Regulations on investment project contracts in case of investor selection in Vietnam - 6 notable points you need to know

Regulations on investment project contracts in case of investor selection in Vietnam - 6 notable points you need to know (Internet image)

Regarding this issue, LawNet would like to answer as follows:

1. Rules for executing investment project contracts in case of investor selection in Vietnam

Specifically, Article 71 of the Law on Bidding 2023 stipulates the rules for executing investment project contracts in case of investor selection as follows:

- An investment project contract shall be signed if the following conditions are met:

+ The bid of the selected investor must still remain valid at the time of signing the contract;

+ At the time of signing contract, the selected investor is required to meet technical and financial requirements for executing the investment project as laid down in the bidding documents.

- Contents of the signed contract must be conformable with contents of the bidding documents, the investor’s bid, decision on approval of investor selection result, and contract negotiation and completion record.

- The contract shall be signed by and between a competent authority or the procuring entity (if authorized) and the selected investor. In case of a consortium, the contract agreement must bear signatures and seals (if any) of all members of the consortium.

- The investment project contract shall be executed following the rules set forth in Article 69 of the Law on Bidding 2023.

2. Investment project contract documents in case of investor selection in Vietnam

The documents constituting an investment project contract consist of:

- Contract agreement;

- Contract appendices (if any);

- Contract negotiation and completion record;

- Decision on approval of investor selection result;

- The selected investor’s bid and clarifications thereof;

- Bidding documents and addenda thereto;

- Other relevant documents.

(Article 72 Law on Bidding 2023)

3. Contents of investment project contract in case of investor selection in Vietnam

An investment project contract shall, inter alia, have the following primary contents:

- Particulars of the contracting parties, effective date and duration of the contract;

- Details of the investment project, including: objectives, location, and execution schedule; scale and total investment; conditions for use of land and other resources (if any); compensation and relocation measures and requirements, and construction of auxiliary works (if any); safety and environmental protection requirements; force majeure events and actions taken;

- Responsibility to follow compensation and relocation procedures and organize construction of auxiliary works (if any); allocation or lease of land (if any);

- The investor's obligations to fulfill commitments proposed in their bid; establishment of enterprise in charge of managing the investment project (if any);

- Performance security; rules and conditions for modification and termination of contract; transfer of rights and obligations by the parties;

- Governing law and dispute settlement mechanism.

(Article 73 of the Law on Bidding 2023)

4. Duration of investment project contract in case of investor selection in Vietnam

Pursuant to Article 74 of the Law on Bidding 2023, regulations on duration of investment project contract in case of investor selection with investors are as follows:

- Duration of an investment project contract means the length of time for executing the contract which is specified in the signed contract.

- Duration of an investment project contract begins on the effective date of the contract until the investor fulfills their commitments specified in their bid and other obligations as agreed upon by the parties in the contract.

- When the contract expires, the investor shall execute the investment project in accordance with regulations of the Law on investment and relevant laws.

5. Regulations on Security for performance of investment project contract in case of investor selection with investors in Vietnam

According to Article 75 of the Law on Bidding 2023, regulations on security for performance of investment project contract in case of investor selection with investors are as follows:

- The investor is required to adopt one of the following performance security options for ensuring their fulfillment of responsibility to execute the investment project before or when the contract becomes effective:

+ Submit a letter of guarantee issued by a domestic credit institution or foreign bank branch lawfully established under the law of Vietnam; or

+ Submit a certificate of surety bond insurance issued by a domestic non-life insurer or branch of a foreign non-life insurer duly established under the law of Vietnam.

- Depending on the scale and nature of the investment project, the value of the performance security equaling 1% - 3% of the total investment shall be specified in the bidding documents.

- The validity period of the performance security begins on the official signing date of the contract until the contract is terminated. If the duration of the contract needs to be extended for a specified period, the investor shall be requested to extend the validity of their furnished performance security for a corresponding additional period.

- The performance security shall be forfeited if the investor:

+ Refuses to perform the contract that is still effective;

+ Violates terms and conditions of the contract; or

+ Refuses to extend the validity period of the performance security, in case failure to meet the contract execution schedule is at the investor’s fault.

6. Regulations on modification of investment project contract in case of investor selection in Vietnam

An investment project contract may be modified in the following cases:

- The investment project which is subject to approval of investment guidelines is modified in accordance with regulations of the Law on investment resulting in changes in contents of the project contract.

Modifications to the contract shall only be made after the modified investment guidelines have been approved by a competent authority. The investor must meet technical and financial requirements for executing the modified investment project;

- The investment project is transferred in accordance with regulations of the Law on investment and relevant laws;

- In other cases as agreed upon by the parties in the contract in conformity with regulations of law.

The transfer of an investment project specified above must meet the following conditions:

+ The transfer is approved by the competent person;

+ The investor that receives the transfer (transferee) meets technical and financial requirements for executing the investment project;

+ The transferee commits to inherit all rights and obligations of the transferor as defined in the signed investment project contract.

(Article 76 of the Law on Bidding 2023)

Ho Quoc Tuan

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