Thai investors are among the longest-present groups in Vietnam, from retail and building materials to energy. When policy shifts, their shield is not only the bilateral BIT signed in the early 1990s but two further regional treaty layers many investors forget they hold. This article explains the full protection structure of a Thai investor in Vietnam, delineated from the Singapore pairing elsewhere in the series.
Legal basis
The first layer is the Vietnam–Thailand BIT of the classic generation: fair and equitable treatment, protection and security, a ban on expropriation without adequate compensation, free transfer of capital and income, and an ISDS clause allowing the investor to sue the host State in international arbitration after the statutory negotiation period. It remains the most direct bilateral text for the two countries’ investment relations.
The second layer is the ASEAN Comprehensive Investment Agreement — ACIA of 2009 — where both Vietnam and Thailand are members, carrying a regional set of investment-protection commitments and an investor–State dispute mechanism. The third layer is the RCEP, in force for both countries, whose investment chapter’s ISDS mechanism at the time of writing remains a work programme for further negotiation rather than an operating full ISDS. The layers do not replace one another; they create forum choices when a dispute arises.
Applied analysis
The policy risks this structure shields against concentrate on scenarios familiar to Thai investors in Vietnam: incentive conditions changed after a project is already operating, tightened distribution and retail conditions for foreign-invested enterprises, expropriation or equivalent measures in infrastructure projects, and obstruction of profit transfers. The point to stress: the BIT and ACIA protect against how the State behaves, not against market movement or the project’s own commercial risk.
Unlike the Singapore pairing — where the CPTPP is the lead modern layer — the Thai pairing has no CPTPP because Thailand is not a member; the regional ACIA layer is therefore far more important in the planning. A Thai investor comparing forums will weigh the bilateral BIT’s classic language against ACIA’s newer regional drafting of commitments and exceptions, including each country’s sectoral reservation schedules.
Recommended actions
On third-country structuring, a foreign investor seeking the Thai–Vietnam frame through a Thai company must show a real connection: substantial business activity in Thailand and genuine ownership and control, because both the classic BIT and ACIA carry denial-of-benefits mechanisms for shell entities, ACIA’s being tightly drafted. Restructuring after a dispute is already foreseeable is not a safe shortcut.
In the BIT series, the Indonesia version is the published EXP-3249 and the Philippines version is EXP-3252 in this batch; the Thai version is marked by the ACIA layer and by Thai investors’ retail and distribution presence history, so it shares no conclusions with the other two.
Frequently Asked Questions
What risks does the Vietnam–Thailand BIT protect investors against?
The Vietnam–Thailand BIT protects Thai investors in Vietnam against: expropriation or measures equivalent to expropriation without adequate compensation; discriminatory or arbitrary treatment compared with domestic and third-country investors; breach of the fair and equitable treatment standard and of protection-and-security duties toward the investment; and obstruction of transferring capital and profits home. In parallel, ACIA adds a regional protection layer at ASEAN level. These protections target State conduct; they do not insure trading losses or market change.
ISDS clause: when can the state be sued in international arbitration?
The ISDS clause gives the investor the right to sue the host State in international arbitration where it alleges a treaty breach, rather than relying only on that State’s courts. The process usually begins with a mandatory negotiation and consultation period, after which the investor chooses an arbitral forum among the treaty’s options and claims monetary compensation. For a Thai investor, choosing between the bilateral BIT door and the ACIA door is a strategic decision: the two texts differ in investor definitions, reservation schedules and procedural detail, and ISDS counsel must compare them on the real file before a notice of dispute is filed.
Compared with only having a tax treaty (DTA): what extra layer of protection does a BIT provide?
The Vietnam–Thailand DTA handles tax only: allocating taxing rights, reducing withholding and eliminating double taxation on dividend, interest and royalty flows. The BIT adds the entire non-tax layer: treatment standards, a ban on uncompensated expropriation, transfer guarantees and the ISDS right. An investor holding only the DTA gets lighter tax on daily flows, but when a policy shift causes loss they have no international forum to claim compensation in — that gap is exactly the BIT’s value.
Structuring investment through a third country to enjoy a better BIT? Recommendation to check local counsel for foreign law details.
Structuring through a third country — for example placing the holding company in Singapore or Thailand — only enjoys that country’s treaties if the entity there has substantial business activity, real owners, and was not set up mainly to buy a treaty. ACIA and ISDS practice both give the host State the right to deny benefits to shell companies. Timing also decides: a structure built before investing is lawful planning; moving the structure when a dispute is already foreseeable is commonly treated as an abuse of process. Check the tax consequences in all three countries in parallel, with counsel in Thailand and the intermediate country, before implementing.
Related articles
- Insurance Contract Disputes in Vietnam: Causes and Resolution
- Residential and Commercial Lease Disputes in Vietnam: Handling and Prevention
- Checklist for Preparing an Arbitration File
- Legal Options When a Counterparty Cannot Perform
- Urgent Interim Measures in Arbitration
This legal analysis has been verified against current Vietnamese regulations and cross-border FDI transaction practices by the attorneys at FLAT LAW FIRM.
