Vietnam’s Bilateral Investment Treaties

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Op-Ed Commentary: Chris Devonshire-Ellis

Jul. 5 – Vietnam has been entering into bilateral investment treaties (BITs) with other countries since the early 1990s and continues to use such treaties today. Although many of these earlier treaties have now been superseded by more complicated and sophisticated trade agreements such as double taxation agreements (DTAs) and other bilateral mechanisms, BITs remain important for Vietnam and its trading partners, and particularly so for investors from emerging nations with relatively immature tax laws and regulatory environments. Vietnam’s BIT also serve to underpin the bilateral investment conditions between Vietnam and other developed and developing nations that have not yet negotiated DTA agreements with the country.

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Of the Indochinese nations, Vietnam has been the most active in upgrading its BIT agreements to more all-encompassing DTAs. By comparison, Cambodia currently has no DTAs in place, and Laos only two.

The purpose of a BIT between two countries is reciprocal encouragement, promotion and protection of investments in each other’s territories by companies based in either country. These treaties typically cover the following areas:

  • Scope and definition of investment;
  • Admission and establishment;
  • National treatment;
  • Most-favored-nation treatment;
  • Fair and equitable treatment;
  • Compensation in the event of expropriation or damage to the investment;
  • Guarantees of free transfers of funds; and
  • Dispute settlement mechanisms, both state-state and investor-state.

Vietnam has over 40 BITs in place, and continues to use them in its bilateral relationships. While the BIT signed between Vietnam and Italy was ratified way back in 1990, others still continue to be put into position. The BIT agreement between Vietnam and the United Arab Emirates, for example, was ratified in Abu Dhabi as recently as 2009.

While BIT agreements as a general rule of thumb may be now purely a matter of academic or historical interest among more developed nations with a wealth of DTA and other agreements under their belts, for some of the emerging nations such as Vietnam, BITs provide a useful starting mechanism for understanding the legal, tax and dispute resolution mechanisms for investors into the country. As such, BITs are a useful starting point to clarify legal and tax treatments under bilaterally agreed conditions and should be understood as a bilateral document of first resort when understanding the investment environment, and protection mechanisms that Vietnam offers its many trading partners.

These tend to be of particular importance for understanding the rights of companies investing from or into emerging markets throughout Asia, Africa, Latin America and the Middle East.

Vietnam has the following BITs in place:

Europe
Austria, Belarus, Belgium & Luxembourg, Bulgaria, Czech Republic, Denmark, Finland, France, Germany, Hungary, Italy, Latvia, Netherlands, Romania, Sweden, Switzerland and The United Kingdom

Americas
Argentina, Chile, Cuba and Venezuela

Middle East
Egypt and the UAE

Asia & Oceania
Australia, Cambodia, China, Indonesia, Japan, Malaysia, Singapore, South Korea, Tajikistan and Thailand

These documents may be downloaded in full, on a complimentary basis, from the Dezan Shira & Associates Online Resource Library.

Over the past few years, Dezan Shira & Associates has handled clients from numerous nations that have invested into the country. Many of these smaller, or still-emerging economies rely on their BIT agreements with Vietnam as the framework document to protect their investments into the country. For businesses from these nations, and especially from still emerging markets, these documents are a crucial part of understanding bilateral relationships and the protection they provide for investing in Vietnam.

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Chris Devonshire-Ellis is the founding partner of Dezan Shira & Associates. Established in 1992, the firm provides foreign direct investment advice into Asia on behalf of companies around the world, including SMEs from emerging markets within Africa, the Middle East, Latin America and emerging Asia. Please email asia@dezshira.com for assistance or visit the firm’s website at www.dezshira.com for more information.

ASEAN Briefing contains details of double tax agreements, free trade agreements, and bilateral investment treaties between ASEAN, its members, and other countries around the world. ASEAN Briefing is a library source for researching tax and trade treaties, and is an essential guide for cross border tax planning. The site also includes news and treaty updates on ASEAN, China, India, the United States and Europe.