A Constitutional Court required to protect investment environment

Dr. Le Net, Lawyer of LNT & Partners

If a document issued is against the Constitution, who is in charge to dismiss it? In most countries, the rights for legal interpretation or declaring an unconstitutional document fall within the jurisdiction of a constitutional court or the supreme court.

Many documents are against the spirit of innovation of the Constitution

The 1992 Constitution initiates to promote all competences of economic sectors, including economies with foreign owned capital, conduct production and business in industries and trades permitted by law, which may jointly carry out long-term development and co-operation (Article 16). Organizations (including economic organizations with foreign owned capital) are entitled by law to allot land and to transfer land use rights (Article 18), with legal property to be protected by the State (Articles 22 and 81). The State encourages and creates favourable conditions for Vietnamese who live abroad to invest in their homeland (Article 25).

Most of the articles above have been specified in legal documents. Many legal documents issued against constitutional principles, however, still exist. The most typical one is the procedures for establishing enterprises under the Law on Investment. There is an evident inequality between Vietnamese enterprises (where only certificate of business registration is required) and foreign investment enterprises (where a certificate of investment is required and in most cases, they are issued only after appraisal).

Another example is the regulation for land use. While Vietnamese enterprises are entitled to allot land, to transfer and to be transferred land use rights, foreign investment enterprises cannot enjoy the same. This discrimination is evident in the Law on Land, Law on Housing and Law on Real Estate Business. Even Vietnamese enterprises who sell their shares to foreign investors are considered economic organizations with foreign owned capital, leading them to be limited to the lowest foreign holding rate (Article 3.4 of Decision No. 88/2009/QD-TTg).

The discrimination between Vietnamese and foreign investment enterprises also limits the investment capital of overseas Vietnamese. Before the Law on Investment was issued, overseas Vietnamese were entitled to invest in Vietnam in domestic economic sectors. However, currently, they are limited to economic sectors with foreign owned capital.

Any model must ensure the institution of a constitutional government

There is a point of view that the Constitution only mentions that all sectors are equal to each other “by the law”, so if the law does not make equality a regulation, there is no equality. Such statement, however, seems to set the law over the Constitution.

Another point of view supposes that Vietnam is inexperienced in the global market due to its recent participation in the global economy. Therefore, if rampant investment can be made by economic organizations with foreign owned capital, it will be uncontrollable, block the domestic economy, under-develop local industries and negatively impact on national security. Nevertheless, the solutions for those risks are to have competition law and to comply seriously with it, to have labour law in order to protect Vietnamese employees, to have regulations for environmental protection and to have specific and strict laws on taxation. That said, select any solution which is not unconstitutional in place of forthwith thinking about inequality. Foreign investors trust the Constitution, do not make that trust doubtful or challenged.

In the past, there were some countries pursuing protectionism. Some were unsuccessful, such as India, Indonesia and Malaysia. In those countries, people must use poor quality but high-priced products, such as Tata 2007 automobile based on the technology of Morris (England) in 1950s, or Proton automobile of Malaysia based on Mitsubishi (Japan) in 1970s. In countries that have successfully implemented protectionism like Japan and South Korea, the protection must be implemented along with antitrust and improving competitiveness. In fact, the market of these countries have been opened, with foreigners and local people enjoying equal competition. Above all, the successful countries, regardless of any model they are pursuing, must ensure the institution of a constitutional government.

At anywhere, with a constitutional government, every government agency and citizen must strictly obey the law, and the legal document with the highest value is the Constitution. Other documents can only interpret and execute the Constitution without being against it.

A Constitutional Court is in need

If a legal document is issued against the Constitution, who will be in charge to dismiss it? Pursuant to the 1992 Constitution, the Standing Committee of the National Congress has jurisdiction to interpret the Constitution and the law. Yet up to now, this Committee has failed to execute this function because in principle, it is a legislative arm, not an agency for legal interpretation.

Legislating is the function of the National Congress, and adopting ordinances is of the function of the Standing Committee of the National Congress. One cannot be both soccer and referee at once. Furthermore, members of the National Congress are not surely jurists or have law offices for legal support. Thus the function of legal interpretation to the Standing Committee of the National Congress is both unreasonable and beyond its capacity.

In order to have a correct legal interpretation, there must be concerns about it. Hence, the legal interpretation must be undertaken on each particular case – accommodating specific legal events. Only the court with the judge’s obligation of trial is eligible and responsible for interpretation regarding a particular case and similar cases, not general and vague interpretation. In most countries, the rights for legal interpretation or declaring an unconstitutional document falls under the jurisdiction of the constitutional court, or supreme court.

Some suppose that Vietnamese law overlaps and is deficient and conflicting due to its mechanism. That mechanism probably lacks a constitutional court, like crossroads full of vehicles without traffic lights or traffic police. The unequal treatment against the economic sectors with foreign owned capital also originates from the fact that some patriotic legislatures, in disregarding constitutional principles, subjectively issue legal documents as directions without consideration of provisions of the Constitution.

Last but not least, though everyone acknowledges that the Constitution has the greatest legal weighting, nobody cites provisions of the Constitution in statements of claim or to apply provisions of the Constitution in administrative documents to the people. Due to the lack of “referees” of the law, the will of the agencies to apply the law becomes more important to the agencies to make laws. This results in a situation in that when applying to documents, the Constitution is not as important as laws, laws are not as important as decrees, decrees are not as important as circulars, circulars are not as important as instructions, dispatches etc.

It is a fact that the most recent 20 years demonstrates that the investment environment in Vietnam has only slightly improved in ranking and is still down due to disorder, overlap and conflict in the legal environment. If we continue the unfair treatment to foreign investors, the surrounding countries such as Laos, Cambodia, Myanmar and the Philippines will attract more investment than Vietnam, and the recession will continue.