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Saturday, August 19, 2017

Vietnam’s draft Civil Code: 10 debatable issues

Updated: 15:38’ - 06/02/2015

A public consultation on the draft revision of the 2005 Civil Code has been launched to collect opinions of people from all walks of life, inside and outside the country.

Speaking at a conference held on January 17 in Hanoi to guide the collection of public opinions, Deputy Minister of Justice Dinh Trung Tung said the revision aimed to produce a new Civil Code that governs social relations established on the basis of freedom, voluntariness, equality and self-responsibility.

Particularly, he said, the new Code would better acknowledge and safeguard rights of individuals and legal persons in civil transactions in light of the new Constitution.

“Because the Civil Code is regarded as the general law in the legal system, its revision will affect specialized laws such as the commercial law, the law on marriage and family, the housing law, etc. Therefore, it is extremely important to organize a public consultation on the draft,” he stressed.

The draft revised Code has a total of 712 articles and 26 chapters arranged in six parts: general provisions; ownership and other real rights; obligations and contract; inheritance; law applicable to civil relations involving foreign elements; and implementation provisions.  Compared to the 2005 Code, the draft keeps 265 articles unchanged, revises 298, adds 176 and removes 147.

Because of the breadth of the civil law’s scope and the complexity of its contents, the Ministry of Justice, the agency in charge of drafting the new civil code, wants to focus the public consultation on 10 major issues on which opinions remain divergent in the drafting process. These issues are highlighted below.

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Minister of Justice Ha Hung Cuong announces the Governmental Plan to gather people’s opinions on the draft revised Civil Code__Photo: Phuong Hoa/VNA

Responsibilities of competent agencies for protection of civil rights

The current civil code underlines the principle that all civil rights of individuals, legal persons or other subjects must be respected and protected by law but fails to define responsibilities of courts and other competent agencies in accepting and settling civil cases and matters not yet governed by any law.

The draft revised Code adds a new article saying that courts may not refuse requests for settlement of civil cases and matters for the reason of unavailability of applicable laws. In these cases, courts would base themselves on practices, the principle of application of analogy of law, fundamental principles of civil law and justice to consider and settle.  

While agreeing that such provision would help promptly and thoroughly protect lawful rights and interests of parties to civil transactions, some experts are still worried about its constitutionality. Clause 2, Article 103 of the Constitution stipulates: “During trial, the judges and assessors are independent and shall obey only law,” hence, the requirement that judges and assessors must make judgments even in case of lack of applicable laws is unconformable with the Constitution.

Personal rights

The draft devotes 20 articles to specifying personal rights. Compared to the 2005 Code, the draft has a number of new contents. For example, the right to personal secrets provided in the 2005 Code is revised into the right to guarantee of private life and personal secrets. The draft also adds some new rights which have been enshrined in the 2013 Constitution such as the right to association, the right of access to information and the right to life. Additionally, the draft says that other human rights and personal rights in the civil sphere would be recognized, respected, protected and guaranteed in accordance with the Constitution and law.

According to the drafters, the Civil Code, in its capacity as a general law, should stipulate in detail personal rights already provided in the Constitution in order to lay a foundation for the development of regulations on protection of personal rights in specialized laws and sub-law documents.

However, some legal experts hold that the Civil Code should not repeat all personal rights already enshrined in the Constitution. Instead, it should only focus on a number of personal rights necessary for determination of the status of individuals as subjects of civil relations such as the right to family and given names and the right to residence, and particular rights not yet specified in the Constitution such as the right to re-assignment of gender, the right of an individual with respect to his/her picture, and the right to birth and death declaration. 

Subjects of civil legal relations

Under the 2005 Civil Code, subjects of civil legal relations include individuals, legal persons, households and cooperative groups.

Since members of a household frequently change due to household splitting and merger, death , birth, marriage, divorce, etc., upon occurrence of a dispute involving a household, it is difficult to identify household members, a condition for determination of rights and obligations. Besides, as “common property” and “common interests” of a household when entering into a civil relation can hardly be determined, it is not easy to decide whether the household or one or several of its members will assume civil responsibilities arising from that relation. Meanwhile, nearly 80 percent of existing cooperative groups have not yet been registered. This situation has led to many difficulties in the settlement of disputes involving households or cooperative groups.

In order to tackle the above problems and to conform to international practices, the draft revised Code states that only individuals and legal persons may act as subjects of civil legal relations.

However, there are opinions that the revised Code should continue recognizing households and cooperative groups as subjects of civil legal relations because they are entities that currently exist in the society and take part in various civil relations. Some current laws also acknowledge these two entities as subjects of legal relations, such as the Land Law, the  Law on Forest Protection and Development, the Law on Health Insurance and the Cooperative Law.

Legal consequences of civil transactions incompliant with prescribed forms

Under the draft, a civil transaction which is made at variance with the prescribed forms would not be declared to be invalid if the non-compliance does not intend to shirk obligations toward others and the subject of the transaction has transferred property or performed jobs.

This is a significant change compared to the 2005 Code which requires parties to civil transactions to comply with regulatory requirements on the form, otherwise, the transactions will be declared to be invalid.

The new provisions would help guarantee lawful rights and interests of parties to civil transactions as well as related third parties, thus contributing to assure the stability of market relations. But in fact, there are only few civil transactions which are required to be made according to law-prescribed forms and all of them are related to high-value assets, e.g., houses, aircraft and automobiles. Therefore, some opinions still propose retaining the current Code’s provisions.

Protection of bona fide third parties when civil transactions are declared to be invalid

The draft revised Code specifies two cases in which interests of a bona fide third party would be guaranteed. First, the third party establishes or performs a transaction involving a property subject to ownership registration on the basis of available information on property ownership registration. Second, the third party receives a movable or an immovable subject to ownership registration through auction or transaction with a person who, under a court judgment or ruling, was the owner of the property but later is not the owner of the property as the court judgment or ruling is cancelled or modified.

Legal experts still fail to reach agreement on the first case. Some support this provision, saying that it conforms with current regulations on property ownership registration while contributing to better protecting lawful rights and interests of goodwill and innocent parties in civil transactions. Others want to exclude it from the Code as it does not conform with the principle of guaranteeing the ownership right laid down in the Constitution.

Forms of ownership

The current Civil Code prescribes six forms of ownership: state ownership, collective ownership, private ownership, common ownership, ownership by political organizations and socio-political organizations, and ownership by socio-politico-professional organizations, social organizations and socio-professional organizations.

The draft reduces the forms of ownership to only three, including all-people ownership, private ownership and common ownership.

On this issue, there are three different types of opinion.

The first type of opinion supports the draft provisions.

Opinions of the second type hold that the revised Code should only provide for common ownership and private ownership. 

Proponents of these two types of opinion agree that ownership should be classified based on the number of subjects exercising ownership rights rather than the status of such subjects. It is private ownership if ownership rights are exercised by a single subject and common ownership if ownership rights are performed by more than one subject. However, according to supporters of the first option, because of its great political and economic importance, all-people ownership should be acknowledged as an independent form of ownership. Meanwhile, supporters of the second option argue that all-people ownership is, by nature, a special form of common ownership, i.e., indivisible common ownership by integration with the entire people being the owner and the State acting as the representative. The revised Code, therefore, should not mention all-people ownership as an independent form but provide it in a separate part of the section on common ownership.

The third type of opinion recommends that the revised Code should prescribe three forms of ownership, including state ownership, private ownership and common ownership.

Time of establishment of ownership rights and other real rights

Under the draft revised Code, the establishment of ownership rights and other real rights would take effect from the time of transferring the property, unless otherwise provided in contracts or by law. In case the law requires the transfer of property be registered with a competent authority, the establishment of ownership rights and other real rights would come into force from the time of registration.

This provision, according to legal experts, would help distinguish more clearly the time a transaction takes effect from the time ownership rights and other real rights are established.

However, some suggest that in order to ensure consistency between the Civil Code and specialized laws with regard to social relations involving real estates, the revised Code should provide a uniform principle that ownership rights and other real rights over real estates would be established at the time the immovables are registered with competent authorities after all transfer procedures are completed.

Modification of contracts upon change in circumstances

While the current civil code says nothing about this issue, the draft revised Code states that upon occurrence of changes in circumstances which seriously affect rights and interests of a contractual party, courts may modify contracts with a view to ensuring the harmony of interests among contractual parties and stability of relevant civil and commercial relations.

Commenting on the draft, some voice their concern that this provision goes counter to the principle of free will and freedom of disposition in contractual relations. State agencies, including courts, may not and should not intervene into the will of parties to civil transactions in general and contracts in particular. The Civil Code, therefore, should not empower courts to modify contracts in any circumstances.

Interest rates in loan agreements

The draft says that loan interest rates may be agreed by involved parties but must not exceed 200 percent (the current cap is 150 percent) of the prime interest rate announced by the State Bank for the corresponding types of loan, unless otherwise provided by law.

While agreeing that the Civil Code should contain provisions on loan interest rates so as to prevent usury, some still propose that the State Bank-announced prime interest rates should not be used as reference. Instead, the revised Code should provide a specific maximum permissible interest rate for each type of loan as well as define the principles and competence to adjust these interest rates.

Statute of limitations

Under the draft revised Code, individuals and legal persons must file requests for settlement of civil cases or matters within the law-prescribed time limits. However, in case an individual or a legal person files a request when the law-prescribed time limit has expired, the court would, instead of rejecting the request as at present, accept and settle the request and announce the subject is entitled to civil rights or released from civil obligations.  

This new provision is welcomed by many experts who believe that it suits the legal nature of statute of limitations and would form a better legal instrument for courts to protect civil rights of organizations and individuals.

Others worry that the new provision, if approved, might place courts under the burden of settling cases and matters which happened a long time ago, therefore, the revised Code should provide statutes of limitations for settlement of civil cases and matters. Past the law-prescribed time limits, subjects will lose the right to initiate a lawsuit.-

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