You are using an outdated browser and your browsing experience will not be optimal. Please update to the latest version of Microsoft Edge, Google Chrome or Mozilla Firefox. Install Microsoft Edge

Search
Close this search box.
June 6, 2024

Potential Impact of Vietnam’s New Land Law on the Energy Sector

Subscribe to Updates

On January 18, 2024, Vietnam’s National Assembly passed a new Land Law (“Land Law 2024”) that is scheduled to take effect on January 1, 2025, replacing the current Land Law 2013. To mitigate challenges faced by the real estate market, in late May 2024, the government proposed amendments to the Land Law that would move the effective date up five months, to August 1, 2024, pending approval by the National Assembly.

One of the key sectors to be impacted by the Land Law 2024 is the energy sector, which requires large land areas for power plants and infrastructure, especially given Vietnam’s 2050 net zero emissions commitment. Below are highlights of how the new Land Law 2024 will affect Vietnam’s energy sector.

Annual payment of land rental

Under the Land Law 2013, investors implementing energy projects (e.g., solar power projects) are entitled to choose to lease land with either (i) an annual rental payment or (ii) a single upfront payment for the entire term of use. Under the Land Law 2024, these investors are only allowed to use land in the form of an annual rental payment.

As the annual land rental is calculated in five-year cycles, based on the land price table decided by the state, this new restriction means that investors in energy projects will face an additional risk of a sudden increase in land rental, disrupting their financial planning.

Investors using land sites leased with annual rental payments are also not allowed to mortgage their land-use rights, but can only mortgage assets attached to the land, at credit institutions licensed to operate in Vietnam. Accordingly, this may affect the ability of energy projects to obtain financing during the development stage, because they no longer have assets that can be mortgaged.

Obtaining land

Under the Land Law 2024, investors can obtain land through a lease without any auction or bidding process; through an auction process (for selecting the land user of a land site); or through a bidding process (for selecting the investor implementing an investment project with the need to use land).

Investors in energy projects using public investment capital and public-private partnership (PPP) projects can lease a land site from the state without an auction or bidding process. Further details on these conditions are to be provided by the government.

An auction process will apply to energy projects that intend to use land obtained from the land fund managed by the state if the following conditions are satisfied: (i) the land site is clean and does not require compensation or site-clearance work; (ii) the land site is included in the annual land-use plans approved for auction; and (iii) a 1/500 plan and auction plan are approved by the competent authorities.

A bidding process will apply to energy projects that must conduct bidding to select investors according to specialized laws, such as the laws on electricity, if the following conditions are satisfied: (i) the land is on the list of land sites subject to bidding for selection of investors for an investment project as decided by the provincial People’s Council; (ii) a detailed plan or a 1/2000 zoning plan is approved by the competent authorities; and (iii) other conditions under the laws on bidding are met.

Compared to the Land Law 2013, the Land Law 2024 supplements the bidding for projects using land as a new method for investors to gain access to land. This addition aims to increase competition and fairness for investors.

Compensation, support, and resettlement procedure

If the land for implementing an energy project is currently occupied, a compensation, support and resettlement procedure must be carried out. Under the current Land Law 2013, the decision on land recovery and the decision on the plan for compensation, support and resettlement are issued concurrently. Under the new Land Law 2024, the decision on land recovery will only be issued within 10 days after, among other conditions, the plan on compensation, support, and resettlement has been issued, if resettlement is not required; or the person whose land is recovered has had another land site allocated or handed over by a competent authority to build their own resettlement housing.

These new regulations will extend the length of the land clearance procedure considerably when the recovered land requires resettlement, as the decision on land recovery will only be issued after the resettlement is deemed completed.

Commercial arbitration as a dispute resolution mechanism

Another crucial aspect of the new law is that commercial arbitration is clearly recognized as a dispute resolution mechanism for land-related disputes. Previously, there was uncertainty surrounding whether disputes relating to land could be adjudicated by arbitration. Pursuant to the Land Law 2024, Vietnamese commercial arbitration can resolve disputes arising from commercial activities related to land in accordance with the law on commercial arbitration.

Outlook

The new Land Law aims to address overlapping and conflicting issues of related land policies and laws, while tackling practical challenges in land management and land use. It promotes the commercialization of land-use rights, fostering transparent real estate markets, modernizing land management systems, and implementing administrative and digital reforms to improve land accessibility, especially for energy projects.

Related Professionals

Industries

Energy

Practices

Real Estate

Location

RELATED INSIGHTS​

August 12, 2024
With the growing prominence of ESG (Environmental, Social, and Governance) factors, businesses in Vietnam are increasingly recognizing their importance in driving global demand, societal impact, and economic value. A comprehensive acknowledgment of ESG-related legal requirements is critical for investors and companies operating in Vietnam to meet stakeholder expectations and ensure compliance. Our guide provides a basic overview of the rapidly evolving ESG landscape in Vietnam, covering a range of key issues for companies doing business in the country: What is ESG, and what does the ESG legal framework look like in Vietnam? Who needs to follow ESG regulations in Vietnam? What are the benefits of ESG compliance? How can enterprises enhance ESG best practices in Vietnam? Please click on the link below to view the full article.
Read More
June 4, 2024
Thailand’s Department of Mineral Fuels (DMF) is in the process of preparing a notification that will open the application period for onshore petroleum exploration and production rights in the country’s 25th bidding round. The 25th round of bidding will cover nine petroleum blocks, including the northeastern areas (blocks L1/66, L2/66, L3/66, L4/66, L5/66, L7/66, and L9/66) and central areas (blocks L6/66 and L8/66). The DMF estimates that application submissions will commence around the middle of 2024, and the successful bidder will be announced at the end of the same year. Based on previous rounds of bidding, applicants must meet the following key criteria: The applicant is a company with the purpose of carrying out petroleum exploration and production; The applicant commands the necessary assets, machinery, equipment, tools, and specialists to explore for, produce, sell, and dispose of petroleum; The applicant has not abandoned its operations under a concession or been subject to revocation of a concession in Thailand; and None of its personnel, shareholders, directors, or authorized directors is listed as a person who has abandoned its operations under a concession, or has been subject to revocation of a concession in Thailand. If the applicant does not itself possess all the qualifications under (2) above, it must have another government-approved company that possesses all the qualifications under (2) and has a capital or management relationship with the applicant, and the applicant must supply guarantees that the company will make available to the applicant all necessary assets, machinery, equipment, tools, and specialists for the applicant to explore for, produce, sell, and dispose of petroleum. Companies with a vested interest in petroleum exploration and production in Thailand must remain vigilant for updates. The DMF is expected to provide an update and more details on the bidding very soon. For more details
Read More
June 4, 2024
As Vietnam continues its rapid economic development, the demand for sustainable and reliable energy sources has never been more critical. Solar power has emerged as a key component of Vietnam’s strategy to diversify its energy portfolio and reduce its carbon footprint. Recent developments of the regulatory framework governing solar power projects in Vietnam, as discussed below, highlight the country’s commitment to renewable energy and its efforts to create a conducive environment for solar power investments. Objectives for the Development of Solar Power Projects On May 15, 2023, the Prime Minister issued Decision No. 500/QD-TTg, approving the National Power Development Plan for 2021-2030 with a vision to 2050 (“PDP VIII”). Following this, on April 1, 2024, the Prime Minister promulgated the Implementation Plan for PDP VIII (“Implementation Plan”). These documents underscore Vietnam’s commitment to promoting renewable energy, particularly solar. They emphasize self-production and self-consumption of solar power, the development of rooftop solar systems, and the promulgation of the direct power purchase mechanism. The integration of solar power with battery storage is also encouraged, contingent upon economic viability. PDP VIII sets ambitious capacity targets for solar power. By 2030, the capacity is projected to reach approximately 12,836 MW, accounting for 8.5% of the total power capacity. This includes 10,236 MW from concentrated solar power and 2,600 MW from self-production and self-consumption solar power. By 2050, the capacity is expected to rise to between 168,594 MW and 189,294 MW, representing 33.0-34.4% of the total power capacity. Additionally, PDP VIII and the Implementation Plan list 27 solar power projects, totaling 4,136.25 MW, slated for implementation after 2030. However, these projects may be advanced under self-production and self-consumption arrangements. Draft Decree on Direct Power Purchase Agreements On April 15, 2024, the Ministry of Industry and Trade (“MOIT”) released a draft decree on direct power
Read More
June 3, 2024
Nearly a year after Vietnam’s issuance of its National Power Development Plan for 2021-2030, with a vision to 2050 (“PDP VIII”), the Prime Minister issued Decision No. 262/QD-TTg dated April 1, 2024, approving the Implementation Plan for PDP VIII (“Implementation Plan”). Among other contents, the Implementation Plan sets forth the list of prioritized power source projects through 2030, and the capacity of renewable energy sources through 2030, as detailed below. Prioritized Power Source Projects through 2030 The Implementation Plan lists out six types of power source projects prioritized for development through 2023 according to the capacity approved under PDP VIII. They include: Domestic gas-fired power (14,930 MW) LNG-fired power (22,400 MW) Coal-fired power (30,127 MW) Cogeneration power using residual heat, blast furnace gas, and by-products of technological lines in industrial facilities (2,700 MW) Hydropower (29,346 MW) Pumped storage hydropower (2,400 MW) With respect to each type, the Implementation Plan provides details of projects by location and their operational progress. Such information is set out in Schedule III of the Implementation Plan. For power source projects not included in this list, the provincial People’s Committees will consult with the Ministry of Industry and Trade (“MOIT”) and relevant agencies on compliance with the planning prior to appraisal and issuance of in-principle investment approval. Renewable Energy Projects through 2030 The Implementation Plan allocates the capacity of the following renewable energy sources by locality/region: Offshore wind power (6,000 MW) Onshore wind power (21,880 MW) Hydroelectric power (29,346 MW) Biomass electricity (1,088 MW) Electricity produced from waste (1,182 MW) Rooftop solar power for self-production and self-consumption (2,600 MW) Battery storage (300 MW) With respect to each renewable energy source, the Implementation Plan provides a list of certain renewable energy projects through 2030, including the expected life cycle of the projects, and the allocated capacity
Read More

Contact

We have seven offices in six countries
across Southeast Asia.

Contact Us

Careers

We are always seeking great people to grow
our amazing team.

Join Us

Networks

© 2024 Tilleke & Gibbins International Ltd. All rights reserved.

© 2020 Tilleke & Gibbins International Ltd. All rights reserved.

Privacy Policy

| Fraudulent Communications

| Legal Notice