By Lawyer Luu Thi Hue – UniLaw LLC

Foreign Investment in Vietnam

The Sovereign Shield and Investor Accountability: Lessons from the Landmark ICSID Dispute

The landscape of Foreign Investment in Vietnam is not merely governed by statutes but is profoundly shaped by the enforcement of international treaties and arbitral awards. A definitive case illustrating the complexities of Vietnam investment law involves a dispute between Mr. Shin Dong B, a South Korean investor, and the Government of the Socialist Republic of Vietnam. Mr. Shin, who held a 49% stake in a Vietnamese logistics entity (Company TA), initiated an investment arbitration under the International Centre for Settlement of Investment Disputes (ICSID) Additional Facility Rules, invoking the Vietnam-South Korea Bilateral Investment Treaty (BIT),. The dispute, centered on the construction of a warehouse project, culminated in a final award issued on October 29, 2020, by an arbitral tribunal seated in Singapore,.

In a rare victory for the state, the ICSID tribunal declared the Government of Vietnam the “winning party,” dismissing all of the investor’s substantive claims. Furthermore, the tribunal ordered Mr. Shin to reimburse the Government for 75% of the arbitration costs and 75% of its legal fees, totaling approximately 1.9 million USD. When the Vietnamese authorities (represented by the Ho Chi Minh City People’s Committee) sought the recognition and enforcement of this cost award within Vietnam, Mr. Shin and Company TA filed an appeal,. They argued that the tribunal was not independent or impartial, citing undisclosed past relationships between the arbitrators and the Vietnamese government’s legal counsel, as well as ties to international law firms in Vietnam that had advised the state in other matters.

The Ho Chi Minh City High People’s Court, in its Decision No. 40/2024/QĐ-PT, ultimately rejected the investor’s appeal,. The court ruled that the investor failed to provide legally valid evidence of bias and that the recognition of the award did not violate the fundamental principles of Vietnamese law,. Consequently, the court recognized and allowed the enforcement of the ICSID award in Vietnam. This case serves as a stern reminder to global investors that while Vietnam investment law protects their rights, it also provides the state with mechanisms to hold investors accountable for the costs of meritless claims,.

Navigating the Gateway: Determining Your Status under Vietnam Investment Law

Before deploying capital, it is imperative for any vietnam investment lawyer to clarify the legal status of the client. The distinction between domestic and foreign entities determines the entire procedural roadmap,.

Article 3. Interpretation of terms
…
18. Investment project means a set of proposals for medium-term or long-term capital investment to conduct business investment activities in a specific area and for a determined period of time.
…
19. Foreign investor means an individual with foreign nationality or an organization established under foreign law that conducts business investment activities in Vietnam.
20. Domestic investor means an individual with Vietnamese nationality or a business organization that does not have any foreign investor as a member or shareholder.

Unilaw lawyer notes: This definition is the cornerstone of your entry strategy. If you are an individual holding a foreign passport or a company incorporated abroad, you are legally classified as a foreign investor, regardless of your ethnicity or origins.

In our practice at Unilaw, a foreign law firm in Vietnam, we frequently encounter cases involving “Dual Nationality” investors. For instance, a client who is a Vietnamese citizen but also holds foreign citizenship must choose whether to apply market access conditions as a domestic or foreign investor.

Article 16. Entities to which the List of industries and trades with restricted market access is applied
…
2. For business investment activities conducted in Vietnam, an investor who is a Vietnamese citizen and concurrently has a foreign nationality has the right to choose to apply market access conditions and investment procedures as applied to domestic investors or foreign investors.

Unilaw lawyer notes: If you choose the domestic route, you may bypass certain foreign ownership limits but must waive all rights and benefits specifically granted to foreign investors under international treaties.

Establishing a Commercial Presence: Forms of Investment and the Licensing Blueprint

When seeking legal service in vietnam, the first question is usually: “How should I structure my business?”. The Law on Investment offers several pathways.

Article 21. Forms of investment
1. Investment in the establishment of a business organization.
2. Investment in capital contribution, purchase of shares or capital contributions.
3. Implementation of an investment project.
4. Investment under a business cooperation contract (BCC).
5. New forms of investment and types of business organizations as prescribed by the Government.

Unilaw lawyer notes: Most investors prefer establishing a new company (subsidiary) or acquiring an existing one. A BCC is useful for short-term projects where you don’t want to create a new legal entity,.

For a new establishment, the process typically involves two major steps: obtaining an Investment Registration Certificate (IRC) and then an Enterprise Registration Certificate (ERC),.

Article 22. Investment in the establishment of a business organization
…
1. c) Before establishing a business organization, a foreign investor must have an investment project and perform the procedures for the issuance or adjustment of an Investment Registration Certificate…

Unilaw lawyer notes: Unlike domestic companies that only need an ERC, foreign-invested enterprises (FIEs) must first have their project’s objectives, location, and scale approved via the IRC,.

In a client case handled by Unilaw (Memo: 2010_Agvn_1), a German trade company initially considered a 100% foreign-owned entity but eventually opted for a Joint Venture (JV) with a Vietnamese individual. This structure allowed them to leverage local market expertise while owning 49% of the charter capital. Our role as an international law firm in Vietnam was to ensure that the JV’s charter and internal voting mechanisms protected the foreign partner’s interests, even as a minority holder,.

The Compass of Compliance: Prohibited and Conditional Sectors

Vietnam is a signatory to the WTO and various FTAs, yet it maintains “negative lists” to protect national security and social stability,.

Article 6. Prohibited investment business lines
1. Prohibited investment business activities include:
a) Trade in narcotic substances…;
b) Trade in various chemicals and minerals…;
c) Trade in specimens of wild flora and fauna…;
d) Prostitution…;
e) Human trafficking; trade in human tissues, corpses, human body parts, human fetuses…;
f) Business activities related to human cloning…;
g) Trade in firecrackers…;
h) Trade in debt collection services.

Unilaw lawyer notes: These are “hard stops.” No entity, domestic or foreign, can operate in these sectors. Notably, debt collection was recently moved from “conditional” to “prohibited”.

Beyond prohibitions, foreign investors must navigate “Market Access Conditions”.

Article 9. Industries, trades and market access conditions for foreign investors
…
3. Market access conditions for foreign investors… include:
a) Ratio of ownership of charter capital by foreign investors in a business organization;
b) Form of investment;
c) Scope of investment business activities;
d) Capacity of the investor; partners participating in the implementation of investment activities;

Unilaw lawyer notes: Even if a sector is open, there might be a cap on how much equity you can own (e.g., 51% in film production or 49% in maritime transport),.

For example, in a legal service in vietnam case for a Thai investor (Memo: 080 Mannequin), the client wanted to manufacture mannequins in Hung Yen. Since this fell under general manufacturing, it was relatively straightforward. However, for a different client entering the “Specialized Technical Consulting” field (CPC 8672), we had to verify that the parent company had over 5 years of experience to meet the “capacity” requirement often scrutinized by the Ministry of Industry and Trade,.

Safeguarding Your Assets: Guarantees against Nationalization and the Right to Repatriate

A primary concern for any global investor is the security of their capital. Vietnam investment law provides robust statutory guarantees,.

Article 10. Guarantee of property ownership
1. Lawful assets of investors shall not be nationalized or confiscated by administrative measures.
2. In cases where the State purchases or requisitions assets for reasons of national defense or security… the investor shall be paid or compensated in accordance with the law…

Unilaw lawyer notes: This is your primary defense against arbitrary state interference. Lawful assets are protected by the Constitution and this Law.

Equally important is the ability to send profits back home.

Article 12. Guarantee of the right to transfer assets of foreign investors abroad
After performing all financial obligations to the State of Vietnam in accordance with the law, foreign investors may transfer the following assets abroad:
1. Investment capital and liquidated investment amounts;
2. Income from business investment activities;
3. Money and other assets under the lawful ownership of the investor.

Unilaw lawyer notes: “After performing all financial obligations” is the key phrase. This means you must have cleared all taxes (TNDN, VAT) and obtained a clearance from the tax authority before the bank will process the remittance,.

In a case involving an Italian logistics group (Memo: 2012_Nidec), the client needed to transfer 60% of their equity to a Japanese group. Unilaw advised on the tax implications—specifically the 20% capital gains tax—and ensured that the profit transfer was compliant with the State Bank of Vietnam’s foreign exchange regulations,.

The M&A Route: Acquiring Stake in Local Enterprises

Many investors bypass the greenfield IRC process by purchasing shares in local companies. This is often faster but requires careful due diligence.

Article 24. Investment in the form of capital contribution, purchase of shares or capital contributions
1. Investors have the right to contribute capital, purchase shares or capital contributions of business organizations.
2. The capital contribution, purchase of shares or capital contributions by a foreign investor… must meet the following regulations and conditions:
a) Market access conditions…;
b) Assurance of national defense and security…;

Unilaw lawyer notes: You don’t always need an IRC for this. If you are buying less than 50% of a company in a non-sensitive sector, you might only need to update the ERC,.

However, if the acquisition leads to the foreign side owning more than 50%, or if the company is in a conditional sector, you must perform an “M&A Clearance” (Registration of capital contribution) with the Department of Planning and Investment (DPI),.

Unilaw recently assisted a major Korean electronics supplier in an M&A deal (Memo: 2018_Ty_1). The transaction involved complex valuation of “assets on land” and the transfer of land lease rights in an industrial zone,. We had to resolve a conflict where the local seller had not fully paid the infrastructure fees, which could have encumbered the foreign buyer’s title,.

Real Estate and Land Use: FDI Rights in a Socialized System

In Vietnam, land belongs to the people and is managed by the state. Investors do not “own” land; they hold “Land Use Rights” (LURs).

Article 42. Rights and obligations of foreign-invested business organizations using land received as capital contribution
…
1. A foreign-invested business organization that receives capital contribution in the form of land use rights… shall have the rights and obligations prescribed in Clause 3, Article 41 of this Law.

Unilaw lawyer notes: Foreign-invested enterprises can lease land from the state, or from industrial zone developers, or receive LURs as capital contribution from a Vietnamese partner,.

In a case involving an Australian education group (Memo: ITT Global), the client wanted to establish a school in Hanoi. The legal hurdle was ensuring the land lease was long enough to justify the significant investment in school facilities. Vietnam investment law allows for a project duration of up to 50 years (or 70 years in special cases), and the land lease must match this duration,.

Post-Investment Vigilance: Compliance and Reporting Duties

Getting the license is only the beginning. Maintaining it requires strict adherence to reporting cycles,.

Article 72. Reporting on investment activities in Vietnam
…
2. Business organizations implementing investment projects shall perform the following reporting regimes:
a) Quarterly reports: before the 10th of the first month of the following quarter…;
b) Annual reports: before March 31 of the following year…

Unilaw lawyer notes: Failure to report on the “fdi.gov.vn” system can lead to administrative fines and, more critically, may hinder your ability to adjust your license or repatriate profits in the future,.

For one of our clients, a French inspection firm, we manage their monthly and quarterly reporting for five different branches across Vietnam,. This includes reporting on capital contribution progress, labor usage, and environmental protection compliance,.

Dispute Resolution: Choosing the Right Forum

When things go wrong, the choice of forum is critical.

Article 14. Settlement of disputes in business investment activities
1. Disputes related to business investment activities in Vietnam shall be settled through negotiation and mediation.
…
3. Disputes between investors in which at least one party is a foreign investor… shall be settled through one of the following agencies or organizations:
a) Vietnamese Court;
b) Vietnamese Arbitration;
c) Foreign Arbitration;
d) International Arbitration;

Unilaw lawyer notes: While you can choose foreign arbitration (like SIAC in Singapore), the award must still be “recognized” by a Vietnamese court to be enforced against assets inside Vietnam,.

In a recent dispute involving an Israeli tech firm (Memo: 2012_Jetview), the shareholders had a falling out over the valuation of “pledged shares”. Since the dispute involved real estate located in Vietnam, the Vietnamese court claimed “exclusive jurisdiction” over certain aspects of the case, highlighting the need for an international law firm in Vietnam to harmonize local court procedures with international contractual agreements.

Investment Incentives: Strategic Opportunities in High-Tech and Underdeveloped Regions

Vietnam offers significant “carrots” to attract quality investment.

Article 15. Forms and subjects of investment incentives
1. Forms of investment incentives include:
a) Corporate income tax incentives…;
b) Exemption from import tax on goods imported to create fixed assets…;
c) Exemption from or reduction of land use fees, land rent…;
d) Accelerated depreciation…

Unilaw lawyer notes: Incentives are not automatic. They must be specified in your IRC or applied for during the tax declaration process,.

A notable recent amendment (Source) provides Special Investment Incentives for strategic projects, such as R&D centers or semiconductor manufacturing, with a total investment capital of 30,000 billion VND or more. For such projects, the government may offer land rent exemptions for decades and ultra-low tax rates.

For a German gypsum manufacturer (Memo: Knauf), Unilaw helped secure a 15-year preferential tax rate of 10% because they located their factory in the Dinh Vu – Cat Hai Economic Zone in Hai Phong. This tax holiday was a decisive factor in their multi-million dollar investment decision.

The Road Ahead: 2025 and Beyond

Vietnam continues to modernize its legal framework. The Law No. 90/2025/QH15 (Source) introduced significant changes to streamline procurement and tax laws to better integrate with global supply chains. For the foreign investor, the key to success remains the same: thorough pre-investment research, meticulous licensing preparation, and unwavering commitment to post-licensing compliance.

Whether you are a startup from Singapore or a conglomerate from the EU, the legal service in vietnam provided by experienced practitioners can be the difference between a stalled project and a thriving enterprise,. At Unilaw, your vietnam investment lawyer acts not just as a legal advisor, but as a strategic partner in navigating one of the world’s most dynamic emerging markets,.