In certain business sectors (e.g., film projection service, or road transportation services), Vietnam undertakes to allow foreign investors to invest though setting up a joint venture or a business cooperation contracts (BCC) with capital contribution not exceeding certain limits. However, it is not clear if the ownership limit provided in these commitments apply to investment through a joint venture only or to both investment through joint ventures and BCCs.

On the one hand, in a BCC, the parties are still required to specify the contribution of each party. In addition, in the WTO Commitments of Vietnam, there are several places where the foreign ownership limits specifically refer to joint ventures only. Accordingly, one could argue that the foreign ownership limit also applies to business cooperation contracts if it does not refer to joint venture specifically.

On the other hand, there are several arguments supporting the view that the relevant foreign ownership limits do not apply. In particular:

- Under the Investment Law 2020, only foreign ownership limits in the charter capital of a company are specified as a foreign investment condition. This indicates that the draftsmen of the Investment Law 2020 does not intend to impose foreign ownership limit to BCCs in general;

- A BCC does not involve the establishment of a separate company to perform the investment activity. In general, this form of investment is considered as less favorable to foreign investors since the foreign investor does not have direct involvement in the investment activity. Accordingly, imposing a foreign ownership limit on a BCC in the same manner as a joint venture is not logical; and

- In some unofficial explanation of the relevant commitment, Vietnamese authority appears to consider that foreign ownership limit applies joint venture only.

This post is written by Nguyen Quang Vu with research support from Nguyen Thu Giang and Luu Tuan Hung.