The New Anti-corruption Law and its impact on the private sector
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Publishing date:
May 9, 2019

On 20 November 2018, the National Assembly passed a new Anti-corruption Law  (the “New Law”) to replace its 14-year-old predecessor and the latter’s related guiding instruments.  A working draft of a decree detailing certain articles of the New Law (the “Draft Decree”) has also been released for public review and comment.

The New Law is slated to effectuate on 01 July 2019 and, in association with the Draft Decree, expected to have a significant impact on how enterprises, especially public companies and credit institutions in the private sector, should conduct their business activities and interact with each other.

Why it matters: The New Law aims to emphasize and promote the roles of non-state enterprises and organizations in the fight against corruption, and therefore has extended the scope of governance to these entities, though the public sector remains its primary focus. In particular, office holders in non-state entities are explicitly prohibited from (i) embezzling, (ii) taking bribes, and (iii) bribing or brokering bribery to the advantage of their enterprise or organization, or for personal gain (“acts of corruption”). The constitutive elements of these acts of corruption shall be identified in accordance with the Criminal Code 2015.

Who should be mindful of the New Law:

⦁ Non-state entities at large, and, especially,

⦁ Private sector enterprises mobilizing capital from the society on a large scale i.e. public company, credit institutions, and social charity organizations established by a competent State authority (collectively, “special non-state organizations”).

What the New Law seeks to achieve:

More vigorous anti-corruption stance within the private sector:

⦁ Non-state enterprises and organizations at large are obliged to develop, issue and implement a code of conduct and an internal control mechanism addressing conflicts of interests and acts of corruption, as well as promoting an anti-corruption corporate culture.

⦁ Special non-state organizations are further compelled to comply with regulations on (i) information publicity and transparency, (ii) control of conflicts of interests, and (iii) responsibility of the heads and deputies.

Managing conflict of interest:

⦁ “Conflict of interest” is first introduced in the New Law i.e. “a situation where the interests of an office holder or his/her relative have or are likely to have an improper influence on performance of his/her duties”, which can consequently lead to corruption in short-term and escalate corruption in long-term.

⦁ The New Law sets out certain obligations applicable to both public and special non-state organizations:

(i) The obligation of the assigned office holder who knows or must know about conflict of interest to report to a competent person.

(ii) The obligation of third parties who have discovered conflict of interest of an office holder to inform the latter’s line manager or employer.

(iii) The obligation of the line manager to, among other things, suspend the office holder from the performance of his/her duties, to control conflict of interest in case he/she finds that the integrity, objectivity or truthfulness of the said office holder can be affected by such conflict.

⦁ Details on situations which are deemed conflicts of interest, the procedures for whistleblowing and handling information on conflicts of interest as well as how the related control mechanism operates shall be as clarified in the Draft Decree.

Information publicity and transparency

⦁ Special non-state organizations are obliged to make the following information, among others, publicly available:  

(i) The implementation of policies and laws relating to the legitimate rights and interests of the employees; salary and allowance; and other social welfare regimes;

(ii) Internal organizational structure;

(iii) Code of conduct, charter of enterprises or organizations.

⦁ Where the laws are silent on the required mode of publication, the entity’s head may decide at his/her own discretion how the information should be published, such as by posting information at the entity’s premises or on the website.

The legal consequences for allowing corruption activities to occur

⦁ Any act of corruption committed by an office holder in a non-state organization which is not sufficiently serious to be criminally prosecutable will be subject to administrative sanctions.

⦁ Specifically, a penalty including and up to VND 100 million (approx. USD 4,300) shall be imposed on acts of corruption.

⦁ The heads, i.e. the General Director or Director as prescribed in the Draft Decree, of special non-state organizations may on a case-by-case basis bear personal direct responsibility, or be held jointly liable with their deputies, for the occurrence of corruption within the entity under their management.

⦁ In case the head is held jointly liable with their deputy, the head and deputy may each be fined up to VND 40 million (approx. USD 1,700).  However, the deputy, being the party held directly responsible for the occurrence of corruption, will face more severe repercussions since in addition to the fine their identity will also be published on the websites of the competent agencies.

⦁ If the head is held directly liable for the occurrence of corruption, they will similarly be fined and their identity published on the websites of the competent agencies.  In this case, the deputy will however not be held jointly liable with the head.

⦁ Notwithstanding the above, the severity of the legal liability of the head or deputy is not immutable but may be considered for exemption, reduction or even increase upon thorough examination of certain relevant factors such as his/her initiative and attempt to promptly take necessary measures to prevent, remedy or handle the corruption.

What’s next: If the recent legislation trend is of any indication i.e. to make new laws in general possible to implement once put into force instead of waiting for guiding instruments, it is expected the Draft Decree would take effect concurrently with the New Law. As such, private sector entities, especially special non-state organizations, will only have a two-month grace period to comply with the New Law. Accordingly, at the minimum, these entities should have in place internal regulations on, among other things, transparency, conflict of interest, and responsibility of the heads and deputies regarding anti-corruption.

This briefing is for information purposes only. Its contents do not constitute legal advice and should not be regarded as detailed advice in individual cases. For legal advice, please contact our Partners.
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