New regulations effective from January 1, 2017
According to the Civil Code of 2015, which came into effect, the interest rate on loans in civil transactions is determined by mutual agreement between the parties, but it must not exceed 20% per year of the loan amount. If the agreed interest rate exceeds the above limit, the excess interest rate is invalid.
Regulations prior to January 1, 2017
The 2005 Civil Code stipulates: "Interest rates on loans shall be agreed upon by the parties, but shall not exceed 150% of the basic interest rate announced by the State Bank of Vietnam for the corresponding type of loan."
So, for determining the legal interest rate on contracts currently in effect, whether they have been signed but not yet executed, or have been signed and are in effect, which legal code's regulations apply?
To address the above issue, the Supreme People's Court issued Document No. 01/GD-TANDTC dated July 25, 2016, providing the following guidance:
Points a, b, and c of Clause 1, Article 688 of the 2015 Civil Code stipulate:
“1. For civil transactions established before the effective date of this Code, the application of law is regulated as follows:
a) If a civil transaction has not yet been executed but its content and form differ from the provisions of this Code, the parties to the transaction shall continue to execute it according to the provisions of Civil Code No. 33/2005/QH11 and the legal documents detailing Civil Code No. 33/2005/QH11, except in cases where the parties to the civil transaction agree to amend or supplement the content and form of the transaction to conform with this Code and to apply its provisions.
Civil transactions being carried out that have content and form different from the provisions of this Code shall be governed by the provisions of Civil Code No. 33/2005/QH11 and other legal documents detailing Civil Code No. 33/2005/QH11;
b) Civil transactions that have not yet been completed or are in progress, but whose content and form conform to the provisions of this Code, shall be governed by the provisions of this Code;
c) Civil transactions completed before the effective date of this Code that are subject to disputes shall be resolved in accordance with the provisions of Civil Code No. 33/2005/QH11 and other legal documents detailing Civil Code No. 33/2005/QH11.
Therefore, loan agreements established before January 1, 2017, that have not yet been executed or are currently being executed and contain interest rate agreements different from those stipulated in the 2015 Civil Code, shall be governed by the provisions of the 2005 Civil Code and its detailed regulations, except in cases where the contract has not yet been executed but the parties agree to amend or supplement the interest rate to conform with the 2015 Civil Code and to apply the provisions of the 2015 Civil Code.
Loan agreements established before January 1, 2017, that have not yet been executed or are currently being executed and contain an agreement on interest rates in accordance with the provisions of the 2015 Civil Code, shall be governed by the 2015 Civil Code.
Loan agreements established before January 1, 2017, and completed before the 2015 Civil Code came into effect, if disputes arise, shall be resolved by applying the 2005 Civil Code and its detailed regulations.
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