Sharing Experiences: Resolving Financial and Banking Disputes Effectively

Financial dispute is a fairly diverse and common type of dispute in the economic market. Financial disputes may arise between individuals or enterprises and credit institutions and other parties with the object of the dispute is usually borrowed assets, collateral, and mortgage,…Most parties would like to resolve the dispute quickly, cost-effectively and with high enforceability. The article Sharing Experience: Resolving Financial and Banking Disputes Effectively will provide readers with common financial and banking disputes and experiences in dispute resolution.

1. Financial and banking disputes

Identifying financial and banking disputes

Financial and banking disputes are not clearly listed and defined in Vietnam’s legal documents. The Civil Procedure Code 2015 also does not have any specific classification for financial and banking disputes. In fact, this type of dispute is often classified by the Court as a civil dispute.

According to the common definition, a financial and banking dispute is a conflict of interest between parties in related transactions in the field of finance and banking. Financial and banking disputes can be identified when one party in the dispute is a credit institution, and the object of dispute in these cases is usually related to borrowed assets, mortgages, credit, investment and bank insurance.

Common financial and banking disputes

• Disputes over property loan contracts/credit contracts

Credit lending is one of the activities that bring high commercial benefits to banks in particular and credit institutions in general. However, along with the interest earned from borrowers, credit institutions also have to bear significant risks in terms of bad debts and bad debts. Therefore, disputes that may arise from Property Loan Contracts/Credit Contracts are disputes related to the collection of a debt when the borrower has breached its payment obligations, including failure to repay the debt on time or failure to repay the debt.

• Credit card disputes

A credit card is an effective tool that allows cardholders to advance money for payment and shopping activities at locations that accept credit card payments. The use of credit cards also leads to many legal disputes. Accordingly, some of the disputes often mentioned are disputes over late fees, fees over the limit, unclear interest rates and credit card fraud. Disputes over credit card fraud are the most common when information technology is increasingly developing, but it is also a dispute where most of the risks belong to users. When fraudulent transactions occur, the cardholder’s request, such as not counting the lost money in the statement or extending the payment period, is often rejected by the card issuing bank because it cannot be proven that the loss of money is a fraudulent transaction.

• Disputes over collateral

In financial and banking activities, the use of collateral for loans is an activity that occurs quite frequently. The assets used to secure these loans may be the assets of the borrower or of a third party used to secure the loan. That is why disputes arising from collateral often involve the handling of collateral, conflicts in ownership or control of assets. In addition, disagreements over debt collection methods and issues related to liability can also lead to disputes between customers and banks.

• Bank-related insurance disputes:

Bank-related insurance disputes can include many different aspects. For example, the customer and the bank may have conflicts about the terms of the insurance policy, such as coverage, compensation levels, and claims processes. These disputes often arise when customers are unhappy with the bank’s interpretation or application of insurance terms. In addition, disputes can also arise from issues related to premium rates, transparency in how fees are calculated, and the bank’s ability to provide insurance services that meet customer expectations.

2. Methods and experience in resolving financial and banking disputes

To resolve these disputes, the parties often need to take measures such as direct negotiation, mediation, or even through dispute resolution procedures at arbitration and court in order to ensure fairness and correctness in the dispute resolution process.

Negotiation and mediation

According to the 2015 Civil Code, the parties are free to agree to resolve disputes through negotiation. Negotiation in financial and banking dispute resolution is often the most common and popular method, chosen first by the parties after a dispute arises. Claimants often use this method because it does not require complicated legal procedures, is less expensive, and is not bound by legal regulations.

However, stemming from the principle of freedom of negotiation and freedom of agreement between the parties, the most significant disadvantage of the negotiation method is the enforceability of the agreement and the binding. The implementation of the negotiated agreements is entirely dependent on the will of the parties, without the participation of any enforcement agency. In addition, the organisation of negotiations may cause unfairness in the agreement. Especially in the relationship between credit institutions and individual customers, it is not uncommon for credit institutions to take advantage of their position to infringe upon the legitimate rights and interests of individual customers.

Different from negotiation, the mediation mechanism is specified in the Law on Conciliation and other relevant legal provisions. One of the basic features that distinguishes mediation from negotiation is the appearance of a third party as an intermediary. This intermediary must be independent of the disputing parties, have no interests related to the dispute and have no right to adjudicate. The law does not affirm which individual, organisation, or agency is allowed to be an intermediary, but this is the agreement of the two parties to the dispute to choose a mediator. In fact, the mediation method is very popular in financial and banking disputes, and the parties agreed to conduct mediation at mediation centres across the country.

Therefore, depending on the object of the dispute and who the disputing parties are, the parties can choose the method of negotiation and mediation as a way to understand the wishes of the parties before proceeding with other methods of dispute resolution.

Notes when conducting dispute resolution by negotiation and mediation in financial and banking disputes

Firstly, in order to ensure the enforceability of the negotiation and mediation method, the parties to the financial and banking dispute may agree to involve a third party, which may be a party to ensure the enforceability of the agreement negotiated between the disputing parties in the form of issuance of a security deed receiving or buying insurance for loans, intermediary banks make payments through margin accounts.

Secondly, the parties may consider not using this method if they want the other party to fulfil their obligations quickly. When agreeing on this negotiation clause in the contract, the obligor can take advantage of the negotiation to extend the time for performing the obligation, in order to avoid responsibility.

Arbitration

Besides the courts, arbitration is considered an effective jurisdiction to resolve financial and banking disputes, which is a form of dispute resolution through the operation of the Arbitral Tribunal or the Arbitrator as an independent third party to resolve disputes by making a valid judgment forcing the parties to enforce.

The advantage of this dispute resolution method is that it is proactive, creates flexibility for the parties to apply, saves time, effort and is objective for the parties. Arbitration is settled according to the arbitration regulation, has a legal basis and is highly compulsory. Arbitration Settlement is not limited in terms of territory as the parties have the right to choose any arbitration centre to resolve the dispute for themselves. The arbitral award is final, which is a superior advantage over the form of dispute settlement by negotiation and mediation.

In fact, parties to financial and banking disputes often choose arbitration to resolve conflicts. With the nature of disputes related to credit institutions, banks and credit institutions often choose the arbitration option to minimise the complicated procedural process at the Court. However, the method of dispute settlement by arbitration also has some disadvantages such as relatively high costs, the longer the settlement case, the higher the arbitration fee.

Notes on dispute resolution at Arbitration

Firstly, the pre-arbitration procedure, whereby most of the sample dispute settlement clauses in all contracts between the parties record the multi-tiered dispute settlement agreement clause such as “The parties shall proceed to resolve the dispute through negotiation, mediation and arbitration”. Accordingly, a clause like the above obliges the parties to complete the entire negotiation and mediation process and have full minutes to record the negotiation and mediation process. It is one of the procedural requirements of arbitration, known as pre-proceedings. It is necessary to pay attention to model contracts with the above clauses to avoid violations of pre-arbitration procedures, leading to the arbitral award being invalidated or not accepted.

Secondly, about the value of the dispute and arbitration court costs. Accordingly, arbitration court costs are usually calculated based on the total value of the dispute. Especially for financial and banking disputes of great value, the parts of the property and the contents that can be agreed and negotiated by the parties should be prioritised to avoid the disputed assets being too large, leading to high court costs.

Court

Dispute settlement by court is a form of dispute settlement carried out by the State jurisdictional agency. Litigants often seek the help of the Court as a solution to effectively protect their rights and interests when they fail to use the negotiation or conciliation mechanism and do not want to bring their disputes to be settled by arbitration. This is the most enforceable method of settlement, but along with that, the Court is also the most time-consuming, laborious and complicated method of resolving disputes. That makes the parties to financial and banking disputes not fond of this method.

However, stemming from a dispute related to high-value property, the parties also want their judgment/judgment to be highly enforceable and able to claim the property. Therefore, the Court is also considered to settle financial and banking disputes for the reasons mentioned above.

Notes when conducting dispute settlement according to the Court

• Firstly, the procedural process is one of the most challenging things when the parties proceed to settle financial and banking disputes at the Court. Because the procedural process is complicated, violating one of the above processes can make the parties unable to achieve their wishes and affect the validity of the judgment.
• Secondly, regarding the conditions for initiating a lawsuit, the parties to the financial and banking disputes need to review all the terms to ensure that the parties have sufficient grounds to initiate a lawsuit. In addition, for some special cases that need to go through the mediation process or negotiate as agreed between the parties, the parties must carry out those procedures before requesting a lawsuit to avoid being rejected by the lawsuit petition.
• Thirdly, regarding the issue of judgment enforcement, the parties should note that the judgment is not automatically enforced. The right party must request the judgment enforcement agency to execute its judgment and pay the judgment enforcement fee accordingly. In case the parties request the settlement of enforcement of any property, the parties must find information about the assets of the obligor to request enforcement. Judgment enforcement requires much effort on the part of the party with the right to reclaim its rights.

Above is the general content related to the Sharing Experiences: Resolving Financial and Banking Disputes Effectively that Phuoc and Partners share with readers. If you have any difficulties related to the legal field, please contact us. Phuoc & Partners is a law professional consulting firm established in Vietnam and which currently has nearly 100 members working in offices in Ho Chi Minh City, Hanoi and Danang. Phuoc & Partners is also considered one of the leading law firms with specialised staff in the legal field in Vietnam, whose practice areas are ranked first in the legal market such as Labour and Employment, Taxes, Mergers and Acquisitions as well as Litigation. We are confident to be one of the Law Firms providing the best legal services to clients.