Nguyễn Minh Hiếu
According to the political economy framework from Pistor and Milhaupt (2008), the birth of a new investment product with enough market participation – in this case, vacation ownership – should trigger the reevaluation of the demand and supply for laws affecting the market at hand. The issue at hand, howewver, is whether there should be additional rules and regulations every time a new service emerges?
The demand for laws
To answer the question, let’s first consider the demand for new laws, which greatly depends on (1) market size and complexity, (2) the accessibility of legal options, and (3) the availability of non-legal alternatives[1].
According to Pistor and Milhaupt (2008), increasing market size correlates with an increase in demand for laws, when current transactions have started to breach the established norms of “mutual monitoring, trust, and reputation”. The case deals with a fairly new definition of ownership in Vietnam, where the plaintiff bought the “right” to (1) occupy the real estate and other on-site services for one week a year (usually for 20-30 years in similar contracts[2]) and (2) buy, sell and exchange their “right” on a secondary market[3]. To understand simply, whereas leasing entails the right to use the space in a single, continuous period; timeshare – the umbrella concept of vacation ownership – allows for the right to use a space in recurring, shorter periods spreading out into the future. However, the word “ownership” (“sở hữu”) used in many contracts may have caused the plaintiff to mistake the definition with “real estate ownership”. Therefore, although the addition of “vacation ownership” inherrently does not add complexity to our existing real estate and leisure service market, how it is called can be misleading.
On the other hand, the low accessibility of legal options and the lack of non-legal alternatives could spell higher demand for regulation in the field. Firstly, because Vietnam does not allow for class action lawsuits, all consumers of untested products are at a significant disadvantage should anything goes awry. The high cost of seeking legal actions – protionately a bigger burden on individuals comparing to the companies being sued – will prevent many disatisfied consumers from pursuing justice. Additionally, the wrongdoing of a company may not be sufficiently demonstrated through their interaction with a single customers, making the burden of proof hard to overcome for the plaintiff. In fact, Vietnamese press reported a significant number of ‘victims’ in this emerging market[4], yet the majority of them did not seek legal actions. Secondly, regarding non-legal alternatives, the novelty of “vacation ownership” means the society has yet to developed effective norms to regulate the market. In future research on the topic, the effectiveness of current non-law options should also be evaluated more carefully.
The current state of law supply in Vietnam
Judging from the 3 demand-side factors above, the needs for regulation in timeshare property seems to have moderately increased. Next, the essay seek to evaluate how the Vietnamese legal system has reacted to these signals in the form of formal law and enforcement practices.
Regarding formal law, the most relevant law affecting this case is the Civil Code 2015 – specifically Section 7 on Contracts, and the Laws on Travel 2017 and relevant Decrees. Firstly, regarding the legality of the vacation ownership contract by ALMA corporation, there are multiple troubling clauses limiting the rights of consumers. For example, the contract required customers to settle dispute in English via Singapore International Arbitration Centre. Article 9 of the contract also prohibits customers from disputing against the company. Additionally, the contract stated that the company is under no obligation to return fully or partially the amount paid by the customer, in any circumstances. The last point is directly against clause 2, article 427 in Vietnam’s Civil Code 2015, stating that in the case of contract invalidation, each party must return what they have received after deducting reasonable cost. Secondly, as vacation ownership is more similar to renting an accommodation for leisure than real estate ownership, the product/service does not fall into any predetermined travel accommodation facility in the current Laws on Travel 2017, Decree168/2017/NĐ-CP and Decree 142/2018/NĐ-CP. Examining the requirements on travel accommodation in these documents, it is also clear that the services promised by ALMA corporation does not meet many of them. Hence, this product/services exists in the grey area of travel services, and thus unregulated. In conclusion, the formal law governing the legal space where ALMA corporation operates remains unsatisfactory in protecting consumers.
On the other hand, the judicial process of this case serves as an example of how the law enforcement professionals view this market. Aside from the accusations already made by the plaintiff, there was clearly no consequences on the corporation for having illegal clauses in their contract regarding refunds. Additionally, regarding the plaintiff’s complaint that the final model was different than advertised, the court ruled in ALMA corporation’s favour, reasoning that an approval for the new model was granted in May 2016 and that the defendant has informed the customer about this change[5]. However, the contract between the plaintiff and the defendant was signed in February 2016, 3 months before the defendant obtained the approval for their significantly downsized model (from 5-pax accommodation to 2-pax accommodation). If the verdict of the case can be interpreted as a signal from Vietnam’s legal system’s attitudes towards this new market, the odds are not on the consumers’ side.
Now that a gap between the demand and supply for legal intervention in the market for vacation ownership has been identified, it is necessary to evaluate whether to introduce more rules and regulations or make litigation more accessible. According to Pistor and Milhaupt (2008), “where disorder is the actual or perceived major challenge, a legal system that prefers regulation to litigation is the answer”. With a country in the middle of the road like Vietnam, an ideal approach could be to introduce open-ended rules and regulations in ways that not only solve the current confusion, but also be applicable to possible market movements in the future.
[1] (Milhaupt & Pistor, 2007)
[2] (CTy Luật TGS, 2017)
[3] (Phạm Duy Nghĩa, 2021)
[4] (Long Giang, 2018)
[5] (Phạm Duy Nghĩa, 2021)
Bibliography
English
Milhaupt, C. J., & Pistor, K. (2007). Law and Capitalism: What Corporate Crises Reveal about Legal Systems and Economic Development around the World (SSRN Scholarly Paper ID 987291). Social Science Research Network. https://papers.ssrn.com/abstract=987291
Vietnamese
CTy Luật TGS. (2017, November 7). Hợp đồng sở hữu kỳ nghỉ theo quy định pháp luật Việt Nam**. Công ty Luật TNHH TGS. https://congtyluattgs.vn/hop-dong-so-huu-ky-nghi-theo-quy-dinh-phap-luat-viet-nam/
Long Giang. (2018, May 12). Vỡ mộng với sở hữu kỳ nghỉ. https://nld.com.vn. https://nld.com.vn/news-20180511221735238.htm
Phạm Duy Nghĩa. (2021). Bất động sản nghỉ dưỡng.
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