Foreclosure on collateral under French and Vietnamese laws

Abstract

In Vietnam, as a result of limited financial competence, it is quite normal for small and medium enterprises to acquire loans from credit institutions, mostly under pledge and mortgage agreements. With the purpose of fostering economic growth, it is, therefore, very important to help individuals and businesses gain access to credit and increase the credit availability for them. In order to do so, obviously the possibility of predicting the time and cost involved in the realization of their security rights should be clearly seen by creditors through clear and effective regulations on enforcement or particularly on the foreclosure of collateral. In fact, Vietnamese laws on secured transactions has recently been developed under the Civil Code 2015, adding two new security devices which are retention of title and retention of property. The new code also clearly distinguishing security devices which have the characteristic of personal rights and real rights as well as perfects the mechanism of effectiveness against third parties. The paper focuses on presenting the differences between the foreclosure o pledged and mortgaged property in French laws and in Vietnamese laws and suggests some modifications to Vietnamese relevant statutes to protect the rights of both debtors and creditors in pledge and mortgage transactions, learning from French practices. Recommendations include a more active role of the securing party in serurity right enforcement process under judicial supervision, the court's involvement in property value appraisal, an extra-judicial mechanism for creditors for collaterall repossession and a provision setting forth an obligation of the secured party to diligently and effectively exploit the secured property to earn maximum fruit and incomes and deduct such amount from the interest and original loan.