GUIDELINES FOR APPLICATION OF REGULATIONS ON INTERESTS, INTEREST RATES AND PENALTIES

On January 11, 2019, the council of justices of the supreme people’s court issued Resolution No. 01/2019/NQ-HDTP guiding on application of regulations on interests, interest rates and penalties (“Resolution 01/2019”).

Resolution provides guidance on application of certain regulations on interests, interest rates and penalties for breach of property loan agreements, average interest rates, and decisions on interests and interest rates in judgments and decisions of Courts. Property loan agreements governed by Resolution includes:

Agreements for loan of property which is a sum of money made between credit institutions and borrowers (hereinafter referred to as “credit agreements”)
Agreements for loan of property which is a sum of money entered into between individuals and legal entities other than credit institutions (hereinafter referred to as “property loan agreements other than credit agreements”).

Specifically:

I. PROPERTY LOAN AGREEMENTS (NOT CREDIT AGREEMENTS)

Application of regulations

Based on the date of concluding the credit agreement, from which it can be determined when if there is a dispute, the Civil Code 1995, 2005 or 2015 will apply

Regulations determination of interests and interest rates

		The loan principal under the signed agreement bears no interest	The loan principal under the signed agreement bears interest	Regulations
Signing date	Before January 01, 2006	The interest on overdue principal = (the overdue principal) x (interest rate on term savings deposit announced by the State Bank of Vietnam at the repayment date) x (late payment period of principal).	The interest on the outstanding principal not yet due = (the outstanding principal) x (the agreed interest rate) or (the interest rate on term savings deposit accounts announced by the State Bank of Vietnam at the debt repayment date) x (the loan period during which the interest has been not yet paid); The interest on overdue principal = (the overdue principal) x (the interest rate on an overdue deb by the State Bank of Vietnam at the debt repayment date) x (late payment period of principal);	Civil code 1995, Resolution No.01/2019/NQ-HĐTP
	Before January 1, 2017	The interest on overdue principal = (the overdue principal) x (the basic interest rate announced by the State Bank of Vietnam at the debt repayment date) x (late payment period of principal).	The interest on the outstanding principal not yet due = (the outstanding principal) x (the agreed interest rate or the basic interest rate announced by the State Bank of Vietnam at the date of concluding the loan agreement) x (the loan period during which the interest on the principal has been not yet paid); The interest on overdue principal = (the overdue principal) x (the basic interest rate announced by the State Bank of Vietnam at the debt repayment date) x (late payment period of principal);	Civil code 2005, Resolution No.01/2019/NQ-HĐTP
	Before January 1, 2017	The interest on overdue principal = (the overdue principal) x (the interest rate regulated in Clause 2 Article 468 of the 2015 Civil Code applicable at the debt repayment date) x (the late payment period of the principal);	The interest on the outstanding principal not yet due = (the outstanding principal) x (the agreed interest rate or 50% of the limit on interest rate prescribed in Clause 1 Article 468 of the 2015 Civil Code applicable at the debt repayment date) x (the loan period during which the interest on the principal has been not yet paid). The interest charged on unpaid interest = (the unpaid interest amount) x (the interest rate prescribed in Clause 2 Article 468 of the 2015 Civil Code applicable at the debt repayment date) x (the late payment period of the interest on outstanding principal); The interest on the overdue principal = (the overdue principal) x (the agreed interest rate or 150% of the lending interest rate agreed upon by the parties) x (the late payment period of overdue principal).	Civil code 2015, Resolution No.01/2019/NQ-HĐTP
Debt repayment date		The lender may reclaim the property, and the borrower may repay the debt, at any time provided that each party gives reasonable prior notice to the other party, unless otherwise agreed.	Specified in the Contract and the agreement of the parties.
Late payment period		-The late payment period of the principal begins from the date following the end of the “reasonable time” and ends on the date of first-instance trial. – “Reasonable time” is decided by the Court in each specific case provided that such reasonable time shall not be longer than 03 months from the notification date;	-The late payment period of the principal begins from the date following the end of the loan term and ends on the date of first-instance trial, unless otherwise agreed. -The late payment period of the interest charged on the outstanding principal begins from the date following the date on which the interest on the outstanding principal must be paid and ends on the date of first-instance trial, unless otherwise agreed upon by the concerned parties.	Civil code 1995, Civil code 2005, Civil code 2015 Resolution No.01/2019/NQ-HĐTP

II. FOR CREDIT AGREEMENTS

Application of regulations

At the date of first-instance trial, the interest/ interest rate in a credit agreement is determined according to 2 timelines, before and after January 1, 2017.

Regulations determination of interests and interest rates

		Credit agreement	Regulation
Signing date	Before January 01, 2017	– The interest on the outstanding principal not yet due: shall be calculated at the agreed interest rate – The interest on the overdue principal shall be calculated at the agreed interest rate	Law on credit institutions and legislative documents providing regulations on interest rates on credit agreements at the date of concluding the credit agreement and the interest calculation date for the loan period during which the interest has been not yet paid.
	On January 01, 2017 or afterwards	– The interest on the outstanding principal not yet due: shall be calculated at the agreed interest rate – The interest on the overdue principal shall be calculated at the agreed interest rate – Pay interest on late payments calculated at the interest rate which is agreed upon by the credit institution and the borrower but shall not exceed the interest rate limit regulated by laws for the late payment period of interest on the outstanding principal not yet due. (If a borrower fails to make payment of the interest on the outstanding principal on the due date as agreed upon in the credit agreement)	Law on credit institutions and legislative documents providing regulations on interest rates on credit agreements at the date of concluding the credit agreement and the interest calculation date for the loan period during which the interest has been not yet paid.
Late payment period		– The late payment period of the outstanding principal begins from the delinquency date and ends on the date of first-instance trial, unless otherwise agreed upon by the concerned parties. -The late payment period of the interest charged on the outstanding principal begins from the date following the date on which the interest on the outstanding principal must be paid and ends on the date of first-instance trial, unless otherwise agreed upon by the concerned parties.	Law on Credit Institutions, legal documents detailing and guiding the application of the Law on Credit Institutions

III. CASE OF DELAYED PAYMENT

Where a contract-breaching party delays making payment for goods or payment of service charges and other reasonable fees, the aggrieved party may claim an interest on such delayed payment at the average interest rate applicable to overdue debts in the market at the time of payment for the delayed period.

The determining the interest on late payments, the Court shall determine the interest rate on late payments on the basis of average interest rates on overdue debts announced by at least 03 (three) commercial banks (such as Vietcombank, VietinBank, Agribank, etc.) whose headquarters, branch or transaction office is located in the same province or central-affiliated city where the headquarters of the Court in charge of the case is located at the payment date (the date of first-instance trial), except otherwise agreed upon by the parties or regulated by laws.