Nguyen Khoi Nguyen[1] and Ha Cong Anh Bao[2]
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| Production of garments for export at Tinh Loi Garment Co., Ltd. in Lai Vu Industrial Park, Hai Phong city__Photo: VNA |
Fair and equitable treatment and the state's right to regulate
Fair and equitable treatment (FET) is a standard of protection under international investment law, although its scope and the threshold for establishing a breach vary between treaties.
Under Article 9.6(1) and (2) of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), FET forms part of the minimum standard of treatment under customary international law. This includes the obligation not to deny justice in criminal, civil or administrative adjudicatory proceedings, in accordance with the principle of due process. Article 9.6(4) and (5) further clarify that state action contrary to an investor's expectations, or a decision to discontinue, modify or reduce a subsidy or grant, does not in itself constitute a breach of the provision, even if the investment suffers losses.
Meanwhile, Article 2.5(2) of the EU-Vietnam Investment Protection Agreement (EVIPA) identifies several forms of conduct that constitute a breach of FET, including denial of justice, a fundamental breach of due process in judicial and administrative proceedings, manifest arbitrariness, targeted discrimination on manifestly wrongful grounds and abusive treatment. Under Article 2.5(4), a dispute settlement body may also consider whether the state made a specific representation to encourage an investment, creating a legitimate expectation on which the investor relied when making or maintaining the investment, but which was subsequently frustrated. Such representations may be considered when assessing compliance with FET, but do not amount to a general guarantee that all investors' business expectations will be met.
At the same time, Article 2.2 of EVIPA recognises the state’s right to regulate in pursuit of legitimate policy objectives. Investment protection does therefore not require the state to maintain an unchanged legal framework. Together, these provisions suggest that safeguards for investment incentives should be assessed not only in terms of the grounds for changing investors’ entitlements but also how the resulting impact is addressed. Viewed through the lens of FET, particular attention should be paid to whether decisions are properly justified and procedures are fair, taking into account the specific obligations under each agreement.
Vietnam’s safeguards for investment incentives when laws change
Article 12 of Vietnam’s 2025 Law on Investment provides two forms of protection for investment incentives when laws change. If a new legal instrument introduces new or more favourable incentives, investors are entitled to these incentives for the remainder of the incentive period, except certain special investment incentives excluded by law. Conversely, if the new rules provide less favourable incentives, investors may continue to enjoy their existing incentives for the remaining period.
However, this protection is subject to exceptions on grounds of national defence, national security, social order and safety, social morality, public health or environmental protection. Investors who lose their existing incentives as a result of these exceptions may be considered for one or more remedial measures, including deducting actual losses from taxable income, adjusting their investment projects’ objectives or receiving support to offset their losses. Investors seeking these remedial measures must submit a written request within three years from the date the new legal instrument takes effect.
Article 4 of Government Decree 96/2026/ND-CP, which guides the implementation of the law, further details these safeguards, covering incentives specified in documents issued by competent authorities or persons, as well as those granted directly under the law. Investors seeking remedial measures must submit an application dossier to the investment registration agency, which has 30 days from receipt of a valid dossier to consider and decide on the request. If the matter falls outside its authority, the agency must refer it to the competent authority for a decision.
Improving the framework requires a clear understanding of the scope of investor protection. Investors are entitled to fair treatment, but this does not give them the right to demand that the legal framework remain unchanged throughout the life of their projects.
The key considerations are how the state changes and applies the law, whether legally established rights are respected and what procedures are available for investors to seek remedies.
Key issues in safeguarding investment incentives
Article 12 of the 2025 Law on Investment provides for the continued application of investment incentives and remedial measures when investors can no longer retain those incentives in circumstances specified by law. By contrast, FET is a standard for assessing how a state treats investments protected under a particular treaty. Comparing the two frameworks therefore requires examining not only investors’ entitlements but also how state authorities handle their claims, from determining eligibility and selecting appropriate remedies to implementing the relevant procedures.
The first issue is determining why an investor can no longer benefit from an existing incentive. Article 12.4 applies when incentives cannot be maintained because of legal changes made for the reasons specified in Article 12.3. This differs from cases where businesses lose their eligibility for incentives because they no longer meet the statutory conditions. Hence, authorities must establish which incentives investors previously enjoyed, how the new regulations affect those incentives and the legal grounds for discontinuing them. Identifying the cause is essential to determining the appropriate course of action, rather than focusing solely on the extent of the benefits lost.
Once a claim is found to fall within the scope of Article 12.4, the next step is to determine which remedial measure is appropriate for the losses incurred and the circumstances of the project. For example, allowing a loss-making business to deduct losses from its taxable income may offer little immediate relief. Similarly, allowing investors to adjust their project objectives would be meaningful only if the proposed changes are feasible. Authorities should therefore be able to justify their choice of remedies and explain why they are appropriate in each case. Effective protection depends not only on the availability of remedies under the law but also on their implementation.
These considerations are also relevant to assessing state conduct under the FET standard. Clear criteria for selecting remedies, opportunities for investors to present their views and properly reasoned decisions would make administrative decisions easier to review and reduce the risk of arbitrary treatment. Such improvements could help prevent conduct identified in Article 2.5 of EVIPA, including manifest arbitrariness and fundamental breaches of due process. However, a procedural error or an unfavourable outcome does not automatically constitute a breach of FET. Any alleged violation must be assessed against the specific requirements and threshold established by the applicable treaty. Under the CPTPP, the relevant benchmark remains the minimum standard of treatment under customary international law.
Another concern is the time limit for seeking remedies. Under Article 12.5, investors have three years from the date a new legal instrument takes effect to submit a request, even if the adverse consequences become apparent only later. This may leave affected investors with less time to identify their losses, gather supporting evidence and file a request. Consideration should therefore be given to how the law addresses losses that arise later or could not reasonably have been identified earlier.
Preventing disputes is equally important. When drafting new regulations, policymakers should assess their potential impact on ongoing investment projects, particularly those with long payback periods, and review specific commitments previously established in accordance with the law. Such assessments would provide a basis for appropriate transitional provisions, allowing investors to anticipate regulatory changes and adjust their project plans accordingly.
Improving remedies and procedures for investor claims
To address these concerns, the law should establish clearer criteria for assessing losses, selecting appropriate remedies, determining levels of support and assigning responsibility for implementation. Support measures should take account of businesses’ circumstances, with clearly defined eligibility criteria and funding sources. Any proposed adjustment to a project’s objectives should also be assessed for feasibility, as allowing such changes does not necessarily mean that the losses have been remedied. These proposals would require more detailed guidance on implementing Article 12 of the Law on Investment and Article 4 of Decree 96/2026/ND-CP, consistent with relevant tax and budget laws.
It is also important to distinguish between support provided following lawful changes in legislation and compensation for losses arising from unlawful conduct where legal liability has been established. If an unlawful administrative decision causes losses, investors should have access to procedures for challenging the decision and seeking compensation in accordance with applicable laws. For claims brought under investment protection treaties, investors must establish a breach of a treaty obligation, resulting losses and a causal link between the breach and those losses. The support measures provided under Article 12 cannot automatically replace mechanisms for determining and addressing such legal liability.
Decisions on investors’ requests should clearly specify the remedies granted, the level of support or benefits, the responsible agencies and implementation deadlines. Investors whose requests are rejected or remain unresolved should have access to appropriate administrative complaint and judicial procedures. While consultation and negotiation could help resolve disputes at an early stage, clear time limits are needed to prevent prolonged uncertainty over investors’ entitlements. Effective procedures must therefore ensure not only that decisions are made but also that the remedies granted are implemented in practice.
The three-year time limit for seeking remedies also warrants review, including possible provisions for cases where losses arise later or could not reasonably have been identified earlier. Any adjustment to this statutory time limit would require action by a competent authority through an appropriate legal instrument, rather than an informal extension through administrative practice. Domestic deadlines for requesting remedies must also be distinguished from the limitation periods and conditions governing claims under investment treaties. Filing a domestic request does not automatically preserve the limitation period for initiating international proceedings.
To prevent disputes, policymakers should assess the impact of new regulations on ongoing projects, reviewing specific legally established commitments and introducing appropriate transitional provisions, particularly for projects with long payback periods. In the context of Article 2.5(4) of EVIPA, such reviews could also help identify specific representations made by the state on which investors relied when making or maintaining their investments. This would help Vietnam prepare for the agreement’s implementation without creating an obligation to maintain every incentive that investors may have expected to receive.
Ultimately, strengthening safeguards for investment incentives requires more than recognising investors’ legal entitlements. It also calls for clear grounds for resolving claims and effective implementation of remedies.
Effective investor protection requires claims to be considered on a reasoned basis, decisions to be open to review and remedies to be implemented in practice.
Such an approach would help protect investors’ lawful rights and interests while preserving the state’s ability to amend its laws.-
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Editorial note
Dr. Ha Cong Anh Bao is a co-author of this article. Third-person references to him, reported speech and quotations attributed to him have therefore been integrated into the authors’ analysis. The byline and author notes above identify both authors and their credentials.
[1] LL.B. (High Distinction), Foreign Trade University.
[2] PhD; Vice-Rector in charge of the School of Law and Political Science, Foreign Trade University.
