The EVIPA Ensures Investment Protection and Alternative Dispute Resolution for EU Investors in Vietnam

In February, the European Parliament ratified the Free Trade Agreement (EVFTA) and the Investment Protection Agreement (EVIPA) between the European Union (EU) and Vietnam, coupled with the National Assembly of Vietnam subsequently ratifying the EVFTA and EVIPA at their May 2020 meeting.

While the most discussed Agreement is by far the EVFTA, which not only eliminates over 99% of customs duties on goods, but also opens up the Vietnamese service markets to EU companies, the EVIPA has not received its much deserved public attention despite containing reformed investment protection rules that guarantee that EU investors will enjoy the best available treatment when investing in Vietnam & opening up trade, which in turn will drive prosperity by deepening economic ties between business, consumers, workers and citizens across the globe. It also seeks to bridge differences between social and environmental standards and conditions in the EU and its trading partners. Following the EU’s commitment, the National Assembly also approved the revised Labor Code in November 2019 and acceded to the International Labor Organization Convention (ILO) Convention in June 2019.

New precise standards on investment protection introduced are basic guarantees that governments will respect certain fundamental principles of treatment. Among others, these guarantees include non-discrimination, no expropriation without prompt and adequate compensation and the possibility to transfer and repatriate funds relating to an investment.

The EVIPA defines precisely when governments are in breach of the fair and equitable treatment obligation and removes the scope for discretionary interpretation. Such cases may be observed when justice in criminal, civil or administrative proceedings is denied or parties are seriously in breach of due process in judicial and administrative rulings.

Vietnam and the EU have agreed on a modern and reformed investment dispute resolution mechanism by establishing The Investment Tribunal System, a permanent tribunal which will decide on disputes in respect to the investment protection provisions included in the EVIPA (such as protection against expropriation without compensation, non-discrimination or fair and equitable treatment).

The Members of the Tribunal System will be appointed in advance by the EU and Vietnam. Cases will be heard by divisions of the tribunal which will be composed of 3 Members, one from the EU, one from Vietnam, and a presiding Member from a third country. Decisions of the Tribunal can be appealed to a permanent Appeal Tribunal which will ensure legal correctness and certainty in regards to the interpretation of the agreement.

All Members of the Tribunal and Appeal Tribunal will be appointed through a joint decision taken together by the EU and Vietnam. The Members shall be independent beyond any doubt, not affiliated with any government and must have demonstrated expertise in public international law and must possess the qualifications required in their respective countries for appointment to judicial offices or be jurists of recognized competence. If particular technical knowledge is required for an individual dispute, the agreement also foresees the possibility to appoint one or more experts to the Tribunal.

The legal grounds for non-enforceability are included into the grounds for appeal. A final award must be enforced and domestic courts cannot put into question the legal validity of the decisions. This represents an important advantage for European investors abroad. Vietnam will be granted a five-year transition period for the entry into force of the enhanced enforcement regime as Vietnam is currently revising its internal legislation in this respect

The recently adopted United Nations Commission on International Trade Law (UNCITRAL) rules on transparency will apply to all proceedings. Proceedings before the Tribunal System will be fully transparent and interested third parties will be allowed to make submissions even if they are not recognized as a party to the dispute.

While the investment dispute resolution mechanism ensures that the rights of European and Vietnamese investors will be respected, it also safeguards the EU and Vietnam against potential abuses of the system, notably through the prohibition of multiple and parallel claims, as well as enhanced disclosure requirements incumbent upon investors.