Debt collection in Vietnam

Our local debt collection agency located in Vietnam who 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 debt collection process. From when a debt collection agency trying to get the debtor to pay the debt in the out-of-court debt collection phase, to judicial debt collection in Vietnam where a creditor goes to court to have his or her case heard.

• Out-of-court debt collection in Vietnam.
• Juducial debt recovery in Vietnam.
• Vietnam’s legal system.
• The courts in Vietnam.
• Which court do you take your Vietnamese debt collection case to?
• Alternative dispute resolution.
• Statutes of limitations.
• Enforcement of claims in Vietnam.
• Insolvency proceedings.

Out-of-court debt collection in Vietnam.

When an invoice against a Vietnamese debtor is due, the first step is often to send a payment reminder and to contact the debtor to understand why the invoice is not paid.

If payment is still not forthcoming, it is time to escalate the matter to a debt collection agency in Vietnam.

They will then start recovery of the case in the out-of-court collection phase. This means that they try to ensure that the debtor pays without having to take any legal action.

By contacting the debtor by 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 major impact on the willingness of Vietnamese debtors 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 specifically 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 is, according to Vietnam’s constitution, the highest body of power in the country and has the legislative power in Vietnam. In addition, the National Assembly sets the country’s policy and budget, and elects key positions such as the presidency etc. 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 the term of office of the National Assembly and is five years.

In Vietnam there are 63 provinces, which are in turn 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 called 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 a collection of legal cases with commentaries and instructions every year.

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:

1. 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.
2. Provincial People’s Courts (63 Provincial Courts); which are courts in the provinces.
3. District People’s Courts (710 District Courts). Which are 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, criminal court, civil court, economic court, administrative court, labour court and 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 the appeal procedures.

How does the court decide whether it has jurisdiction to hear a claim?

To determine whether a court has jurisdiction to hear 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 are 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 starts when the court receives the plaintiff’s lawsuit, supporting documents and proof that the plaintiff has paid the court fee.

Service of the summons on the debtor is made by the court, but each party is also obliged to provide the other party with copies of the summons or supporting documents and evidence, except for documents that 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 the costs, including court fees and any assessment fee. In the judgment, the court will apportion the costs between the parties. However, with the exception of intellectual property litigation, legal fees for commercial litigation will not be awarded to the losing party unless the parties have agreed to it.

Alternative dispute resolution:

Mediation.

A large proportion of disputes in Vietnam are resolved out of court, usually through some form of mediation between the parties. Vietnamese laws also place great emphasis on the role of 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 very common 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 from 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 mentioned that sometimes situations arise where a debtor does not actually have sufficient assets to pay his debts to 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 is left fairly to the creditors.

A petition for bankruptcy is filed with the district court where the company is registered (with the provincial court if the petition is filed by a foreign creditor or if the debtor has offices in several places or more than 300 employees).

This is how our debt collection service works.