BUSINESS CONDITIONS ON TRANSPORTATION SERVICES REDEFINED

LEGAL UPDATE

Decree 10/2020/ND-CP (Decree 10) replaces Decree 86/2014/ND-CP (Decree 86). It sets out several business conditions applicable to transportation business by vehicles. These include amongst others the app-based taxi services currently provided by companies like Vinasun, Mai Linh, Grab and Be.

Decree 10 will enter into force on 1 April 2020, and the pilot program for technology carriers under Decision No. 24/QD-BGTVT (Decision 24) will be suspended from the same date.

Although Decree 10 seems not to impose significant changes to the business conditions previously applicable to the transportation business, it will probably introduce challenges to ride-hailing services by re-defining the transportation business.

1. Transportation Business or Technology Service?

The app-based taxi service was for the first time officially acknowledged under a pilot scheme provided for in Decision 24. Although it failed to provide a definition of the application, or app-based taxi service, it became a perfect entrance card for Grab and Uber to take part in the local transportation industry. This happened amid increasing protest by traditional taxi companies as they faced a significant drop in their business as a result of the entry.

Decision 24 categorises providers of app-based taxi services into 2 groups which include entities providing

- the app services such as Grab, Uber and Be; and

- the transportation services via an application of the traditional taxi services such as Vinasun and Mai Linh.

While Decision 24 requires an entity providing the transportation service to obtain a license for the transportation business as stipulated under the laws on road transport, it does not require the entity providing the app services, such as Grab, Uber and Be to obtain a license for their app-based taxi services.

The discussion focused on the question if Grab and Uber should be categorised as a transportation service provider or merely an app service provider. Those businesses are of the view that they are a technology company providing the ride-hailing application connecting drivers and passengers. Traditional taxi companies argue that the businesses are collecting money for transportation activities which, due to its nature, should be considered transportation business. Therefore, these businesses would be required to obtain relevant business license and would be subject to other requirements also applicable to traditional taxi companies.

2. New Definitions

After various drafts discussed since 2016, Decree 10 has been finalised and will introduce various new definitions.

2.1 Providers of Transport Marketplace Applications

For example, article 35 of Decree 10 is an important article as it defines providers of transport marketplace applications. A distinction is made between those who provide transport marketplace applications for profit-making purposes without coordinating automobiles or drivers, or deciding transport costs, and those who also coordinate automobiles or drivers and decide on transport costs.

The inclusion or exclusion is important as it decides which law is applicable, either the Law on Electronic Transaction or the regulations applicable to vehicle transport business operators, amongst which the requirements prescribed in Decree 10.

2.2 Transport Marketplace Application

The term transport marketplace application means an application that provides the app to connect transport businesses and drivers with passengers or vehicle renting companies digitally .

2.3 Vehicle or Driver Coordination

The term vehicle or driver coordination refers to the process where an organisation or individual assigns a passenger or freight transport task to a driver via the transport marketplace application . It also means that the organisation directly operates the vehicle and/or driver, and makes a decision on the transportation fares.

2.4 Vehicle Ride-hailing Service

Decree 10 does not contain a definition of vehicle ride‑hailing service. However, Decree 10 describes some business models that might be relevant to this type of service. Both taxi and contracted-car businesses may use the application, but requirements might differ.

3. Electronic-Contract

Currently, it is not stipulated that electronic-contracts, or e‑contracts, can be used for the contracted-vehicle businesses, Decree 10 provides for specific requirements for the use of e-contracts in the transport businesses such as but not limited to: the business’ name and logo, and phone number that can be contacted in case of an emergency. The business must also send an electronic invoice to the account of the passenger and to the tax authority. The business must archive e‑contracts for at least 3 years.

4. Expected Impact

On the entry into force of Decree 10, hail-riding services such as Grab and Be may need to show the local authorities that they are not engaged in the administration of the vehicles and drivers nor decides the transportation fares, otherwise these businesses will face challenges resulting from regulatory requirements applicable to transportation business including, among others, owning or having the right to use all the taxis or vehicles which are operated for the business.

It would also mean that the provider would need to enter into labour contracts with its drivers as they would be considered employees. This would have a large impact on the existing providers such as Grab and Be.

Of a separate note, if these businesses would not be considered transport businesses but simply providers of the transport marketplace application, still various requirements would apply such as confidentiality of various information, archiving requirements.

5. Indirect Collection of Transportation Fares

Interesting is also that as a result of the entry into force of Decree 10 the business line of transportation with indirect collection of transportation fares will disappear. In Decree 86 the transportation business was split into 2 types being the transportation business with direct collection or with indirect collection of transportation fares. Direct collection refers to the traditional business of transport service providers. There would be indirect collection in case a transportation service is made by a business that performs at least one other activity in the manufacturing or distribution business and collects transportation fares by selling manufactured products or by providing distribution services. In this case the transportation business is not the main business of the company.

To give an example, company A is a manufacturer of foods and beverages which owns vehicles only used to deliver its products to local distributors. Although Company A does not collect any transportation fares for such delivery activities, under Decree 86, the transportation fares would be considered to be included in the product price and therefore Company A performs the transportation business This requires these businesses to obtain the relevant business license and satisfy certain other requirements substantially similar to those applicable to the providers of traditional transport services as well.

For more information, please contact:

Mark Oakley / Managing Partner

mark.oakley@acsvlegal.com

Huyen Pham / Senior Associate

huyen.pham@acsvlegal.com

© 2020 ACS Legal Vietnam Company Limited – All rights reserved

This legal update is not an advice and should not be treated as such.

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