Decree 35/2023/ND-CP address the licensing of Foreign Contractors

1. Changes in Authority Issuing Construction Permits

Prior to the introduction of Decree 35/2023/ND-CP on June 20, 2023, the process of obtaining construction permits in Vietnam for foreign contractors involved navigating a complex web of authorities. This decree marks a significant shift by bringing about key changes in the responsible entities issuing construction permits, aiming to simplify procedures, expedite approvals, and ultimately, encourage foreign participation in the country's construction sector.

Decentralized Permit Issuing:

One of the most impactful changes introduced by Decree 35/2023/ND-CP is the decentralization of authority for issuing construction permits. This shift empowers Provincial People's Committees (PPCs) to take the lead in granting permits for most construction projects within their respective provinces. This move eliminates the need for approval from the Ministry of Construction (MoC) in most cases, streamlining the process and reducing administrative burdens for foreign contractors.

Previously, the MoC acted as the central authority for issuing construction permits for all projects exceeding a certain threshold of investment or complexity. This centralized approach often resulted in lengthy processing times and potential delays due to administrative bottlenecks. By empowering PPCs, the decree empowers local authorities with a deeper understanding of regional development plans and specific project needs, potentially leading to faster and more efficient permit approvals.

However, it's important to note that the decree does not eliminate the role of the MoC entirely. PPCs still require the MoC's approval for projects falling under specific categories, such as:

• Projects involving construction in special economic zones or industrial parks managed by the MoC.
• Projects undertaken by state-owned enterprises under the direct management of the MoC.
• Projects related to national defense and security.

Clearer Authority for Special Cases:

In addition to decentralization, Decree 35/2023/ND-CP also aims to address situations where the authority issuing construction permits was previously unclear, particularly for complex projects or those undergoing design adjustments.

For instance, prior to the decree, confusion existed regarding who would issue permits for projects involving multiple work types, such as a construction project with both building and infrastructure components. The decree now clarifies that the authority responsible for the dominant work type will be in charge of issuing the permit, eliminating ambiguity and ensuring smooth processing for such projects.

Similarly, the decree addresses concerns regarding projects requiring adjustments to their designs after the initial permit is issued. The previous regulations lacked specific procedures for handling such situations. Decree 35/2023/ND-CP now outlines a clear process for applying for permit adjustments, providing much-needed guidance for foreign contractors facing design changes during the construction process.

Impact and Future Implications:

The changes to permit issuing authorities under Decree 35/2023/ND-CP are expected to have a positive impact on foreign contractors seeking to participate in Vietnam's construction sector. The decentralization approach offers several advantages:

• Faster Processing Times: By eliminating the need for MoC approval in many cases, the process of obtaining a construction permit is likely to become faster and more efficient for foreign contractors.
• Reduced Administrative Burden: Streamlining the application process and reducing the number of entities involved simplifies administrative procedures, minimizing the workload and potential delays for foreign businesses.
• Improved Transparency: Decentralization can potentially lead to increased transparency as foreign contractors directly interact with local authorities familiar with specific regional regulations and requirements.

While the decree marks a significant step towards simplifying construction licensing for foreign contractors, it's crucial to remember that navigating the legal landscape in Vietnam can still be complex. Foreign companies seeking to participate in the construction sector are recommended to:

• Stay informed: Regularly monitor regulatory updates and changes in Vietnamese construction law.
• Seek legal assistance: Consult with qualified Vietnamese legal professionals specializing in construction law to ensure compliance with all applicable regulations and navigate the permit application process effectively.
• Maintain clear communication: Establish consistent communication with the relevant authorities (PPC or MoC) to ensure a smooth and transparent application process.

By understanding the changes introduced by Decree 35/2023/ND-CP and taking the necessary steps to comply with updated regulations, foreign contractors can leverage the opportunities presented by Vietnam's dynamic construction sector and contribute to its continued growth and development.

2. Simplified Construction Operating License (COL) Issuance

Prior to the introduction of Decree 35/2023/ND-CP on June 20, 2023, obtaining a Construction Operating License (COL) in Vietnam for foreign contractors presented a challenge due to a complex and multifaceted process. Decree 35/2023/ND-CP aims to address these complexities, introducing significant changes aimed at simplifying COL issuance and streamlining operations for foreign contractors engaged in construction activities within Vietnam.

Consolidated Authority for COL Issuance:

One of the most impactful changes introduced by Decree 35/2023/ND-CP relates to the issuing authority for COLs. Previously, the responsibility for issuing COLs was divided between two entities:

• Construction Specialized Agency (CSA) under the Ministry of Construction (MoC): Responsible for issuing COLs for projects of high complexity, significant investment value, or national importance.
• Department of Construction (DoC) in the province: Responsible for issuing COLs for all other projects.

This previous system created confusion and administrative burden for foreign contractors, as determining the correct authority to approach for their specific project could be complex and time-consuming.

Decree 35/2023/ND-CP simplifies the process by consolidating the authority for issuing COLs to the DoC in the province where the foreign contractor's administrative office is located. This shift eliminates the ambiguity surrounding which entity to approach and streamlines the application process for foreign contractors regardless of project size, complexity, or location.

Simplified Application Process:

By consolidating the authority for issuing COLs, Decree 35/2023/ND-CP also simplifies the application process. Under the previous system, foreign contractors had to navigate two separate application procedures, potentially requiring different document sets and procedures depending on the responsible authority.

With the new regulations, foreign contractors can submit one application directly to the DoC in the relevant province, regardless of project specifics. This streamlined approach reduces administrative burdens, minimizes potential delays, and makes the application process more efficient for foreign businesses.

Addressing the Gap in COL Adjustments:

An additional significant change introduced by Decree 35/2023/ND-CP relates to adjustments of COLs after issuance. Previously, the previous regulations lacked a clear mechanism for handling situations where foreign contractors needed to update information on their licenses after they were issued. This gap created uncertainty and potential legal ramifications for contractors required to make changes to their legal structure, personnel, or other details reflected in the COL.

Decree 35/2023/ND-CP addresses this gap by introducing a new provision outlining the process for adjusting COLs. This new provision establishes a clear and defined procedure for foreign contractors to follow when needing to update their licenses after issuance, providing much-needed clarity and minimizing potential legal risks.

Overall Impact and Benefits:

The changes brought about by Decree 35/2023/ND-CP regarding COL issuance are expected to offer several benefits to foreign contractors operating in Vietnam's construction sector:

• Reduced Administrative Burden: The consolidation of authority and streamlined application process contribute towards reducing the administrative burden and complexity associated with obtaining and maintaining COLs.
• Enhanced Efficiency: Faster processing times and simplified procedures can lead to a more efficient operational environment for foreign contractors, enabling them to focus on core business activities.
• Increased Transparency: Clearer procedures and a single point of contact can enhance transparency for foreign contractors, promoting better understanding of regulatory requirements and fostering trust in the regulatory framework.

In summary:

Decree 35/2023/ND-CP marks a significant step towards simplifying COL issuance in Vietnam, making the process more user-friendly and efficient for foreign contractors. While navigating the legal landscape in Vietnam can still be intricate, understanding these changes and seeking guidance from qualified legal professionals can enable foreign businesses to operate effectively and contribute to the ongoing development of Vietnam's construction sector.

3. Other Key Updates

While the changes related to construction permit issuing authorities and Construction Operating Licenses (COLs) represent the most significant amendments introduced by Decree 35/2023/ND-CP, the decree incorporates several other key updates aiming to streamline and clarify construction licensing procedures in Vietnam.

1. Revocation of Construction Permits:

The decree expands the grounds for revoking construction permits to ensure adherence to legal requirements and ethical practices. In addition to previously established reasons for revocation, the decree now includes situations where the issued permit:

• Does not meet the conditions for issuance in accordance with the law. This provision empowers authorities to revoke permits granted due to errors, omissions, or misrepresentations during the application process.
• Violates the law. This clarifies the consequences of non-compliance with construction regulations, ensuring that permits can be revoked if contractors engage in illegal activities during the construction process.

2. Project Classification:

Decree 35/2023/ND-CP clarifies the purpose and application of project classification outlined in Decree 15/2021/ND-CP. The decree explicitly states that project classification:

• Serves the management of construction activities according to the Law on Construction.
• Does not apply to new urban area construction projects subject to land recovery under the provisions of Article 62 of the Land Law No. 45/2013/QH13. This distinction ensures that the specific regulations surrounding land recovery and new urban area development are not overridden by the project classification system.

3. Transitional Regulations:

The decree also establishes transitional regulations to ensure a smooth implementation process and minimize disruptions for ongoing projects:

• Foreign contractors who have already submitted applications for construction permits or COLs under the previous regulations will continue to have their applications processed according to those regulations.
• The issuance and adjustment of COLs from the effective date of Decree 35/2023/ND-CP will be carried out in accordance with the provisions of the new decree.

Conclusion:

The additional updates included in Decree 35/2023/ND-CP, while not as extensive as the revisions to permit issuing authorities and COL issuance, contribute to the overall goal of streamlining and clarifying construction licensing procedures in Vietnam. These changes aim to:

• Enhance the integrity of the licensing system by addressing potential loopholes and ensuring adherence to legal requirements.
• Provide greater clarity and predictability for foreign contractors navigating the regulatory environment.
• Promote a more efficient and transparent construction sector in Vietnam.

By understanding these additional updates, foreign contractors can operate with greater confidence and contribute to the sustainable development of Vietnam's construction industry.

4. Conclusion

Decree 35/2023/ND-CP marks a significant milestone in Vietnam's efforts to streamline and simplify construction licensing procedures for foreign contractors. The decree introduces key changes, including the decentralization of permit issuing authority, the consolidation of COL issuance, and a range of other clarifications, aiming to:

• Reduce administrative burdens and expedite the licensing process.
• Enhance transparency and predictability for foreign businesses.
• Promote a more efficient and competitive construction sector in Vietnam.

While navigating the legal landscape in Vietnam can still be complex, understanding the changes introduced by Decree 35/2023/ND-CP and seeking guidance from qualified legal professionals can equip foreign contractors to operate effectively and contribute to the continued growth and development of Vietnam's construction industry. As Vietnam strives to further attract foreign investment and expertise in its construction sector, these recent regulatory changes pave the way for a brighter future for foreign contractors seeking to participate in this dynamic and evolving market.

If you need further explanation on this subject, please don't hesitate to contact us through email at lienhe@luatminhkhue.vn or phone at: +84986 386 648. Lawyer To Thi Phuong Dzung.