28 July 2021
Though online purchases of goods and services have been booming in Laos, the country’s laws and regulations have not kept pace. Providers of legal advice on these activities have therefore had to interpret laws and regulations on traditional physical retail activities instead, and apply them to online activities. However, Laos is making strides toward providing clear legal guidance for e-commerce operations by issuing legal measures to facilitate the regulation of online business activities.
For instance, on June 4, 2021, the new Decree on E-commerce No. 296/GOV (dated April 12, 2021, and published in the Lao Official Gazette on May 20) came into effect to clarify the regulatory framework for e-commerce in the country and to set requirements for electronic purchase contracts.
The decree, which applies only to operators residing or registered in Laos, regulates individuals and legal entities involved in the following activities:
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Selling goods and services via their own electronic platform (website, program, or other instruction set);
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Providing electronic marketplace services; and
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Selling goods and services via electronic marketplaces.
Seller Notification Requirement
Business operators looking to sell goods or services via an electronic platform, either on their own website or application or via an electronic marketplace, must notify the relevant department of the Ministry of Industry and Commerce of their activity. (Existing operators must notify the ministry within 90 days from the decree’s effective date.) Although the chief concern of the decree is to target those whose regular activity is to sell goods and services online, the decree does not address whether those selling occasionally through an electronic marketplace still need to notify the ministry.
Documents for the notification consist primarily of the application form provided by the Ministry of Industry and Commerce, the enterprise registration certificate (i.e., proof of having registered a legal entity in Laos) or a simple ID card for individuals, a copy of the business operating license (for activities that require approval from a line ministry), and a copy of a contract with a payment service provider for payment via an electronic platform. Upon receipt of the necessary documentation, the ministry’s relevant departments or agencies will certify the notification within three working days. This certificate is valid for two years, and must be renewed thirty days before its expiry.
Electronic Marketplace Registration
Electronic marketplaces must be operated via an incorporated legal entity, which means an Enterprise Registration Certificate is a necessary prerequisite to operating an electronic marketplace in Laos. As for technical requirements, electronic marketplaces must obtain a Ministry of Technology and Communications certificate confirming their “technical conformity.” (The process and requirements for obtaining this certificate may be the subject of guidance that is yet to be issued.)
Similar to the grace period for the notification requirement mentioned above, existing electronic marketplace operators have 90 days (from June 4, 2021) to request authorization from the ministry. Upon receipt of the necessary documentation, the ministry’s relevant departments will consider and provide its authorization within five working days. This authorization is valid for three years, and must be renewed thirty days before its expiry.
Foreign Restrictions
Foreign shareholders cannot hold more than 90 percent of the shares of the legal entity operating an electronic marketplace, and the registered capital must be at least LAK 10 billion (approx. USD 1.05 million).
It is important to note that this decree does not replace existing laws and regulations that address certain types of goods or services sold, for which licensing, notification, minimum investment, and other requirements may apply. For instance, foreign participation in the provision of retail and wholesale services in Laos is limited under the Decision on Retail and Wholesale Business. Under this decision, a foreign shareholder who holds up to 50% of the shares in a retail or wholesale business must invest at least LAK 4 billion (approx. USD 423,350). Between LAK 10 billion (approx. USD 1.05 million) and less than LAK 20 billion (approx. USD 2.1 million) a foreign shareholder may hold 70% of the legal entity, while a foreign shareholder must invest at least LAK 20 billion to hold 100% of the shares of the marketplace’s legal entity conducting retail and wholesale services. Similar restrictions are likely to apply for online retail and wholesale businesses.
Transparency
The decree requires business operators of electronic platforms to disclose information on their platforms and activities, as well as on the goods and services sold. Accordingly, information on the business operator, such as its name, address, contact details, and Enterprise Registration Certificate or the relevant operating license, must be displayed on the electronic platform.
Descriptions of goods or services should note the product specifications (size, color, aspect, and so on) following the product labels as applicable, and product-related information such as origins, prices, return and warranty policies, related fees (e.g., shipment and payment methods), and terms and conditions. In addition, information on customers’ “satisfaction and opinion” concerning the goods and services must be displayed on the corresponding electronic platform. The decree also emphasizes that information on the goods or services offered must be realistic and portray products’ actual characteristics.
Product Liability
The decree also addresses liability for the goods and services sold, deeming electronic selling platforms and sellers on electronic marketplaces legally responsible for the goods and services they sell online.
The decree does not assign similar legal responsibility to entities operating electronic marketplaces on which the goods or services are sold. However, electronic marketplace operators are prohibited from authorizing or ignoring the sale of prohibited goods or services on their electronic marketplaces. Accordingly, they must take a proactive role in the inspection of goods and services sold.
E-commerce Contracts
According to the decree, which endeavors to cover e-commerce contracts specifically (as opposed to electronic contracts more generally), there are two types of e-commerce contracts.
First, e-commerce contracts made via an “online ordering function” are defined as agreements between seller and client for the sale, purchase, or exchange of goods or services, made by electronic means via the online ordering function of an electronic platform created by the “owner of the electronic platform.” Essentially, this means e-commerce contracts that cover transactions made on electronic platforms (other than electronic marketplaces), and assumes that they use electronic means of payment.
The second type of e-commerce contract is one made “via social media,” which is a term in the decree that the regulator interprets as also covering electronic marketplace contracts for the sale, purchase, or exchange of goods or services.
The decree stipulates that the offering of either type of e-commerce contract is governed primarily by the rules provided in the electronic platform’s terms and conditions. Upon acceptance of the offer by the seller, the e-contract will be deemed formed. The offer will be nullified if the seller does not respond within 12 hours (unlike the 15 days for a traditional contract in writing), unless otherwise stipulated in the terms and conditions of the electronic platform. The client may also cancel its offer before receiving a response from the seller.
Both types of e-commerce contracts must remain accessible to clients after the transaction, (e.g. through archives and purchase histories).
For e-commerce contracts made via the online ordering function of an electronic platform (not on an electronic marketplace), the electronic platform must have a system that allows clients to review, add, amend, confirm, or cancel an offer before formally submitting it by means of the online ordering function. In case of cancellation by the client, electronic platforms must provide clients with evidence that the notification to cancel the contract was sent.
Conclusion
E-commerce activities in Laos have typically had to rely on extensive interpretation of laws that were not made to address e-commerce. The new e-commerce decree discussed in this article is an example of how the government is working to update the regulatory framework to sustain promising high-tech sectors such as e-commerce, fintech, and others. As Laos remains a relatively untapped market in these areas, the Decree on E-commerce eases both local and international investors’ concerns about launching operations by clarifying some key issues. The decree does not address sanctions for noncompliance, and questions remain regarding some of the mandatory requirements (such as the “technical requirements”) to register an electronic marketplace. Therefore, in its current state full implementation of the decree may require subsequent guidance from the authorities.
For further information, please contact:
Dino Santaniello, Head Laos, Tilleke & Gibbins
dino.s@tilleke.com
