vietnam litigation review - Le & Tran

VIETN AM LITIGATIO N R EVIEW MARCH

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TIME TO OFFSET THE OBLIGATIONS AND CALCULATE THE LATE PAYMENT INTERESTS

THE SUPREME PEOPLE’S COURT

QUESTIONS & ANSWERS

HAS PUBLISHED 06 NEW PRECEDENTS

JUDGMENT ENFORCEMENT

Page 6 - 7

Page 8 - 9

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STRATEGIES FOR

EFFECTIVELY FILING A LAWSUIT A GUIDE TO

ESTABLISHING EFFICIENT AND SUCCESSFUL LITIGATION Page 3 - 5

©2018 LE & TRAN. All rights reserved.

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authors

Mr. STEPHEN LE HOANG CHUONG Managing Partner [email protected]

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Mr. CHAD L. MEEK

Mr. DEREK PHAN VAN CONG DANH

Affiliate Counsel

Senior Associate

Ms. HALEY CHAU KIM HANH

Ms. ESTHER CAO DIEU QUYNH TRANG

Associate

Trainee Solicitor

VIETNAM LITIGATION REVIEW

MARCH 2018

legal insight

STRATEGIES FOR

EFFECTIVELY FILING A LAWSUIT A GUIDE TO

ESTABLISHING EFFICIENT AND SUCCESSFUL LITIGATION 1. Who should you sue?

Filing a lawsuit is the initial step in the litigation proceedings to protect the violated rights and benefits. Elaborate preparation for the litigation lays a solid foundation for effectively performing litigation strategies throughout the entire litigation proceedings, and helps you to achieve the purpose of the litigation at minimum costs. Therefore, you should carefully consider the following factors:

To protect your legitimate rights and benefits, bringing actions against individuals or organizations in breach of the law is a need. However, there may have been multiple people or entities who committed violations of your rights in a specific case. Some may have directly done so while others may only have been indirectly involved in the wrongdoing. Should the lawsuit be solely against the one person or business who you believe to be primarily at fault in causing damage to you? In most cases, this is not the most prudent course of action. Often, litigation is more about obtaining compensation than punishing the wrongdoer. It follows that in order to maximize your compensation, and your statement of claim should name the person or entity with deep pockets that can fully pay your damages in the event you are awarded a favorable judgment. For instance, A and B (both are foreigners) enter into a business cooperation agreement to establish and operate a hotel in Vietnam. Under the agreement, each person will be responsible for 50% of the investment in the hotel. However, in practice, A was the one who leased a house, renovated and re-constructed it into a hotel and purchased all the furniture; while B failed to make his investment as agreed. Following this, B uses his relationship with the landlord to take over the hotel and block A from entering the premises. In this case, the most obvious option is to sue B for breaching the business cooperation agreement. However, B is a foreigner that has almost no assets under his name in Vietnam. As such, suing B will not result in any collectible judgment. On the other hand, suing the landlord may be a viable alternative option. The landlord is the owner of the house used for the hotel business, so he is certainly capable of paying A from his income or assets. Nevertheless, suing the landlord means that A needs to structure the claim in a different way than that which was originally intended (e.g. suing the landlord for breaching the lease agreement instead of suing B for breaching the business cooperation agreement). Thus, identifying the deep pocket is very important and may significantly alter your litigation strategies and the final outcome of the lawsuit.

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2. Where should you submit your statement of claim?

(iii) paying the advance court fee for the additional claims, (iv) officially accepting the additional claims, and (v) holding a mediation meeting pertaining to the additional claims. In these proceedings, holding another mediation meeting is the most time-consuming step since the court must plan a reasonable schedule to notify and summon all involved parties. Going through such proceedings again may significantly prolong the case and as a result, cost you more time and expenses. Furthermore, if you request for adding new claims after the opening of the hearing, the court may reject your request.

Usually, the court where the head office of the defendant is located (if the defendant is an organization) or the residence of the defendant (if the defendant is an individual) will have jurisdiction over the lawsuit. However, in some cases, you may also be allowed to file a lawsuit in: yy

The court where a branch of the defendant is located, when the dispute relates to the activities of the branch;

yy

The court situated in the location where the contract was performed.

Choosing the court that is near to you is quite important. It will not only save expenses and travel time but may also enable you to timely monitor developments of the case. For instance, assuming that Company A has its headquarters located in Ho Chi Minh City and entered into a contract with Company B having its headquarters located in Ha Noi City to carry out a project in Ho Chi Minh City, Company A may have the option to file a lawsuit in Ho Chi Minh City or Ha Noi City. If Company A files the lawsuit in Ha Noi City, Company A may put itself at a disadvantage from the outset as it will be very inconvenient for Company A to attend and react to proceedings in a court located so far away.

3. What should you request in the statement of claim?

Therefore, when filing a lawsuit in a court, you should make as many claims as possible at the beginning and then gradually withdraw the ones that have a low chance of winning. Moreover, it may gain an advantage for you in the negotiation prior to the hearing (note that there are some lawsuits filed for the purpose of negotiation, not the court’s settlement).

3.2. If you file a lawsuit in an arbitration center You should consider that: yy

The arbitration fees are quite high, e.g. for a commercial dispute valued at VND1,000,000,000 (around USD43,966), the arbitration fee at the Vietnam International Arbitration Center (“VIAC”) will be VND85,800,000 (around USD3,772);

yy

The arbitration fees are not fully refunded when withdrawing requests, e.g. for VIAC:

The strategies for making requests in the statement of claim will depend on whether you file a lawsuit in a court or an arbitration center.

hh Before the arbitral tribunal is established: 70% of arbitration fee can be refunded;

3.1. If you file a lawsuit in a court

hh After the arbitral tribunal is established, but before the hearing schedule is created: 40% of arbitration fee can be refunded;

You should take into consideration that: yy

yy

Court fees are low, e.g. for a commercial dispute valued at VND1,000,000,000 (around USD43,966), the first-instance court fee will be VND42,000,000 (around USD1,847) and the appellate court fee will be VND2,000,000 (around USD88). Refunding the court fee is a simple process: hh The first-instance court fee will not be charged on claims that are withdrawn before or at the first-instance hearing; hh 50% of the appellate court fee can be refunded if the appeal is withdrawn before the appellate hearing.

yy

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Withdrawing the claims is uncomplicated and usually, you just need to submit a written confirmation to the court. Nevertheless, adding more claims requires you and the court to repeat almost the entire litigation proceedings, including (i) filing an additional statement of claims, (ii) considering the additional claims and issuing a notice on advance court fee,


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hh After the hearing schedule is created, but before the hearing: 20% of arbitration fee can be refunded. yy

Similar to the litigation proceedings in court, withdrawal of claims is uncomplicated and usually, you only need to submit a written confirmation to the arbitration center. However, the litigation proceedings in the arbitration center are often simpler, faster than in court and mediation meeting is not a compulsory step before the hearing. Thus, adding more claims may be proceeded quickly and may not create any significant adverse effect to the litigation process. Apart from that, adding more claims during the hearing may also be accepted, if (i) the claims are added before the closing of the last hearing, (ii) the additional claims are within the arbitration jurisdiction and (iii) it is not an abuse of the process aimed at causing difficulties or delaying the Arbitral Award (e.g. the plaintiff shows signs of deliberate delay when filing additional claims to prolong the proceedings, adding claims irrelevant to the issues that has been under discussion and settlement so far, etc.).

Therefore, when filing a lawsuit in the arbitration center, you should be selective when making claims, i.e. only making the claims that have a significant chance of winning to keep the arbitration fee reasonable. Then, depending on the course of the litigation proceedings, you may consider whether you should add more claims or withdraw the submitted claims.

4. How much evidence and arguments should you present in the statement of claim? If you have a strong case, identifying all of your arguments and evidence in the statement of claim may be a good strategy in order to pressure the opposing party. However, doing so may not be wise in all cases, because: yy

It may disclose your strategies too soon and, as a result, give your opponent the time to prepare counter measures;

yy

It may unnecessarily waste your time. You will always have the opportunity to supplement arguments and evidence in later proceedings. Thus, spending too much time preparing the statement of claim may not be an efficient allocation of resources, especially when time is of the essence (e.g. you may need to file a lawsuit quickly to meet the statute of limitations).

Furthermore, regarding evidence, you should only submit evidence that can significantly support your arguments. You should not submit anything unnecessary because: yy

It will waste the time of the judge(s) or arbitrator(s) and distract them from focusing on the relevant evidence. It is unrealistic to submit everything you have and expect the judge(s) or arbitrator(s) to read them for you and sort out your claim; they will not do so;

yy

It may provide the opposing party with information that is necessary for their counter-strategies, i.e. the opposing party may use your own evidence against you. It is critical that, before submitting any evidence, you should check carefully whether such evidence contains any information that may adversely affect your case; and if it does, whether you can replace it with different evidence.

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TIME TO OFFSET THE OBLIGATIONS

& CALCULATE

THE LATE PAYMENT INTERESTS

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JUDGMENT NO.26/2017/KDTM-PT DATED NOVEMBER 21, 2017 OF THE PEOPLE’S COURT OF HAI PHONG CITY VIETNAM LITIGATION REVIEW

MARCH 2018

case study: practical adjudication and assessment 1. Summary of facts - Plaintiff: Single-member Limited Liability Company B (“Company B”). - Defendant: Commercial Transportation and Services Limited Liability Company H (“Company H”).

1.1.

On July 10, 2012, Company B and Company H signed a lease contract for a ship with the lease term of 06 months (with an extension of 01 month for the return of the ship or the return of the ship 01 month before the due date being acceptable), the lease fee being USD1,150/day, which must be made within 03 days from the date of receiving a payment request from Company B.

1.2. On July 15, 2012, Company B handed over the ship to Company H and on January 20, 2013, Company H returned the ship to Company B.

1.3.

By March 22, 2013, Company H had made payments on the lease fee totaling only USD127,326.11 to Company B, with a remaining amount outstanding of USD25,820.74, equivalent to VND539,653,466. As the full payment was not forthcoming, Company B filed a lawsuit against Company H in the People’s Court of District A, Hai Phong City, requesting Company H to pay this remaining amount with late interest.

1.4. During the first-instance stage of the litigation, Company H made counterclaims and requested

Company B to pay an amount equivalent to 02 crew members’ salaries, which Company H had paid on behalf of Company B during the ship’s lease term. The counterclaim requested this amount be deducted from Company B’s monetary claim.

1.5. Following the proceedings, both the first instance court and the appellate court ruled that Company H was entitled to an offset of VND201,591,502. However, these two courts had different opinions regarding the timing of the deduction and the calculation of the interest amount. Specifically:

yy

The first instance court calculated the amount of interest Company H owed was: the original principal of VND539,653,466 x 10% late interest/12 months x 52 months owed (from the time when the debt was incurred to the time when the case was brought to hearing) = VND233,849,835. Afterwards, the court made the deduction of the counterclaim to calculate the total amount Company H was liable to pay: (the original principal of VND539,653,466 + the interest of VND233,849,835) – the offset of VND201,591,502 = VND571,911,799;

yy

The appellate court made the deduction at the beginning. This resulted in the remaining principal being the original principal of VND539,653,466 – the offset of VND201,591,502 = VND338,061,964. Afterwards, the appellate court calculated the interest to identify the amount Company H was required to pay: (the remaining principal of VND338,061,964 x 10% late interest/12 months x 52 months owed) + the remaining principal of VND338,061,964 = VND484,555,482.

2. Le & Tran’s assessment Upon consideration of the two rulings, it is Le & Tran’s opinion that the calculations of both courts are unreasonable and not completely fair. In the first instance, the court’s calculation is beneficial to Company B but detrimental to Company H. On the other hand, the appellate court’s calculation is beneficial to Company H but detrimental to Company B. In this case, in order to precisely identify the time of the deduction and interest calculation, the court needed to accurately identify the time when the payment obligation of the 02 crew members’ salaries (i.e. the amount that Company H counterclaimed for a deduction of the final judgment) was incurred. Accordingly, the interest amount should have been properly calculated as follows: the entire principal owed by Company H has to be charged with interests until the time that the crew members’ salaries were incurred; following this, the amounts incurred from the counterclaim will be deducted from the principal by VND201,591,502 and the remaining principle owed by Company H used as the basis for calculation of interest until the judgment is paid. In other words, the correct formula to be used to calculate the amount that Company H had to pay should be [principal minus deductions from the counterclaim] + [interest on the original principal, calculated from the date the payment obligation arose until the time that the crew members’ salaries were incurred] + [interest on the remaining principal after the amount of the crew members’ salaries are deducted from the date the amount incurred from the counterclaim was deducted]. MARCH 2018


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The Supreme People’s Court HAS PUBLISHED

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MARCH 2018

do you know that

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On December 28, 2017, the Supreme People’s Court promulgated Decision No.299/ QD-CA publishing 06 precedents, which all levels of people’s courts must accordingly study and apply for adjudication starting from February 15, 2018. These include the following specific precedents: The precedent on recognizing a mortgage contract for land use rights where the asset is on land that does not belong to the mortgagor (Precedent No.11/2017/AL)

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The precedent addresses 02 issues: (i) if there are several assets on land belonging to many different owners, including those who have land use rights, and the owner only mortgages the land use rights and his assets, then the mortgage contract shall be legally enforceable if its terms and conditions, as well as its formality, are in accordance with the law; (ii) if the person who owns land use rights makes an agreement with the mortgagee, allowing the mortgagee to transfer the land use rights as a collateral asset when there is another person’s asset on that land, then that asset owner shall be given priority in receiving such transfer of land use rights. The precedent on payment validity of the letter of credit (L/C) in the event that the international trading contract which is basis for the L/C is abandoned (Precedent No.13/2017/AL) If, in an international trading contract, there is an agreement on L/C payment method pursuant to international trade practices (Uniform customs and practice for documentary credits, 6th revision in 2007 (UCP600) of the International Chamber of Commerce) and is in compliance with Vietnam law, and such trading contract is abandoned, the L/C shall not lose its validity since this agreement is a transaction separate from the trading contract. This is due to the fact that an L/C, by its nature, is obtained by the buyer requesting the bank to pay the seller as long as such seller can present valid documentation, without taking into consideration on how the parties perform the contract (e.g. whether the goods are delivered on time, with agreed quality, etc.).

The precedent on recognizing an oral agreement between the parties in the conversion of agricultural land use rights before October 15, 1993 (the effective date of the 1993 Law on Land) if the converted land has been registered, declared for area and recorded in cadastral book, and cultivated; and the use of the land is stable, continuous, and long-lasting (Precedent No.15/2017/AL).

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The precedent on determining the case where the parties are summoned for the first time after the Court has postponed the hearing (Precedent No.12/2017/AL)

If the court issues a decision postponing the hearing on its own initiative, and not due to actions of the parties, when the hearing is reopened and the summoned party, his/her representative or guardian of his/her legitimate rights and interests is absent, it shall be considered as the first failure to comply with a valid summons.

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The precedent on recognizing a contractual condition donating land use rights where such condition is not explicitly stated in the contract but is presented in other documents (Precedent No.14/2017/AL) An illustrative case was the dispute between plaintiff – Mr. Quang Van P1, and defendant – Mr. Quang Van P2 and his wife - Ms. Phan Thi V, which was reconsidered by the Civil Court of Supreme People’s Court on January 17, 2011. Although the donating contract between Mr. P1 and Mr. P2/Ms. V did not clearly state the donating condition, the parties had already created a power of attorney and written commitment which clearly stated this condition. The court, therefore, considered this as a valid contractual condition donating the land use rights.

The precedent on recognizing the contract for the transfer of land use right which is an inheritance asset and transferred by one of the co-heirs if (i) the other co-heirs are aware of the transfer but do not object to such transfer and (ii) the amount of money gained from such transfer shall be used to care for the lives of co-heirs (Precedent No.16/2017/AL).

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questions & answers

judgment enforcement

Q: At what time does a party have the right to request enforcement of judgment? A:

In principle, the judgment and decision can only be enforced after entering into force. However, in some special cases relating to matters of support, salary payment, work compensation, severance allowance, job loss allowance, allowance for loss of work capacity, compensation for life and health damage, mental damage, reinstating employees; or implementing temporary emergency measures, such judgment may still be enforced upon request, even though the judgment or decision has not yet entered into force and it is possible that it can be appealed and protested.

Q: How much time does a person have to request enforcement of the judgment? Does this right expire? A:

The person who has the right to request the enforcement of a judgment must make a request within 05 years from the effective date of judgment/decision. After this time, if no request for judgement enforcement is made, such person shall lose his/her right, except in cases of objective obstacles or force majeure.

Q: What if the court decides that party A is required to fulfill its payment obligation towards party B in several installments with different terms, but after the end of the 1st term, party A has not fulfilled its payment obligation? Does party B then have the right to request the civil judgment enforcement authority for a decision enforcing payment for the entire remaining amounts? A:

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No. The civil judgment enforcement authority can only issue a decision enforcing payment of due installments; except for cases where the parties agree on a one-time payment of all obligations with different terms, in this event, the civil judgment execution authority can issue a decision enforcing full payment of all obligations.


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F: ( +84 28 ) 38 44 40 80 www.letranlaw.com

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