IFLR 1000
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Though corruption and inflation remain issues in Vietnam, the country is rapidly expanding and attracting interest from multinationals, including international law firms. Freshfields, Baker & McKenzie and Mayer Brown JSM already have a longstanding presence in Vietnam, but earlier this year magic circle firm Allen & Overy announced that it too would open offices in Ho Chi Minh City and Hanoi in 2012; a move one in-house counsel at an international bank labelled "the biggest shake-up in the legal market for years"....

Though corruption and inflation remain issues in Vietnam, the country is rapidly expanding and attracting interest from multinationals, including international law firms. Freshfields, Baker & McKenzie and Mayer Brown JSM already have a longstanding presence in Vietnam, but earlier this year magic circle firm Allen & Overy announced that it too would open offices in Ho Chi Minh City and Hanoi in 2012; a move one in-house counsel at an international bank labelled "the biggest shake-up in the legal market for years". The firm has already hired well-respected lawyer Dao Nguyen from Mayer Brown JSM to head its practice, a move that will undoubtedly shake up the market.

Many corporate counsels are eagerly awaiting the magic circle firm's arrival; with some pointing out that it could be a catalyst for a market that has long been stagnant. "Things have just ploughed on and the international lawyers have become arrogant. This has really woken them up, and now they have to pull their socks up," says an in-house counsel. "The fact that Allen & Overy is investing in Vietnam is a sign of massive confidence and gives me a lot of reassurance."

Practitioners also note that documentation in Vietnam is still at a nascent stage and corruption in some industries and sectors is a problem. Clients recommend firms familiar with the system's bureaucracy who can guide you through the process. The leading Vietnamese firms also boast relationships with state-owned companies and are regularly mandated for much of their work.

But certain foreign practitioners admit that in their view some Vietnamese lawyers have not yet caught up to the service standards of international firms. "The days where people talked about local firms catching up to international standards are over," another counsel says. "If you choose Vietnamese lawyers who begin practising after they graduate from university and apply the law without commercial consideration, there is a lot of pain. I want to see a sea change in the way law firms invest in their local lawyers and think in a more cross-border, pragmatic and solution-driven way." As in all markets there are of course varying skill sets, though in this case the hope is that more universal market standards will be applied.

Practitioners also note that documentation in Vietnam is still at a nascent stage and corruption in some industries and sectors is a problem. Clients recommend firms familiar with the system's bureaucracy who can guide you through the process. The leading Vietnamese firms also boast relationships with state-owned companies and are regularly mandated for much of their work.

"Vietnamese law is purposefully ambiguous," says one partner. "The reason is to maintain the maximum amount of administrative discretion which allows for the personal interests of bureaucrats who administer the regulations."

The same partner adds that there is never anything particularly clear. "It's endlessly frustrating for people who arrive, or who haven't been here for a while. Once your company is set up and running, you understand how to do things. It's just like any other country, and there really is logic behind it all. Once you understand it, you don't get frustrated - you just deal with it," he says.

CONTEXT AND TRENDS Though Vietnam's state bank curbed inflation rates this year, the country's weak macroeconomic fundamentals have not been repaired. Practitioners say that the legal market has not developed alongside the markets; they frequently deal with slow regulators and ambiguous laws....

Though Vietnam's state bank curbed inflation rates this year, the country's weak macroeconomic fundamentals have not been repaired. Practitioners say that the legal market has not developed alongside the markets; they frequently deal with slow regulators and ambiguous laws.

The government's slow pace means that the much-anticipated privatisation, or equitisation, of state-owned companies is taking years longer than expected. Practitioners had anticipated the equitisation of Vietnam Airlines, among others, but have not seen any concrete indications that they will enter the market in the next year.

Though equitisation is not occurring at the expected pace, medium-cap M&A transactions in Vietnam are increasingly popular. Investors are looking at deals in consumer goods, food and beverages. Practitioners especially note Japanese food companies trying to gain strategic positions with local food and drinks manufacturers.

Recently Japanese investors have been especially dominant in Vietnam. A lawyer notes, "Japan is a mature market so companies need to find growth opportunities and Japanese corporates are looking at companies in all sectors, from cosmetics to milk to pharmaceuticals. Vietnam is very attractive because of the young population and the growing middle class."

However, the State Bank of Vietnam has quickly halted rising inflation by lowering interest rates and reduced the prospect of bad banks by quickly forcing banks to merge. The government is aiming for Vietnamese banks to reach international standards and practitioners expect the state bank to encourage small banks to merge. However, market players admit that the State Bank's initiatives have come at a cost for growth. They remain concerned that foreign investors will not be interested in investing in Vietnamese banks with the current caps; foreign banks cannot own more than 20% of local institutions.

Larger banks such as Vietinbank and Sacombank are looking abroad for the issuance of US dollar-denominated bonds in Singapore, even though the equity capital markets in Vietnam have generally been quiet.

An area gaining prominence is project finance. After the completion of the financing for a 1200MW coal-fired power project in Mong Duong, named Mong Duong II, practitioners expect similar projects to come on-stream. However the public-private-partnership (PPP) model popular elsewhere in Asia have not caught on in Vietnam; instead, practitioners frequently utilise a build-operate-transfer (BOT) model.

MAJOR LATERAL HIRES

Jerome Buzenet
From: Freshfields Bruckhaus Deringer
To: DFDL

Dao Nguyen
From: Mayer Brown JSM
To: Allen & Overy