Foreign Investment in Ship Towage Services: Vietnam Legal Framework

Currently, maritime transportation and related services in Vietnam are developing strongly and attracting significant interest from foreign investors. Ship towage services play an essential role in maritime operations. However, as maritime activities relate to national sovereignty, Vietnamese law imposes restrictions on foreign capital contributions and the operation of ship towage services. In the article below, Viet An Law Firm will provide clients with information about foreign investment in ship towage services: Vietnam legal framework.

What are the ship towage services?

According to Article 256 of the Maritime Code 2015, ship towage refers to tugging, towing, hauling, pushing, or sailing alongside the ship and other floating equipment on the sea and within a port water area by a towboat.

Ship towage includes:

• Towage within the area;
• Assistance with towage within a port water area.

Market access conditions for foreign investors in ship towage services

According to Vietnam’s WTO Commitments, ship towage services fall under maritime transport services. Accordingly, international maritime transport service providers may utilize other services (part of CPC 749), specifically port towing services, under reasonable and non-discriminatory conditions.

For marine towing services, from the date of accession, foreign service providers were only allowed to offer services via joint ventures with Vietnamese partners, in which the foreign capital share did not exceed 49%. After three years, this restriction was raised to 51%. Currently, this capital restriction has been lifted according to international commitments. However, compliance with sector-specific domestic laws is still required.

Requirements for conducting ship towage services in Vietnam

According to Article 256 of the Maritime Code 2015 and Chapter IV of Decree 160/2016/ND-CP, as amended by Decree 147/2018/ND-CP, the requirements for trade in ship towage services include:

Legal status

• Any enterprise providing towage services in Vietnam must be established in accordance with legal provisions.
• Foreign ownership ratio: In a case where a foreign-invested enterprise provides towage services, the foreign investors’ capital holding may not exceed 49% of the enterprise’s charter capital.

Organizational structure and personnel

• Any person in charge of the business and operation of towage services must obtain at least a college degree in one of the maritime, foreign trade, commercial, or economic specialties.
• Any person in charge of legal affairs must obtain at least a college degree in a law specialty.

Number of vessels

Must legally have the right to use at least one (01) towboat; towboats must be Vietnamese ships.

Conditions for foreign organizations

• Foreign ownership ratio: In a case where a foreign-invested enterprise provides towage services, the foreign investors’ capital holding may not exceed 49% of the enterprise’s charter capital.
• A foreign organization is permitted to use seagoing vessels flying foreign national ensigns to provide towage services in Vietnam solely on the ground that its towboats flying Vietnamese national ensigns fail to satisfy the prescribed requirements.
• Any towboat flying a foreign national ensign must satisfy requirements prescribed in law on maritime safety, security, and environmental protection.
• The foreign organization must have a towage contract concluded with a charterer of Vietnam.
• The foreign organization must have a branch or a representative office, or a towing enterprise of a Vietnam towing company authorized in Vietnam.

How to invest in ship towage services in Vietnam

Foreign investors can enter the ship towage services sector in Vietnam in two ways:

• Establishing a foreign-invested ship towage service company in Vietnam;
• Contributing capital or purchasing shares/stakes in an existing Vietnamese ship towage service company.

Foreign investment in ship towage services: Vietnam legal framework

As analyzed, the foreign investor’s capital contribution in such a company must not exceed 49%. Therefore, foreign investors cannot establish a 100% foreign-owned ship towage company but must partner with a Vietnamese entity, with foreign ownership capped at 49%.

Steps to establish the company:

Step 1: Apply for an Investment Registration Certificate (IRC)

Dossier component

The dossier is stipulated in Clause 1, Article 33 of the Law on Investment 2020.

Competent authorities

Department of Finance (DPI), where the headquarters is planned to be located, or the Management Board of industrial/economic/high-tech zones for projects in such areas.

Procedure

• Within 15 days of receiving a complete application, the investment competent authority will issue the IRC.
• If rejected, a written explanation will be provided.

Step 2: Apply for an Enterprise Registration Certificate (ERC)

Dossier component

The dossier depends on the type of enterprise, as per Decree 01/2021/ND-CP.

Competent authorities

Department of Finance, where the headquarters are planned to be located.

Time to process

The Department of Finance issues ERC within 3 working days from receipt of a complete application.

Step 3: Post-establishment procedures

Publishing of enterprise registration information

• As per Clause 1, Article 32 of the Enterprise Law 2020, after an enterprise is granted the Certificate of Enterprise Registration, it shall announce it on the National Enterprise Registration Portal and pay the fee as prescribed by law.
• The information shall be published for 30 days.
• The announcement shall include the content of the Enterprise Registration Certificate.

Note: According to Clause 1, Article 45 of Decree 122/2021/ND-CP, a fine ranging from VND 10,000,000 to VND 15,000,000 shall be imposed for Publishing enterprise registration information on the National Business Registration Portal behind schedule.

Seal creation

The enterprise may authorize Viet An Law Firm or do it independently. The enterprise is free to decide the form, quantity, and content of the seal, but it must show the enterprise’s name and business registration number.

Note: The Enterprise Law 2020 no longer requires notification of seal usage to the Department of Finance.

Contributing capital or purchasing shares/stakes in a Vietnamese ship towage services company

In this method, foreign investors do not need to obtain an Investment Registration Certificate, but only need to register their capital contribution, share purchase, or equity acquisition in a Vietnamese ship towage service company with the Department of Finance. This method is more time and cost-efficient. Once approval is granted by the Department of Finance, the enterprise will proceed with the transfer and change of members or shareholders.

Step 1: Foreign investors register capital contribution or share/stake purchase

Dossier component

As guided in Article 66 of Decree 31/2021/ND-CP.

Competent authorities

Business Registration Office at the Department of Finance, where the enterprise is headquartered

Procedure

If the investor meets the ownership ratio and investment form requirements under Vietnam’s Commitments and Laws, the Department of Finance will, within 15 days from the receipt of the valid application, issue a confirmation to both the investor and the enterprise. The notification shall be sent to foreign investors and business organizations to which foreign investors contribute capital or whose shares/stakes are purchased by foreign investors.

Step 2: Transfer of shares/stakes and change of members/shareholders

• After foreign investors are approved capital contribution or purchase of shares or stakes, the business organization to which foreign investors contribute capital or whose shares/stakes are purchased by foreign investors shall follow procedures for change of members or shareholders at the business registration authority in accordance with regulations of law on enterprises and other law corresponding to each type of business organization.
• Rights and obligations of foreign investors that act as members or shareholders of the business organization shall be established after completing the procedures for the change of members or shareholders.

Above is the advice of Viet An Law on the issue of foreign investment in ship towage services: Vietnam legal framework. Clients who have related questions or need legal support, please contact Viet An Law Firm for the best support!