mortgaged in accordance with the agreement in the mortgage contract. On this basis, when the securities company receives a request to sell mortgaged securities from the mortgagor (or adds other conditions), it will carry out the sale order, the proceeds will be transferred to the mortgaged credit institution to deduct the loan debt (unless the parties have another agreement).
In a mortgage transaction where the mortgagee is a credit institution, based on the provisions of Circular No. 05/2015/TT-BTC dated January 15, 2015 of the Minister of Finance guiding the activities of registration, depository, clearing and payment of securities transactions, VSD also stipulates the case of transferring ownership of securities due to the handling of mortgaged assets not through the securities trading system at the Stock Exchange. However, the mortgage transaction between the customer and the credit institution must satisfy the conditions prescribed in Article 46 on "Transfer of ownership due to the handling of collateral assets being securities in mortgage, pledge and deposit transactions", the Regulation on securities registration activities issued together with Decision No. 22/QD-VSD dated March 13, 2015 of the General Director of the Vietnam Securities Depository Center; specifically:
1. VSD shall only transfer ownership of securities from the account of the mortgagor, pledger, or depositor to the account of the pledgee, mortgagee, or depositee in cases where the securities pledge, mortgage, or deposit contract stipulates that the method of handling the collateral being pledged, mortgaged, or deposited securities shall be carried out by transferring ownership from the mortgagor, pledger, or depositor to the pledgee, mortgagee, or depositee via VSD's transfer system. [27, Article 46]
This method of implementation without going through the securities trading system at the Stock Exchange can be identified as a measure to receive the collateral itself to replace the performance of the obligations of the guarantor. In this case, the legal limitations on share purchase activities for credit institutions according to the provisions of the Law on Credit Institutions 2010 will also be set. For example,
For example, in the case of commercial banks, according to the provisions of Clause 4, Article 103 on "Capital contribution, share purchase", Law on Credit Institutions 2010:
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Commercial banks are allowed to contribute capital and purchase shares of enterprises operating in the following fields:
a) Insurance, securities, remittances, foreign exchange trading, gold, factoring, credit card issuance, consumer credit, payment intermediary services, credit information;
b) Other fields not specified in Point a of this Clause. [36, Clause 4, Article 103]
In addition to the fields of insurance, securities, remittances, foreign exchange trading, gold, factoring, credit card issuance, consumer credit, payment intermediary services, and credit information, commercial banks must have written approval from the State Bank before implementation.
Therefore, the implementation of regulations on the method of receiving the pledged securities to replace the obligations of the guarantor by the mechanism of transferring securities ownership without going through the securities trading system at the Stock Exchange is very rare in practice.
2.2.3. Pledge of bill of lading
2.2.3.1. Legal nature of pledge of bill of lading
According to the definition in Clause 2, Article 73 on "Transport documents", Maritime Code 2005:
2. The bill of lading is a transport document that serves as evidence that the carrier has received the goods with the quantity, type, and condition as stated in the bill of lading for transport to the place of delivery; evidence of ownership of the goods used to determine and receive the goods and is evidence of the contract of carriage of goods by sea. [33, Clause 2, Article 73]
Air waybill is defined in Clause 1, Article 129 on “Air waybill and cargo receipt”, Law on Civil Aviation of Vietnam 2010.
2006 as follows: “ 1. The air waybill is a document for the carriage of goods by air and is evidence of the conclusion of the contract, the receipt of the goods and the conditions of the contract. ”
In essence, the bill of lading is understood as evidence of ownership of the quantity of goods recorded on the bill of lading. Therefore, similar to the case of savings cards, valuable papers
Currently, there is no legal regulation specifically regulating the mortgage of air waybills. Article 19 on “Rights of the mortgagee in case of mortgage of air waybills, savings cards, valuable papers”, Decree 163/2006/ND-CP on Secured Transactions only records the mortgage of maritime waybills according to the provisions of the 2005 Maritime Code.
Article 89 on “Transfer of Bill of Lading”, Maritime Code 2005 lists three types of bills of lading: Order Bill of Lading, Bearer Bill of Lading and Straight Bill of Lading . [33, Article 89]
According to the provisions of Clause 1, Article 19 on "Rights of the pledgee in case of accepting a pledge of a bill of lading, savings card, or valuable paper", Decree 163/2006/ND-CP on Secured Transactions can be understood that the law only recognizes pledge transactions for Order Bills of Lading and Anonymous Bills of Lading.
This provision in Decree 163/2006/ND-CP on Secured Transactions follows the viewpoint of the 2005 Maritime Code and the 2005 Civil Code on the actual transferability of mortgaged assets.
In the case of a bill of lading pledge, in essence, the material value the parties are aiming for does not lie in the bill of lading itself (or the accompanying set of documents) but in the value of the goods for which the bill of lading is evidence of the right to receive and enjoy the goods.
For straight bills of lading, according to the provisions of Clause 3, Article 89 on “Transfer of bills of lading”, Maritime Code 2005: 3. Straight bills of lading are not transferable. The person named in the straight bill of lading is the legal consignee. [33, Clause 3, Article 89] . Therefore, assuming the parties have transferred
If the parties hand over the bill of lading, the secured party cannot receive the goods - which are the actual assets that the parties are aiming for in the bill of lading pledge transaction; in other words, there is no legal basis for the secured party to accept the transfer of assets in this case.
For anonymous bills of lading and order bills of lading, the entity entitled to receive the goods has not been identified in the bill of lading. With anonymous bills of lading, the person presenting the bill of lading is the person legally entitled to receive the goods (Clause 2, Article 89 on “Assignment of bills of lading”, Maritime Code 2005). With order bills of lading, the last endorser entitled to issue an order to deliver the goods is the legal recipient (Clause 1, Article 89 on “Assignment of bills of lading”, Maritime Code 2005).
The pledgee of an anonymous bill of lading or an order bill of lading has the right to the goods recorded on the bill of lading; Clause 1, Article 19 on “Rights of the pledgee in case of accepting a pledge of a bill of lading, savings card, or valuable paper”, Decree No. 163/2006/ND-CP on Secured Transactions stipulates: 1. In case of accepting a pledge of an ordered bill of lading or an anonymous bill of lading (full set of bills of lading) as prescribed in Article 89 of the Vietnam Maritime Code, the pledgee has the right to the goods recorded on that bill of lading. [13, Clause 1, Article 19]
2.2.3.2. Validity of bill of lading pledge transaction
In case of pledge of bill of lading, the pledge transaction will also take effect at the time the bill of lading is transferred to the pledgee according to the provisions of the 2005 Civil Code and Decree No. 163/2006/ND-CP on Secured Transactions as stated above.
2.2.3.3. Handling of mortgaged assets
According to the provisions of Clause 1, Article 19 on "Rights of the mortgagee in case of accepting mortgage of bills of lading, savings cards, valuable papers", Decree No. 163/2006/ND-CP on Secured Transactions as stated, with maritime bills of lading being order bills of lading and anonymous bills of lading, in case of having to handle the mortgaged property
In order to recover the loan, the credit institution receiving the mortgage has the right to handle the goods listed on the bill of lading according to regulations.
Clause 2, Article 67 on “Handling of secured assets such as valuable papers, bills of lading, savings cards”, Decree No. 163/2006/ND-CP stipulates:
2. The party receiving the bill of lading as a pledge has the right to present the bill of lading in accordance with the procedures prescribed by law to exercise the right to possess the goods stated on the bill of lading. The handling of the goods stated on the bill of lading shall be carried out in accordance with the provisions of Article 65 of this Decree. [13, Clause 2, Article 67]
Article 65, Decree No. 163/2006/ND-CP stipulates on "Handling of secured assets being movable property in cases where there is no agreement on the method of handling", specifically:
In case there is no agreement on the method of handling secured assets, the secured assets shall be auctioned in accordance with the provisions of law. Particularly for secured assets whose specific and clear price can be determined on the market, the person handling the assets shall sell them at the market price without having to go through the auction procedure, and shall notify the guarantor and other co-guarantees (if any). [13, Article 65]
Accordingly, with the goods recorded on the bill of lading, the credit institution receiving the mortgage has the right to auction the goods according to the provisions of law on property auction.
Article 67 of Decree No. 163/2006/ND-CP also stipulates the obligation of the goods holder to transfer goods to the pledgee; in case of failure to transfer goods to the pledgee causing damage, compensation must be paid.
2.2.4. Mortgage of property rights
2.2.4.1. Legal nature of property rights mortgage
The 1995 Civil Code specifically stipulates Article 338 on “Pledge of property rights” as follows:
In case the property right is mortgaged, the mortgagor shall deliver to the mortgagee the documents confirming the property right and must notify the obligated person about the mortgage of the property right . [29, Article 338]
Clause 1, Article 330 on "Pledge", Civil Code 1995 also states:
Property rights that are allowed to be traded may also be mortgaged . [29, Article 330]
The 2005 Civil Code, when regulating mortgage measures, does not specifically record that property rights can be mortgaged like the 1995 Civil Code, but only generally stipulates in Article 322 on "Property rights used to secure the performance of civil obligations", specifically:
1. Property rights owned by the guarantor include property rights arising from copyrights, industrial property rights, rights to plant varieties, debt claims, rights to receive insurance money for secured objects, property rights to capital contributions in enterprises, property rights arising from contracts and other property rights owned by the guarantor are all used to secure the performance of civil obligations.
2. Land use rights are used to secure the performance of civil obligations according to the provisions of this Code and the law on land.
3. The right to exploit natural resources is used to secure the performance of civil obligations according to the provisions of this Code and the law on resources. [30, Article 322]
Accordingly, the 2005 Civil Code stipulates three groups of property rights that can be used as collateral, including: Land use rights, Natural resource exploitation rights and Other property rights owned by the securing party.
In reality, according to legal regulations, land use rights are only recognized to apply to mortgage measures (according to the provisions of the 2013 Land Law and its implementing documents and related documents).
Regarding the right to exploit natural resources and other property rights, there are currently no specific regulations on the use of these types of assets for protection.
ensure the performance of civil obligations; especially, in the actual loan security activities of credit institutions, the acceptance of collateral as property rights such as the right to exploit natural resources, property rights belonging to copyright, industrial property rights, etc. is still very rare.
In the Draft of the revised Civil Code (Draft 5, submitted to the National Assembly for comments at the 9th Session, 13th National Assembly), property rights are also pledged according to the provisions of Clause 2, Article 322 on "Establishing mortgage rights".
Specifically, Clause 2, Article 322 on "Establishing mortgage rights", in the Draft of the revised Civil Code stipulates: " 2. The mortgage of real estate, mortgage of debt claims and other property rights shall be effective against third parties from the time of registration. " [40, Clause 2, Article 332].
Similar to the case of pledging valuable papers, the parties do not transfer physical assets to each other but only transfer documents proving ownership of the physical assets. The transfer of documents proving ownership can be understood as the mortgaged assets have been transferred to the mortgagee. However, if analyzed more carefully, the mortgage of property rights such as mineral exploitation rights, property rights belonging to copyrights, and industrial property rights is different in characteristics.
- With mineral exploitation rights:
According to the provisions of Clause 7, Article 2 on “Interpretation of terms”, Law on Minerals 2010: “ Mineral exploitation is an activity aimed at recovering minerals, including basic mine construction, excavation, classification, enrichment and other related activities .” [34, Clause 7, Article 2]
Organizations and individuals establish mineral exploitation rights based on mineral exploitation licenses. Mineral exploitation rights can be transferred according to the provisions of Article 66 on “Transfer of mineral exploitation rights”, Law on Minerals 2010, specifically as follows:
1. Organizations and individuals granted a Mineral Exploitation License that have completed basic construction work and put the mine into operation are entitled to transfer the mineral exploitation rights.
2. Organizations and individuals receiving the transfer of mineral exploitation rights must meet the conditions to be granted a Mineral Exploitation License.
3. The transfer of mineral exploitation rights must be approved by the competent state management agency that grants the Mineral Exploitation License; if approved, the organization or individual receiving the transfer of mineral exploitation rights shall be granted a new Mineral Exploitation License.
4. The Government shall detail the transfer of mineral exploitation rights. [34, Article 66]
In principle, as well as according to the provisions on property mortgage of the 2005 Civil Code, due to the transfer of property, it is understood that the mortgagee cannot exploit or actually use the mortgaged property. Therefore, the law also binds the mortgagee to the obligation of " not to exploit the utility, enjoy the benefits and profits from the mortgaged property, without the consent of the mortgagee " [30, Clause 3, Article 332].
In the case of pledging mineral exploitation rights, according to this logic, the parties can agree that the mortgagor will not use the mineral exploitation rights. If understood in the direction of determining the value of the mortgaged property according to the value of mineral reserves, then in this case the value of the mortgaged property is preserved (because it is not exploited). But in reality, this will encounter a limit on the time limit for mineral exploitation; if this time limit is violated, the mineral exploitation license may be revoked, at that time, the secured property, the mineral exploitation rights, will also no longer be valid. Clause 1, Article 58 on "Revocation and termination of validity of Mineral Exploitation License", the 2010 Law on Minerals stipulates as follows:
1. Mineral exploitation license shall be revoked in the following cases: