by Russin & Vecchi's lawyers

ENVIRONMENTAL CONSIDERATIONS

In this Chapter, we provide an overview of environmental legislation. While environmental legislation is not yet fully developed, Vietnam pays attention to protection of the environment. Foreign investors should find the discussion below helpful in understanding the environmental framework.

3.1 Environmental legislation

Although the 1993 Law on Environmental Protection created a legal framework for Vietnam to protect the environment, it revealed limitations that had to be addressed amid the country's efforts to boost industrialization, modernization, and Vietnam's global economic integration. In anticipation of accession to the WTO, Vietnam adopted a new Law on Environmental Protection with effect from July 1, 2006. It replaced the 1993 Law on Environmental Protection.

As in normal practice, the new law required implementing regulations. There are a number of implementing documents. Decree 80/2006/ND-CP of the Government (August 9, 2006) ("Decree 80") detailing and guiding the implementation of a number of articles of the Law on Environmental Protection; Decree 21/2008/ND-CP of the Government (February 28, 2008) ("Decree 21") amending and supplementing a number of Articles of Decree 80; Decree 81/2006/ND-CP of the Government (August 9, 2006) ("Decree 81") on sanctioning administrative violations in environmental protection; Decree 29/2011/ND-CP (April 18, 2011) ("Decree 29") regulating the strategic evaluation on environmental impact, evaluation on environmental impact, commitment to environmental protection; Circular 05/2008/TT-BTNMT of the Ministry of Natural Resources and Environment ("MNRE") (December 8, 2008) ("Circular 05") guiding implementation of Decree 80 and Decree 21; Circular 08/2006/TT-BTNMT of the Ministry of Natural Resources and Environment (September 8, 2006) ("Circular 08") implementing Strategic Environmental Assessments, Environmental Impact Assessment Reports and Environmental Protection Undertakings; Circular 04/2008/TT-BTNMT of the MNRE (October 18, 2008) ("Circular 04") guiding the Formulation and Approval or Certification of Environmental Protection Schemes and the Examination and Inspection of Implementation of Environmental Protection Schemes; Joint Circular 02/2007/TTLT-BCT-BTNMT promulgated by the Ministry of Industry and Trade and the Ministry of Natural Resources and Environment (August 30, 2007) ("Circular 02"), guiding the implementation of Article 43 of the Law on Environmental Protection regarding criteria for and conditions on the import of scrap; Circular 25/2009/TT-BTNMT of MNRE (November 16, 2009) ("Circular 25") promulgating National Technical Regulations on Environment.

In addition, there are some other specific provisions, such as: Decree 59/2007/ND-CP of the Government (April 9, 2007) ("Decree 59") on Management of Solid Wastes; Circular 12/2006/TT-BTNMT of MNRE (December 26, 2006) ("Circular 12") guiding the Implementation of Conditions, Registration, Licensing, and Issuance of Code Numbers to Organizations and Individuals Which Release Hazardous Wastes; and Decision 23/2006/QD-BTNMT of the Minister of MNRE (December 26, 2006) ("Decision 23") promulgating the List of Hazardous Wastes; Circular 08/2009/TT-BTNMT of the Minister of MNRE (July 15, 2009) on Environmental Management and Protection of Economic Zone, High Technology Zone, and Industrial Zone ("Circular 08") and Circular 48/2011/ TT-BTNMT of the Minister of MNRE (December 28, 2011) amending and supplementing a number of Articles of Circular 08 ("Circular 48").

3.2 State management agencies

The Ministry of Natural Resources and Environment ("MNRE") is the primary regulatory body responsible for protecting the environment under the Law on Environmental Protection. Its responsibilities include:

  • Submitting to the Government for promulgation, or itself promulgating and implementing detailed laws and regulations to protect the environment;
  • Submitting to the Government for decision national policies, strategies and plans on environmental protection;
  • Establishing and regulating a system of environmental standards;
  • Creating plans to combat environmental degradation; and
  • Performing uniform management of the evaluation and approval of environmental impact assessment reports and registration of environmental protection undertakings nationwide; organizing the evaluation and approval of environmental impact assessment reports; guiding the registration of environmental-friendly establishments and products and granting environmental standard conformity certificates.

While it is MNRE that is primarily responsible for regulating protection of the environment, a number of other agencies are also involved. Local environmental authorities, local governments and non-governmental entities also play a major role in monitoring and enforcing environmental protection policies within their jurisdictions.

3.3 Enterprises and environmental obligations

Any Vietnamese or foreign individual or organization that invests in Vietnam must comply with Vietnam's Law on Environmental Protection. Although Vietnam is a developing country, in practice, it seems to take seriously the need to protect the environment. There are certainly lapses, but Vietnam does pay attention, at least to the large industrial environmental issues, at both a local and national level.

The Law on Environmental Protection requires that certain foreign investors prepare either an Environmental Impact Assessment Report ("EIAR") or an Environmental Protection Undertaking ("EPU") for their projects, depending on the importance and level of environmental impact of the project. An EIAR must be submitted to the appropriate authority for appraisal, while an EPU need only be registered.

Under Article 19.2 of the Law on Environmental Protection, an EIAR must be prepared concurrently with the feasibility study of a project. The law does not clearly state when an EIAR must be submitted. Based on the Investment Law and conversations with officials of the HCM City DPI - the licensing authority - investors may submit an EIAR after they receive their investment certificate. In other words, an EIAR is required only after an investment certificate is issued. Depending on the nature of each project, the appropriate authority to appraise an EIAR can be the MNRE, or a ministry, government agency or provincial-level people's committee. The appropriate authority appoints a council to perform the actual appraisal.

An EPU is simpler than an EIAR. An EPU is registered with the district-level people's committee. That body, when necessary, may authorize commune-level people's committees to issue a certificate of registration and the investor may proceed with the activity. An EPU is also normally required only after an investment certificate is issued.

Investors must comply with Vietnam's environmental laws and regulations. Violation may result in penalties, the most severe of which is the withdrawal of the investment certificate. Investors are subject to civil and criminal penalties (see Section 3.8 below). At the same time, incentives are provided to those that employ technological innovations to limit pollution. Investors that employ environmentally friendly technology in otherwise polluting industries will find it easier to obtain an investment certificate.

3.4 Building a factory: compulsory environmentally friendly facilities

In order for a project to satisfy environmental requirements, as mentioned above, the investor must prepare either an EIAR or an EPU, depending on the importance of the project.

Projects for which an EIAR must be prepared are specified in Appendix II to Decree 29 irrespective of the location of the projects. There are 146 projects, categorized into 20 groups. Following are several examples:

  • Projects that needs National Assembly's or Prime Minister's approvals;
  • Projects relating to construction; construction materials;
  • Projects relating to transportation;
  • Projects relating to power, radioactive substances; Projects relating to telecommunications facilities;
  • Projects relating to irrigation, forestation and forest exploitation, minerals;
  • Projects relating to oil and gas; waste treatment;
  • Projects relating to mechanical and metallurgy matters;
  • Projects relating to wood processing, glass production, pottery, food and drink processing plants; farm products processing plants, poultry, aquatic products processing plants;
  • Projects relating to chemical fertilizer plants;
  • Projects relating to chemical substances, pharmaceutical products, cosmetics, dyeing textiles and garments.

We do not discuss EIAR considerations in great detail, but a number of projects will be affected.

Investors in projects other than those for which an EIAR is required must register an EPU. An EPU registration includes: location, form and scale of manufacturing business and raw materials, fuel that will be used, types of waste produced, and an "undertaking to apply measures aimed at minimizing and treating wastes and to comply strictly with the provisions of the Law on Environmental Protection." Unlike procedures for approval of an EIAR, as mentioned above, an EPU need only be registered. The registration procedure is quite simple. An EPU registration serves as a basis for the state to inspect the factory's design, construction, and operation.

3.5 Application of Vietnamese environmental standards

Environmental standards refer to the permitted parameters of the quality of the surrounding environment, and the nature and the content of pollutants contained in wastes. The standards are set by the responsible state agencies as a basis for management and protection of the environment.

All investment projects in Vietnam must apply Vietnamese environmental standards issued by MNRE. Some provinces or cities have issued their own environmental standards; those standards may be applied, provided they are more strict than those issued by MNRE. Vietnam's environmental standards apply mainly to air quality, water quality, noise, vibration, and soil quality.

In case Vietnam's environmental standards are silent on a particular quality measure, an investor may obtain written permission from MNRE to apply environmental standards of other advanced countries in that area. Generally, obtaining such permission is not difficult.

3.6 Responsibility of environmental protection of investor in production, business and service activities

According to the Law on Environmental Protection, every individual and organization is responsible to:

  • Comply with the Law on Environmental Protection;
  • Take such environmental protection measures as are required in an EIAR or EPU and satisfy environmental standards;
  • Prevent and limit any adverse impact on the environment caused by its activities;
  • Remedy environmental pollution caused by its activities;
  • Disseminate, educate and raise environmental protection awareness among its employees;
  • Comply with requirements of environmental reporting;
  • Observe environmental protection, supervision and inspection regimes;
  • Pay environmental tax and environmental protection fees. An environmental tax is applicable to any individual, organization that produces and trades in products that have a long-term adverse impact on the environment and human life.

3.7 Investor's responsibility for environmental protection in case of imported products

Imported machinery, equipment, means of transportation, materials, fuels, chemicals and other imported products must satisfy environmental standards.

The Law on Environmental Protection prohibits an enterprise from importing new or used machinery, equipment, means of transportation, materials, fuels, chemicals and other kinds of products in the following cases:

  • Machinery, equipment, and means of transportation do not meet environmental standards;
  • Machinery, equipment, and means of transportation are intended for scrap;
  • Materials, fuels, chemicals are on a list of substances that are prohibited from import;
  • Machinery, equipment, and means of transportation are contaminated with radioactive substances, pathogenic microbes or other poisons;
  • Foods, medicines are either out of date or do not satisfy standards of hygiene or safety.

3.8 Corporate liability in respect of environmental management

According to the Law on Environmental Protection, insurance for environmental damage is compulsory for organizations that engage in activities that have the potential to cause large-scale environmental damage.

The Law on Environmental Protection specifically discusses handling violations. Entities that violate the Law, depending on the nature and severity of their violations, may be administratively sanctioned. Sanctions include warning, monetary fine, revocation of an investment certificate or criminal penalties. Moreover, if an entity's violations cause environmental pollution, degradation that damages other individuals or organizations, it may be required to provide remedies, rehabilitate the environment, and pay compensation. Compensation for environmental damage is handled on the basis of negotiations between parties. In case negotiations fail, the parties may request settlement by arbitration or they may initiate lawsuits.

Polluters may also face criminal penalties. These penalties are stated in the Penal Code, and their severity depends on the nature and impact of the violation on the environment. For violations that have a severe adverse impact on the environment, the penalty ranges from probation for up to one year or imprisonment for between three months to two years. The penalty for violations that have an extremely severe adverse environmental impact is imprisonment for between one to five years. In addition to these penalties, polluters must answer for acts or omissions such as destruction of public property, failure to meet safety standards required for hazardous substances, and failure to comply with labor safety standards.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.