|The domestic partner is pressing Hong Kong partner Artkins Property Agency Ltd. through the lawsuit |
Ho Chi Minh City People’s Court has recently resumed a lawsuit in which the Vietnamese party – Science Technology Service and Production Corporation (PTC) – claimed that the foreign partner in the joint venture – Hong Kong-headquartered Artkins Property Agency Limited – has failed to realise its commitments leading to project failure and had sold its entire stake to other local firms without getting approval from competent government agencies and having forged PTC's approval.
In light of the lawsuit which was submitted in 2019, PTC said that after signing the joint venture contract and completing compensation payment, the Hong Kong partner failed to complete its obligation to contribute legal capital as well as its commitment to get the project off the drawing board.
Before the lawsuit was submitted, Ho Chi Minh City People's Committee had twice issued a decision to terminate the joint venture and another decision on taking back the project site in September 2007 in order to reauction it for giving to a more capable investor.
In its lawsuit, PTC also said that the project site is being occupied by several local firms and that it wants the court to return the site to PTC.
|Due to unsolved impediments between the two parties, the foreign JV has yet to complete liquidation procedures as of now. |
In November 1993, PTC, a unit of the Vietnam Union of Science and Technology Associations (VUSTA), signed a joint venture contract with Artkins Property Agency Limited to set up PTC-Artkins Joint Venture Company.
According to the agreement, PTC would contribute 30 per cent of the total legal capital in the form of the land and housing valuewhile Artkins Limited would offset the remaining 70 per cent in the form of cash, associated equipment, and materials for project implementation at the land block at 464 Nguyen Thi Minh Khai in Ho Chi Minh City’s District 3.
In September 1994, PTC-Arkins JV was established to carry out the project. After getting the investment certificate, to expand the project, PTC-Artkins JV had bought the nearby land block at 462 Nguyen Thi Minh Khai, with a similar capital contribution obligation.
In January 1996, the Ministry of Planning and Investment (MPI) enacted Decision No.979/GPDC1 allowing the JV partners to build an office tower for lease and provide office services at 462-464 Nguyen Thi Minh Khai in Ho Chi Minh City’s central business district with the total investment capital reaching $8 million, including $2.58 million of legal capital. According to the agreement, the Vietnamese partner contributed 30 per cent of the capital in form of the land value, whereas the foreign partner offset the remaining 70 per cent in cash and equipment.
Also, in 1996, Ho Chi Minh City People’s Committee issued several decisions on providing pink books, allowing the foreign JV to go ahead with the project.
According to a report by the Government Inspectorate, in 1997, the JV did work on the project, designing and clearing the site at 464 Nguyen Thi Minh Khai, yet doing no construction work at the 462-464 Nguyen Thi Minh Khai site.
The Government Inspectorate also verified that the financial economic downturn in Asia during 1997-1998 had a big impact on businesses in Hong Kong, including Artkins. "The failed investment joint venture of PTC-Artkins was due to a combination of factors".
To date, until 2005, Ho Chi Minh City People’s Committee had twice approved the JV to temporarily halt project implementation. The project, however, has yet to lift off the drawing board.
Due to this delay, the committee decided on terminating the operation of the PTC-Artkins JV via Decision No.09/QD-UB dated January 4, 2005.
Shortly after the enactment of the decision, Chan Ming Chuen, chairman of the Board of Management at PTC-Artkins JVC, representing the foreign partner, lodged a petition at the MPI protesting the Ho Chi Minh City People’s Committee's decision to stop the JV.
Later, in February 2006, via Decision No.179/QD-BKH on settling the claim, the MPI supported the decision of Ho Chi Minh City People’s Committee to terminate the operation of PTC-Arkins JVC and establish a liquidation committee to work on business liquidation.
Due to unsolved impediments, the foreign JV has yet to complete liquidation procedures.
In fact, while waiting the MPI to settle the claim, Artkins Property Agency Limited had reportedly signed contracts to sell its entire stake in the JV to another local firm, Tan Thanh Co., Ltd.
In its conclusion report in April 2016, the Government Inspectorate affirmed that Artkins’ capital transfer was unlawful as it took place after the Ho Chi Minh City People’s Committee issued the decision to terminate the operation of PTC-Artkins JVC and during the time the foreign partner representative was waiting the decision of Ho Chi Minh City’s People’s Committee and the MPI.
The Law on Foreign Investment 2000 and guiding decrees effective at that time rule that any capital transfer must be mutually agreed by the stakeholder parties and the foreign partner needs to register the capital transfer with the agency granting the investment certificate, as well as submit a resolution issued by the JV Board of Management on the capital transfer.
In addition, the PTC petition to the Ho Chi Minh City People’s Court also shows evidence that besides selling the stake to Tan Thanh Co., Ltd., in January 2004, Artkins also signed another contract on capital transfer to another local firm Thien Gia Dinh Co., Ltd. at a value of about $1.28 million. Right after learning of the case, the PTC sent a document to Artkins, requesting it to transfer the capital to PTC instead (giving priority to the JV partner), but was refused.
PTC claims that in both cases of capital transfer, Artkins had forged their approval when signing the contracts.