In the process of Vietnam joining the World Trade Organization – WTO, Vietnam has rapidly and comprehensively renewed and modernized its commercial legal framework, typically the legal framework on franchising. The provisions on franchising in the 2005 Commercial Law are followed by sub-law documents with detailed regulations that have helped Vietnam become one of more than 30 countries in the world with its own legal regulations. on franchising.
Franchising and Vietnam’s commitment to join the WTO on franchising
Conceptually, franchising can be understood as a business practice in which “the franchisor – the party who has ownership rights over a marketing system, business service or product (attached to trade name or trademark) – enters into a contract with the franchisee and grants the franchisee under certain conditions the right to use the trade name or trademark and the right to manufacture or distribute the products and services obligations of the franchisor” (1).
In Vietnam, franchising is a relatively new business method but has developed stably for more than a decade, especially since Vietnam promulgated a direct legal regulation on franchising. in 2005 (effective from 2006). Since the introduction of these regulations, the number of franchise systems, both domestic and foreign, has increased to 96, more than four times the total number of systems established in the previous 10 years. Up to now, the number of franchise systems nationwide is about 270, most of which are foreign franchise systems. (2) Although most of the stores are still owned and operated by franchisees, the number of stores in each franchise system has increased significantly since Vietnam joined the WTO.
The general commercial legal framework governing commercial franchising in Vietnam includes general regulations governing commercial activities, including important legal documents such as the Constitution, international treaties relating to commercial activities. Commercial Law, Civil Code, Commercial Law, Intellectual Property Law, Enterprise Law, Investment Law, Technology Transfer Law, Competition Law. Meanwhile, Vietnam’s own law on franchising was introduced in 2005 with regulations that directly govern franchising.
When joining the WTO, along with having to comply with the provisions of the General Agreement on Trade in Services (GATS), Vietnam has made specific and open commitments on franchising as a type of commercial franchising. independent distribution service (CPC 8929). (3) In which, on market opening for franchising, except for the method of presence of natural persons, Vietnam makes specific commitments to the remaining three modes of service provision: providing through borders, consumption abroad and commercial presence. Accordingly, for the cross-border method and consumption abroad, Vietnam does not put any restrictions on foreign franchisors in accessing the Vietnamese market and they will be entitled to the same treatment. equal to Vietnamese franchisors. In the commercial presence mode, the foreign franchisor enjoys national treatment, under which they are equal to the domestic franchisor, except for the case where the foreign franchisor establishes a branch in Vietnam. The head of the branch must be a permanent resident in Vietnam.
Vietnamese legal framework on franchising
Before joining the WTO, the provisions of Vietnamese law did not recognize franchising as an independent commercial activity, causing many obstacles for franchisors and franchisees, unable to operate properly. Commerce. The introduction of a separate law on commercial franchising with the first component being legal regulations encapsulated in a chapter of the 2005 Commercial Law – is the “response” of the State of Vietnam. Nam for the practical requirements of a clear legal framework for the development of franchising. These regulations have created the basic framework for Vietnam’s own law on franchising.
In order to create a more complete legal environment for franchising, on the basis of that framework, on March 31, 2006, the Government issued Decree No. 35/2006 detailing the Commercial Law on commercial activities. Franchising. Decree 35 focuses on regulating the franchise introduction, which is at the heart of any franchise-specific legislation around the world. This Decree also sets forth regulations governing the rights and obligations between franchisors and franchisees regarding franchise registration. In order to further clarify regulations on franchise registration and franchise introduction, on May 25, 2006, the Ministry of Trade (now the Ministry of Industry and Trade) issued Circular No. 09/2006/TT -BTM guides the registration of franchising activities. This Circular has introduced the compulsory Franchise Introduction form in Appendix III of the Circular. On November 17, 2008, the Minister of Finance issued Decision No. 106/2008/QD-BTC on stipulating the collection rate, mode of collection, payment, management and use of fees for registration of franchising activities. commercial rights.
With the provisions contained in the above four legal documents, Vietnam has for the first time developed its own law on commercial franchising with an adjustment model that is quite popular in the world right before the time of WTO accession. – establishes an obligation to provide a franchise demo in conjunction with moderate requirements for franchise registration and enforcement standards. In an effort to further reduce unnecessary administrative procedures for businesses as well as ensure compliance with WTO’s national treatment principles, the Government has issued Decree 120/2011/ND-CP and Decree No. Decree No. 08/2018/ND-CP abolishes the obligation to register for commercial franchising for domestic and foreign investors, respectively. These decrees have really created equality, like Vietnam’s commitment when joining the WTO, between foreign franchisors and domestic franchisors in not having to perform compulsory franchise registration obligations.
Franchising in the process of implementing WTO commitments
The development of a common commercial legal framework has brought about a better business-investment environment for franchising. The development of the common commercial legal framework is really impressive: individuals and organizations can conduct business in any field, not prohibited by law; freedom of contract is recognized; a common “playing field” is established for all types of businesses and an equal treatment is applied to all investors; along with that is a mechanism to protect intellectual property rights in line with the WTO’s TRIPs Agreement and advanced international practices. Meanwhile, in order to ensure compliance with the requirements set forth by the WTO accession negotiation process, especially the specific commitments on franchising, the provisions of the separate law on franchising for the first time must be met. The first was built by Vietnam on the basis of extensive reference to international experiences, especially those of the US, Australia, China and UNIDROIT (4). Vietnam’s own law on franchising has recognized franchising as an independent commercial activity true to its inherent nature and is considered to be basically modern, elaborately drafted and balance the issue of freedom of business with protection of franchisees (5). These regulations have continued to be improved during the implementation of WTO commitments, including the abolition of the franchise registration procedure. The process of joining and implementing WTO clearly has a great and positive influence on Vietnam’s commercial franchising law. These are not only strong innovations in the provisions of the general commercial legal framework, but especially Vietnam’s regulations on commercial franchising in accordance with WTO law, Vietnam’s commitment to join the WTO, and Vietnam’s commitment to join the WTO. advanced international reality.
The article references the following sources:
(1) The House of Representatives Standing Committee on Industry, tldd., paragraph 3.4;
(2) According to the statistics of Assoc. Prof. Dr. Nguyen Ba Binh in the article “Effect of WTO accession to Vietnam’s commercial franchising law”, Jurisprudence Journal No. 10/2020;
(3) Schedule of service commitments upon Vietnam’s WTO accession;
(4) Interview with Professor Andrew Terry, University of Sydney, April 1, 2011;
(5) Vietnam Investment Review, “Franchise Operations Face Serious Challenges”.
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