Debt Collection in Vietnam
Do you have overdue invoices against customers in Vietnam? We can help you get paid efficiently. Read on to see how!
How Oddcoll can help you achieve successful debt collection in Vietnam
Companies that sell to customers in countries other than their own know how complicated the collection process can be when customers abroad do not pay on time. This is because the laws and regulations of the customer’s country apply when a debt is to be collected. In addition, legal action must be taken in the customer’s country if they fail to pay. All these circumstances give a debtor peace of mind when payment demands come from another country.
Oddcoll is a platform for international companies. We have selected high-performing debt collection agencies worldwide to collect your debts locally when you start a debt collection case with us. This means that if you upload your Vietnamese recovery case to our platform, our local debt collection specialists in Vietnam will take care of it in a matter of minutes. In this way, your chances of a positive outcome increase significantly.
Our local debt collection agency, located in Vietnam, will directly initiate collection actions on the spot:
We are pleased to introduce Upper Class Collections as our debt collection partner in Vietnam. They will immediately start collection actions in Vietnam when you start a case.
The debt collection process in Vietnam
Below is an overview of the Vietnamese local and international debt collection process, from the out-of-court phase, when a debt collection agency tries to get the debtor to pay, to judicial debt collection, where a creditor goes to court to have their case heard.
- Out-of-court debt collection in Vietnam
- Judicial debt recovery in Vietnam
- Vietnam’s legal system
- The courts in Vietnam
- Alternative dispute resolution
- Statutes of limitations
- Enforcement of claims in Vietnam
- Insolvency proceedings
Out-of-court debt collection in Vietnam
When an invoice to a Vietnamese debtor is due, the first step is often to send a payment reminder and contact the debtor to understand why the invoice has not been paid. If payment is still not forthcoming, it is time to escalate the matter to a debt collection agency in Vietnam. They will then begin recovering the case during the out-of-court collection phase. This means they try to ensure the debtor pays without taking any legal action.
By contacting the debtor, e.g., letter, phone call, email, etc., they are made aware that they have taken over the case as a debt collector in Vietnam and that they expect a quick payment of the debt. This often has a significant impact on Vietnamese debtors’ willingness to pay, as they realise the seriousness of the demands made by a local debt collection agency. The reason is that they understand that the claim can quickly escalate into legal action, resulting in additional costs and time.
A local debt collector has also learned, through years of experience, how to put pressure on debtors, particularly in Vietnam. These circumstances make the resolution rate high in the out-of-court debt collection phase in Vietnam.
Judicial debt collection in Vietnam:
Vietnam’s legal system
Vietnam is a one-party state ruled by the Communist Party. The Communist Party elects the members of the National Assembly. The National Assembly, as provided in Vietnam’s constitution, is the highest body of power in the country and exercises legislative authority. In addition, the National Assembly sets the country’s policy and budget and elects key positions, such as the presidency. The term of office of the National Assembly is five years.
The Vietnamese Government is the executive body of the National Assembly and is the highest state administrative body. The term of office of the Government corresponds to that of the National Assembly and is five years. In Vietnam, there are 63 provinces, each divided into districts. Under the districts are the communes. There are four levels of local Government: provinces, districts, communes, and special administrative and economic units. Each of these four levels has its own local Government, consisting of a representative body elected by the local population every five years, called the People’s Council, and an administrative body, the People’s Committee, whose members are elected by the People’s Council.
Vietnam’s legal system has all the hallmarks of a civil law tradition, based on written law. Case law is not recognised as a source of law and is not part of the legal system. In practice, however, the Supreme People’s Court publishes an annual collection of legal cases with commentaries and instructions.
The courts in Vietnam
The highest court in Vietnam is the Supreme People’s Court. Under the Supreme Court, there are three levels of courts, in descending hierarchical order:
- High People’s Courts (“High Courts”). There are three High Courts located in Hanoi, Da Nang, and Ho Chi Minh City. The High People’s Courts hear appeals from the lower courts.
- Provincial People’s Courts (63 Provincial Courts), which are courts in the provinces.
- District People’s Courts (710 District Courts), which are the courts in the districts.
(In addition to these, there are also military courts.)
In the High People’s Courts and Provincial People’s Courts, there are specialised courts which adjudicate cases of a special nature. For example, the criminal court, the civil court, the economic court, the administrative court, the labour court, and the family and juvenile court. District courts may have a criminal court, a civil court, a family and juvenile court, and an administrative court.
Which court do you take your Vietnamese debt collection case to?
So, which court should you take your claim against your Vietnamese debtor when the debtor does not pay? Disputes in Vietnam are mainly governed by the Civil Procedure Code (“CPC”). According to the CPC, provincial courts shall be the courts of first instance for disputes involving at least one foreign party, and the high courts shall handle appeals. How does the court decide whether it has jurisdiction to hear a claim? To determine whether a court has jurisdiction to listen to a claim, it must generally assess whether:
- The dispute relates to a matter within the court’s jurisdiction under the CPC,
- Whether the parties have a valid agreement on the choice of another forum for dispute resolution (e.g., arbitration)
- And whether the court has jurisdiction to hear the claim under the rules on the hierarchy of courts and territorial jurisdiction.
A dispute is generally heard by the court of the defendant’s domicile, unless the parties have agreed to transfer the dispute to the court of the plaintiff’s domicile. The judicial debt collection procedure in Vietnam begins when the court receives the plaintiff’s lawsuit, supporting documents, and proof of payment of the court fee. The court serves the summons on the debtor. Still, each party is also obliged to provide the other party with copies of the summons or supporting documents and evidence, except for documents the other party already has or that are exempt from disclosure under the CPC. Within 15 days of service, the defendant must file its statement of defence.
In general, the losing party in the case is responsible for paying court fees and any assessment fees. In the judgment, the court will apportion the costs between the parties. However, except in intellectual property litigation, legal fees for commercial litigation will not be awarded to the losing party unless the parties have agreed to them.
Alternative dispute resolution:
Mediation
A large proportion of disputes in Vietnam are resolved out of court, usually through mediation between the parties. Vietnamese law also places great emphasis on mediation. Mediation is a mandatory part of some dispute resolution procedures, such as civil litigation. This category includes almost all claims that become subject to judicial collection in Vietnam. The State encourages the resolution of civil and family disputes and non-criminal offences, administrative offences, and other disputes and offences provided for in the Civil Procedure Law through mediation.
Arbitration
Arbitration is also a possible option for dispute resolution in Vietnam. However, this procedure is limited to commercial disputes only. Historically, this has not been a widespread way of settling disputes in Vietnam.
Statutes of limitations
Limitation periods: for commercial disputes, the applicable limitation period is two years. The limitation period starts to run on the day when the plaintiff “should have known” that its legitimate rights have been infringed.
Enforcement of claims in Vietnam
As a final step in the legal debt collection process in Vietnam, it may be necessary to apply for enforcement. This means that you have a judgment for taking the case to court, but the debtor is still not paying voluntarily. In this case, you can apply for enforcement and get help to transfer assets from the debtor to yourself.
Insolvency proceedings in Vietnam
It should also be noted that sometimes situations arise in which a debtor does not actually have sufficient assets to pay his creditors. Bankruptcy proceedings may then be appropriate. In bankruptcy proceedings, the debtor’s assets are taken over by a trustee in bankruptcy, who will then distribute what remains fairly to creditors. A bankruptcy petition is filed with the district court where the company is registered (with the provincial court if a foreign creditor files the petition or if the debtor has offices in several places or more than 300 employees).