the law on protection of consumers' rights – vietnam's ... … · the law on protection...

Ho Chi Minh City, 9 May 2012

The Law on Protection of Consumers' Rights –Vietnam's Magna Carta for Consumers?

Christian Schaefer, Hogan Lovells International LLP

www.hoganlovells.com

OUTLINE

1. Overview

2. Scope of application

3. Standard form contracts and "general trading conditions”

4. Protection of personal data and information

5. Implications for product liability

6. Dispute resolution process

7. Risks and legal consequences

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1. Overview

Key regulations:

• Law 59/2010/QH12 dated 17 November 2010 on protection ofconsumers’ rights (effective as of 1 July 2011, “LOPC”)

• Decree 99/2011/ND-CP dated 27 October 2011 of the Governmentmaking detailed provisions and providing guidelines for theimplementation of a number of articles of the Law on protection ofconsumers’ rights (“Decree 99”)

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1. Overview (cont’d)

• Decree 19/2012/ND-CP dated 16 March 2012 of the Governmentproviding on fines in protection of consumers’ rights (“Decree 19”)

• Decision 02/2012/QD-TTg dated 13 January 2012 of the PrimeMinister promulgating the list of essential goods and services forwhich contract forms and general trading conditions must beregistered (“Decision 02”)

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Objectives:

• initially: to establish a comprehensive framework of consumers’ rightsin Vietnam – Article 1 LOPC

• to replace the outdated Ordinance on protection of consumers’ rights(1999)

• however, results and outcome are far “tamer” than initially planned

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• Introduction / clarification of a number of typical conceptsrelating to consumer protection, such as:

- Standards for general terms and conditions

- Right of rescission from contracts entered into online, over thephone, at consumer’s home or work place

- Product liability

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2. Scope of application

• LOCP governs the relationship (rights and responsibilities)between consumers and “traders”

• “Consumer”:

- “person purchasing or using goods and services with the aim ofconsumption for living purposes by an individual, family ororganization” (Article 3.1 LOCP)

- no requirement that buyer and user/consumer of the goods orservices are identical

- use/consumption by organization?

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2. Scope of application (cont’d)

• “Trader”

- organization or individual conducting business in goods and servicesthat “implement” one or more phases of the investment process fromtheir manufacturing to their commercial sale (Article 3.2 LOCP)

- including business entities under the Commercial Law andindependent individual traders (non-registered) that act with a certainregularity

• In addition, LOCP includes rights and obligations of socialorganizations for consumer protection, and State agencies

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3. Standard form contracts and "general tradingconditions”

(Article 19 LOCP and section 1, chapter 3 of Decree 99)

• standard contracts used by traders in an unspecified number oftransactions with consumers

• “general trading conditions” (akin to standard terms and conditions ofsale/service): terms for sales to consumers / provision of services toconsumers

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3. Standard form contracts and "general tradingconditions” (cont’d)

• general requirements for standard form contracts and“general trading conditions”:

– Vietnamese language

– contents must be “clear and simple to understand”

– font size must be at least 12pt

– readability of the print (paper and ink used must ensure sufficientcontrast)

– consumers must be allowed time to review standard form contracts;“general trading conditions” must be publicly announced anddisplayed at the business location of the seller / service provider

• Incorporation of standard terms into an agreement?

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• mandatory registration of standard form contracts and“general trading conditions” applies only to contracts forgoods / services included on the “list of essential goods andservices” (as issued by the Prime Minister with Decision 02 )

- utilities contracts for personal consumption (electricity, water)

- “pay television” (cable and other pay TV services)

- telephone subscriptions (other than prepaid)

- internet connection contracts

- air and rail passenger transport contracts

- purchase and sale of apartments, day-to-day services provided byapartment-managing units

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• interestingly, no banking services (e.g. personal accounts),hospital / medical treatment contracts, other personaltransport services (in particular, bus transport), postal /delivery contracts etc.

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• registration process:- Ministry of Industry and Trade (“MoIT”) for contracts / conditions that

are applied Vietnam-wide or at least in two provinces / municipalities

- local Department of Industry and Trade (“DoIT”) for contracts /conditions applied only in a particular province or municipality

• scope of review:- Content to be reviewed: validity-test against requirements provided by

Article 16 LOCP

- examples of clauses prohibited by Article 16 LOCP the clause excludes statutory liability of the trader (Article 16.1(a) LOCP);

unilateral changes (Article 16.1(b) LOCP);

imprecision / lack of regulations (Article 16.1(b) LOCP);

clauses allowing the trader to unilaterally determine the price upon delivery(Article 16.1(dd));

clauses providing that the consumer must discharge its obligation before thetrader discharges its own obligations (Article 16.1(h)

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- Competent state agency has authority to request the Traders toamend / delete any provisions that are unclear or conflict with theLOCP (Article 16 Decree 99). Also, the state agency reserves theright to obtain opinions from other authorities / agencies during theregistration procedures of the standard form contracts and “generaltrading conditions”

- There is no clear basis to define “unclear provisions” or “conflictingprovisions”, this means the authorities will have substantial discretionin requiring amendments to standard form contracts and “generaltrading conditions”

- Review of format and content (as provided by Article 7 of Decree 99)

• Breaches of provisions on registration of standard formcontracts and “general trading conditions” may be fined up toVND 70 million (USD 3,500)

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4. Protection of personal data and information

• Article 6 LOCP protects personal data and information ofconsumers (in addition to other provisions, e.g. in Article 38of the Civil Code)

- Article 6 LOCP is more specific on obligations of traders using orcollecting information

- includes details on information requirements, consent, conditions formaintaining and transferring personal data

• Breaches of provisions on protection of personal data andinformation of consumers may be fined up to VND 20 million(about USD 1,000) and other penalty measures

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4. Protection of personal data and information(cont’d)

• Article 3.1 of Decree 19: information may be deemed a“personal secret” of consumers under three conditions:

a. information relates to consumers personally

b. Information is protected by the consumer or other organisations,relevant persons

c. disclosure of this information without approval of consumer maycause an adverse effect on the consumer

• Breaches of provisions on protection of personal secrets ofconsumers, may be fined up to VND 30 million (about USD1,500) and other penalty measures.

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New / additional provisions on product liability including:

• Recall (Article 22 LOCP)

- Specific obligation to stop supply of further goods to the market

- Recall of goods / products, including:

compliance with the recall procedures provided by the law: (e.g. publicnotice on at least 5 consecutive editions of daily newspaper withcompulsory contents about the products)

unclear whether failure to comply with recall procedures has onlyadministrative consequences (fines) or other (e.g. in determining “fault”)

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- obligations for compensation in case defective goodscause damages (Article 23 LOCP)

- liability of importer / trademark owner or licensee

- liability also where there has been no “fault” unless tradercan demonstrate that the product was “state-of-the-art”and defect could not have been detected or anticipated

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6. Dispute resolution process

• LOCP provides for three permitted methods of disputeresolution:

- mediation: conditions to set up mediation organisations and conditionsto become mediator

- courts: in accordance with Civil Code and Civil Procedures Code,special “consumer claim” where the value of the transaction is lessthan VND 100 million (USD 5,000)

- arbitration: will only be applied if consumer accepts arbitration evenwhere an arbitration clause is included in the contract.

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7. Risks and legal consequences

• High degree of uncertainty regarding the legal validity of general termsand conditions in consumer transactions (these are mitigated in part forregistered terms)

• Greater liability / exposure for importers / trademark owners’ andlicensees’ from a product liability perspective

• Increase in important of consumer protection organizations (who aregiven the right to initiate proceedings)

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www.hoganlovells.com 21

Christian SchaeferSenior Associate

Hogan Lovells International LLP10th Floor, VTP Building8 Nguyen Hue Street, District 1Ho Chi Minh CityTel: +84 8 3829 5100Direct: +84 8 3822 6198Fax: +84 8 3829 5101Email: [email protected]


mailto:[email protected]

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the law on protection of consumers' rights – vietnam's ... … · the law on protection...

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