In business activities, cooperation between foreign enterprises is no longer strange in Vietnam. However, cooperation is not always smooth due to many problems that arise, including debts arising between domestic enterprises and foreign enterprises. These are debts with foreign elements, so the foreign debt collection has some differences from the domestic counterpart. In this article, TNTP will analyze issues related to debt collection by Vietnamese enterprises when the debtor is a foreign enterprise (collectively referred to as “the debtor”) so that Vietnamese enterprises can deal with similar situations.

1. Common difficulties when collecting debt from the debtor

• Difficult to identify the exact address and legal status of the debtor

Because the debtor has the address and headquarters in a foreign country, it is difficult to determine whether that is the exact address of the debtor or not, even if the debtor has changed its operating address, representative, etc. Furthermore, identifying this information via the Internet is restricted because different countries and regions make accessing enterprise information more difficult.

• Language barrier

Using foreign languages to communicate with foreign debtors is very important so that enterprises can express their opinions and views, and request payment from the debtors. However, not all debtors use English or other common languages. The debtor sometimes only uses Chinese, Korean, Japanese, Russian, etc., and does not understand English. At that time, it will be difficult for the parties to convey each other’s opinions, not to mention the language barrier will lead to misunderstandings, making debt collection difficult.

• Filing a lawsuit abroad is very expensive (because the contract signed between the parties stipulates a foreign dispute settlement body).

– Normally, in a contract, if the parties have agreed to apply foreign law and settle disputes at a foreign competent authority, normally they will not be able to choose to settle disputes at competent authorities in Vietnam.

– In this case, the party whose debt needs to be collected will have to research the legal regulations of the country chosen to settle the dispute as well as send documents and dossiers to foreign agencies under the laws of that country to settle disputes. They should also consider using legal services from a law firm in the country whose law is chosen to settle the dispute.

– However, the costs of filing a lawsuit abroad are much more expensive than the costs of filing a lawsuit at a domestic competent authority. Therefore, depending on the value of the debt, Vietnamese enterprises should consider choosing whether to initiate a lawsuit abroad or not.

2. Debt collection methods that Vietnamese enterprises should apply

• Contacting the debtors by phone or email

With the development of technology, platforms, and devices such as email, phones, text messages, etc. are flexible, fast, and convenient when conveying information. Therefore, Vietnamese enterprises can prioritize using these methods to communicate and discuss with the debtor first to demonstrate a moderate, gentle but resolute attitude by setting a payment deadline or payment plan in a specific and reasonable manner to request the debtor to respond and properly perform the obligations in the contract.

• Sending Letter of Demand (LOD)

– Sending LOD is a more powerful and effective method than contacting by phone or email. Normally, the LOD will be drafted by a law firm representing the Vietnamese enterprise and sent to the debtor. LOD is not only an appropriate method to express the tough attitude of Vietnamese enterprises toward the debtors but also a basis for enterprises to initiate lawsuits, determine the statute of limitations for initiating lawsuits, etc. (according to the law in the country where the dispute settlement agency is chosen) and creates an advantage in case of settling the dispute at a foreign dispute settlement body.

– LOD will be sent via email to the debtor by the representative law firm to warn and request serious consideration of paying the debt. In case a Vietnamese enterprise wants the LOD to reach the debtor, currently, law firms can assist Clients in finding a competent unit in the debtor’s country to serve the hard copy of the LOD to the debtor’s address. This action can be seen as a strong warning measure.

• Hiring a law firm in the debtor’s country

– This is the method that Vietnamese enterprises should consider and choose. Because foreign law firms are specialized legal units, they understand the laws in their country and can offer the best, most favorable, and legal solutions to collect the debt without violating the laws of that country (because most of the laws of other countries promote and protect individuality, privacy, confidential information, honor, of individuals and organizations).

– Vietnamese enterprises can authorize law firms in Vietnam to directly discuss and work with lawyers at selected foreign law firms. According to our experience, TNTP has represented clients many times to discuss with foreign lawyers, ensuring that the debt collection work performed by the foreign law firm is always followed, supervised, urged, and has the fastest progress.

• Filing a lawsuit at a foreign dispute settlement agency

After conducting the above methods but without positive results and having considered the feasibility of the case, Vietnamese enterprises can consider deciding to proceed with the more drastic method of filing a lawsuit at a foreign dispute settlement agency. As we noted above, the cost of filing a lawsuit (including costs at foreign dispute settlement agencies and hiring foreign lawyers) is expensive. Therefore, depending on the value of the debt and wishes, Vietnamese enterprises can consider this method.

It can be seen that debt collection for debtors who are foreign enterprises has many difficulties. Vietnamese enterprises need to research carefully and prepare to minimize risks and implementation costs so that debt collection is most effective.

Above is our article on “Debt collection when the debtor is a foreign enterprise – What do Vietnamese enterprises need to do?“. Hope this article is useful to readers.