Nowadays, in business activities, contact and cooperation between foreign companies have become very popular with Vietnamese companies. This is an inevitable part of the globalization trend. However, with the obvious advantages, there are potential risks and disputes. One of them is the arising of debt between Vietnamese companies and foreign companies. In this article, we will analyze the difficulties when foreign companies collect debts in case Vietnamese companies are debtors so that foreign companies can have more experience when facing similar situations.
1. Foreign companies can no longer collect debts through Debt collection companies in Vietnam
In many other countries, the law allows Debt collection companies to operate. However, in Vietnam, under the Law on Investment 2020, the “debt collection” service has been totally prohibited. Thus, currently, only law firms can support foreign companies in collecting debts to ensure that debt collection is carried out in accordance with the provision of Vietnamese Law.
Therefore, if a foreign company wants to collect debts that Vietnamese companies are debtors, to save time, costs, and be effective in the process of debt collection, the foreign company should use the legal service of law firms that specialize in debt collection.
2. The Authorization of a foreign company for a law firm in Vietnam can take a long time
It will take plenty of time for a foreign company to authorize a law firm in Vietnam because the Power of Attorney needs to be transported from abroad to Vietnam, not to mention the duration for consular legalization of documents, which make the time to perform the authorization can be extended from 1 to 3 months.
3. Difficulties when conducting consular legalization of documents
To authorize a law firm in Vietnam or request a competent authority in Vietnam to handle the case, the foreign company needs to send documents to the law firm or the competent authority in Vietnam. However, in accordance with Vietnamese law, to make documents be legally valid in Vietnam and accepted by competent authorities in Vietnam, it needs to be consular legalized.
Depending on the characteristics and quantity of the documents, the time for consular legalization can take from 05 to 07 working days. However, the implementation of consular legalization can only be done in countries that have diplomatic relations with Vietnam. It means that a foreign company cannot conduct consular legalization of documents if the country where the foreign company is located has not established diplomatic relations with Vietnam.
4. It is difficult to meet the debtor directly
In fact, foreign companies that want to meet directly with debtors in Vietnam always face many barriers. The biggest problem is geographical distance. Procedures, travel costs between countries are much more expensive than moving within a country. It is tough for foreign companies to meet debtors in Vietnam directly, especially when those companies’ headquarter are in countries far from Vietnam such as the United States, Germany or France, etc.
In that case, the parties can mainly communicate only through forms of communication such as the telephone or the internet. However, these forms also reveal many limitations such as unstable network connection, non-continuous conversation, the debtor does not cooperate so that communication is not possible.
5. Complicated international payment procedures
Under the law of Vietnam, as well as many other countries, the money transfer from Vietnam to another country will have to go through credit institutions with an international money transfer function, and the company must prove the transfer money for the right purposes as prescribed by law. Therefore, if the debtor in Vietnam cooperates in payment, it is also necessary to carry out the payment procedures in accordance with the provisions of Vietnamese law. This payment can take a long time and the procedure is very complicated.
As a result, the debt collection in case debtors are Vietnamese companies has many difficulties that require foreign companies to carefully research regulations of the law of Vietnam and prepare from the beginning to minimize the risks and the costs for debt collection are used effectively.
Here is our experience about the difficulties of debt collection with foreign elements. We hope this article is useful to you.
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TNTP & Associates International Law Firm
Lawyer Nguyen Thanh Ha