On 24 April 2023, the Justices of the Supreme Court of Vietnam (the Supreme Court) hosted an online seminar to tackle some issues that arise in the courts’ trial practice. Official Letter no. 196/TANDTC-PC issued by the Supreme Court on 3 October 2023 (the Official Letter) documents the results from the online seminar in April. The Official Letter contains mainly the clarification and interpretation of the Supreme Court of the existing legal provisions across various areas of law, including penal, civil, commercial, and administrative. Although these clarification and interpretation are non-binding, they constitute an important source of interpretation for the court system to rely on.

In this post, we will discuss some clarifications from the Official Letter that we find interesting or noteworthy:

1) The subjects capable of committing the crime of “Intentional public disclosure of false information or concealment of information in securities activities” (Article 209 of the Penal Code 2015) are the natural persons or commercial legal persons responsible for public disclosure of information regarding securities, and not the parties to a securities transfer transaction.

Our comments:

The clarification for the Supreme Court is not clear since under the securities regulations, sometimes parties to a securities transaction must make public disclosure about the transaction (e.g., sale or purchase of shares by a major/inside shareholder). So it appears that this crime only applies to a person who violate the disclosure obligations under securities regulations but not to a person who fails to disclosure information under its contractual obligations.

2) If a party to a commercial dispute is a limited liability company or a joint stock company that has multiple legal representatives but its charter does not assign liabilities and authorities for each legal representative, and there is no power of attorney or agreement on who represents the company in such dispute then the court should base on Article 12.2 of the Enterprise Law 2020 to determine all legal representatives of such company as legal representatives of the company to participate in legal proceedings.

Our comments: Even though the wording under the Official Letter is still somewhat ambiguous, since the Supreme Court Justices refer to Article 12.2 of the Enterprise Law 2020, this statement should be understood to mean that any of the legal representatives of the company should have the full authority to represent said company in legal proceedings.

3) In case the parties to a dispute do not request the court to declare that the agreement between them is invalid, (1) if the court finds that such agreement complies with laws, then the court must recognise the validity of said agreement, (2) if the court finds that the agreement fails to meet the requirements for an agreement to be legally valid, then the court must declare that such agreement is invalid, regardless of whether the parties have requested so or not (para. III.7).

Our comments: The Supreme Court Justices did not refer to any specific provision of law regarding the “[failure to meet] the requirements for an agreement to be legally valid”. Thus, we think that this should cover (i) Article 117 (Conditions for effective civil transactions) and Article 122 (Invalid civil transactions) of the Civil Code 2015, which seems to match the description perfectly, and (ii) other cases to the same effect, such as Article 123 (Invalidity of civil transactions due to breach of legal prohibitions or contravention of social morals) of the Civil Code 2015.

On the other hand, it is still unclear whether an agreement which is invalid for reason(s) other than “failure to meet the requirements for an agreement to be legally valid” (for example, the case under Article 408 (Invalidity of contracts due to impossibility of performing subject matter) of the Civil Code 2015) may be declared invalid by the court even if the parties to such dispute do not request the court to do so.

4) In case an agricultural land use right, which is the securities in a mortgage agreement, expires during the term of said mortgage agreement, the mortgage agreement would be terminated in accordance with Article 422.5 of the Civil Code 2015 (termination of contract unable to be performed due to the subject matter of the contract no longer exists) if the land use right is not extended

Our comments: As the mortgagor may decide on whether to request an extension from the competent authority or not, the mortgage agreement should be drafted to cover the risk that the mortgagor purposefully let the land use right expires during the term of the mortgage agreement to be released from the mortgage agreement.

This post is written by Le Thanh Nhat and edited by Nguyen Quang Vu.

Vietnam Business Law