Under Vietnamese law, it is a common understanding that the obligee (e.g, the lender) must be the secured party (e.g., the mortgagee) in a secured transaction although the securing party (e.g., the mortgagor) could be different from the obligor (e.g., the borrower). In fact, this has been the position under Decree 163/2006 for several years. However, the new Decree 21/2021 replacing Decree 163/2006 from 15 May 2021 removes the express description that the oblige is the secured party in a secured obligation. It is not clear if this change provides for the possibility that the secured party needs not to be the obligee in a secured transaction.

A clearer example is introduced in the context of a public issuance of secured bonds. In particular, Decree 155/2020 provides that in case of public issuance of secured bonds:

• the representative of bond holders will be the secured party to enforce the secured transactions on behalf of the bond holders; and

• if the representative of bond holders is prohibited from acting as the secured party then the representative of bond holder could appoint a third party to act as the secured party.

In short, Decree 155/2020 allows the representative of bond holders to act as security agent for the bond holders even if the bond holders themselves may not have the right to act as the secured parties. Decree 155/2020 even allows the representative bond holders to appoint a third party to act as the secured party if they are not allowed to do so.

If thanks to the change under Decree 21/2021 and the examples under Decree 155/2020, the secured party needs not to be the obligee in a secured transaction, then Decree 21/2021 will open the possibility for foreign lenders to take mortgage over land use rights by engaging a Vietnamese bank to act as the mortgagee in favour of the foreign lenders. And there may be more interest changes to the security package which involve land use rights in Vietnam.

This update is written by Nguyen Quang Vu with input by Nguyen Hoang Duy.