New guidance on expedited proceedings for disputes arising from handling of non-performing loans in Vietnam

On 15 May 2018, the Supreme Court issued Resolution 3 on expedited proceedings for disputes arising from handling of non-performing loans (NPL) and security assets of NPL (Resolution 3). Resolution 3 is an implementing legislation of Resolution 42 of the National Assembly on NPLs (Resolution 42). Resolution 3 takes effect from 1 July 2018 and will expire when Resolution 42 expires in August 2022. Resolution 3 will apply to claims (1) accepted for hearing by the courts before 1 July 2018 but have not been brought to trial; and (2) accepted during its term but still in process when it expires. Resolution 3 cannot be based on to protest against effective judgment under retrial and cassation.

Resolution 42 allows disputes relating to security asset of an NPL to be conducted under expedited proceedings. Resolution 3 further clarifies that:

  • Disputes on obligations to hand-over security assets of an NPL is clarified to be dispute relating to the case where the securing party or the party holding the security asset (1) does not hand-over the security asset, or (2) does not hand-over correctly according to the request of the secured party or the party having right to enforce the security asset; and
  • Dispute on right to enforce security asset of NPL is clarified to be dispute on the determination of person having right to enforce the security asset of an NPL.

Under the expedited proceedings, the following documents are to be enclosed to the petition:

  • Credit contract;
  • Document evidencing that the debt under dispute is NPL;
  • Security agreement (which should include the obligation to hand-over security asset upon enforcement) and document evidencing the registration of the security agreement; and
  • Document on the residency or working place or head office of the defendant and the person having related rights and obligations;

Other than security agreement, obligation to hand-over security asset upon enforcement can also be recognised in schedule to security agreement or other document which is as effective as a contract.

Resolution 3 also guides on inheriting rights and obligations in legal proceedings. The purchaser of NPL will inherit the whole or part of the rights and obligations to legal proceedings of the seller corresponding the part of the NPL it purchased. Such determination will be recognized by the court from the date it received documents proving that the NPL sale and purchase agreement is effective and the purchaser has established title to the NPL.

Resolution 42 provides that lenders can seize security assets to enforce if, among others, the security assets are (1) not subject to accepted dispute at the court, (2) not under injunctive relief applied by the court, or (3) not seized or applied of measure to secure the enforcement of civil judgment. Resolution 3 further regulates that the lender will not be able to seize security assets which are of borrower subject to bankruptcy proceedings accepted by the court. However, the lenders can still seize security assets if they belong to a third-party who provides credit support to such borrower.

This post is contributed by Nguyen Hoang Duy, an associate of Venture North Law.