QUY ĐỊNH PHÁP LUẬT VÀ THỰC TIỄN ÁP DỤNG BIỆN PHÁP PHONG TỎA TÀI SẢN TRONG TỐ TỤNG DÂN SỰ / LEGAL PRO

1. Overview of legal provisions on the measure of asset freezing in civil proceedings

Asset freezing is a general term referring to certain provisional urgent measures prescribed under the 2015 Civil Procedure Code, which are applied by competent authorities for the purpose of temporarily restricting rights or completely suspending the use, transfer, sale, donation, mortgage, etc. of assets owned by individuals or organisations, thereby ensuring that the relevant assets shall not be dispersed or destroyed during the process of dispute resolution or judgment enforcement. This measure aims to protect the lawful rights and interests of the parties concerned and plays an important role in guaranteeing the ability to perform obligations by the obligated party in civil transactions, particularly those involving entities engaged in economic activities that are resolved before a dispute resolution body.

Regarding its development process, the measure of asset freezing was initially envisaged in Ordinance No. 27-LCT/HĐNN8 dated 07 December 1989 on procedures for the settlement of civil cases, which referred to provisional urgent measures, including provisions relating to the prevention of asset disposition. Subsequently, the Ordinance on Civil Judgment Enforcement of 1993 continued to address this issue; however, at that stage, the concept of “asset freezing” had not yet been clearly stipulated and remained fragmented and lacking in systematic structure. It was not until the Civil Procedure Code of 2004 was adopted that the measure of asset freezing was officially codified and thereafter further improved under the Civil Procedure Code of 2015.

At present, the measure of asset freezing under the Civil Procedure Code of 2015 may include, inter alia: freezing of accounts at banks, other credit institutions, or the State Treasury; freezing of assets kept in custody; freezing of assets belonging to the obligated party, in which:

– Freezing of accounts at banks, other credit institutions, or the State Treasury shall be applied if, during the process of case resolution, there exist grounds to determine that the obligated person maintains an account at a bank, another credit institution, or the State Treasury, and the application of such a measure is deemed necessary to ensure the settlement of the case or the enforcement of the judgment.

– Freezing of assets held in custody shall be applied if, during the process of case resolution, there exist grounds to determine that the obligated person has assets currently held in custody, and the application of such a measure is deemed necessary to ensure the settlement of the case or the enforcement of the judgment. 

– Freezing of assets belonging to the obligated person shall be applied if, during the process of case resolution, there exist grounds to determine that the obligated person possesses assets, and the application of such a measure is deemed necessary to ensure the settlement of the case or the enforcement of the judgment.

Pursuant to Resolution No. 02/2020/NQ-HĐTP dated 24 September 2020 of the Council of Judges of the Supreme People’s Court providing guidance on the application of certain provisions regarding provisional urgent measures under the Civil Procedure Code, the litigant, the lawful representative of the litigant, or any agency, organisation, or individual initiating a civil lawsuit to protect the lawful rights and interests of others, public interests, or the interests of the State shall have the right to request the Court to apply one or more measures of asset freezing if falling under any of the following circumstances: a) For the purpose of provisionally resolving an urgent request of the litigant directly related to the case being handled by the Court, which must be settled immediately, as any delay may adversely affect the life, health, honour, dignity, or property of the litigant; b) For the purpose of collecting or preserving evidence in a case under consideration and resolution by the Court, where a litigant obstructs the collection of evidence, or where the evidence is being destroyed, is at risk of destruction, or is likely to become difficult to collect at a later stage; c) For the purpose of preserving the existing status quo and preventing irreparable damage, that is, to preserve the relationship or object directly related to the case being handled by the Court; d) For the purpose of ensuring the resolution of the case or the enforcement of the judgment, that is, to secure the basis for resolving the case and the conditions to ensure that, when the Court’s judgment or decision is enforced, there are sufficient means for execution. In addition, Resolution No. 02/2020/NQ-HĐTP also provides guidance on several other matters concerning the application of provisional urgent measures, including the measures of asset freezing stipulated in the Civil Procedure Code.

2. Practical application of the measure of asset freezing and its impacts on private economic activities in civil proceedings

In practice, the measure of asset freezing is currently requested by litigants for application by the Court with considerable frequency, particularly in civil, commercial, and business cases involving disputes over substantial financial obligations or ownership rights. Specifically, Clause 1 Article 111 of the 2015 Civil Procedure Code stipulates that, during the course of case resolution, a litigant shall have the right to request the Court to apply one or more provisional urgent measures as prescribed in Article 114 of the 2015 Civil Procedure Code in order to provisionally resolve the litigant’s urgent request, protect life, health, and property, collect and preserve evidence, maintain the existing status quo to prevent irreparable damage, and ensure the resolution of the case or the enforcement of the judgment. Accordingly, upon the Court’s decision to order the freezing of assets belonging to a related or obligated person, the Court may request banks or other relevant authorities such as land registration offices or asset-holding institutions to temporarily suspend all related transactions, thereby ensuring that the assets of the party subject to the order shall not be transferred or dispersed during the process of dispute resolution or judgment enforcement.

In general, the measure of asset freezing in civil proceedings serves as an essential instrument to prevent acts of deliberate evasion of obligations by the parties concerned. In practice, there have been numerous instances in which many litigants, immediately upon learning that they have been sued, have swiftly transferred or dispersed their assets to a third party in order to avoid their obligations. The incorporation of the asset-freezing mechanism into the Civil Procedure Code effectively minimises acts of asset dissipation or circumvention of the law, thereby mitigating risks during subsequent judgment enforcement and ensuring the lawful rights and interests of the litigants. Moreover, the measure of asset freezing also assists in preserving the current status of the assets, thereby supporting the Court in the objective evaluation of evidence and the transparent determination of financial obligations.

However, in practice, the application of this measure has encountered numerous difficulties and obstacles, specifically as follows:

Firstly, the difficulty in identifying the assets of the obligated party.

The determination of a litigant’s assets for the purpose of requesting the application of an asset-freezing measure poses significant challenges, since the litigants themselves are not entitled to access or search for asset-related information of the obligated party. Asset information such as land, vehicles, or shares is managed by State authorities and kept confidential, thereby prohibiting individuals or legal entities from conducting independent searches. Accessing accurate asset records is often extremely difficult without assistance from the Court or other competent authorities. In many instances, obligated enterprises tend to transfer their assets to other enterprises under the same ownership, membership, shareholding structure, or to individuals with close personal relations, in order to evade the asset-handling measures imposed by competent State authorities. This situation reveals that the mechanisms for identifying assets to which the freezing measure may be applied, for the purpose of protecting the lawful rights and interests of the requesting party or the infringed party, remain limited. Such limitations directly affect the legitimate interests of litigants, particularly those who are enterprises or business individuals, whose disputes often involve substantial financial values.

Secondly, the Court shall only be entitled to freeze accounts or assets whose value is equal to or less than the property obligation that the person subject to the provisional urgent measure is required to perform. However, the act of proving the value of the assets requested to be frozen remains exceedingly difficult.

For example: The plaintiff, A Investment and Development Company Limited (“Company A”), initiated a lawsuit requesting the defendant, D Import-Export Company Limited (“Company D”), to pay a debt exceeding VND 3 billion arising from a goods sale and purchase contract dated 05 July 2024 between the two companies. In order to ensure the enforcement of the judgment, the plaintiff requested the Court to freeze the assets, namely the D Seafood Processing Factory located at Lot 42, Street No. 2, T Industrial Zone, T Ward, B District, together with the land-use rights for the premises used by Company D. Pursuant to Clause 2, Article 12 of Resolution No. 02/2020/NQ-HĐTP dated 24 September 2020 of the Council of Judges of the Supreme People’s Court, it is stipulated that: “The applicant requesting the imposition of a provisional urgent measure shall bear the obligation to prove the value of the account or assets to be frozen. The applicant must take responsibility for the truthfulness and accuracy of all documents related to the determination of the value of the assets and accounts requested to be frozen.” Accordingly, upon the request for asset freezing, the Court requires the plaintiff to substantiate the value of the property in order to ensure its proportionality with the obligation being sought. The issue arising here is that Company A is unable to independently conduct, or engage a valuation organisation to conduct, an appraisal, as such an activity necessitates a decision from the Court or another competent authority. Consequently, this situation may result in the Court refusing to apply the asset-freezing measure on the grounds of insufficient evidence regarding the asset’s value, out of concern that the measure might be “applied beyond the scope of the obligation to be performed.” Therefore, the law needs to provide specific guidance on the types of evidence required to determine the “value of assets” subject to freezing.

Thirdly, regarding the grounds for the application of the asset-freezing measure

In practice, there exist numerous instances in which, at the time of applying the provisional urgent measure of asset freezing, the conditions for its implementation have not been fully satisfied. Such circumstances include: the absence of any property-related obligations arising between the litigating parties; the lack of any indication of asset dissipation; the assets requested to be frozen being unrelated to the disputed relationship; or the absence of any urgent necessity, among others. The application of the asset-freezing measure in these cases may, on the one hand, serve to protect the rights and interests of the requesting party; yet, on the other hand, if improperly applied, it may cause serious detriment to the party subject to the measure, as they may be deprived of the ability to utilise their funds or assets for an extended period. This is particularly consequential for economic actors whose business operations may be disrupted or even forced to cease, leading to unforeseeable, irreparable, and uncompensable consequences.

Therefore, it is essential that the application of asset-freezing measures be carried out with prudence, certainty, and only when clear legal grounds are established. At present, the Court’s decision on whether to impose a provisional urgent measure often relies primarily on the request, evidence, and statements submitted by the requesting party. The Court’s tendency to readily approve such requests, sometimes without fully considering the potential economic impact on the enterprise concerned, poses significant risks. Although a freezing order may be legally sound, it can nevertheless produce severe adverse consequences for the business operations of the affected party.

Fourthly, the current application of asset-freezing measures lacks stringent judicial oversight, resulting in prolonged freezes. After issuing a freezing order, many Courts fail to conduct periodic reviews or reassess the necessity of maintaining the measure. Consequently, assets may remain frozen for years throughout various stages of the proceedings without any decision of revocation. As of now, the law contains no provisions requiring the Court to reconsider the necessity of maintaining the measure after a certain period, leading to unnecessarily prolonged asset freezes and undue hardship for the affected parties.

3. Recommendations for improving legal provisions on the application of asset-freezing measures in civil proceedings in response to the requirements of private economic development

In general, to refine the legal provisions governing the application of asset-freezing measures so as to minimise their negative impacts while still ensuring their protective function in civil proceedings, particularly with a view to promoting the growth of the private economic sector in the coming period, the author proposes several specific recommendations.

Firstly, it is essential to establish a dedicated asset database accessible exclusively to procedural authorities. Such a system should ensure interconnectivity between the Court, the Procuracy, Commercial Arbitration Centres, the Enforcement Agencies, Land Registration Offices, Banks, and Securities Institutions. Once a request from a litigant is deemed lawful, the competent authority should be empowered to retrieve asset-related data promptly, thereby enabling the swift and timely application of asset-freezing measures.

Secondly, clearer regulations are required regarding the conditions for the application of asset-freezing measures. 

At present, such measures are governed by Articles 114 and 133 of the 2015 Civil Procedure Code and guided by Article 2 of Resolution No. 02/2020/NQ-HĐTP dated 24 September 2020 of the Council of Judges of the Supreme People’s Court. However, these provisions remain largely general and do not fully address the practical difficulties arising during their implementation. Therefore, it is necessary to supplement more specific regulations defining the criteria of “urgency” and the “potential for damage” in cases where asset-freezing measures are not applied, in order to prevent their misuse by litigants. Moreover, the law should classify the types of assets eligible for freezing, with particular restrictions on those essential to the continuous operation of enterprises.

Thirdly, it is essential to establish specific provisions regarding the evidentiary responsibility and binding commitments of the party requesting the asset-freezing measure. At present, the requesting party is merely required to submit an application accompanied by supporting evidence and is often not subject to substantial accountability if the request proves to be unfounded. Therefore, the law should require that the requesting party provide a form of financial security, such as a deposit or a bank guarantee, of an appropriate value. This measure would help prevent arbitrary or unfounded requests that may cause damage to the enterprise whose assets are frozen, while ensuring that the requesting party bears responsibility for their own claims.

Fourthly, it is necessary to supplement legal provisions concerning the liability of the Court in cases where the inappropriate application of a provisional urgent measure causes adverse effects to the litigants. Currently, Article 113 of the 2015 Civil Procedure Code provides for the Court’s responsibility when applying a provisional urgent measure, as follows:

“2. If the Courts apply the provisional emergency measures improperly, thus causing damage to those subject to such measures or to the third persons, the Courts shall have to pay compensation therefor in the following cases:

a) The Courts have applied the provisional emergency measures on their own;

b) The Courts have applied other provisional emergency measures than those petitioned by agencies/organizations/individuals;

c) The Courts have applied the provisional emergency measures beyond the petitions of agencies, organizations and individuals;

d) The Courts have applied the provisional emergency measures unconformably with the time limit prescribed by law or the Courts fail to apply the provisional emergency measures without good and sufficient reasons.

3. The compensation specified in clause 2 of this Article shall comply with regulations in the Law on State compensation liability.”

However, this provision currently limits the Court’s liability to only four specific circumstances: when the Court applies a provisional urgent measure on its own initiative; when it applies a measure different from or beyond the request of the litigant; when it applies the measure beyond the prescribed time limit; or when it does so without justifiable reasons, provided that such actions result in damage to the affected party or a third party.

In practice, the improper application of a provisional urgent measure, including the asset-freezing measure, will undoubtedly have adverse impacts on the party subject to its enforcement. For those engaged in economic activities, such consequences may initially manifest in harm to their reputation and credibility, followed by damage to their assets, and ultimately, disruption to the stability and continuity of their business operations. Therefore, the current rliability, requiring the affected party to prove the occurrence of damages and excluding all cases not explicitly listed in the four scenarios above from judicial liability, fails to adequately safeguard the legitimate rights of affected individuals and entities.

Accordingly, to strengthen judicial accountability in the consideration and issuance of decisions on the application of asset-freezing measures, and to prevent undue harm to litigants and third parties, the provision should be amended in the direction that: if the Court issues, fails to issue, or revokes a provisional urgent measure in contravention of the law, it must bear full responsibility. The Court should be required to issue a public apology to the affected party and any third party involved, and, where damages occur, provide compensation in accordance with legal regulations.

Fifthly, it is necessary to establish a mechanism for monitoring and reviewing the legality of asset-freezing measures throughout their application during both the litigation and enforcement stages. The Court should periodically re-examine and assess whether the grounds for applying such measures remain valid. Where continued enforcement is deemed unnecessary, the Court must proactively lift or narrow the scope of the freeze to protect the property rights of the asset owner. Additionally, a mechanism should be introduced allowing enterprises subject to asset freezing to request independent evaluation by a competent body or organization regarding the business losses caused by such decisions, which may serve as the basis for seeking compensation when appropriate.

Lawyer Hoàng Thuý Quỳnh – FDVN Law Firm