In the context of increasingly volatile international capital flows, the issue of freezing direct investment capital has attracted significant attention, raising numerous legal challenges concerning investors’ property rights and mechanisms for ensuring security in cross-border investment activities.
I. Current situation related to the freezing of direct investment capital
In the context of globalization and the increase in cross-border capital flows, the issue of freezing direct investment capital has become increasingly prominent, particularly when disputes, legal violations, or requirements to ensure national financial and security interests arise.
- Firstly, in practice, the freezing of direct investment capital often occurs in cases involving investigations into legal violations such as money laundering, tax evasion, or transfer pricing. In such situations, competent authorities may apply measures to freeze bank accounts or assets of investors for the purpose of verification and handling. However, the boundary between protecting public interests and ensuring investors’ property rights remains highly controversial.
- Secondly, practice shows that in some cases, capital freezing lasts for an extended period due to delays in investigation or dispute resolution, causing significant disruption to the production and business activities of foreign-invested enterprises. It reduces the attractiveness of the investment environment and may lead to international claims.
- Thirdly, in some cases, investors believe that the freezing of capital is unreasonable or exceeds legal authority, thereby leading to disputes with State authorities.
In summary, the current situation of freezing direct investment capital shows that this is a sensitive issue requiring a balance between state management requirements and the protection of investors’ legitimate rights and interests, thereby creating the need to clarify the concept and legal basis of such a measure.
II. Concept of freezing direct investment capital
1. What is the freezing of direct investment capital?
The freezing of direct investment capital refers to the application by competent authorities of measures restricting or temporarily suspending the right to use, transfer, or dispose of an investor’s investment capital, usually conducted through the freezing of bank accounts or related assets.
Such a measure is commonly applied for the purposes of State management, investigation of legal violations, or ensuring the performance of financial obligations and legal liabilities of investors.
2. Is the freezing of direct investment capital an administrative enforcement measure?
The freezing of direct investment capital may have different legal characteristics depending on each specific case:
- In the sector of administrative violation handling, it may be an administrative enforcement measure to ensure the execution of sanctioning decisions.
- In criminal or civil proceedings, it may serve as a preventive measure or a measure to ensure judgment enforcement.
- In the sector of anti-money laundering, it functions as a financial transaction control measure.
Therefore, freezing direct investment capital cannot be uniformly classified as only one type of legal measure.
3. Which entities have the authority to decide on the freezing of direct investment capital?
The authority to freeze direct investment capital belongs to various entities depending on the legal basis:
- Procedural authorities (Investigation Agencies, Procuracies, Courts): In criminal and civil cases.
- Civil judgment enforcement authorities: Ensuring the enforcement of legally effective judgments and decisions.
- Competent State management authorities (tax authorities, inspectorates, etc.): in certain cases of handling administrative violations.
- Commercial banks: Implementing account freezing at the request of competent authorities or in accordance with anti-money laundering regulations.
Thus, the authority to freeze direct investment capital is distributed among many different entities depending on the legal field involved. Therefore, correctly identifying the competent authority is an important condition for ensuring the legality of the freezing measure.
III. Legal regulations related to the freezing of direct investment capital
1. In which cases may the freezing of direct investment capital occur?
The freezing of direct investment capital may arise in the following cases:
- Serving the resolution of civil cases: According to Article 124 of the Civil Procedure Code 2015, freezing accounts at banks, other credit institutions, or the State Treasury may be applied if, during case resolution, there are grounds showing that the obligated person has accounts at such institutions and the application of such a measure is necessary to ensure case resolution or judgment enforcement.
- Serving the investigation, prosecution, and trial of criminal cases: According to regulations on seizure and freezing of assets under Article 126 of the Criminal Procedure Code 2015.
- Ensuring civil judgment enforcement: According to Article 66 of the Law on Civil Judgment Enforcement 2025 regarding the application of security measures, including account freezing.
- Anti-money laundering and control of suspicious transactions: According to Article 45 of the Law on Anti-Money Laundering 2022 regarding account freezing, freezing, or temporary detention of assets.
Thus, capital freezing may only be applied in legally prescribed cases to protect public interests and ensure law enforcement.
2. Principles for implementing the freezing of direct investment capital
The freezing of direct investment capital must comply with the following basic principles:
- Correct authority, procedures, and processes in accordance with specialized laws.
- Clear legal grounds, without arbitrarily infringing upon investors’ property rights (based on Article 32 of the 2013 Constitution regarding protection of ownership rights).
- Ensuring necessity and proportionality with the purpose of application (general principle of civil law - Article 3 of the Civil Code 2015).
- Limited within the necessary scope to avoid unnecessary damage to business operations.
Thus, compliance with these principles not only ensures the legality of the freezing measure but also contributes to protecting the lawful rights and interests of investors during its implementation.
3. What is the maximum duration for freezing direct investment capital?
Current law does not provide a unified general time limit; rather, it depends on each specific sector:
- In criminal proceedings: The freezing period is associated with the investigation, prosecution, and trial periods under the Criminal Procedure Code 2015.
- In civil judgment enforcement: It lasts until the obligation is secured or terminated according to the Law on Civil Judgment Enforcement 2025.
- In anti-money laundering: Implemented according to the decision of the competent state authority regarding account freezing (Article 45 of the Law on Anti-Money Laundering 2022).
Therefore, the freezing period is temporary in nature but may be extended depending on the nature of the case and the applicable legal grounds.
4. What can enterprises do to prevent the risk of freezing direct investment capital?
To minimize the risk of capital freezing, enterprises should:
- Fully comply with legal obligations regarding tax, accounting, investment, and foreign exchange.
- Ensure transparency of cash flow and financial transactions to avoid suspicion of money laundering or transfer pricing.
- Establish effective internal control mechanisms and risk management systems.
- Proactively review contracts and investment structures with legal support from lawyers.
- Cooperate promptly with competent authorities when inspections or examinations are required.
In summary, the freezing of direct investment capital is a special legal measure that may only be applied in specific circumstances and must strictly comply with legal principles and procedures, ensuring a balance between the State’s management rights and investors’ property rights.
IV. Questions related to the freezing of direct investment capital
1. Can an investor request the competent authority to lift the freezing before the expiration of the time limit?
When the grounds for freezing no longer exist or the obligation has been fulfilled, the investor has the right to request the competent authority to lift the measure under Point a, Clause 1, Article 138 of the Civil Procedure Code 2015.
2. Is the investor entitled to prior notice before the freezing of direct investment capital?
Generally, the freezing must be based on a written decision of the competent authority and be notified to the relevant subject. However, in some urgent cases (for example, anti-money laundering), notification may be made simultaneously with or after the application of the measure under the Law on Anti-Money Laundering 2022.
3. During the period of freezing direct investment capital, can the enterprise continue its business operations?
If the freezing only applies to a specific account or a certain portion of assets. However, if the entire source of capital is frozen, business operations may be seriously affected.
4. If the direct investment capital account is frozen, can the enterprise open another account as a replacement?
In principle, an enterprise may not arbitrarily open another account to evade the freezing measure, as it may be considered a violation of law. The opening and use of accounts must comply with foreign exchange management regulations and remain subject to the supervision of competent authorities.
5. Does the investor have the right to file a complaint or initiate legal proceedings against the decision to freeze direct investment capital?
Investors have the right to file complaints or initiate administrative lawsuits against freezing decisions if they believe such decisions are unlawful, pursuant to the Law on Complaints 2011 and the Law on Administrative Procedures 2015.
V. Why you should seek legal advice from NPLaw regarding the freezing of direct investment capital
Because the freezing of direct investment capital involves multiple legal fields and directly affects investors’ property rights, obtaining legal advice is highly necessary. Lawyers at NPLaw assist in assessing the legality of freezing decisions, advising on handling strategies, working with competent authorities, and protecting the lawful rights and interests of enterprises.
The above information is for reference purposes only. If you require detailed advice for your specific case, please contact NPLaw Firm for immediate consultation.
