DECREE 51 ALLOWS FOREIGN INVESTMENT IN COMMODITY EXCHANGE IN VIETNAM

LEGAL UPDATE

Decree 51/2018/ND-CP (Decree 51) amends and supplements several articles of Decree 158/2006/ND-CP (Decree 158) about commodity trading through a commodity exchange as per the Commercial Law. Decree 51 is effective per 1 June 2018.

There are about 70 commodity exchanges in the world. Since the Vietnamese commodity exchange started in 2010, only a limited number of exchanges in mainly coffee and rubber has taken place for a limited amount of about 8 trillion VND (about USD 351 million).

It is expected that Decree 51 will make trading in other commodities such as pepper easier for Vietnamese farmers. Reason for this is that the transparency of sale volumes and prices is ensured which enables farmers to take appropriate actions to prevent oversupplies and price drops during bumper crop seasons.

The most remarkable point of Decree 51 is that foreigners can now invest – under certain conditions – in the establishment of a commodity exchange in Vietnam, and trade on the commodity exchange or become a broker or trader.

Hereafter we will set out the most important changes.

1. Connection between Vietnamese and global commodity exchanges

Vietnamese traders were already entitled to trade commodities through foreign commodity exchanges. Based on Decree 51 a Vietnamese can now connect with a foreign commodity exchange. This will likely facilitate the integration and development of the Vietnamese commodity exchanges.

Payments in foreign currencies can only be done via a credit institution licenced for this.

2. Commodity trading and foreign investors

As mentioned before one of the most important points of Decree 51 is that it opens up this sector for foreign investors. Foreign investors can now

- contribute capital to establish a Commodity Exchange in Vietnam on the condition that the contribution does not exceed 49% of the -charter capital;

- purchase shares or stakes of the Commodity Exchange on the condition that the contribution does not exceed 49% of the charter capital; or

- become a client, a member broker or trader of the commodity exchange without ownership restraint.

3. Commodities to be traded

Decree 51 also increases the number of commodities that can be traded at a commodity exchange. A distinction is made regarding a commodity being on the list of commodities banned from business, limited to business and subject to conditional business, or not. The commodity exchange needs to:

- inform the relevant authorities 30 days before the commodities will be listed on the commodity exchange in case not on the list; or

- register with the relevant authorities, in case on the list, so the commodities can be listed on the commodity exchange.

However, note that the list of commodities limited to business or subject to conditional business as per Decree 59 has not yet been amended and brought in line the Law on Investment. Therefore, further guidance is needed.

For more information, please contact:

Mark Oakley / Managing Partner

mark.oakley@acsvlegal.com

Hieu Pham / Special Counsel

hieu.pham@acsvlegal.com

© 2018 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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