If the bank requests debt repayment under the contract after the statute of limitations for filing a lawsuit has expired, will the Court in Vietnam suspend the lawsuit or not?

The Supreme People's Court of Vietnam issued Official Dispatch 02/TANDTC-PC on August 2, 2021, providing clarification on certain issues in court proceedings. In particular, TANDTC provided clarification on certain issues related to banking activities, including the time limit for initiating a lawsuit regarding loan contracts in Vietnam.

Specifically, in question 2 of Part III on Civil Matters, it states: Mr. A borrowed 1 billion Vietnamese dong from the Bank, with a loan term of 1 month starting from January 2, 2017, and an interest rate of 2% per month. After the 1-month loan term, Mr. A was unable to repay the principal and interest. Within the 3-year period from February 3, 2017, to February 3, 2020, the Bank did not initiate a lawsuit to demand repayment from Mr. A. Now, if the Bank files a lawsuit demanding Mr. A to repay the debt, does Mr. A have the right to request the application of the provisions on time limits before the Court of First Instance issues a judgment or decision to resolve the case or not?

According to Article 429 of the Civil Code 2015, the limitation period for initiating a lawsuit to request the court to settle a contract dispute is 03 years, counting from the date the person with the right to request becomes aware or should have been aware of their rights and legitimate interests being violated.

Based on the above regulation, the limitation period for initiating a lawsuit to request the court to settle a credit contract dispute has expired. However, according to Clause 2 of Article 155 of the Civil Procedure Code 2015, the limitation period does not apply in the case of "requesting protection of ownership rights, except when this Code or other related laws provide otherwise". Therefore, the bank can file a lawsuit against Mr. A to demand the recovery of the asset (principal debt) and the court can accept the case and settle it without depending on whether the parties requested the application of the limitation period before the court of first instance issues a judgment or decision to settle the case.

With this content, it is established that the bank has the right to file a lawsuit to demand the recovery of the asset (principal debt), the court can accept the case and settle it as a dispute "Demanding the recovery of the asset (principal debt borrowed by Mr. A)". Of course, in a dispute for the recovery of the asset, there is no requirement to apply the limitation period.

The issue arises when the bank files a lawsuit demanding Mr. A to repay both the principal debt and interest according to the contract. How will the court settle this?

First viewpoint: For the bank to file a lawsuit demanding Mr. A to repay the loan according to the credit contract, both the principal debt and interest, the court of first instance handling the dispute is a credit contract dispute. During the proceedings, the court will examine the legality of the credit contract according to the provisions of the law, and the court will only apply the limitation period according to the request of one party or the parties, provided that this request must be made before the court of first instance issues a judgment or decision to settle the case, as stipulated in Clause 2 Article 184 of the Civil Procedure Code 2015. In the case where the defendant - Mr. A requests the court of first instance to apply the limitation period, the court will settle the dispute by redefining the "Recovery of the asset" dispute, and will not accept the plaintiff bank's request for interest on the principal debt according to the credit contract.

Second viewpoint: Different from the first viewpoint, it is argued that it is not by chance that the Supreme People's Court has provided additional guidance in question 3 of Part III of the Civil Law[1]: For civil contracts: ... contracts for borrowing assets between individuals or groups (not credit contracts), the limitation period applies according to the provisions of Article 429 of the Civil Code 2015 and Article 184 of the Civil Procedure Code 2015. In the content of the answer to question 3, the Supreme People's Court affirmed the content of the answer to question 2: "For cases where the bank provides loans, the bank can only file a lawsuit to demand the recovery of the asset (principal debt), once the limitation period for the credit contract has expired and the court of first instance has jurisdiction to settle the dispute for the recovery of the asset without depending on whether the parties requested the application of the limitation period or not". Therefore, in the case where the bank files a lawsuit demanding both the principal debt and interest according to the credit contract, and the limitation period for the contract has expired, the court will suspend the settlement of the case according to the provisions of point h, clause 1 of Article 217 of the Civil Procedure Code 2015.

Third viewpoint: The argument of the second perspective, which relies on the guidance of the People's Court and the suspension based on Article 217, Clause 1 of the Civil Procedure Code, is not solid. In the case where the bank sues Mr. A to demand repayment of both the principal and interest according to the contract, the limitation period for initiating a lawsuit to request the court to resolve the contract dispute is 03 years, counting from the date the person with the right to claim knows or should have known that their legitimate rights and interests have been violated, as stipulated in Article 429 of the Civil Code 2015. The Court only applies the limitation period as requested by one party or the parties, with the condition that this request must be made before the Court of first instance issues a judgment or decision to resolve the case, as stipulated in Article 184, Clause 2 of the Civil Procedure Code. This means that only when Mr. A requests the application of the limitation period before the Court of first instance issues a judgment or decision to resolve the case, the Court must suspend the case related to the contract dispute of the credit contract, with the reason being that the plaintiff has requested the application of the limitation period before the Court of first instance issues a judgment or decision to resolve the case, and the limitation period has expired. Therefore, different from the first perspective, the Court does not change the dispute relationship to "Recovering assets". Accordingly, the bank believes that its legitimate rights and interests have been violated with regard to the principal debt and will file a separate lawsuit for the case to be resolved by the Court. This is also the author's perspective.

We look forward to receiving valuable contributions from readers.

VO VAN NHU (People's Court of Soc Trang City, Soc Trang Province)

Source: "Tạp chí Tòa án" (Court Magazine)

[1] 3. For civil contracts such as lease contracts, property lease contracts, and property loan contracts between individuals, organizations (not credit contracts), does the limitation period for initiating a lawsuit apply as stipulated in Article 429 of the Civil Code 2015?

According to the provisions of Articles 155, Clause 2 and Clause 3 of the Civil Code 2015: "The limitation period does not apply in the following cases:

...2. A request for property protection, except as otherwise provided by this Law or relevant laws.

3. Disputes over land use rights as provided in the Land Law...."

According to the provisions of Article 429 of the Civil Code 2015: "The limitation period for requesting the Court to resolve a contract dispute is 03 years, counting from the date the person with the right to claim knows or should have known that their legitimate rights and interests have been violated."

According to the provisions of Article 184, Clause 2 of the Civil Procedure Code: "The Court only applies the limitation period as requested by one party or the parties with the condition that this request must be made before the Court of first instance issues a judgment or decision to resolve the case."

Therefore, for disputes over property ownership and recovery of assets, the Court does not apply the limitation period regardless of whether one party or the parties request its application. For disputes arising from civil transactions such as lease contracts, property lease contracts, and property loan contracts between individuals, organizations (not credit contracts), the limitation period applies as stipulated in Article 429 of the Civil Code 2015 and Article 184 of the Civil Procedure Code.

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