5th Annual Asia-Pacific Law Leaders Forum

5th Annual Asia-Pacific Law Leaders Forum

03 – 04 March 2016, 9:15 – 15:20

Maxwell Chambers, Singapore

On 3 – 4 March 2016, the conference “5th Annual Asia-Pacific Law Leaders Forum” will be held in Maxwell Chambers, Singapore with participations of leading lawyers across the region. The conference promises lively debate about recent enforcement developments and ongoing challenges in the region, as well as informative presentations by senior government regulators and expert in-house and outside counsel.

Dr Nguyen Anh Tuan, Partner, head of Competition practice at LNT & Partners will speak at the conference in the “Discussion on competition law in practice in the ASEAN region from practitioners’ perspective” session.

For more information and registration, please visit the official website

Click here for conference’s agenda: Conference schedule 2016.

 Vietnam Law Insight

Asian Competition Forum 11th Annual Conference – Vietnam Law Insight

Asian Competition Forum 11th Annual Conference – Due Process and Transparency in Competition Law in Asia

30 November 2015 – 01 December 2015, 9:00 am5:00 pm (Save to cal)

Due Process and Transparency in Competition Law in Asia

This year’s ACF conference will look closely at issues of due process and transparency across competition regimes, a topic of substantial interest worldwide.

The Hong Kong Competition Ordinance coming into effect shortly after the conference takes place and, in addition, the recent passing of the Philippine Competition Act naturally raises questions as to due process and transparency in competition regulation in the Asian region. Furthermore, the business sector has consistently raised its concerns as to regulatory transparency in competition law. We will explore these issues and more at this year’s conference with a range of distinguished speakers including legal practitioners, economic experts and competition academics.

This year ACF is delighted to announce that The Honourable Chief Justice Robert Shenton French of the High Court of Australia will be our keynote speaker, drawing on his longstanding expertise to provide us with insight into the role of courts in competition law.

Dr Nguyen Anh Tuan, Partner, head of Competition practice at LNT & Partners will speak at the conference in the “Transparency and Due Process in Selected ASEAN Countries” session with a presentation  on “Comments from a Practical Perspective: Towards Procedural Transparency and Fairness in Vietnam’s Competition Regime”.

For more information and registration, please visit the official website. 

Registration for Delegates

Click here for conference’s agenda: Conference schedule 2015

 Vietnam Law Insight

 

Understanding State-Owned Enterprises in China and Vietnam

In April 2015, leading lawyers, academics, and policy-makers will come together at the historic Fairmont Empress Hotel in Victoria, British Columbia, Canada, for an in-depth look at recent legal developments in Asia and their relevance to the Americas.

The inaugural Asia Desk Forum will provide a unique opportunity for private and public sector lawyers with an Asian dimension to the practice to extend and deepen their knowledge of cutting-edge legal issues through a series of workshops, panels, and lectures, led by those who know Asia best.

Asia Desk Forum

source: Asia Desk Forum

The Forum will consist of an Asian Law Academy, aimed at early-career lawyers, and a main Conference Program, organized around issues of acute relevance to Asian legal practice, such as international arbitration in Asia, doing business in India, recent developments in China and ASEAN, energy law, corporate social responsibility, and Latin America-Asia legal relations.

Understanding State-Owned Enterprises in China and Vietnam

Dr. Tuan Nguyen, one of partners at LNT & Partners, is to address the legal professional and academics with respect to the state-owned enterprises in Vietnam in plenary session. Dr. Nguyen is to focus on legal, political and economic context in which State-owned enterprises operate as well as recent efforts to reform and regulate them in China and Vietnam. The session will also discuss how these efforts may impact the Americas, particularly on a business level.

The rise of state capitalism has been attracting the attention of lawyers, economists, business leaders, and policy-makers, and state-owned enterprises are often the focus of this attention. This session examines the legal, political, and economic context in which these companies operate as well as recent efforts to reform and regulate them. This session will also consider the implications of state-owned enterprises for businesses in the Americas that are looking to invest in or work with partners in China and Vietnam.

Panelists:

For more informaion, please visit Asia Desk Forum

Competition law key factor in M&As

While investors’ interest in Vietnam has translated into healthy growth in mergers and acquisitions (M&As) and foreign direct investment (FDI), the potentially far reaching impact of the Competition Law is not understood by many players, writes Dr. Nguyen Anh Tuan from LNT & Partners.

As Vietnam’s increasingly outward looking economy and Competition Law develop, the country’s merger control regulations should not be overlooked – not least because of the hefty penalties that they attract. A fine of up to 10 per cent of a company’s total revenue in a financial year may be imposed for a breach of merger controls, including requirements on notification. Other severe penalties include forced demerger or withdrawal of a company’s business certificate.

It is also worth remembering that investors who have just completed transactions are not out of the woods yet. Competition authorities can still penalise companies up to two years from the date of the breach and prospective or existing investors must be aware of how these merger controls affect them and how to deal with potential non-compliance risks.

The term, “economic concentrations”, under the Competition Law includes company mergers, consolidations and acquisitions, as well creations of joint ventures. The law imposes certain merger controls on these economic concentrations that investors should be aware of, especially when dealing with larger transactions.

These merger controls focus on the consideration of the economic concentration’s “combined market share”. The market share of a company is calculated by referencing its percentage of turnover from sales or inwards purchases against total turnover from sales or inwards purchases by all companies in the business of the same type of goods in the relevant market for a month, quarter or year. The combined market share is defined as the total market share in relevant markets of all companies participating in an economic concentration. The job of looking at the extent of the combined market share falls to the Vietnam Competition Authority (VCA) when assessing whether an economic concentration will be subject to notification or prohibition under the Competition Law.

This makes it crucial for investors, before entering into an economic concentration, to calculate the resulting combined market share to evaluate potential risks of offending Vietnam’s merger control regime. This prudence will allow investors to determine whether VCA notification of the transaction is required.

The data necessary to determine market share can be obtained from government agencies, such as the General Statistics Office, the ministries of Finance and Information and Communications or the State Bank, depending on the respective industry. Reputable market research can also be used.

To prevent an under or overstatement of this market share figure, investors also need to identify the “relevant market”, because market share will be calculated on an assessment of the relevant product market and geographical area. For example, the market share of a company may be more than 95 per cent for the Ho Chi Minh City area, but only 5 per cent for the whole country.

With respect to notification requirements, there are generally no restrictions against an economic concentration if the resulting combined market share in the relevant market will be below 30 per cent, or if the resulting economic concentration is considered a small or medium-sized enterprise (SME).

If the combined market share falls between 30-50 per cent, the VCA must be notified of the proposed transaction before the parties can execute it. The parties can only proceed with the transaction once the VCA approves it.

Economic concentrations that result in a combined market share of more than 50 per cent will be prohibited, unless the VCA grants an exemption. Such an exemption can be granted if one or more companies in the economic concentration will be at risk of dissolution or bankruptcy or if the economic concentration will contribute to the country’s socio-economic development or technical and technological progress. However, these exemptions are not guaranteed and will be at the authorities’ discretion.

An open door to VCA consultation

If investors harbour doubts or concerns over whether a proposed transaction will be prohibited or require VCA notification, they may actively consult the VCA for guidance.

This VCA consultation function has proved successful and resulted in VCA assistance in accurately calculating combined market shares in certain cases. PV Drilling and Mirae are two key recipients of VCA expertise. These companies were advised not to make a notification (with regards to respective deals or a combined  deal/merger) as the participants’ combined market share did not meet the threshold stipulated by law.

However, despite VCA being on hand to provide this free service, only a handful of companies have utilised it. In fact, it was called into action just nine times from 2008 to 2011.

The VCA offers two types of consultations – general and specific consultations. The former, which can be done through email or phone, is primarily used for clarifying general Competition Law concerns. The latter is used when considering whether the proposed transaction requires notification or is prohibited. Through the provision of salient details on a proposed transaction, the VCA can help ascertain the relevant market share and its potential market impact.

It must be remembered that this consultation service does not excuse companies from legally notifying the VCA of larger economic concentrations, however such consultations are an invaluable resource for investors in navigating through the country’s complex merger control regime. Moreover, they could potentially save millions of dollars in penalties and legal headaches, as well as save time and costs in ascertaining whether a breach has occurred.

Confronting early notification fears

There have also been growing investor concerns about the serving of notification letters to the VCA, a Competition Law requirement, on proposed transactions.

Particularly, fears over the possibility of the VCA preventing the transaction from going ahead and breach of confidentiality are still commonplace among prospective investors.

However, the VCA does not act as a roadblock to transactions upon receiving a notification. In fact, it has not objected to any of the notified economic concentrations. These include substantial economic concentrations that have resulted in considerable increases in local market share, such as the merger of Nippon Steel and Sumikin Bussan Corporation and the proposed merger of AIA and Prudential.

In regard to confidentiality concerns, the VCA is prohibited by law from disclosing or using confidential company information and the extent of information disclosed in notices and applications for exemption vary on a case-by-case basis. For example, future business plans are often needed if an application for exemption is made. Companies can rest assured though that sensitive information, such as prices and detailed post-transaction business plans, will almost never need disclosure.

With this in mind, it is unclear why prospective investors unnecessarily chance facing a substantial fine for a Competition Law breach. Failure to notify the VCA as required by law may result in a company getting hit with a substantial fine of 3 per cent of its total turnover for the preceding fiscal year.

For this reason, prospective investors must put irrational fears aside and notify the VCA to comply with the Competition Law. In addition, companies are not bound to proceed with transactions after receiving VCA approval. Notification should be provided as soon as the commercial terms of the transaction have been reached or even earlier during the deal negotiations.

Sound advice on offer

Vietnam’s Competition Law regime is challenging for new and seasoned investors, despite the sound VCA support on offer. For investors that strive to comply with the law, their combined lack of experience and knowledge in Vietnam’s business and legal environment have often resulted in drawn out VCA assessment or consultation processes, largely a result of improperly prepared notifications and explanations.

For this reason, seeking assistance from professional advisers is highly recommended. In dealing with the VCA, legal assistance will leave an invaluable footprint on the preparation of notifications and explanations – particularly when it comes to how much information should be disclosed on the proposed transaction.

While Vietnam’s Competition Law arguably lacks the sophistication of other developed jurisdictions, with substantial penalties and the potential to make or break a deal, they are often the overlooked elephant in the room for larger transactions.

Competition Law compliance should always be on the agenda when investors propose and negotiate an upcoming economic concentration. However, there is no need to be daunted.  For prospective transactions to proceed as smoothly as possible in agreement with the Competition Law, the VCA should be considered a friend, not a foe.

The VCA is ready to serve investors and the nation in promoting healthy competition and maximising foreign investment to the greatest extent permissible under the Competition Law.

By Vietnam Law Insight, LNT & Partners.

Disclaimer: This Briefing is for information purposes only. Its contents do not constitute legal advice and should not be regarded as detailed advice in individual cases. For more information, please contact us or visit the website: Http://LNTpartners.com

New tendering law challenges foreign pharma producers

On November 26 2013 the National Assembly passed the new Law on Tendering, which came into force on July 1 2014. The new law (which replaces the 2005 Law on Tendering) relates to state management of the tendering process and governs the responsibilities of concerned parties as well as tendering activities.

While the new law is expected to afford greater equality among local tender participants (and promote access for small and medium-sized enterprises), its promotion of local players in the drug market at the expense of foreign players has caused concern. The law now explicitly provides preferential treatment to domestically produced drugs, which is expected to have a considerable impact on foreign investors active in this burgeoning market.

Extent of preferential treatment

Before the enactment of the new law, no clear preferential treatment was given to domestic drugs under Vietnamese law. The only minor mention was Article 16 of Circular 1/2012/TTLT-BYT-BTC (January 19 2012), pursuant to which the relevant authority gave priority to drugs produced domestically (but only for drugs of similar quality and a price no higher than the drugs imported at the time of tender). Under this circular, the criteria for selecting the winning bid was based on both the price and quality of the pharmaceutical products. No other preferential treatment existed.

However, the new law takes a protectionist approach, which directly and indirectly adversely affects foreign players in the market. The preferential treatment afforded by the circular is drastically expanded under the new law – almost to the extent that it drives foreign players out of the market.

As a direct impact, the law now prohibits those offering tenders from providing imported drugs if there are domestic drugs available that fully satisfy the requirements on medical treatment, price and availability (according to criteria published by the Ministry of Health). To add a further layer of restriction, Decree 63/2014/ND-CP (June 26 2014), which guides the tendering selection provisions in the new law, states that if any tenders are ranked equally after applying all preferential treatments, the tender that involves higher domestic production costs and uses more local employees will prevail.

As an indirect impact, the law sets a preferential treatment regime for participants in domestic and international tenders. This does not apply only to pharmaceutical players. Participants in domestic or international tenders to supply goods in which domestic production costs account for 25% of production or more will receive preferential treatment. For the supply of services, foreign tenderers in partnership with domestic tenderers which give 25% or more of the work value of the tender package to domestic tenderers will receive preferential treatment.

While these provisions apply to all industries, among the hardest hit will be those in the pharmaceutical industry.

Ambiguity in new law

While the term ‘domestic pharmaceutical products’ is used extensively in the law, a clear definition has not been provided. As domestic products are given preferential treatment, the law’s ambiguous system of classification is problematic. The number of disputes concerning the precise classification of ‘foreign’ pharmaceutical products which are partly produced (eg, packaging) in Vietnam has already increased considerably.

Decree 63/2014/ND-CP (which guides the new law) fails to address this matter, despite commentators previously stating that it was a pressing issue that had to be addressed. The lack of clarity has led to industry-wide uncertainty as to whether foreign pharmaceutical products processed in Vietnam should be considered domestic pharmaceutical products, thereby creating roadblocks in tendering activities.

Comment

As the protectionist provisions of the law come into force, foreign pharmaceutical players are expected to face greater obstacles in building a presence in Vietnam. This comes at an inconvenient time, when the number of drugs imported by domestic pharmaceutical companies is increasing. It also comes at a time when the government is increasing its efforts to promote foreign direct investment into the economy.

Together with the already stringent restrictions against foreign pharmaceutical players in Vietnam, the new law seems to pave the way for an environment that fosters an almost monopolistic position for domestic pharmaceutical companies. While Vietnam has a competition law regime in place, these provisions effectively compromise their effectiveness in the pharmaceutical industry.

As the demand for life-changing innovations increases, the only real winners in this industry are domestic players. However, as the industry’s competitiveness is lessened, the losers will be not only foreign players, but also the Vietnamese economy as a whole.

By Vietnam Law Insight, LNT & Partners.

Disclaimer: This Briefing is for information purposes only. Its contents do not constitute legal advice and should not be regarded as detailed advice in individual cases. For more information, please contact us or visit the website: Http://LNTpartners.com

Draft circular to make foreign drug importers sick

The Ministry of Health (MoH) has just introduced the latest draft circular (Draft 13) providing guidelines for foreign direct investment (FDI) pharmaceutical enterprises to implement import-export rights in the pharmaceutical field in Vietnam.

Although it reflects some suggestions by FDI enterprises in relation to the expansion of businesses’ rights, LNT & Partners’ partner Nguyen Anh Tuan says it still has some shortcomings that need to be addressed before promulgation.

The category of “FDI enterprises in the pharmaceutical field” that are permitted to carry out drug import-export activities is defined by Article 3.11 of Draft 13.

According to this provision, in order to implement the drug import and export rights, FDI enterprises must invest in one of the following activities – drug manufacturing, drug storage services and drug testing services. This provision expanded the range of enterprises permitted to have the drug import-export rights defined under Decree No79/2006.

However, enterprises with drug import rights stipulated in their investment certificates still cannot directly import from overseas, even if pursuant to the Pharmaceutical Law, drug import and export are drug business activities that are independent from these aforementioned activities. In addition to the aforementioned business lines, in accordance with Article 5 of Draft 13 “Conditions for implementing the drug import rights”, FDI pharmaceutical enterprises must meet other conditions for being considered a grant of a Certificate of Satisfaction of Conditions (CSC) for drug import activities. These include(1) being licenced with drug import rights in its investment certificate, (2) holding the respective CSC for implementing drug manufacturing, drug storage services and drug testing services and (3) having drug storage warehouses with GSP standards. Upon satisfaction of all these conditions, FDI enterprises operating in the pharmaceutical field seeking to implement drug import and export rights need to undertake the following steps, (1) complete the registration for issuance of the investment certificate with the investment management authorities, (2) have a drug preserving warehouse of GSP standard and (3) request for issuance of the CSC in the pharmaceutical field (Article 6 of Draft 13). As a direct consequence of the above restrictions, FDI pharmaceutical enterprises are not permitted to conduct drug import activities independently. In order to implement the drug import rights, they are required to engage other drug trading businesses (such as drug manufacturing or drug storage services) together with drug import activities in their investment licences, obtain the relevant CSC and build a warehouse of GSP standard for drug preservation.

These requirements not only increase the investment capital of FDI pharmaceutical enterprises, but also consume a lot of time. In addition, as mentioned above, these restrictions conflict with Vietnam’s WTO commitments and Article 11 of the Pharmaceutical Law. Hence, their legitimacy is in dispute.

Notwithstanding being restricted on conditions for drug import, FDI pharmaceutical enterprises are also limited to choices of business partners in Vietnam. According to Article 7.3 of Draft 13, FDI enterprises are only permitted to carry out trading activities with and selling imported drugs to certain Vietnamese pharmaceutical entrepreneurs who meet distribution conditions regulated by the MoH, namely the enterprises that either (1) engage a chain of GPP pharmacies, (2) have distribution centers as regulated by the MoH or (3) have warehouses of GSP standard, and a drug distribution system of GSP standard and a computer software system to manage goods. As such, this regulation if passed, will directly limit FDI enterprises’ right to choose business partners, thereby centralising the imported drug distribution rights to a few domestic enterprises that meet the above standards. As a matter of law, since the Pharmaceutical Law and its promulgating documents regulate the conditions for granting the CSC for drug distribution activities, these limitations are not necessary and lack convincing foundations.

In relation to distribution activities, FDI enterprises are still not allowed to implement drug distribution activities in Vietnam, except for distributing drugs that are manufactured by themselves in Vietnam (Articles 9.1 and 9.2 of Draft 13). Also, FDI enterprises are not allowed to conduct some activities relating to the implementation of distribution rights as specified in Article 9.3, which includes contributing charter capital to Vietnamese distribution enterprises. This limitation conflicts with Vietnam’s WTO Commitments in which foreign investors are allowed to do their business by way of establishing new companies, contributing capital or purchasing shares in enterprises in Vietnam.

Moreover, when the circular is promulgated remains a valid question. It appears that FDI enterprises that seek to be licenced with a CSC must wait until this proposal is officially promulgated. It is not difficult to recognise that these limited regulations of adjusting the FDI enterprises’ activities relating to drug import-export activities regulated by the MoH decrease the competitiveness of FDI enterprises in the Vietnamese pharmaceutical market. Hence, FDI enterprises face many difficulties in expanding their business in order to meet their patients’ needs and to serve the public’s health system.

For the time being, pharmaceutical products may only be imported into Vietnam through domestic pharmaceutical companies possessing import licences. FDI pharmaceutical enterprises that have been granted drug import rights in their investment licences can only import drugs through consignment due to an absence of a CSC for drug import activities.

The inconsistency in the regulations and the MoH’s postponement of promulgating documents instructing the import-export activities of FDI pharmaceutical enterprises has inadvertently created policy barriers against FDI pharmaceutical enterprises in penetrating drug import and distribution fileds in Vietnam.

Although it was expected to remove these barriers to create free and fair competition between FDI and local enterprises in pharmaceutical markets, unfortunately Draft 13 has not yet met this expectation and requires further revisions to meet this goal.

By Vietnam Law Insight, LNT & Partners.

Disclaimer: This Briefing is for information purposes only. Its contents do not constitute legal advice and should not be regarded as detailed advice in individual cases. For more information, please contact us or visit the website: Http://LNTpartners.com