With the increasing infrastructure demands, while the budget and ODA resources are limited, the call for private investment in infrastructure projects is seen as viable solution. Thus, the Government issued Decree 15/2015/ND-CP on February 14th 2015, provides for regulations on investment in the form of public-private partnerships (PPP) which will partially solve the real problems when implementing PPP projects in Vietnam.
Decree 15 has some new and notably regulations as follows:
1. Decree 15 provides for forms of project contracts, including build – transfer contract (BT contract); build – transfer – lease contract (BTL contract) and build – lease – transfer contract (BLT contract). Thus, investors do not necessarily have to transfer the work to the State. They can choose different solutions depending on the requirements of the investors and fund lenders of the project.
2. Decree 15 clearly stipulates the form of investment and project classification that can apply the form of PPP. Besides the projects on physical infrastructure such as bridge, road, building…, the works on trade, science, technology, meteorological, economic zone, industrial park, tech park, information technology park; information technology application are also included in the list of projects that can apply the form of PPP.
3. Decree 15 also stipulates that the PPP projects will be classified according to national important projects, projects of groups A, B and C. Thanks to this, small projects will be approved more quickly. Accordingly, the project in group C will not have to carry out the procedures for investment registration issuance.
4. Decree 15 regulates that the state capital in the project implementation process will be used primarily to support the construction of auxiliary facilities, the organization of compensation, site clearance and resettlement. However, the decree does not specify the value of land use rights that have been included in the total cost of investment or not.
5. One of the conditions for the selection of projects is that projects must have a total investment of 20 billion VND or more (excluding O&M projects and a number of special projects). In addition, the project has the ability to recover capital from business activities will be prioritized.
6. In terms of the project proposal contents, beside the contents on project information, technical factors …, the contents on expected risk assessment in the course of project implementation and allocation of risk between the competent state agencies and investors should also be mentioned.
7. Decree 15 also provides for the time of project contracting. Accordingly, investors negotiate and sign off the contract project first, and then they will be granted the investment registration certificate. The final step is the signing of the project contract. Thus, the losses, changes or arising before contracting the project will arise legal consequences or not? This issue has not yet been answered.
8. In terms of the project contract contents, Decree 15 lists the necessary contents in a PPP contract and the necessary attached documents. In addition, the Decree also stipulates open so that ministries and provincial People’s Committees are allowed to propose a different form of contract with the form prescribed in Decree 15 to submit the Government for consideration and decision.
9. Decree 15 allows the transfer of rights and obligations under the project contract, or transfers a part or the whole project. This open opportunity to securitize the project, relieving nervous for donors or banks with the project finance issues, especially when investors are not qualified to continue to perform project.
10. Regarding the applicable law, Decree 15 allows the contracting parties may agree to the application of foreign laws to regulate the project contract in which one party is foreign investor or the contracts that are guaranteed by the Government for performance obligation. This is a major change and allowing the international financial consultants to involve deeply in the project.
11. Decree 15 provides for the obligation to guarantee the implementation of project contract, however, this matter will be resolved by the Law on Procurement. The issue of Government guarantee is not clearly defined and it was handed over to Ministry of Finance and Ministry of Justice to study.
12. For the project enterprise, after being granted the investment registration certificate, investors then establish the enterprises to implement projects that consistent with the objectives and scope of activities as agreed in the contract plan. The establishment of the project is implemented in accordance with the business law.
13. Decree 15 clearly stipulates the obligation to monitor the project contract implementation of investors, project business and competent state agencies. The specific allocation of responsibilities is necessary to ensure that the project is monitored to implement carefully. In terms of prices, cost of goods, services and revenue, Decree 15 respects the agreements of the parties in the project contracts and creates conditions for investors to recover capital and profit. This is an important basis for investors to negotiate the price with the supplier or the buyer of the state if there is any disadvantage binding to investors.
14. Decree 15 also specifies the time limit for project settlement. Accordingly, within 6 months from the completion day of the construction, the investor shall make final settlement of investment capital.
15. In terms of the mortgage of assets and the right to operate the project, Decree 15 specifies that investors and project business can mortgage the property, land use rights and the right to operate the project to the lenders under the provisions of the civil law and the law on land, provided that the mortgage term is not exceed the project contract period.
However, the mortgage term may exceed the project contract period if there is an agreement in the project contract. Regarding the form of mortgage agreement, the mortgage agreement of assets and the right to operate the project must be made in writing and signed by the lending party and the contracting parties of the project. Thus, the interests of the lending party to the project will somewhat be secured.
16. On the use of foreign currency in the project, Decree 15 stipulates the principle of ensuring the balance of foreign currency. Accordingly, investors and project enterprises can purchase foreign currency from credit institutions that are licensed to operate foreign exchange in order to meet the needs of current transactions, capital transactions and other transactions or transfer of capital, profits and proceeds from liquidation of foreign investments under the provisions of law on foreign exchange management.
17. On the issue of dispute resolution, Decree 15 classifies disputes into:
(i) Disputes between competent state agencies and investors or project enterprises and disputes between project enterprises and economic organizations participating in the project implementation;
(ii) Disputes between competent state agencies and foreign investors or project enterprises that established by foreign investors;
(iii) Disputes between the project enterprises and foreign organizations, individuals or economic organizations of Vietnam and disputes between investors.
Accordingly, the dispute settlement body corresponding to the above cases is the arbitration organization or the courts of Vietnam in accordance with the law of Vietnam; The arbitration or the Court of Vietnam or the arbitral tribunal are established upon agreement of the parties and are settled according to the provisions of the Investment Law. Disputes that are resolved by arbitration under the provisions of the project contract and related contracts are commercial disputes. The decision of foreign arbitration is recognized and enforced under the provisions of the law on recognition and enforcement of foreign arbitration decisions.
18. Decree 15 stipulates the responsibilities of the concerned ministries and agencies. In particular, the Ministry of Planning and Investment, in addition to other responsibilities, shall have to issue, modify and revoke the certificate of investment registration to projects under their jurisdiction; evaluate the State investment capital participating in the project within its jurisdiction; contribute opinion on issues within their functions and competence required by ministries, agencies and provincial People’s Committees. Ministry of Justice, in addition to other responsibilities, shall have to issue legal opinion to the project contract, guarantee document of the Government and the documents relating to the project signed by the state agencies.
19. As for the project contracts that are signed off before Decree 15 takes effect, they will not have to be renegotiated. Thus, the BT projects that are suspended previously can be redone.
To sum up, the changes in Decree 15 on PPP brought many positive signals to investors and sponsor banks. Many PPP projects are continuing to start, especially in the field of transport, showing that this will be the motivation to promote the development and proper management of infrastructure project.