The Investment Protection Agreement between the European Union and Vietnam — the EVIPA — was signed on 30 June 2019 together with the EVFTA free trade agreement, but the two agreements have lived different fates: the EVFTA took effect in 2020 and is operating, while the EVIPA is still not in force because it must be ratified by each individual EU member state. This commentary explains what level of protection the EVIPA promises EU investors in Vietnam, how its Investment Court System differs from classic investor–State arbitration, and by what instruments an EU investor is actually protected while waiting for entry into force.
Legal basis
On protection content, the EVIPA carries the EU’s modern standard set: national treatment and most-favoured-nation treatment at the post-establishment stage; fair and equitable treatment defined in a closed list of prohibited conduct — denial of justice, fundamental breaches of due process, manifest arbitrariness and targeted discrimination; full physical protection and security; a ban on direct and indirect expropriation except for a public purpose, non-discriminatorily, under due process and against adequate compensation at market value; and guaranteed free transfer of capital, profits and payments abroad without unreasonable hindrance. The agreement simultaneously affirms the parties’ right to regulate for legitimate public objectives — an anchoring clause so that ordinary regulatory measures are not construed as breaches.
On dispute settlement, the EVIPA replaces ad hoc ISDS arbitration with an Investment Court System — ICS: a permanent two-tier court comprising a first-instance Tribunal and an Appeal Tribunal, whose members are appointed by the two parties for fixed terms, are bound by strict professional ethics rules, and may not act in parallel as arbitrators or counsel in other investment cases. The investor must pass a consultation stage before filing; a first-instance award may be appealed to the Appeal Tribunal for errors of law and manifest errors of fact assessment; and recognition and enforcement of awards is connected to existing international enforcement frames. This is the model the EU has applied in its new-generation agreements and the largest structural difference between the EVIPA and Vietnam’s classic bilateral BITs.
Applied analysis
On entry into force — the most practical question: the EVIPA is not in force at the time of writing. The EVFTA trade agreement falls within the EU’s exclusive competence, so it needed only European Parliament approval and took effect on 1 August 2020; the EVIPA is a mixed agreement, so beyond EU-level approval it requires ratification by each EU member state under its own constitutional procedure. Vietnam ratified both agreements back in 2020, but the process in EU member states remains incomplete after several years, and no official effective date has been announced. When the EVIPA enters into force, it will replace the existing bilateral investment protection agreements between Vietnam and individual EU member states, with a transitional protection clause for investments already made, for a period as the agreement prescribes.
The practical consequence of the not-yet-in-force status is that an EU investor in Vietnam today still relies on three real protection layers: the bilateral BIT between its home state and Vietnam — still in force and carrying classic ISDS; investment chapters of other agreements both sides join, where any exist; and domestic investment law with the Vietnamese court and arbitration system. An expensive mistake is structuring an investment on the assumption the EVIPA already applies, or skipping the check of the current bilateral BIT because it is assumed replaced — both assumptions are wrong at this time.
Recommended actions
Recommendations for EU investors: inventory the protection layer actually applying to your investment by the nationality of each entity in the ownership chain, because a BIT applies by the direct investor’s nationality; track the EVIPA ratification process in the relevant member state and prepare a switchover scenario for when the agreement takes effect, including its transitional protection clause; and in partner contracts and project structures, write no clause that presupposes the ICS mechanism is already available.
This commentary reads the EVIPA as a complete text — protection content and the ICS mechanism; the published EXP-3566 views the same agreement from the opposite angle, namely the dispute mechanisms applying during the period when the EVIPA is not yet in force, and the two articles cross-refer so readers hold both sides.
Frequently Asked Questions
In what respects does EVIPA protect EU investors?
The EVIPA protects EU investors in Vietnam at these main points: national treatment and most-favoured-nation treatment for established investments; a fair and equitable treatment standard defined by a closed list of prohibited conduct such as denial of justice, fundamental breach of due process, manifest arbitrariness or targeted discrimination; full protection and security for investment assets; a ban on direct and indirect expropriation that is not for a public purpose, is discriminatory, or lacks adequate compensation at market value; and the right to freely transfer investment capital, profits and related payments abroad. This protection comes with an affirmation of Vietnam’s and the EU’s right to regulate for legitimate public objectives such as health, the environment and safety, so ordinary, non-discriminatory regulatory measures are not treated as treaty breaches.
How does the investment dispute settlement mechanism under EVIPA work?
The EVIPA mechanism is the Investment Court System — ICS — in place of classic ad hoc ISDS arbitration. An EU investor alleging that Vietnam breached the EVIPA must first request consultations; if consultations do not resolve the matter, the investor may bring the case before the permanent Investment Tribunal, where a first-instance division — composed of members appointed by Vietnam, the EU and from third countries under the agreement’s mechanism — hears and decides the case. The biggest difference is the appeal tier: a first-instance award may be appealed to the Appeal Tribunal for review of errors in the application and interpretation of law and manifest errors in fact assessment, before the award becomes final and enforceable under the recognition mechanism the agreement prescribes. Tribunal members are subject to strict ethics rules, including a ban on parallel practice as arbitrator or counsel in other investment cases, and an unsuccessful investor may bear costs under the loser-pays direction the agreement takes.
Has the agreement entered into force yet, and what is the roadmap?
Not yet. At the time this article was prepared, the EVIPA is not in force although it was signed on 30 June 2019 and Vietnam and the European Parliament completed their side of approval back in 2020. The reason lies in its mixed-agreement structure: the EVIPA requires ratification by each individual EU member state under that state’s own procedure, and this process is not yet complete across all member states, so no official effective date exists. The expected roadmap is that when the last member state completes ratification and the two sides notify each other, the agreement will take effect and replace the bilateral BITs between Vietnam and each EU member state, with a transitional protection clause for investments already made. In the meantime, EU investors remain protected by those very bilateral BITs and by domestic investment law — a company should track ratification in its own home state rather than assume a timeline that does not yet exist.
This article has been quality-reviewed by the FLAW AI Legal Council
