Decree on MOJ Legal Opinions

Transcription

1 Decree on MOJ Legal Opinions On 26 May 2015, the Government of Vietnam promulgated a specific legislation on legal opinions (Decree No. 51/2015/ND-CP), which, for the first time, governs the conditions and procedures for the issuance of legal opinions by the Ministry of Justice (MOJ) for transactions signed by the Government and State agencies (Decree 51). Effective as of 15 July 2015, Decree 51 will replace the current provisions on the issuance of legal opinions across different Decrees, namely Decree No. 38/2013/ND-CP on official development funds (ODA), Decree No. 01/2011/ND-CP on issuance of Government bonds, and Decree No. 15/2011/ND-CP on issuance of Government guarantees. In short, Decree 51 will have a significant impact on the scope of legal opinions issued by MOJ for important infrastructure projects, especially public-private-partnership (PPP) and ODA projects. To date, MOJ has issued various legal opinions for BOT projects in compliance with the provisions of Article 48.2 of Decree No. 108/2009/ND-CP on investment under the forms of BOT, BTO or BT and in line with previous precedents first established by the Phu My power projects. Those opinions were always issued on a case-bycase basis, and only after typically hard argumentation between the parties. During that time, there was no specific regulation to govern the issuance process or the scope and content of such MOJ legal opinions. MOJ has argued that it needs a framework, as justification for the current Decree 51. Since the provisions of Decree 51 vary so dramatically from past precedents, it is of significant importance to note that the key features of the decree, which once effective, shall apply to all projects involving legal opinions issued by MOJ. Critically, as will be discussed below, after the effective date of this Decree, the MOJ will not be empowered to issue any opinion on the financing documents and the power purchase agreement of a project. 1

2 1. Restricted scope of application In previous transactions, MOJ has issued legal opinions for power projects on the basis of Decree 108 and past precedents. Investors and lenders on project financed infrastructure projects have come to rely heavily on the MOJ legal opinion to substantiate key bankability issues, especially, the validity and enforceability of key project contracts, government and State owned enterprise commitments, guarantee obligations and currency convertibility. The scope of parties and documents for which MOJ could issue its opinions were not specifically restricted. For example, for certain precedent projects, the MOJ legal opinions recognized the validity and enforceability of financing documents and security documents between the investors and lenders. Under Decree 51, the scope of MOJ legal opinion is restricted to agreements to which the State, the Government or a State agency is a party. 1 Regarding PPP projects (including BOT power projects), the MOJ issues legal opinion to project contracts, government guarantee documents, land lease agreement and other relevant documents that are entered into by the State, the Government or a State agency. This now excludes the issuance of a MOJ legal opinion for agreements involving any non-governmental party, such as State-owned enterprises (SOE), coal suppliers and financing parties. In short, key project agreements such as the power purchase agreement, acknowledgement and consent of an SOE, local construction contracts, local supply contracts, security documents and financing documents are no longer subjects of MOJ legal opinion. There is no exception under this provision. It should be noted that under the transition clause of Decree 51, if the filing requesting the issuance of an MOJ legal opinion is submitted to MOJ before the effective date of the Decree, the issuance of such legal opinion will be in accordance with the current legislations. 2 That means, in theory, there is still a possibility that the MOJ legal opinion 1 Article 5.5 of Decree 51 reads as follows: The Ministry of Justice considers and issues legal opinions on documents to which the State, the Government or a State agency is a party [ ]. 2 Decree 51, Article

3 can cover the financing documents and security documents if it is agreed by the parties and the request for issuance of MOJ legal opinion is submitted to MOJ before 15 July After that filing cutoff date, the inclusion of those documents in the MOJ legal opinion would no longer be negotiable. One would expect this glimmer of hope to prompt a rush to file for a favorable opinion before 15 July However, given the clear limitations in the scope of Decree 51, there is no incentive for MOJ to agree to any deviations from Decree 51 in its legal opinion. 2. Principles and conditions for issuing legal opinion The principles for issuing a legal opinion are as follows: (i) (ii) (iii) The legal opinion must be issued on the basis of and in accordance with Vietnamese law at the time of issuance; The legal opinion must be issued after the documents being subject matter of the legal opinion are signed, approved or issued in accordance with the law; and The legal opinion must not increase, decrease or change the rights and obligations of the parties under the relevant documents or the applicable law at the time of issuance. 3 A new condition for the issuance of legal opinion requires that the documents forming the subject matter of the legal opinion must be negotiated, signed and approved in strict accordance with the authority, process and procedures provided by Vietnamese law. In other words, if MOJ issues a legal opinion, then the relevant documentation should be deemed to have fully complied with the legal process and should therefore stand as legally sound documentation. It is still too soon to determine whether this inference of validity will support the bankability of projects or whether it will cause adverse delays for Government negotiators in finalizing documents for fear of being identified as the parties making the determination that the relevant documents and process are fully compliant with the law. 3 Decree 51, Article 3. 3

4 3. Contents of MOJ legal opinion Under Decree 51, the MOJ legal opinion shall contain the following basic contents: (i) (ii) (iii) (iv) (v) Conditions, circumstances and assumptions necessary to clarify the purpose and scope of the legal opinion; Assessment of the legal status of the Vietnamese party signing or issuing the document; Assessment of the authority of the Vietnamese party signing or issuing the document; Assessment of compliance with Vietnam laws regarding procedures for negotiation, signing and issuance of the document; and Purpose of use of the legal opinion and provision of such legal opinion to other organizations and individuals. 4 The legal opinion may contain additional contents, on a case-by-case basis, but it must follow the principles for the issuance of legal opinion. Of note, MOJ legal opinion shall not assess any details (i.e. circumstances), events or other matters not directly related to the laws of Vietnam. 5 It is not clear how details or circumstances are interpreted by the MOJ, but it raises concern that the MOJ may refuse to opine on a specific provision or process, which is stated in an agreement, such as, the provision on force majeure events or other similar issues. Furthermore, the authors have seen a MOJ legal opinion drafted under Decree 51 standards and note that significant limitations and assumptions have been placed against the above five contents of the opinion with the effect that little appears to actually be covered by the opinion. 4 Decree 51, Article Decree 51, Article

5 4. Term for issuance of MOJ legal opinion Regarding PPP projects, the term for issuance of legal opinion is 30 days from the receipt of a complete file requesting for MOJ legal opinion. In complicated cases, such a term may be extended but shall not exceed 60 days from the receipt of a complete file. 5. Limited use of the legal opinion and confidential obligation of the recipients Decree 51 limits the use of the legal opinion only for the purpose of the transaction contemplated in the document, which is subject of the issuance of legal opinion. Moreover, the legal opinion may only be provided to the individuals or organizations mentioned in the legal opinion, unless otherwise approved in writing by the MOJ. For instance, the opinion may be said to extend only to the project company for a limited purpose, which essentially deprives the lenders the right to rely upon the opinion. 6. Conclusion Although forming a specific legal basis and clear process for the issuance of MOJ legal opinion, with its limited scope of application and strict conditions applied to the legal opinion, Decree 51 offers little comfort to lenders and investors developing PPP projects, and does little to facilitate the negotiation and signing up of important and needed infrastructure projects at this key point in Vietnam s economic development. Great strides have been made in the past two years to develop the PPP legal framework and address key bankability issues, with the recognition that both investment and lending for needed infrastructure projects must be streamlined and in line with international norms. Decree 51 is an unfortunate step backwards and will require investors and lenders to take a harder look at the overall bankability of projects where a clear wrap is no longer available from the MOJ, to whom the market has always looked for comfort that deals are compliant, valid and enforceable under Vietnamese law. Investors and lenders should not look to their legal counsel to cover this gap through the issuance of equivalent opinions. The stakes on such projects are simply too high to rely on the opinions issued by law firms, 5

6 especially given the stress placed on law firms to cover risk within their existing professional indemnity cover. The possibility of key projects being later deemed invalid or unenforceable has always been the rationale for seeking an official opinion from the body of government best able to assess that risk, namely the MOJ whose function is difficult to replicate through private law firm opinions. Better alternatives need to now be introduced into the project documentation, such as stronger representations of authority coupled with clear indemnities, from the Vietnam side counterparties. About the authors: Frontier Law & Advisory () specializes in public private partnerships, infrastructure projects and government advisory across the region. The views expressed in this article are those of the Frontier team and do not represent the views or positions of the Vietnam government or any of its development partners. For more information, please contact: 6