Dispute Settlement from PPP Projects in Vietnam

The Public-Private Partnership (PPP) was initiated in Vietnam more than 20 years ago, starting with the Government's Decree on investment in BOT contracts. The National Assembly passed Law 64/2020/QH14 on PPP Investment, effective from January 1, 2021. In addition to a separate legal basis for the PPP investment method, there are still shortcomings arising from PPP projects, which are caused by the PPP Law itself and its instructive decrees.

First of all, PPP policies are not really attractive to investors as they encounter various problems in many stages, from project selection, project information and administrative procedures to mechanisms. So, investors, especially foreigners, become more careful when they choose to invest in PPP projects. Furthermore, many PPP projects are becoming less attractive to investors due to the lack of tools for project risk-sharing, dispute resolution for project stakeholders, and, to investors, weak care from authorities. In addition, disputes about PPP projects are increasing and their nature is also gradually becoming more complicated, leading to a lot of damage, both materially and in reputation, to stakeholders.

Moreover, many regulations are overlapping in laws. Many specific procedures for PPP project implementation are governed by different laws such as the Law on State Budget (for use of State budget for PPP projects), the Law on Public Investment (public investment capital in PPP projects), the Law on Construction (appraisal, approval of design and estimation), and the Law on Public Debt Management (ODA loan used in PPP projects). Contents specified in these relevant laws are developed for public projects or purely private investment regardless of PPP investment characteristics; processes and procedures are also implemented separately, not harmonized with the PPP project implementation.

According to statistics and research, disputes in PPP projects often arise in the first 10 years after a financial agreement is reached. In the first year, emerging disputes account for 4.2% but it climbs to 15% in the fourth year (the start of operation) and up to 30% in the 10th year. Mr. Giang Doan, an international PPP expert at USAID, said that PPP projects are often of great value and have long execution time. PPP disputes are not limited to administrative and commercial disputes. For PPP projects, there will be three common types of disputes: public-private disputes, investor-stakeholder disputes, and investor/project company-service user disputes.

In addition, according to lawyer Le Dinh Vinh, Director of Vietthink Law Firm, PPP project investors currently face many risks, both internally and externally, including risks and problems in land and infrastructure, funding, construction, operation, handover, inflation, exchange rate, tax and force majeure.

Therefore, in the long run, PPP investors must be considered partners, not subjects, he said. Competent authorities are a party to a PPP contract, on equal terms with the investor, and they cannot be imposed on. Problems in PPP investment projects need to be addressed. Regulations on risk sharing with investors in PPP projects as per the Law on PPP Investment should be soon institutionalized and fully enforced.

Source: Vietnam Business Forum