Vietnam Amends Law on Electronic Transactions: Implications for Foreign Firms
The law in Vietnam on e-transactions, issued in March 2006, exhibits some shortcomings concerning modern electronic transactions. Therefore, to promote electronic trade, the National Assembly of Vietnam in June 2023 approved the revised Law on Electronic Transactions. Here’s what this might mean for foreign firms.
In June 2023, the Vietnamese government approved the amended Law on Electronic Transactions (LoET) No. 20/2023/QH15. This was to ensure that Vietnam’s economy would keep pace with global technological advancements and accurately conduct real-time transactions online.
The new law lays the groundwork for electronic transactions and adds new features to the original scope of application, definitions of e-transactions, e-contract performance, data sharing, and regulations on databases.
These efforts were made to reduce cross-border transaction fees for foreign firms and facilitate business transactions in the electronic environment. The amendments to the new law have also abolished unnecessary administrative procedures in the implementation of certain e-transactions, helping foreign firms to swiftly adapt to the ever-evolving global digital payments landscape.
What’s an e-transaction?
As per the LoET 2005, an e-transaction is defined as a transaction that is carried out by electronic means, which are unrestricted by geographical boundaries and are devoid of direct face-to-face interactions.
The new e-transaction laws revolve around regulating electronic components of transactions, such as electronic contracts, signatures, documents, authentication services, and cybersecurity, rather than governing the actual transactions themselves. Furthermore, the LoET 2023 has removed several exclusions from the LoET 2005 and extended its scope of application to allow e-transactions in the following areas:
- Issuance of land use rights certificates;
- Real estate ownership certificates;
- Bills of exchange; and
- Other important documents.
With these documents being excluded from the law’s application, LoET legislation will allow for the application of electronic transactions in all areas of socio-economic development in Vietnam. This will have some profound impact on a wide range of industries, including commerce, real estate, banking and finance, logistics, and industrial production. Therefore, the adoption of e-transactions will offer manifold benefits and conveniences to Vietnamese businesses in the current context of rapid technological change.
Key features in the new amended law
With the increasing digitization of the traditional brick-and-mortar economy, there is a corresponding rising necessity for legislative amendments to manage the online environment.
The LoET 2023 is built on the success of its previous version, which serves as the national legal framework for transactions conducted by electronic data exchange and other means of communication. The features are summarized below.
Assuring the legal validity of new electronic transactions
The new law has supplemented several new definitions of key terms to recognize their legal validity, including e-environment, e-certificate, e-contract, e-signature, and trust services.
This will, in turn, help state administrative management to develop more comprehensive regulations to support e-transactions across all industries. Recognizing the legal validity of e-transactions in areas where notarization or certification are necessary for transaction execution, will help businesses to minimize processing times and expenses.
Additionally, the law also provides for conversions from written documents to data messages and vice versa. With the introduction of trust services and e-certificates, the administrative procedures will take place in the electronic environment, thus facilitating the implementation of online public services. This also guarantees the legal validity of licenses, certificates, and approvals and therefore builds credibility and security for e-transactions.
Stricter requirements for the recognition of foreign e-signatures and foreign e-signature certificates
The LoET 2023 also supplements regulations on the recognition of foreign e-signatures and foreign e-signature certificates. However, the law also requires foreign e-signatures and foreign e-signature certificates to meet certain conditions for usage in cross-border transactions:
- Foreign e-signature authentication service providers must have a representative office in Vietnam.
- Foreign e-signature and foreign e-signature certificates must comply with Vietnamese laws and international standards in the data messages that are sent to the contracting party from Vietnam.
- Foreign e-signature certificates need to be created based on verified identification information of foreign organizations and individuals.
These provisions will minimize cross-border transaction expenses for firms, and therefore carve a path toward simpler cross-border e-transactions. However, the Ministry of Information and Communications (MIC), which is in charge of overseeing e-transactions on behalf of the government, has not yet provided implementation guidelines for this legislation.
Prohibited acts in e-transactions
Article 6 of the Law on E-transactions 2023 sets out specific prohibited acts in e-transactions and helps develop a consistent legal framework regulating e-transactions. These prohibited acts are prescribed under the law as follows:
- Taking advantage of e-transactions to violate legal rights, national security, public safety, as well as the interests of agencies and organizations.
- Disrupting the creation, transmission, receipt, and storage of data messages; illegally damaging the information system supporting e-transactions.
- Illegally collecting, providing, using, disclosing, displaying, distributing, and trading data messages; counterfeiting, falsifying, or illegally deleting, canceling, copying, or moving part of a data message.
- Committing fraud, forgery, misappropriation, or illegal use of e-transaction accounts, e-certificates, e-signature certificates, or e-signatures.
- Obstructing the selection of conducting e-transactions.
- Other acts prohibited by the law.
Implications for relevant stakeholders in adopting e-transactions
The law on electronic transactions lays out the principles for performing e-transactions and the legal groundwork for the evolving e-market in Vietnam. With e-transactions and digital technology advancing at an exponential rate, making existing legislation gradually outdated, it has become imperative for state administrative management to accelerate the National Digital Transformation Program while ensuring user safety in the electronic environment.
For foreign businesses, e-transactions have offered manifold benefits. Remarkable changes brought about by electronic transactions lie in their speed, convenience, resource efficiency, and cost-effectiveness. Foreign firms can optimize the processing time for administrative procedures and contract negotiations, thus providing unprecedented opportunities for businesses to form partnerships and make deals with companies worldwide.
However, with the new law being updated with several amendments and supplements, firms must adapt to comply with the stringent provisions and requirements prescribed in the law, especially for transactions conducted between businesses and state management agencies.
According to Nguyen Hung Quang, executive director of NHQuang & Associates, firms must use caution when conducting e-transactions. For instance, the law is unclear about the use of the open data of state agencies. As per the LoET 2023, organizations are free to access and utilize open data without being asked for identification. They may also freely copy, distribute, trade, and use open data, and use it in their commercial and non-commercial activities.
Businesses need to ensure compliance with the regulations set out in the law. The increasing adoption and implementation of e-transactions in recent years has underscored the need for stricter regulations governing the electronic environment. Certain sectors in Vietnam demanding high levels of global integration—such as e-commerce, banking, and cross-border trade—have gradually become a strong pillar for Vietnam’s economic growth, thus requiring state management agencies to create a more favorable legal framework and a more business-conducive environment.
Recent years have seen the proliferation of digital technologies and the internet economy in Vietnam. Such developments in AI, blockchain technology, big data, and biometrics have made it necessary to update the Law on Electronic Transaction 2005 and revealed some shortcomings in managing the use of e-transactions. The LoET 2023 has set out specific regulations and definitions for key terms to recognize the legal validity of several components constituting e-transactions, helping to accelerate Vietnam’s digital transformation agenda.
However, firms should be aware of the stricter requirements and the prohibited acts regarding the use of e-transactions in Vietnam. Complying with these regulations will help foreign firms tackle the challenges posed by complex procedures and costly e-transactions that are currently taking place in both written papers and electronic forms.
For support with legal and regulatory requirements in Vietnam, contact the legal experts at Dezan Shira and Associates.
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