By Lawyer Luu Thi Hue – UniLaw LLC

VIETNAM STOCK MARKET 2022 – UNILAW’S PERSPECTIVE

The year 2022 was a landmark period for the Vietnamese economy, particularly as it navigated the post-pandemic recovery phase while grappling with global financial fluctuations. For international investors, “fdi vietnam” remained a beacon of growth in Southeast Asia. To understand the intricacies of Foreign Investment in Vietnam and the securities market, we must examine the intersection of international arbitration, domestic legislation, and the practical challenges faced by major multinational corporations. We begin with a significant case that redefined the enforcement of foreign arbitral awards in the country, a crucial factor for anyone investing việt nam.

Enforcement of International Arbitration: The Landmark Sojitz P vs. Company R Case

In the realm of high-stakes corporate disputes, the case between Sojitz P (a Japanese corporation) and Company R (a Vietnamese joint-stock company) serves as a vital lesson in the protection of fdi to vietnam. The dispute originated from a Share Purchase Agreement (SPA) signed on September 8, 2017. Under this agreement, Sojitz P purchased 5,000,000 ordinary shares in Company R Long An from the parent company, Company R, for a total purchase price of 174,375,000,000 VND. Following the transfer, Company R was alleged to have breached several post-closing conditions explicitly stipulated in the SPA.

Invoking Article 5.5.3 of the SPA, Sojitz P exercised its right to terminate the contract and demanded an immediate refund of 90% of the paid purchase price, amounting to approximately 156,937,500,000 VND. When Company R refused to comply, the Japanese investor initiated arbitration proceedings at the Singapore International Arbitration Centre (SIAC). On July 6, 2022, the SIAC Arbitral Tribunal issued Award No. 090, ruling in favor of Sojitz P. The tribunal declared the termination legal, identified the breach by Company R, and ordered the Vietnamese party to pay the principal sum plus 10% annual interest from April 1, 2020, along with substantial administrative and legal fees.

However, the battle did not end in Singapore. To recover its funds, Sojitz P sought recognition and enforcement of the award in Vietnam. Initially, the People’s Court of Ho Chi Minh City, in its first-instance decision (Case No. 42/2023/KDTM-ST), refused recognition. The lower court argued that the tribunal had failed to properly apply Vietnamese law—specifically the Law on Commerce 2005—despite the contract’s choice of law clause, and had ignored the “potential debt” concept which was unfamiliar to the local legal system.

Sojitz P and the Procuracy appealed this decision. On August 24, 2023, the High People’s Court in Ho Chi Minh City issued Decision No. 95/2023/KDTM-PT, which overturned the lower court’s ruling. The High Court emphasized that the arbitral award was final, valid, and that the tribunal’s interpretation did not violate the “fundamental principles of Vietnamese law”. Both Singapore and Vietnam are members of the New York Convention 1958, and thus, the court recognized and allowed the enforcement of the award. This victory for the Japanese investor significantly bolstered confidence for those investing việt nam, proving that the Vietnamese judicial system ultimately upholds international commitments and protects foreign capital.

The Foundations of the Law on Investment 2020 and FDI Vietnam

The legal backbone for all “fdi vietnam” activities is the Law on Investment 2020. This law governs how foreign capital enters the country and how domestic entities can expand abroad. To navigate the market effectively, one must first master the fundamental definitions provided by the legislature.

Article 3. Definitions

In this Law, the following terms are construed as follows:

… 15. Approval of investment policy means a competent State agency’s approval of the objectives, location, scale, progress, and duration of project implementation; the investor or the form of investor selection and special mechanisms and policies (if any) to implement an investment project.

16. Investment registration agency means a State agency competent to grant, adjust, and revoke Investment Registration Certificates.

… 18. Investment project means a set of proposals to spend medium-term or long-term capital to carry out business investment activities in a specific geographical area and for a determined period of time.

… 22. Business investment means an investor spending investment capital to carry out business activities.

… 25. Investment Registration Certificate means a paper or electronic document recording information registered by an investor about an investment project…

Layman’s Explanation: This article sets the “rules of the game” by defining exactly what constitutes an investment project and which government bodies have the power to approve your business plans. Essentially, it confirms that your “Investment Registration Certificate” (IRC) is your official “license” to operate as a foreign entity in Vietnam.

Article 3. Definitions (Continued)

… 32. Investor means an organization or individual that carries out business investment activities, including domestic investors, foreign investors, and foreign-invested economic organizations.

33. Foreign investor means an individual with foreign nationality or an organization established under foreign law that carries out business investment activities in Vietnam.

34. Domestic investor means an individual with Vietnamese nationality or an economic organization that does not have a foreign investor as a member or shareholder.

… 36. Foreign-invested economic organization means an economic organization that has a foreign investor as a member or shareholder…

Layman’s Explanation: This is a critical distinction for the stock market. If a company has even a single foreign shareholder, it is legally classified as a “foreign-invested economic organization,” which may trigger different regulatory requirements compared to purely domestic firms.

Choosing the Right Vehicle: Forms of Foreign Investment in Vietnam

Investors looking at Foreign Investment in Vietnam have several pathways to enter the market. The Law on Investment 2020 provides a flexible menu of options depending on the desired level of control and the nature of the industry.

Article 21. Forms of investment

1. Investment in the establishment of an economic organization.

2. Investment in capital contribution, purchase of shares, or purchase of capital contributions.

3. Implementation of an investment project.

4. Investment in the form of a Business Cooperation Contract (BCC).

5. New forms of investment and types of economic organizations as prescribed by the Government.

Layman’s Explanation: You don’t always have to start a brand-new company from scratch. You can simply buy shares in an existing Vietnamese firm (M&A) or sign a contract to work together on a project (BCC) without creating a new legal entity.

For those establishing a new entity, Article 22 provides the framework:

Article 22. Investment in the establishment of an economic organization

1. An investor shall establish an economic organization in accordance with the following regulations:

a) A domestic investor shall establish an economic organization in accordance with the law on enterprises and the law corresponding to each type of economic organization.

b) A foreign investor establishing an economic organization must satisfy market access conditions for foreign investors as prescribed in Article 9 of this Law.

c) Before establishing an economic organization, a foreign investor must have an investment project and perform the procedures for the grant or adjustment of an Investment Registration Certificate, except for the establishment of small and medium-sized innovative start-ups and innovative start-up investment funds as prescribed by the law on support for small and medium-sized enterprises…

Layman’s Explanation: Unlike locals, foreign investors generally need an “Investment Project” first. This means you must have a concrete business plan and get your Project Certificate (IRC) before you can get your Company Business License (ERC).

Strategic M&A: Capital Contributions and Share Purchases

In 2022, M&A activities were a primary driver for “invest to vietnam”. This route allows rapid market entry by acquiring established local players. However, this process is governed by strict rules regarding ownership limits and security clearances.

Article 24. Investment in the form of capital contribution, purchase of shares, or purchase of capital contributions

1. Investors have the right to contribute capital, purchase shares, or purchase capital contributions of economic organizations.

2. Foreign investors contributing capital, purchasing shares, or purchasing capital contributions of economic organizations must satisfy the conditions and perform procedures for changing members or shareholders in accordance with the law corresponding to each type of economic organization.

Layman’s Explanation: Foreigners can buy into Vietnamese companies, but they must follow the specific rules for either a “Limited Liability Company” (LLC) or a “Joint Stock Company” (JSC).

Crucially, some M&A transactions require prior approval from the Investment Registration Agency. This is outlined in Article 26 (referenced in):

Article 26. Procedures for investment in the form of capital contribution, purchase of shares, or purchase of capital contributions

1. A foreign investor shall perform the procedures for registration of capital contribution, purchase of shares, or purchase of capital contributions of an economic organization before changing members or shareholders if they fall into one of the following cases:

a) The capital contribution, purchase of shares, or purchase of capital contributions increases the ownership ratio of foreign investors in an economic organization business in a conditional market access industry for foreign investors.

b) The transaction results in foreign investors… holding more than 50% of the charter capital of the economic organization….

c) The foreign investor contributes capital… to an economic organization that has a Certificate of Land Use Rights in islands, border communes, wards, or towns; coastal communes, wards, or towns; or other areas affecting national defense and security.

Layman’s Explanation: If you are buying more than 50% of a company, or if that company owns land in a sensitive area (like near the coast or a border), you must get official permission *before* the deal is finalized. Unilaw often handles these “M&A Clearances” to ensure the transaction is legally bulletproof.

Anonymized Case Study: In 2012, a Japanese entity (Nidec Nissin) restructured its ownership, transferring 60% of its capital to another Japanese entity (Nidec Sankyo). Unilaw facilitated the adjustment of the IRC and the amendment of the company’s name to reflect the new ownership structure, ensuring compliance with the Law on Investment 2005 (the predecessor to the current law).

WTO Commitments: The Global Standard for Investing Việt Nam

Vietnam’s accession to the WTO in 2007 established a roadmap for market liberalization. For service sectors, the “Schedule of Specific Commitments in Services” is the ultimate reference for determining how much foreign ownership is allowed.

Horizontal Commitments on Commercial Presence (Mode 3)

Unless otherwise specified in each specific sector… foreign enterprises are allowed to establish commercial presence in Viet Nam in the form of a business cooperation contract, joint venture enterprise, or 100% foreign-invested enterprise.

Layman’s Explanation: By default, most industries are open to 100% foreign ownership. However, if a specific sector says “Joint Venture required,” you must find a Vietnamese partner.

One of the most complex areas is the ownership limit in Vietnamese joint-stock companies. The WTO schedule notes:

Foreign service suppliers are permitted to make capital contribution in the form of buying shares of Viet Nam’s enterprises. In this case, the total equity held by foreign investors in each enterprise may not exceed 30% of the enterprise’s chartered capital unless otherwise provided by Viet Nam’s laws… One year after accession, the 30% foreign equity limitation… shall be eliminated, except for… joint-stock commercial banks, and except for the sectors not committed in this Schedule.

Layman’s Explanation: While the general 30% cap was lifted for most industries in 2008, the banking sector still maintains a strict 30% limit for aggregate foreign ownership. For sectors not mentioned in the WTO list (like publishing), the government can set the limit as low as 0%.

Sector-Specific Analysis: Opportunities and Constraints

1. Financial and Banking Services

Banking remains one of the most protected yet lucrative sectors. The entry of foreign banks is strictly regulated to ensure systemic stability.

One of the key conditions for establishing a branch of a foreign commercial bank in Viet Nam is that the parent bank should have total assets of more than US \$20 billion at the end of the year prior to application. For a 100% foreign-owned bank or a joint-venture bank, the parent bank must have assets exceeding US \$10 billion.

Layman’s Explanation: Vietnam only wants “big players” in the banking sector. You need a massive global balance sheet just to apply for a banking license here.

2. Insurance Services

The insurance market has seen significant liberalization. According to the WTO schedule, 100% foreign-invested insurance enterprises are now permitted, although they were initially restricted from certain statutory businesses like motor vehicle third-party liability. These limitations were largely abolished by 2008. Direct branching for foreign non-life insurance companies was permitted after five years from accession.

Layman’s Explanation: Foreign insurance companies can now own 100% of their Vietnamese subsidiaries and compete directly with local firms in almost all types of insurance.

3. Distribution and Retail (The ENT Rule)

Retail is a sensitive sector. While foreign investors can open their first retail outlet relatively easily, opening a second one is much harder.

The establishment of retail outlets (beyond the first one) shall be allowed on the basis of an Economic Needs Test (ENT). The main criteria… include the number of existing service suppliers in a particular geographic area, the stability of market and geographic scale.

Layman’s Explanation: If you want to open a chain of stores, the government will check if there are already too many shops in that neighborhood. This “Economic Needs Test” is often used to protect small local family businesses from giant international retailers.

4. Logistics and Transport Services

Logistics is a key pillar of fdi vietnam. For “Freight transportation by road,” the foreign ownership limit is generally 49% through a joint venture, which could potentially increase to 51% based on market needs. Interestingly, 100% of the drivers in such joint ventures must be Vietnamese citizens.

Anonymized Case Study: In 2012, a global logistics giant (Cargo-Partner) sought to establish a presence in Vietnam. Unilaw assisted the Austrian and Vietnamese investors in navigating the complex regulatory requirements of the Department of Planning and Investment (DPI) and the Ministry of Industry and Trade (MOIT), particularly regarding the “legal status” of warehouse facilities in Ho Chi Minh City.

Corporate Governance Challenges for Majority Shareholders

A significant concern for those investing việt nam is the ability to control their investment. Under the old Law on Enterprises 2005, certain fundamental decisions required a 65% or 75% majority, which stripped power from shareholders holding only a 51% “majority” stake.

To address this, the Vietnamese government clarified during WTO negotiations:

Investors establishing a commercial presence as a joint-venture… would have the right to establish, through the enterprise’s Charter, all the types of decisions that had to be submitted to the Members’ Council or Shareholders’ Meeting for approval… including a simple majority of 51%.

Layman’s Explanation: This is a “golden rule” for JVs. Even if the standard law says you need 75% to change the company’s direction, you can write into your own company “contract” (the Charter) that 51% is enough. This ensures the majority owner actually has control.

Prohibited and Conditional Investment Sectors

Not every industry is open for business. The Law on Investment 2020 clearly outlines “no-go” zones to protect public health and national security.

Article 6. Prohibited business investment industries

1. The following business investment activities are prohibited:

a) Trading in narcotics…

b) Trading in chemicals and minerals…

c) Trading in specimens of wild flora and fauna…

d) Prostitution…

e) Human trafficking; trading in human tissues, corpses, body parts, or fetuses…

f) Business activities related to human cloning…

g) Trading in firecrackers…

h) Debt collection services…

Layman’s Explanation: Some things are obviously illegal everywhere (narcotics), but investors should note that “Debt Collection Services” were newly banned in 2020 to prevent social disorder.

For sectors that are allowed but restricted, we look at Article 7:

Article 7. Conditional business investment industries

1. Conditional business investment industries are industries in which the implementation of business investment activities must satisfy necessary conditions for reasons of national defense, national security, social order and safety, social ethics, and community health.

Layman’s Explanation: If you want to invest in healthcare, education, or defense equipment, you must meet extra requirements (like minimum capital or specific professional certificates) before you can start.

Dispute Resolution: Protecting Your Assets

Effective dispute resolution is the “safety net” for Foreign Investment in Vietnam. Article 14 of the Law on Investment 2020 provides the framework:

Article 14. Resolution of disputes in business investment activities

1. Disputes related to business investment activities in Vietnam shall be resolved through negotiation and mediation. In case of failure… the dispute shall be resolved at Arbitration or the Court….

… 3. Disputes between investors in which at least one party is a foreign investor… shall be resolved through one of the following agencies/organizations:

a) Vietnamese Court;

b) Vietnamese Arbitration;

c) Foreign Arbitration;

d) International Arbitration;

e) Arbitration established by agreement of the disputing parties.

Layman’s Explanation: Foreign investors have a major advantage: they can choose to settle their fights in international hubs like Singapore or London, and the Vietnamese courts are legally bound to recognize those decisions (as seen in the Sojitz case).

Future Outlook: Law No. 90/2025/QH15 and Special Economic Zones

Looking ahead, the legal landscape continues to evolve. Law No. 90/2025/QH15, effective July 1, 2025, amends several key statutes including the Law on Investment and Law on Tendering. This law aims to streamline procedures further, particularly for “strategic technology” projects.

Furthermore, the government is piloting International Financial Centers in Ho Chi Minh City and Da Nang. Members of these centers will enjoy special privileges:

Members… have the right to establish capital management companies (holding companies) to mobilize capital from abroad… and shall be entitled to freely carry out investment and business activities with organizations and individuals outside the territory of Viet Nam….

Layman’s Explanation: Vietnam is trying to create its own “mini-Hong Kongs” where the rules for moving money in and out are much easier. This will likely be the next big wave for the Vietnam Stock Market.

Conclusion: The Unilaw Advantage

Navigating the “Vietnam Stock Market 2022” and the broader landscape of “fdi to vietnam” requires more than just capital; it requires a deep understanding of the evolving legal “gray areas.” Whether it is the nuance of an “Economic Needs Test,” the protection of a 51% majority in a JV Charter, or the enforcement of an international arbitral award, the details matter.

Unilaw has a proven track record of facilitating these complex transitions. From helping German investors enter the real estate market to assisting Indian entrepreneurs in establishing export businesses, our firm provides the strategic counsel necessary to turn Foreign Investment in Vietnam into long-term success. As the legal framework moves toward 2025 and beyond, staying informed and legally compliant is the only way to safeguard your global interests in this dynamic market.