On 26 August 2016, the Judges’ Council of the Supreme People’s Court issued Resolution No. 03/2016/NQ-HDTP (“Resolution 03”) providing guidance on the implementation of several articles of the Law on Bankruptcy No. 51/2014/QH13 (“Bankruptcy Law”). Resolution 03 took effect on 16 September 2016 and the main highlights are set out below.
Reference to precendents and related decisions
Article 9.14 of the Bankruptcy Law provides judges the duty and obligation to apply principles in case precedents recognised by the Supreme People’s Court to resolve similar bankruptcy matters. Case precedents are arguments and written rulings of judgments or decisions selected by the Judges’ Council of Supreme People’s Court and published for other courts to study and adopt when deciding cases. Resolution 03 further clarifies that judges have the discretion to refer to or apply decisions which are not selected and published but contain principles applicable to the bankruptcy cases that the judges are handling.
Application of injunctive relief
While the Bankruptcy Law lists the available injunctive relief applicable in bankruptcy matters, it is silent on the circumstances in which injunctive relief can be applied. Resolution 03 now defines in detail such conditions. Some of the key points are listed below:
|1.||Seizure of assets||Where there are grounds showing any act of asset dispersal or destruction, or any likelihood that the asset may be lost or devalued.|
|2.||Freezing of bank accounts or assets in depository||– Where enterprises and cooperatives have accounts with a bank, the State Treasury, or other credit organisations.
– Where enterprises and cooperatives have assets held by other individuals or organisations.
|3.||Sealing of warehouses or funds, or keeping of accounting books and relevant documents||Where it is necessary to keep the warehouse, fund, accounting books, and relevant documents intact and in their original condition.|
|4.||Prohibition from transferring rights to assets||Where there are grounds that the rights to assets may be transferred.|
|5.||Prohibition from varying the current condition of the assets||Where there are grounds showing any act to vary the current condition of the assets which may lead to the reduction or loss of asset value.|
|6.||Prohibiting or compelling relevant entities to take certain actions||Where the performance or non-performance of certain actions can affect the conclusion of the case, or of the rights and legitimate interests of the concerned parties.|
Cancellation of injunctive relief
The Bankruptcy Law does not provide for cancelation of an injunctive relief. Without this, it is not possible to deal with an improper application of injunctive relief. Resolution 03 provides that the Courts can issue a decision to cancel an injunctive relief under the circumstances below:
Consequences for improper application of injunctive relief
The Bankruptcy Law has no provision on the penalty or consequences for improper application of injunctive relief. Due to insufficiency in the legislation, there is no mechanism to deal with the legal consequences for their improper application. Resolution 03 provides that petitioners and the courts which apply injunctive relief improperly causing damages shall pay compensation under the civil law. Other individuals, agencies, and organisations that commit any violation during the process of application of the injunctive relief shall be subject to administrative penalties or criminal prosecution; or compensation for damages caused.
Resolution 03 does not only supplement the Bankruptcy Law but also bridges the gap between the law as stated and the practical implementation and application of the law. Resolution 03 clarifies the rights of the parties in bankruptcy matters and the applicability of decisions made in similar cases which will hopefully lead to more consistent application of the law.