“Enterprises are free to do business in any business areas that are not prohibited by law” is one of the statutory rights of the enterprises[1]. Law on Investment 2020 provides a list of prohibited business lines that all domestic and foreign investors must comply with.
- Prohibited business areas
Pursuant to Article 6 of Law on Investment 2020, there are 8 prohibited business areas[2], including:
- Trade in the narcotic substances
The prohibited narcotic substances are specified in Appendix I of the Law on Investment 2020, including 47 types, which can be followed by typical narcotics substances: Cetorphine, Acetyl-alpha- methylfenany, Alphacetylmethadol, Alpha-methylfentanyl, Beta-hydroxyfentanyl, Brolamphetamine, Cannabis and cannabis preparations, Heroine, opium and opium preparations, etc.
- Trade in the chemicals and minerals
According to Appendix II of the Law on Investment 2020, there are 18 types of chemicals and minerals prohibited from investment and business, including some typical substances such as burning gases containing sulfur, tear gas, dodecyl benzene sulfonic acid.
- Trade in specimens of wild flora and fauna
Specimens of endangered and rare wild animals and plants of Group I originated from nature which are banned from business and investment are specified in Appendix III of Law on Investment 2020.
- Prostitution
- Human trafficking; trade in human tissues and body parts
- Business activities pertaining to asexual human reproduction
- Trade in firecrackers
- Debt collection services.
Accordingly, foreign investors are not allowed to conduct any business activities that are relevant to the above-mentioned products and services.
- Legal consequences of doing business in a prohibited business area
Pursuant to Law on Enterprise 2020, the foreign investor shall not be granted an enterprise registration certificate to do business in Vietnam if she/he registers the prohibited business lines[3].
In addition, investors and/or enterprises doing business in a prohibited business area may be subject to criminal prosecution for the prostitution business[4], illegally dealing in narcotics[5], trading in firecrackers[6], trading in human tissues, organs, and body parts[7]. Although an enterprise is not subjected to imprisonment[8]. Criminal Code 2015 stated that “the fact that corporate legal entity has criminal responsibility does not exempt criminal responsibility of individuals”. Therefore, the individuals that instruct, approve the criminal offence of the enterprise may be sentenced up to life imprisonment.
- Exception on production and use of narcotic substances, chemicals, minerals, specimens of plant and wild animals in analysis, testing, scientific research, medicine, production pharmaceutical products, criminal investigation, security protection
Despite being prohibited for both foreign and domestic investors, the production and use of narcotic substances, chemicals, minerals, specimens of plants and wild animals in analysis, testing, scientific research, medicine, production of pharmaceutical products, criminal investigation, security protection may still be performed under the following conditions:
- The narcotic substances specified in Appendix 1 of the Law on Investment can be produced and used under permission from competent state agencies and in accordance with regulations on the Government on the List of narcotic substances and precursors, the Single Convention on Narcotic Drugs of 1961, and the United Nations Convention Against Illicit Traffic in Narcotic Drugs and Psychotropic Substances1988[9];
- The chemicals and minerals specified in Appendix 2 of the Law on Investment can be produced and used under permission from competent state agencies and in accordance with the regulations of the Government on management of controlled chemicals under Convention on the Prohibition of the Development, Production, Stockpiling and Use of Chemical Weapons and on their Destruction and documents providing guidance on implementation of the Rotterdam Convention on the Prior Informed Consent Procedure for Certain Hazardous Chemicals and Pesticides in International Trade[10];
- Samples of wild flora and fauna that are banned according to the Law on Investment can be used under permission of competent state agencies and in accordance with the regulations of the Government on management of endangered, precious and rare species of forest flora and fauna and the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES)[11].
[1] Law on Enterprises 2020, Article 7.1
[2] Law on Investment 2020, Article 6.1.(a)
[3] Law on Enterprise 2020, Article 27.1.(a)
[4] Prostitution broking offence is regulated under Article 328 of Vietnamese Code of Criminal Law 2015
[5] Drug – related offences are regulated under Chapter XX Vietnamese Code of Criminal Law 2015
[6] Offence of manufacturing and trading of banned goods offence regulated under Article 190 Vietnamese Code of Criminal Law 2015
[7] Trading, appropriation of human tissues or body parts offence regulated under Article 154 Vietnamese Code of Criminal Law 2015
[8] Criminal Code 2015, Article 33
[9] Decree No. 31/2021/ND-CP issued by Government on Elaboration of some articles of the law on investment dated 26 March 2021 (“Decree 31/2021/ND-CP”), Article 10.2.(a)
[10] Decree 31/2021/ND-CP, Article 10.2.(b)
[11] Decree 31/2021/ND-CP, Article 10.2.(c)
