In business activities, the cooperation between businesses and countries is not strange. However, the cooperation is not always smooth. The promotion of business between domestic and foreign enterprises leads to more and more debts arising. These debts have foreign elements, therefore, the debt collection also has some differences. This article will analyze the difficulties when Vietnamese enterprises collect debts that the debtor is a foreign individual or foreign legal entity so that Vietnamese enterprises can have experience when they encounter similar situations.

1. The exact address and legal status of the debtor cannot be determined

For Vietnamese enterprises, information can be easily looked up on the National Business Registration Portal. However, because the debtor’s address and head office is in a foreign country, so it is difficult to determine whether it is the debtor’s exact address or not, even if the debtor has changed its operational address, the legal representative, business code, operation status, etc.., Vietnamese enterprises cannot grasp. Furthermore, the identification of this information via Internet is limited because many countries do not have websites of business information or these websites do not allow free access.

Therefore, it is difficult for enterprises in Vietnam to determine the exact address and legal status of debtors that are foreign enterprises to carry out necessary measures to collect the debt.

2. Language barriers

The use of foreign languages to communicate with debtors that are foreign enterprises is important for enterprises to express their opinions, views, and request debtors to pay. However, not all debtors use English or other common languages. The debtors may only use Chinese, Korean, Japanese, Russian, etc… and do not understand English. At that time, the debt collection will meet many difficulties for the parties to convey each other’s opinions. The language barrier will also lead to misunderstandings and make debt collection difficult.

In short, debt collection will not be able to take place as quickly and effectively as for debtors using English or Vietnamese.

3. When the content of the signed contract between the parties stipulates authority settling dispute in a foreign country

Usually, the dispute settlement will be freely agreed by the parties. If the parties have agreed to apply foreign law and settle the dispute at a competent authority in a foreign country in the Contract, they will not be able to choose and apply Vietnamese law and settle the dispute at the competent authorities in Vietnam.

In this case, if a dispute arises, the party that needs to collect the debt will have to study the provisions of the laws of the country selected to settle the dispute, as well as send files and documents to the foreign authority in accordance with the laws of that country to settle dispute. The party that needs to collect the debt should also consider using legal services of a law firm in the country whose law is chosen to settle the dispute.

4. It is very expensive to conduct a lawsuit abroad

If the parties agree that the place of dispute settlement is a foreign country, Vietnamese enterprises wishing to initiate a lawsuit will have to carry out legal proceedings abroad. However, the costs of initiating a lawsuit abroad are much more expensive than initiating a lawsuit at a domestic authority.

Therefore, depending on the value of the debt, Vietnamese enterprises should consider whether to initiate a lawsuit abroad or not. In addition, Vietnamese enterprises should research debt collection services of foreign debt collection companies or foreign law firms where the debtor’s head office is located so that the debt collection can be more effective. Debt collection authorities or law firms in foreign countries where the debtor’s head office is located can work directly with the debtor, easily exchange and search for information, have no language barriers, and have a good understanding of the laws of that country.

In case Vietnamese enterprise cannot find out and authorize to a foreign law firm by itself, Vietnamese enterprise can authorize a law firm in Vietnam because currently, some law firms in Vietnam have a network of cooperation with foreign law firms. The exchange and search of debtor’s information between Vietnamese and foreign law firms can be carried out faster and more efficiently than Vietnamese enterprises work with foreign law firms by themselves.

It can be found that the debt collection for debtors that are foreign enterprises has many difficulties. Vietnamese enterprises need to carefully research and prepare from the beginning to minimize the risks and costs of implementing effective debt collection.

Above are our experiences on the difficulties of debt collection between Vietnamese enterprises and debtors that are foreign enterprises. Hope this article is useful to you.

Best regard,

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Lawyer Nguyen Thanh Ha