Vietnam is undergoing the most far-reaching administrative and judicial restructuring since the Đổi Mới era.
In a recent feature by Asia Business Law Journal, our Managing Partner at LMP – Dr. Le Minh Phieu – shared his perspectives, opening with the statement:
“Vietnam has been in a long period of dormancy – and now it is waking up again.”
In the article, Dr. Phieu outlines three key issues that businesses should pay close attention to during this transition period:
The real-world impact on investment and business operations Legal gaps and potential jurisdictional overlaps Why commercial arbitration and proactive legal planning are increasingly vital
Full article on Asia Business Law Journal: https://law.asia/vietnam-administrative-judicial-reform/
Full interview in Vietnamese: https://lmp-lawyers.com/viet-nam-dang-thuc-tinh-cuoc-cai-cach-manh-me-nhat-trong-nhieu-thap-ky/
Full interview in English is as below.
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Comments by Le Minh Phieu, Ph.D, founder of LMP
General Comments:
Vietnam began its comprehensive reform (Đổi Mới) in 1986. Some of the most significant milestones for the country’s economy since then include the introduction of the 1992 Constitution, the Law on Enterprise Law of 1999 (which ensured the freedom to conduct private business and eliminated the burdensome licensing system), and the 2000 the Law on Investment of 2000 (which unified the legal framework for both domestic and foreign investment, replacing the previous dual-law system).
Following the enactment of these two crucial laws, the government of the late Prime Minister Phan Văn Khải took decisive actions to improve Vietnam’s business environment. However, after his tenure ended in 2006, the pace of reform slowed down.
In this context, the current restructuring can be seen as the boldest and most ambitious reform initiative in Vietnam since these key milestones.
The merger of several ministries and similar agencies at various levels of local government has already been completed. Upcoming major reforms (as announced) include the consolidation of provinces and centrally governed cities, the elimination of district-level administrations, and the merger of commune-level authorities. Additionally, a key focus is ensuring the development of the private sector, with administrative and judicial reforms serving as crucial pillars to support this objective.
1. What have your clients been asking you about the restructuring, and what have you been advising them?
Currently, it seems that people in Vietnam are responding to these reforms with a more positive outlook rather than concern. Most of our clients’ questions revolve around whether these changes will impact the procedures they are in the process of carrying out.
2. What are the biggest legal challenges businesses might face during this transition?
We expect these reforms to bring more positive than negative impacts. However, the biggest legal challenges businesses might face during this transition include:
- Temporary disruptions in licensing procedures: The restructuring and consolidation of ministries, agencies, and departments may lead to changes in leadership and personnel responsible for approvals. This could result in delays or interruptions in licensing and approval processes, particularly for large-scale projects.
- The procedures currently under review by the authorities preparing for dissolution (e.g., Thu Duc City People’s Committee or district-level People’s Committees) remain uncertain as to how they will be handled. It is possible that such procedures will need to be restarted or that the work already completed will be recognized and carried forward. In any case, the process is generally expected to take longer than usual
- Impact on the judicial system: As the restructuring progresses, including the merger of provinces and the elimination of district-level administrations, similar disruptions may occur within the court system, potentially affecting the processing of cases and court proceedings.
3. In your experience, which industries will be most impacted by the shifting regulatory responsibilities? Why?
In legal terms, we often classify laws into substantive law and procedural law. Substantive law governs the conditions, rights, and obligations, while procedural law defines the authorities responsible for handling matters and the processes involved. This reform primarily affects procedural aspects by restructuring the authorities responsible for regulatory oversight.
Industries most impacted will likely be those requiring approvals from multiple government agencies. The merger of ministries and specialized regulatory agencies at various levels—particularly at the provincial level—could have a positive impact on licensing procedures for projects requiring approvals from multiple authorities.
For example, real estate development projects must obtain approvals from various government bodies at the provincial level, including the Department of Planning and Investment, Department of Finance, Department of Construction, Department of Transport, Department of Natural Resources and Environment, and the Department of Agriculture and Rural Development. With the restructuring:
- The Department of Planning and Investment has merged with the Department of Finance (now the Department of Finance).
- The Department of Transport has merged with the Department of Construction (now the Department of Construction).
- The Department of Agriculture and Rural Development has merged with the Department of Natural Resources and Environment (now the Department of Agriculture and Environment).
As a result, approval processes may be streamlined—for instance, instead of submitting applications to two separate departments, businesses may now need to submit only to one. This has the potential to reduce administrative procedures and accelerate project implementation. However, for the reform to be fully effective, additional guiding regulations may still be needed to unify procedures that were previously under two separate departments but have now been merged.
Other sectors, such as education, media, and public services, may also be affected. Each ministry currently oversees one or more universities, media outlets, (including newspapers, magazines, and television channels) or other public services. With the consolidation of ministries and agencies, these affiliated institutions may also undergo restructuring or mergers accordingly.
4. What are the potential consequences of eliminating district-level courts on commercial dispute resolution? Will businesses need to prepare for longer case durations at higher courts?
The government has not yet officially announced a plan to eliminate district-level courts. However, it is highly likely that regional first-instance courts will be established by consolidating multiple district courts. A similar model, where a single first-instance court had jurisdiction over multiple districts, has existed in Vietnam before. This was established under the Decree of the President of the Government No. 13 dated January 24, 1946, and the Decree of the President of the Government No. 51 dated April 17, 1946, which defined the jurisdiction of courts and the division of responsibilities among judicial officers. Therefore, if the first-instance court system is maintained, the overall impact may not be too significant.
That said, the restructuring process may lead to changes in the courts and judges handling ongoing cases, which could cause disruptions or delays in case resolution.
In the long run, however, I believe this reform will enhance the quality of the judiciary. The primary goal of this restructuring is streamlining and selecting capable personnel, which should help eliminate underperforming or problematic judges. As part of broader judicial reforms aimed at strengthening the role of the private sector and improving legal reliability, this process is expected to increase trust in the court system.
Nevertheless, consolidation also carries the risk of overloading certain courts, particularly provincial-level courts, as they may have to handle a significantly higher volume of cases. To mitigate risks, businesses should focus on strengthening their legal compliance, ensuring clarity and precision in contracts and transactions. Additionally, selecting experienced and specialized legal counsel for ongoing operations and dispute resolution will be crucial in effectively safeguarding their interests.
5. Current business licenses remain valid until they expire or certain changes occur. However, businesses may need to update registrations and obtain new permits under the restructured system. What should companies do now to stay compliant, and what considerations should they discuss with their counsel to avoid risks?
Current business licenses remain valid until their expiration or until specific legal changes take effect. However, the restructuring process may lead to changes in the registration and licensing authorities. Businesses should not be overly concerned but should stay proactive in monitoring official announcements from regulatory agencies.
To ensure compliance, companies should review and prepare their legal documentation, engage with relevant authorities to clarify any uncertainties, and seek expert advice where necessary. When discussing with legal counsel, businesses should carefully assess the impact of the restructuring, stay updated on new regulations, plan for the transition, and manage potential risks.
By staying informed, preparing necessary documentation, and consulting with legal experts, businesses can maintain compliance and ensure operational stability throughout the restructuring process.
6. What advice do you have for companies currently operating in Vietnam and those considering establishing in the country?
The government is making every effort to minimize any negative impact on businesses during the restructuring process. As I analyzed in the General Comments section, the consolidation and streamlining of administrative agencies aim to reduce bureaucratic hurdles and lower operational costs, thereby freeing up resources for investment in infrastructure and social welfare policies.
At the same time, these efforts create a more favorable business environment by reducing cost burdens on companies, particularly small and medium-sized enterprises, and opening up new investment opportunities in key sectors.
These reforms will continue in the near future, with a focus on restructuring the administrative system towards a more integrated, multi-sector approach to enhance efficiency and better serve both the public and businesses. As such, companies should view this restructuring as an opportunity for a more streamlined and business-friendly environment in Vietnam.
Vietnam has been in a long period of dormancy, and now it is waking up again.
