With the recent opening of Myanmar’s economy to a variety of new investment, there will inevitably be a corresponding increase in future litigation. While many will try to steer clear of the Myanmar courts, sometimes commercial litigation cannot be avoided.
We summarize below what investors need to know about commercial litigation in Myanmar, with an emphasis on the enforcement of securities and recovery of debts.
Which courts have jurisdiction?
In Myanmar, there are four court levels relevant to commercial disputes: the Township Courts, for suits of 10,000,000 Myanmar Kyat (MMK) (approx. $8,000) or less, and disputes involving immovable property situated within the relevant township; the High Courts, for suits of up to MMK500 million (approx. $390,000) and appeals from the Township Courts; District Courts, for suits exceeding MMK500 million and appeals from the Township and High Courts; and the Supreme Court, which is the highest court in Myanmar, and can hear appeals from the High and District Courts.
Can foreign companies sue and be sued?
Section 83 of the Civil Procedure Code (CPC) gives foreign nationals the right to sue in Myanmar as if they were Myanmar citizens. Exceptions are if the foreign person is an enemy of the state (in which case they would need the Myanmar President’s permission to sue), or where the interest claimed is prohibited to foreigners (e.g. foreigners are prohibited from acquiring immovable property).
In addition, there is nothing in the CPC preventing a foreigner from being sued. Indeed, the CPC specifically addresses the service of a summons on persons residing outside of Myanmar, requiring that the summons be translated into English or the language of the receiving locality.
How is the court process organized?
The average commercial court case in Myanmar takes two to three years. If the defendant does not contest the case, proceedings last only a few months. We often see parties wanting to settle after receiving a summons or when a temporary injunction is granted, which is generally a matter of a month or two, although there are notable exceptions.
The claimant to a commercial dispute must first file a “Plaint” with the appropriate court. Thereafter, the defendant is given time to file an answer, a counterclaim (if applicable), and a claim for set-off against another debt (if applicable). The time period is set by the court and not prescribed by law, although 15-30 days is common. If the defendant does not file an answer, it may be possible to obtain a court decree based on the defendant’s non-compliance with pleading requirements. If the defendant files a counterclaim or claim for set-off, then the plaintiff has an opportunity to respond via a written statement, after which the pleadings are closed.
The next step is first discovery and inspection of documents, which is also when parties may file for temporary injunctions and other interlocutory orders. The court will then frame issues based on the parties’ submissions. Thereafter, if settlement is not reached, there will be a hearing and resulting decree and execution thereof. Appeals may be filed after the decree is issued.
Court-ordered sale
To enforce securities, court intervention is often unavoidable, and nearly always successful before Myanmar courts. Our review of debt enforcement court cases from 1980 to 2014 found that lenders were successful in 95% of the cases.
For a court-ordered sale of property, one must first obtain a preliminary decree from the relevant court, specifying the outstanding amount of principal, interest, and costs. Thereafter, the court will issue a process for execution of the decree, specifying, among other things, the date of execution.
The property is then attached by the court. For movable property (except agricultural property), this means actual seizure of the property by a court officer. For immovable property, attachment is made by an order prohibiting the judgment debtor from transferring or encumbering the property.
After attachment, the court may order that the property be sold to satisfy the debt. This can occur only after at least 30 days for immovable property, and 15 days for movable property. Myanmar courts generally recognise a debtor’s continued right of redemption between the time of attachment and final sale. The sale is conducted by a court or deputy bailiff, who is entitled to a commission of 1% of the realized sale proceeds.
According to the CPC, where a decree-holder purchases the property, the amount it is owed may be set-off against the auction price. However, Myanmar case law confirms that a decree-holder may not exercise its right to set-off where such would deprive another decree-holder, having higher priority, of realising on its debt.
Where the property is a negotiable instrument or company shares, the court may order that the sale be carried out by a broker rather than by public auction. In the case of immovable property, where the court can be persuaded that the debtor can effectively sell/lease/mortgage the property and raise enough proceeds to settle the debt, the court can postpone the auction to allow the debtor to source a buyer/lessee/mortgagee, although the sale/lease/mortgage is not absolute until confirmed by the court.
For the sale of immovable property, the court will require the buyer to immediately pay 25% of the price, with the balance due within 15 days. Once the price is paid in full, and where there has been no application to set aside the sale (based on fraud/material irregularity or a third-party claim of prior interest in the property), the court will issue an order confirming the sale, after which the sale is considered final. Any irregularity in the attachment/sale process will not vitiate the sale once final, although a party wronged by such irregularity may claim for damages.
VDB Loi
Yangon
About the author
Edwin Vanderbruggen is a senior partner of law and advisory firm VDB Loi in Myanmar.