April 2021

How do the courts in Vietnam

determine late payment interest in
commercial disputes?

vietnam court tactics

Senior Trial Lawyer

Stephen Le
hoangchuong.le@letranlaw.com

Summary
Recently, our firm handled a significant case that
involved payment of a delinquent debt 05 years after the
effective date of the judgment. The ruling of the court
was that while the principle amount was payable, the
This Insight will help you understand how and what
interest rate you should provide in contracts with your
business partners in order to protect your bottom line in
the event of a dispute over late payments.

late payment interest could not be collected due to lack

Essentially, the more carefully drafted and detailed the
of the required contractual terms and application of the
contractual terms and conditions regarding interest
relevant regulations.

rates, the more likely the judgment/arbitral award will

This Insight will avoid narrowly focusing on the specific
facts of the above case. However, there were numerous
points we discovered about disputes over late interest
payments during the course of the litigation. We hope to
share with you what we learned and inspire some tips in
drafting contractual provisions concerning late payment
terms and interest rates.
must-read.
be in your favor. Without a meticulously drafted
document, the legal regulations of Vietnam will be
applied to the facts of each case with various and
conflicting interpretations depending on the trier of fact.
In order to protect your business in any future dispute
arising from late interest payments, this Insight is a

In general, the interest rate is calculated differently Read full article

depending on whether it is before or after the
first-instance hearing and whether there is an
agreement about the payment of interest or not.

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Nhuan District, Ho Chi Minh City, Vietnam
One of the most important issues in a commercial
lawsuit involving late payments1 Including payments
under sale and purchase contracts, the deposits, the
down payments, etc. which must be returned.] is how
the court will determine late payment interest. In
practice, the interest rate is calculated differently
depending on whether it is before or after the
first-instance hearing.
Before the first-instance hearing
The interest rate is determined by the current market
rate. Under these circumstances, Article 3062, the 2005
Commercial Law provides the right to claim interest on
delayed payment as follows: “Where a From the first-instance hearing onwards
contract-breaching party delays making payment for
goods or payment of service charges and other
reasonable fees, the aggrieved party may claim an
interest on such delayed payment at the average
interest rate applicable to overdue debts in the market
at the time of payment for the delayed period, unless
otherwise agreed or provided for by law.”
1. Including payments under sale and purchase contracts, the deposits, the
down payments, etc. which must be returned.
follows:
2. Article 306, the 2005 Commercial Law provides the right to claim interest
on delayed payment as follows: “Where a contract-breaching party delays
making payment for goods or payment of service charges and other
reasonable fees, the aggrieved party may claim an interest on such delayed
payment at the average interest rate applicable to overdue debts in the
market at the time of payment for the delayed period, unless otherwise
agreed or provided for by law.”
which, however, must comply with law; if no agreement on interest rate
3. Click HERE to see the full Vietnamese content of the Precedent.
4. Article 11, Resolution No.01/2019/NQ-HDTP provides guidance on how
“the average interest rate” provided by Article 306, the 2005 Commercial
Law will be calculated. In particular: “In case a contract is regulated by
Article 306, the 2005 Commercial Law, when determining the late payment
interest rate for a late-paid amount, the court shall base on the average
interest rate applicable to overdue debts in the market announced at the
time of payment (the time of first-instance hearing) by at least 03 (three)
commercial banks (e.g., Joint-Stock Commercial Bank for Foreign Trade of
Vietnam, Vietnam Joint-Stock Commercial Bank for Industry and Trade,
Vietnam Bank for Agriculture and Rural Development, etc.) that have their
head offices, branches or transaction offices based in the province or
central-level city where the Court resolving the lawsuit is located to decide
on the late payment interest rate, unless otherwise agreed upon by the
parties or otherwise prescribed by law.”
5. Article 13, Resolution No.01/2019/NQ-HDTP provides that:
“1. When resolving a criminal case, an administrative case, or a civil,
marriage and family, commercial, or labor case or matter, the court shall,
together with ruling on the amount payable by the judgement debtor to the
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Precedent No.09/2016/AL3 and Article 114, Resolution
No.01/2019/NQ-HDTP provide clear guidance on how
“the average interest rate applicable to overdue debts in
the market” will be calculated. Accordingly, in order to
determine the late payment interest rate, the court shall
collect the interest rates applicable to overdue debts
announced at the time of payment (at the time of the
first-instance hearing) by at least 03 commercial banks
(such as Vietcombank, VietinBank, Agribank, etc.) that
have their head offices, branches or transaction offices
located in the province or central-level city where the
court resolving the lawsuit is located.
The calculation of the interest rate is more complex and
must comply with Article 135, Resolution
No.01/2019/NQ-HDTP which specifies 02 particular
circumstances as follows:
judgement creditor, rule in its judgement or decision (at the ruling part) as
a. In case of late performing the contractual obligation, if the
contracting parties have an agreement on interest payment, the court
shall decide that from the date following the date of first-instance
hearing to the date the judgement is fully enforced, the judgement
debtor is also obliged to pay interest on the unpaid amount during the
judgement enforcement stage at the rate agreed upon by the parties
is reached, the rate prescribed in Article 468.2, the 2015 Civil Code shall
apply.
b. For the amount to be remitted into the State budget which bears
interest under the law, or for the amount of compensation for
non-contractual damage, or in another case of late performing the
asset-related contractual or non-contractual obligation where the
contracting parties have no agreement on interest payment, the court
shall rule that from the date the court’s judgement or decision takes
legal effect (in case the enforcement agencies have the right to
proactively issue the judgement enforcement decision) or from the date
of the judgement creditor’s request for judgement enforcement (for the
amounts payable to the judgement creditor) to the date the judgement
is fully enforced, the judgement debtor shall also pay an interest on the
unpaid amount during the judgement enforcement stage at the rate
prescribed in Article 357 and Article 468, the 2015 Civil Code, unless
otherwise prescribed by law.
2. “Agreed interest rate” prescribed in Clause 1 of this Article means an
interest rate for overdue debt agreed upon by the parties under the contract
or at the court. If the parties have no agreement on such interest rate, the
rate equaling 150% of the interest rate for immature loans shall apply.”
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The parties have an agreement about the payment of
interest in the event of late performing contractual
obligations
The specific interest rate is subject to the
agreement of the parties provided that such rate
complies with the law; if there is no agreement on
the specific interest rate, the court will decide the
interest rate in compliance with Article 468.26, the
After the first-instance hearing, Article 13, Resolution
No.01/2019/NQ-HDTP is applied as follows: (i) for
overdue rent, Company B must pay interest at the rate
agreed to by the parties in the contract (the agreed rate
must comply with the law), as in Item 2(a) above; (ii) for
the late return of the deposit, Company A must pay the
interest at the rate of 10% per year according to Article
357 and Article 468, the 2015 Civil Code, as in Item 2(b)
above.

2015 Civil Code.

The interest shall be calculated from the next day
after the firstinstance hearing until the judgement
is fully enforced.
The parties have no agreement about the payment of
As such, Article 13, Resolution No.01/2019/NQ-HDTP will
be applied for determining the interest rate for the
judgement enforcement stage. For the period before the
first-instance hearing however, i.e. from the date the
obligation arises until the first-instance hearing, the
interest rate must comply with the Commercial Law.

interest in the event of late performing contractual

obligations
The specific interest rate must comply with Article
3577 and Article 4688, the 2015 Civil Code, unless
otherwise provided by law.
The interest shall be calculated from the date the
judgement creditor submits the judgement
enforcement request9 until the judgement is fully
overdue debts as prescribed in Article 306, the 2005
satisfied.
For instance:
Company A is a landlord and Company B is a tenant.
Company B sues Company A for return of the deposit
while Company A sues Company B for the rent remaining
in the lease period. In the lease contract, the parties
agree that Company B must pay late payment interest if
rent payments are delinquent.
The courts have issued decisions applying the above
provisions in resolving disputes. For instance, in
Judgement No.06/2019/KDTM-ST10 dated November 21,
2019 of the People’s Court of Kien An District, Hai Phong
City regarding a dispute over a contract for supply of
goods (“Judgement No.06”). The court in this case
applied the average market interest rate applicable to
Commercial Law which calculated the interest arising
from the time the obligation arose until the
first-instance hearing. Then, the court applied Article
468.2, the 2015 Civil Code to determine the interest rate
for subsequent judgement enforcement stage.

6. See footnote No.8 below.

by a relevant law. […] In case the agreed interest rate exceeds the
maximum interest rate prescribed in this Clause, the excessive interest
7.Article 357, the 2015 Civil Code provides liability for late performance of
rate shall be null and void.

the payment obligation as follows:

2. In case the parties have agreed on payment of interest but not yet
“1. The obligor that is late in his/her/its payment of money shall pay an
determined a specific interest rate and have a dispute over the interest
interest on the late-paid amount corresponding to the late

rate, such interest rate shall be determined to be equal to 50% of the

payment period.
maximum interest rate prescribed in Clause 1 of this Article at the time
2. The late-payment interest rate shall be determined as agreed upon of debt repayment.”

by the parties but must not exceed the interest rate prescribed in
9. This is applicable to amounts paid to the judgement creditor. For cases
Article 468.1, this Code; if no agreement is reached, the late-payment where the enforcement agencies have the right to proactively issue the
interest rate must comply with Article 468.2, this Code.”
judgement enforcement decision, the interest shall be calculated from the
date the court judgement or decision takes effect.

8. Article 468, the 2015 Civil Code provides interest rate as follows:

10. Click HERE to see the full Vietnamese contents of the judgement.
“1. The interest rate of a loan shall be agreed upon by the parties. In case
the parties have agreed on an interest rate, the agreed interest rate must
not exceed 20%/year of the loan amount, unless otherwise prescribed

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No. 9, Area 284, Nguyen Trong Tuyen Street, Ward 10, Phu (+84 28) 38 42 12 42 info@letranlaw.com www.letranlaw.com
Nhuan District, Ho Chi Minh City, Vietnam
However, there exists some inconsistency in applying Based on this conclusion, according to Article 13,
late payment interest in commercial lawsuits among the Resolution No.01/2019/NQ-HDTP, such agreed rate
courts at all levels. In particular: should have been applied for calculating the
interest during the judgement enforcement period
According to Judgement No.06 above, Company N
by Company An Bao L starting on the day following
sued Company B for the outstanding amount worth
the first-instance hearing. However, in Judgement
VND333,364,050 plus interest. In the contract
No.22, instead of applying the interest rate agreed
signed by the parties, there was no agreement
by the parties, the People’s Court of Vung Tau City
about the payment of interest. As a result, Article
applied the interest rate provided in Article 468.2,
13.1.(b), Resolution No.01/2019/NQ-HDTP should
the 2015 Civil Code for calculating the interest from
have been applied. In other words, meant that the
the date the judgement creditor submitted the
interest should have been calculated from the date
judgement enforcement request.
the judgement creditor submitted the judgement
enforcement request, not from the day after the Another precedent is Judgement No.01/2020/KDTMPT12
first-instance hearing as decided by the People’s dated January 10, 2020 of the People’s Court of Can Tho
Court of Kien An District, Hai Phong City. City regarding a dispute over a sales and purchase
contract. In particular, Company P and Company Quang
Judgement No.22/2019/KDTM-ST11 dated November
G disagreed over the outstanding amount worth
25, 2019 of the People’s Court of Vung Tau City
VND999,999,454 plus interest at the rate of 1.25% per
regarding a dispute over a sales and purchase
month as agreed in the contract by the parties. Similar
contract (“Judgement No.22”). In Judgement No.22,
to Judgement No.22, the People’s Court of Can Tho City
Company BT sued Company An Bao L for the
concluded that such interest rate complied with the
outstanding payment worth VND647,756,160 and
2005 Commercial Law and applied it for calculating the
the interest arising at the rate of 12% per year as
late payment interest from the day the obligation arose
agreed in the contract by the parties. The People’s

until the first-instance hearing. However, regarding the

Court of Vung Tau City concluded that such interest
interest rate for the judgement enforcement stage, the
rate complied with Article 306, the 2005
People’s Court of Can Tho City decided to apply the
Commercial Law which was lower than the average
average interest rate applicable to overdue debts based
interest rate applicable to overdue debts in

on the interest rate promulgated by 03 banks in the
the market.
market. This decision did not comply with Article 13,
Resolution No.01/2019/NQ-HDTP which provides that
the interest rate in the judgement enforcement stage
must be the rate agreed by the parties provided that the
agreed rate is in compliance with the law.

11. Click HERE to see the full Vietnamese contents of the judgement. 12. Click HERE to see the full Vietnamese contents of the judgement.

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Nhuan District, Ho Chi Minh City, Vietnam
Overall, it can be seen that although there are clear
regulations guiding the courts for determining the
applicable interest and interest rates in their judgements
and decisions, the practical application of such
regulations varies. This may adversely affect the parties’
legitimate interests. In particular: if there is an
agreement regarding the payment of interest, the
creditor will be entitled to interest for a longer period i.e.
from the next date of first-instance hearing; if there is
no agreement on the payment of interest, the debtor will
pay interest for a shorter period i.e. from the date of the
judgement enforcement request.
Disclaimer
The contents of this document do not constitute legal advice and do not
necessarily reflect the opinions of our Firm or any of our attorneys or
consultants. The document provides general information, which may or
may not be correct, complete or current at the time of reading. The
contents are not intended to be used as a substitute for specific legal
advice or opinions. Please seek appropriate legal advice or other
professional counselling for any specific issues you may have. We expressly
disclaim all liabilities relating to actions taken or not taken based on any or
all content of this document.
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As a consequence, during court litigation, a full picture
of the terms and application of Article 13, Resolution
No.01/2019/NQ-HDTP needs to be considered and
applied diligently to protect the relevant parties’
legitimate rights and interests./.
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