Is Criminalisation of Civil and Economic Infringement a Solution?

It is not a novel thing to see some entrepreneurs getting jailed for infringements. Especially in recent times, many economic infringements of all sizes with a prison sentence have been made public. The term “criminalization” also makes frequent appearances. 

The questions are: 

  • Are civil and economic infringements increasingly being criminalized
  • Has criminalization become a common measure to settle economic and civil transactions?

To a certain extent, violations by businesses and entrepreneurs must be appropriately penalized by the law. However, if the violations are limited to civil and economic litigations, but its severity is overly criminalized, leading to the arrests of the business owners and the suspension of business operations, then the resulting damage affects more than just the enterprise itself. This situation has become a major concern for many people and businesses. They feel confused and unsafe. Do we need to raise an alarm for the growing mindset of ‘criminalization’?

The Government has directed that civil and economic litigations should not be criminalized. 

“Our intention is to avoid criminalizing economic civil infringements, but whoever violates the law must be penalized, in order to protect and encourage the people who do the right thing, who run genuine and efficient business”, said Prime Minister Pham Minh Chinh at the Conference on ‘Developing a Safe, Healthy and Sustainable Real Estate Market’ on the afternoon of July 14, 2022. Does this directive inspire confidence in people and businesses?

What is criminalization?

Criminalization is a term in criminology referring to the process of criminalizing the misconducts of an individual or an organization that do not violate the criminal law into a criminal act (i.e. a misconduct that is dangerous to society). According to criminal law, such criminalized misconducts must be handled at the criminal court instead of the civil court. Consequently, the individual or organization that commits such acts become a criminal. 

More simply, the word criminalization is similarly to industrialization or modernization. When we say criminalization, we understand that this is a case of a non-criminal nature but is being handled as if it was a criminal case. 

Criminalization is under the purview of the legislature, and only the legislature has the power to enact criminal laws.

The government makes laws in order to put in order all human acts and behaviors, with the goal of stabilizing, maintaining, and preserving the general social order. The law also has different sanctions for violations.

When it comes to criminalizing an act, we should understand that the act has not been prohibited by law, or even if it has been prohibited, the nature of the act does not pose sufficient danger to society to warrant a heavy sanction. 

As the society changes, the severity of that behavior has increased, so the government’s attitude toward it must be adjusted accordingly, warranting stricter sanctions. This is when criminalization was carried out. 

In practice, the concept of criminalization is applied to indicate that a judicial authority, at the investigation stage, attributes a criminal nature to civil and economic acts that previously does not constitute a crime, and then prosecutes that act. 

How to make sense of the criminalization of civil and economic infringements?

Against the recent backdrop of accelerating economic transformation in Vietnam, the criminalization of civil and economic infringements has received special attention. 

Criminalizing civil and economic transactions can easily become a misuse of criminal law, a form of wrongful injustice against innocent people. Such misuse can be intentional or unintentional. A misuse of criminal law occurs when the procedural authorities have not fully and objectively investigated the case, lacking patience in solving the issues, or the investigation is corrupted by certain officials at the procedural agencies who intentionally criminalize the case for personal gains. This misuse targets a breach of a civil obligation or economic obligation that arises from an economic contract (which mainly concerns obligated payments and property returns). This civil or economic breach does not constitute a crime, but it is initiated, prosecuted, investigated, and adjudicated according to criminal law and criminal procedures, as if it were a crime. 

The above understanding of the criminalization of civil and economic infringements also implies that such criminalization is an unlawful interference on the part of the procedural authorities in a normal course of action of civil and economic transactions, thereby encroaching upon civil and economic relations. This infringement happens when the procedure-conducting agency initiates, investigates, and prosecutes (i.e., applying criminal law and criminal procedure law) acts that have not amounted to a crime (not yet constitutes a crime according to the Penal Code).

Problems arising from the criminalization of civil and economic infringements

Criminalization causes many wrongful convictions. There is nothing wrong with prosecuting and arresting criminal businessmen if they have committed a criminal acts. But if the wrongdoings that should only be handled according to civil law is criminalized, leading to the arrest of the business owner, the subsequent damages are more than just suspended operations. 

Everyone should remember the well-known wrongful case of the arrest of Hello Coffee shop owner, and many others. After months and years in prison, these businessmen were released for reasons such as case suspension or the prosecuting agency being unable to bring charges against the commercial disputes. 

In the course of carrying out executive and judicial activities, when a prosecuting agency wrongfully applies legal actions by criminalizing civil and economic infringements, and sanctioning civil and economic violators as criminals, then the agency in question has misused the law, thereby causing wrongful convictions. 

Criminalization is like a double-edged knife. On the one hand, it helps the fight against crimes in many ways, contributing to the prevention and suppression of crimes, and maintaining order and peace. On the other hand, it creates barries in applying the law to the authorities.

Is there a lack of understanding and abuse of power by the authorities when deliberately criminalizing a case? All wrongfully criminalized cases shares a similarity which is public frustration about the incomprehensible, unreasonable, and unconvincing handling by the authorities. Some people on official duty abuse their power, borrowing the law to commit blunders. 

Going back to the Hello Coffee case, Mr. Nguyen Van Tan, the business owner, was prosecuted for illegal business conducts. All details related to the case are not overly complicated, but the officials assigned to investigate and prosecute the case deliberately raises its severity by continuously, intensively checking and documenting the history of this business from the start of its operation. They aimed to form a basis for for criminal handling, which was “having known that the acts were administrative violations but still violated them”. 

However, in essence, Mr. Tan’s normal business activities could not have posed a danger to society. Because of this, the prosecuting agencies met many criticisms, including controversial public opinions, and suspicion of power abuse. Eventually, when the more superior authorities went through all the files and disciplined all involved agencies. 

So what is the crux of the suit? Did the investigators and the prosecutors play a key role in the mishandling? Was the case truly complicated, or did the authorities involved fail to fully comprehend the case?

The criminalization of civil and economic infringements has caused many consequences. For instance, some officials abuse their offcial duties to better their interest groups or personal financial gains. Such abuses destroy the credibility and reputation of the procedural agencies.

The fears and scars of individuals and businesses 

Businesses of all sizes have to borrow capital money to finance their business activities. In cases of unpaid debts, they constitute frauds of appropriating properties and get prosecuted in court. This is the phenomenon of criminalizing civil and economic infringements, causing wrongful convictions. Subsequently, individuals and businesses are fearful about the ambiguous boundary between civil and criminal law. 

Usually, the failure to pay back capital and interest only constitutes as a breach of the contract and is subject to material sanctions under the contract, such as the application of overdue interest, penalties for breach of contract, handling of collaterals for debt collection. In case the debt is still not recovered, the credit institution may request the Court to settle, including the request for bankruptcy declaration according to enterprise bankruptcy law.

The abuse of criminal law and criminal proceedings in the settlement of bank credit disputes usually manifests in the following case: when the debt is due, the borrower fails to pay. Upon the bank’s request, the investigative agency carries out the procedures to prosecute, arrest, investigate, and interrogate the debtors, according to Articles 139 and 140 of the Penal Code – Abuse of trust in property appropriation, or Fraud in property appropriation.

It can be seen that the criminalization of economic and civil infringements is like a ghost haunting businesses; the fear of being criminalized for economic misconducts keeps entrepreneurs in an uncertain and fearful mood when borrowing money to do business. After such misuses of the criminal law, people and businesses feel bewildered and unsafe. 

When we continue to level criminal sentences to civil and economic infringements as an optimal solution to recover debts, we will not only cause wrongful convictions, but also make Vietnam’s investment and business environment suffer from losing many opportunities.

It is important that businesses operate in a transparent, convenient, secure and safe environment where they feel equal, trusting, and secure in their activities. How to keep the specter of criminalization at bay? The answer lies with the authorities!

We have shared with you some knowledge about the criminalization of civil and economic infringements. Please contact our law firm for more detailed consultation: