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Vietnamese Law And The Issue Of Ownership Of Foreign Investors In Vietnam

Dr Doan Nang
Vice Director
Legal Department, Government Office

Ownership of foreign investors in Vietnam is one of the fundamental issues which attract significant attention from Vietnamese policy makers who have been dealing with it in order to find a solution which provides comfort and encourages foreign organizations and individuals to invest in the country. As a matter of course, foreign organizations and individuals who have been investing in Vietnam are most concerned with their right of ownership in the country.

In accordance with the laws and practice of other countries in the region as well as in the world, the issue of ownership of property is dealt with in accordance with the laws of the place where the property is located (Lex Rei Sitae), save some exceptional cases which are provided for by international law or treaties. The practice in Vietnam has been in accordance with the principle. The Vietnam Civil Code, in particular article 833, which was issued in late 1995, absolutely endorses and affirms the principle.

In accordance with article 833 and article 827 of the Vietnam Civil Code, the creation, change, termination and the contents of ownership of foreign individuals and organizations investing in Vietnam (hereinafter referred to as foreign investors in Vietnam), in respect to property located in the country, are governed by Vietnamese law except where a law of Vietnam or an international treaty, which has been signed or acceded to, provides otherwise.

Although it is not specifically provided for, Vietnam absolutely recognizes the right of ownership of foreign investors in respect to their capital and property that are imported for investment in accordance with the Law on Foreign Investment in Vietnam, including their ownership in respect to the capital and property which were created on the basis of foreign law. Vietnam also recognizes the ownership of foreign investors in respect to their goods for daily life and other assets legally brought into the country. Where the property, whether it is investment, goods for daily life or other assets, was legally imported, the contents, change or termination of their ownership and the protection of the ownership are also determined by the Vietnamese law in accordance with the above Lex Rei Sitae principle unless a treaty which has been signed or acceded to by Vietnam provides otherwise.

The issue arising here is whether the foreign investors in Vietnam are entitled to own real property in Vietnam and if so, what kind of real property are they entitled to own?

In accordance with the legal provisions currently in force, foreigners permanently residing in the country are only entitled to ownership in respect of movable property, but not real property located in Vietnam except residential houses. In accordance with Decree 60/CP issued in 1994, a foreigner who is a permanent resident in Vietnam can only have ownership in respect to one house for himself/herself. Foreigners who are not permanent residents in the country are not entitled to ownership in respect of real property located in Vietnam. (In accordance with article 181 of the Vietnam Civil Code, real property is the type of property which can not be moved or relocated and includes items of property fixed to residential houses and residential building works; other assets fixed to land and other assets provided for by the laws.)

Foreign investors in Vietnam are categorized as foreigners who do not permanently reside in the country, but in practice, they enjoy a particular status in respect to ownership of real property in the country notwithstanding the absence of specific provisions of Vietnamese law. In particular, foreign investors are entitled to joint ownership in respect to factories, enterprises, warehouses and other types of real property that they contribute to the capital of joint venture enterprises. The ownership of foreign investors in these cases is proportionate to their capital contribution to the joint venture, and, as a matter of course, they are also entitled to joint ownership in respect of the products produced by and other types of movable property of the joint venture. Where foreign investors invest 100 percent capital to establish the factory, enterprise and warehouses and/or other real property in Vietnam, the property and products produced by their enterprises are absolutely in their ownership. Foreign investors do not have the right to own land in the country; this applies even to Vietnamese individuals and organizations pursuant to the provisions of the 1992 Constitution of Vietnam which stipulates that land is of the state under the ownership of the whole nation.

It is noteworthy that only during the duration of investment in Vietnam the foreign investors have the ownership in respect to the real property that they contributed as capital or which was 100 percent created by their invested capital. Upon the expiration of their investment duration, if no extension is granted or the foreign investors do not apply for any extension, the foreign investors are not permitted to maintain their ownership in respect to the real property they contributed as capital or invested 100 percent in its establishment. In those cases, the foreign investors must deal with their property by way of transferring it to a Vietnamese party or by other means in accordance with the provisions of Vietnamese law.

The prohibition of foreign investors to maintain their ownership in respect to real property in Vietnam, upon the expiration of investment license, is a necessary measure to protect socio-economic development of the country, to facilitate the management of and to make the most use of the socio-economic values of real property. This approach ensures the consistency of Vietnamese laws which set out as a principle that foreigners who are not permanently residing or investing in Vietnam are not entitled to ownership in respect to real property in the country and this is in accordance with international practice.

Vietnamese law also pays appropriate attention to the protection of legal ownership of foreigners in general, and foreign investors in particular. Article 25 of the 1992 Constitution of Vietnam does not just welcome and encourage foreign organizations and individuals to invest in the country but also protects their legal ownership in respect to property and other rights that they have on the basis of Vietnamese laws.

The Vietnamese government does not merely have general statements about protection of legal ownership of foreign investors, it has issued specific legal provisions and established a mechanism to protect their legal ownership.

Among the provisions in relation to measures of protection of ownership of foreign investors in Vietnam, article 21 of the Law on Foreign Investment in Vietnam should be mentioned above all. The article 21 provides:

"The capital and assets invested in Vietnam by foreign organizations and individuals shall not be requisitioned or expropriated through administrative measures. An enterprise with foreign owned capital shall not be nationalized".

Furthermore, the Law on Foreign Investment in Vietnam affirms that in cases where foreign investors are affected by a change in the policies and laws of the country, the Vietnamese government will have a reasonable solution to ensure their legitimate interests.

Where ownership of foreign investors is violated, the provisions of the Law on Foreign Investment in Vietnam will be applied as a basis for the protection of their ownership. In the absence of specific provisions of the Law on Foreign Investment, the relevant provisions of the Civil Code (articles 263, 264, 265 and 266) and other laws apply unless an international treaty, which Vietnam has signed or acceded to, provides otherwise.




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