Freezing bank accounts refers to the act of restricting or prohibiting the transfer and use of deposited funds by an authorized organization when there is a violation of regulations issued by the State.  This article by Le &Tran, a leading law firm specializing in litigation in Vietnam, shall discuss the following issues regarding the freezing of bank accounts in civil lawsuits.

The foundation, process, and conditions for implementing a bank account freezing request

According to Article 124 of the 2015 Civil Procedure Code, the freezing of bank accounts, as well as accounts held in other credit institutions and the State Treasury, is one of the temporary urgent measures that parties have the right to request the Court to apply during the process of resolving a case.  However, there must be sufficient grounds to demonstrate that this measure is necessary to ensure the resolution of the case or the enforcement of a judgment.

The application of temporary urgent measures plays an important role as it enhances the effectiveness of case resolution, facilitates the enforcement of judgments, and prevents the parties involved in the case from dissipating their assets held in banks.

As per the regulations, within 3 working days from the date of receiving the request for account freezing, if the requesting party has fulfilled the required collateral measures, the Judge must promptly issue a decision to apply the temporary urgent measure.  If the request is not accepted, the Judge must notify the requesting party in writing and provide a clear reason for the decision.

Practical issues when requesting a bank account freeze

Collateral Amount for Implementing Bank Account Freeze

According to the provisions of Resolution 02/2020/NQ-HDTP, the Court will issue a decision to freeze a bank account when the requesting party has fulfilled the security measures. Specifically, the requesting party must deposit an amount of money, precious metals, gemstones, or equivalent valuable documents that can compensate for any potential losses or damages that may occur due to wrongful account freezing.  This deposit is made into a bank, credit institution, or the Court itself.  The deposited amount will be returned to the requesting party if subsequent judgments prove the correctness of the account freeze decision and/or no damages are incurred as a result of the bank account freeze.

The court has the responsibility to estimate and approximate the actual damage that may occur but not less than 20% of the estimated value of the frozen amount unless there is clear evidence to prove the loss or damage is less than 20% of the estimated value of the frozen amount.

Therefore, the herein regulation only restricts to not less than 20% of the frozen amount, and the Court can only freeze assets with an equal or lower value than the property obligation that the party subject to the provisional emergency measure is subject to, as stipulated in Article 133.4 of the 2015 Civil Procedure Code.

Obligation to provide information by the requesting party for bank account freeze

As mentioned, the Court can only freeze an amount in the bank account that is equivalent to the property obligation that the requested party is required to fulfill.  Typically, this obligation can be specified by the requesting party in the application for temporary urgent measures submitted together with the lawsuit petition, or it can be requested after filing the lawsuit or during the court hearing.  The Court can also decide to apply temporary urgent measures on its own jurisdiction in situations where there is no specific request from the parties.  Some cases where the Court may apply temporary urgent measures are related to the obligations of support, care, and education; compensation for damages to life and health; temporary advances of wages, health insurance, social insurance, and related expenses for workers who have accidents or occupational diseases.

However,  Resolution 02/2020/NQ-HDTP stipulates: “The petitioner for application of provisional emergency measures is obliged to prove the value of the frozen account or property.  The petitioner for the application of provisional emergency measures is responsible for the truthfulness and accuracy of the documents relating to the determination of the value of the property and the account to be frozen.  The Court shall take account of documents, evidence, and relevant legal provisions to determine the value of the property subject to the application of provisional emergency measure”

Therefore, the above provision imposes the obligation to determine the amount (i.e., the account balance) in the bank account of the requesting party.  This requires the requesting party to have accurate knowledge of the account balance of the party whose account is requested to be frozen so that the Court has a basis to apply the account freeze measure.

This requirement is not practical because information about bank account numbers and balances is confidential and protected by regulations such as Article 14 of the 2010 Law on Credit Institutions and Article 4 of Decree 117/2018/ND-CP on the principle of confidentiality and provision of customer information. Banks only provide such information when requested by authorized agencies according to the provisions of the law

This leads to significant difficulties in completing the procedures for requesting a bank account freeze.  To overcome this obstacle, the Court will either request the bank to provide information about the account number and balance of the party whose account is requested to be frozen or ask the requesting party to prove that they have made every effort but could not collect such information themselves.  Based on that, the Court can then decide to request the bank to provide the information.  This proof usually requires a written refusal from the bank to provide the information or evidence that demonstrates the requesting party’s request for information from the bank but received no response or feedback.

Cooperation from the Bank

In cases where the account holder is requested to freeze their bank account as a long-term and valued customer of the bank, there may be issues arising where the bank discreetly informs their customer, allowing them to withdraw all funds from the account.  This can render the account freezing measure ineffective and significantly impact the legitimate rights and interests of the requesting party.

Considering these practical difficulties and obstacles, the process of implementing temporary urgent measures to freeze bank accounts often does not serve the purpose of protecting or minimizing “urgent” damages.  Relevant authorities should establish more specific regulations and guidelines to ensure that the overall procedure for applying temporary urgent measures, including the freezing of bank accounts, is carried out swiftly.  This would lead to more effective enforcement of court judgments when they come into legal effect.

If you would like to discuss any difficulties or obstacles encountered in the process of requesting the application of temporary urgent measures, please contact our lawyers at info@letranlaw.com.