085/QD-BGTVT dated October 4, 2013, temporarily regulating the tasks and powers of the Project Management Board for investment projects in the form of BOT and BT contracts managed by the Ministry of Transport. This decision has partly overcome the remaining problems and loopholes in the actual implementation of previous BOT projects.

In addition, if previously PPP contracts were limited to BOT and BT forms in many sub-law legal documents, now this term is recognized with a unified name as investment in the form of PPP, with legal status in documents of higher legal value, including:

Bidding Law No. 43/2013/QH13: To contribute to further perfecting the legal corridor on PPP, Bidding Law No. 43/2013/QH13 has added regulations on the organization of selecting investors to implement PPP projects to the scope of the Law in order to select investors in a fair, transparent, competitive and economically efficient manner.

Law on Public Investment No. 49/2014/QH13: stipulates a number of contents related to PPP projects. Accordingly, state investment in PPP projects is considered one of the public investment sectors. Investment in the form of PPP is one of the principles encouraged in public investment management; the condition for deciding on the investment policy of the project program is to prioritize the implementation of PPP projects.

Construction Law No. 50/2014/QH13: State management of construction activities in general and PPP projects in particular has made positive progress at the legal level to contribute to perfecting the legal framework on PPP.

Investment Law No. 67/2014/QH13: The Investment Law stipulates investment in the form of PPP, in which investors and project enterprises sign PPP contracts with competent state agencies to implement investment projects to build new or renovate, upgrade, expand, manage and operate infrastructure works or provide public services.

Land Law No. 45/2013/QH13: has provisions on land allocation, land lease, land use purpose conversion and the State's responsibility to assign investors to manage land areas to implement BOT, BT projects and other forms of investment according to the provisions of the law on investment.

On February 14, 2015, Decree 15/2015/ND-CP on investment in the form of public-private partnership was issued. The Decree has overcome the inappropriate regulations in the previously issued Decrees. Decree 15 has stipulated 07 forms of contracts according to practical needs and international practices, including the form of BOT contracts, providing clearer and stricter regulations.

On March 17, 2015, the Government issued Decree No. 30/2015/ND-CP detailing the implementation of the Law on Bidding on the selection of investors to implement PPP projects. The Decree has notable new provisions such as ensuring competition in bidding; information transparency; forms of investor selection; methods of evaluating bidding documents.

In particular, regarding investment in construction of transport infrastructure works and operation and exploitation of transport infrastructure, the Ministry of Transport issued Circular No. 86/2015/TT-BGTVT on December 31, 2015. This is one of the first specialized circulars guiding the content of the feasibility study report of PPP projects.

On May 4, 2018, the Government issued Decree 63/2018/ND-CP replacing Decree 15/2015/ND-CP. Decree 15/2015/ND-CP as well as Decree 63/2018/ND-CP not only regulates investment under the form of BOT contracts, but also regulates investment forms under public-private partnership (PPP) contracts in general such as BTO, BT, BOO, BTL, BLT, O&M. However, investment under BOT contracts is still the most popular form of investment in Vietnam today due to the advantages that this form of investment brings to investors.

On June 18, 2020, the 14th National Assembly passed the Law on Investment under the Public-Private Partnership model. The PPP Law takes effect from January 1, 2021. This is the first law on public-private partnership in our country. The birth of the law marks a new step forward in the path to perfecting the legal framework on investment under the form of public-private partnership. The new law is expected to help the investment environment under the PPP model become more transparent and attractive in the eyes of investors while helping the State improve its capacity to manage and operate PPP projects. Some of the outstanding, important and very meaningful new points in the PPP Law can be mentioned as follows:

Investment fields: The PPP Law has shortened the fields to focus on investing in 5 essential fields: (1) Transportation; (2) Power grid, power plants; (3) Irrigation, clean water supply, drainage, wastewater and waste treatment; (4) Healthcare, education and training; (5) Information technology infrastructure.

Meanwhile, some countries have a narrower regulation on the scope of infrastructure that can be implemented in the form of public-private partnership investment under BOT contracts, including only economic and technical infrastructure without recognizing subjects such as schools, hospitals, fairs, etc. For example, the Philippine BOT Law stipulates that it applies to 14 fields and allows the addition of "other fields"; Japan's PFI Law stipulates that it applies to 5 fields. Vietnam also regulates in a way that limits the scope of infrastructure that can be implemented under BOT contracts. According to current regulations, the scope of BOT contracts applied in Vietnam is only 5 fields stipulated in the 2020 PPP Law. This more or less limits the choices and investment opportunities of the private sector in the field of social infrastructure in general and road traffic projects in particular in Vietnam through BOT contracts.

Investment scale: In order to concentrate resources and avoid dispersion, the PPP Law stipulates that PPP investment must be implemented for projects with e-commerce capital from 200 billion VND, except for projects in areas with difficult or extremely difficult socio-economic conditions or in the fields of health, education and training (from 100 billion VND).

Classification of PPP projects: Different from previous regulations - PPP projects are classified according to public investment law, the PPP Law stipulates that project classification is linked to the appraisal authority.

The right to decide on investment policies (National Assembly; Prime Minister; Ministers, heads of central agencies and provincial People's Councils).

PPP project appraisal council: The PPP Law stipulates 3 levels of PPP project appraisal councils (state, inter-sectoral and grassroots) corresponding to 3 levels of decision on PPP project investment policy to ensure strictness, efficiency and feasibility before PPP projects are launched on the market and attract investment.

State capital in PPP projects: The PPP Law clearly stipulates state capital in PPP projects and the management plan for each form of support and state capital participation. In particular, the Law stipulates that the participation limit in a PPP project shall not exceed 50% of the total investment of the project.

Investor selection: The PPP Law stipulates the integration of investor selection (formerly in the Bidding Law), ensuring the consistency, integrity and continuity of the implementation process of a PPP project.

Revenue increase and decrease sharing mechanism: The PPP Law stipulates a mechanism for sharing increases (revenue increases of over 125%) and decreases (revenue decreases of less than 75%) of revenue to minimize risks for PPP projects, especially risks due to changes from the State. This is considered a new and very important mechanism.

Capital mobilization of project enterprises: In addition to the traditional capital mobilization channel from banks, the PPP Law allows PPP project enterprises to issue corporate bonds to mobilize capital to implement PPP projects.

State Audit of PPP projects: The PPP Law specifically stipulates the scope and content of the State Audit conducting PPP project audits regarding the management and use of public finance and public assets participating in PPP projects; the state budget used to share the reduced revenue; and the value of assets when transferred to the State.

Project information must be published on the National Bidding Network: to ensure publicity and transparency in investment, the Law stipulates that some information must be published on the National Bidding Network such as: information on investment policy decisions, decisions approving PPP projects; information on investor selection; information on selected investors, PPP project enterprises; main content of the PPP project contract; value of public investment capital settlement in PPP projects in case of use; legal documents on investment under the PPP method; database on investors; information on handling petitions and handling violations of the law on investment under the PPP method.

Specifically stating 12 prohibited acts in PPP investment: stating specific prohibited acts helps the parties involved in the PPP project understand

clarify prohibited acts, avoid unnecessary mistakes and prevent wrongdoings. Some typical prohibited acts include: approving PPP projects without an investment policy; not ensuring fairness and transparency in selecting investors; collusion in bidding; giving, receiving, and brokering bribes;...

Detailed regulations on the eligibility of investors: to ensure the capacity of investors, the Law stipulates that not all investors can participate in investment under the PPP method, but only investors who meet the conditions prescribed by law can participate.

PPP project enterprises are established in the form of companies: after the decision approving the results of investor selection, investors are only allowed to establish PPP project enterprises in the form of limited liability companies or joint stock companies (not public companies) and have the sole purpose of signing and implementing PPP project contracts.

The legal framework regulating investment in the form of public-private partnership in general and BOT contracts in particular has been developed by the State with many regulations, circulars, and decrees. Up to now, the PPP Law, which will take effect from January 1, 2021, is expected to bring a favorable and transparent PPP investment environment. However, the circulars, decrees, and even the newly issued PPP Law are still scattered and not focused. Meanwhile, in the past, the number of contracts and total investment capital in the form of BOT in road traffic projects in Vietnam has been very large, but there has not been a legal adjustment mechanism for this type of contract. Therefore, this is still a limitation and defect that needs to be studied and improved so that the law on BOT in road traffic projects can promote its strengths and pave the way for other economic sectors to develop.

To guide the implementation of the PPP Law, on March 26, 2021, the Government issued Decree No. 28/2021/ND-CP stipulating the financial management mechanism for investment projects under the public-private partnership method and on March 29, 2021, the Government issued Decree No. 35/2021/ND-CP detailing and guiding the implementation of the Law on Investment under the public-private partnership method.

3.1.2. Legal status of BOT contracts in road traffic projects

3.1.2.1 Current legal status on BOT contract content in road traffic projects in Vietnam in recent times.

A BOT contract is a document recording the information, rights and obligations of the parties in the process of implementing an investment project. Accordingly, to implement the activities

In order to invest under a BOT contract, the State must organize the project planning; organize bidding, select contractors and sign BOT contracts with the winning bidder. The content of the BOT contract must comply with legal regulations, approved project proposals, results of selection of investors to implement the project and winning bid documents. Investors have rights and obligations such as: constructing infrastructure works, operating those infrastructure works, transferring those works to the State. Therefore, the BOT contract is a document that serves as a legal basis for the implementation of BOT projects. [46-83].

According to regulations, based on the objectives and nature of PPP project contracts in general and BOT contracts in the field of road traffic in particular, the parties agree on all or some basic contents of the contract including:

- Objectives, scale, location, duration and progress of project implementation; project construction time

- Technical requirements, technology, quality of project works, products or services provided

- Total investment capital and financial plan of the project

- Value, conditions, rate and progress of implementation of the State's participation in the BOT project (if any)

- Conditions of land use and related works

- Compensation, site clearance, resettlement

- Construction; requirements for inspection, supervision, quality management during construction; acceptance and settlement of completed project works.

- Inspection, operation, maintenance, business and exploitation of project works; project transfer

- Safety and environmental protection warranty

- Conditions and procedures for project acceptance by the lender

- Division of risks and responsibilities of the parties in the contract including the competent state agency, the authorized agency (in case of authorized signing) and the investor; principles for handling disputes when they arise; force majeure events.

- Investment incentives and guarantees (if any)

- Law governing project contract relationships, related contracts and dispute resolution mechanisms

- Validity and duration of project contract

- Principles and conditions for amending, supplementing, terminating project contracts, transferring rights and obligations under project contracts

- Other contents as agreed between the signing parties.