Considerations on COM(2018)96 - Law applicable to the third-party effects of assignments of claims - Main contents
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This page contains a limited version of this dossier in the EU Monitor.
| dossier | COM(2018)96 - Law applicable to the third-party effects of assignments of claims. |
|---|---|
| document | COM(2018)96  |
| date | March 12, 2018 |
(2) Pursuant to Article 81 of the Treaty, these measures are to include those aimed at ensuring the compatibility of the rules applicable in the Member States concerning the conflict of laws.
(3) The proper functioning of the internal market requires, in order to improve the predictability of the outcome of litigation, certainty as to the law applicable and the free movement of judgments, for the conflict of law rules in the Member States to designate as the applicable law the same national law irrespective of the Member State of the court in which an action is brought.
(4) Regulation (EC) No 593/2008 of the European Parliament and of the Council of 17 June 2008 on the law applicable to contractual obligations (Rome I) does not cover the questions of third-party effects of assignment of claims. However, Article 27(2) of that Regulation required the Commission to submit to the European Parliament, the Council and the European Economic and Social Committee a report on the question of the effectiveness of an assignment or subrogation of a claim against third parties and the priority of the assigned or subrogated claim over a right of another person which should be accompanied, if appropriate, by a proposal to amend that Regulation and an assessment of the impact of the provisions to be introduced.
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(5) On 18 February 2015 the Commission adopted a Green Paper on Building a Capital Markets Union36 which stated that achieving greater legal certainty in cases of crossborder transfer of claims and the order of priority of such transfers, particularly in cases of insolvency, is an important aspect in developing a pan-European market in securitisation and financial collateral arrangements, and also of other activities such as factoring.
(6) On 30 September 2015 the Commission adopted a Communication with an Action Plan on Building a Capital Markets Union37. This Capital Markets Union Action Plan noted that differences in the national treatment of third-party effects of assignment of debt claims complicate the use of these instruments as cross-border collateral, concluding that this legal uncertainty frustrates economically significant financial operations, such as securitisations. The Capital Markets Union Action Plan announced that the Commission would propose uniform rules to determine with legal certainty which national law should apply to the third-party effects of the assignment of claims.
(7) On 29 June 2016 the Commission adopted a report on the appropriateness of Article 3(1) of Directive 2002/47/EC on financial collateral arrangements38 focusing on the question whether this Directive works effectively and efficiently as regards formal acts required to provide credit claims as collateral. The report concluded that a proposal of uniform rules regarding the third-party effects of assignment of claims would allow determining with legal certainty which national law should apply to the third-party effects of the assignment of claims, which would contribute to achieving greater legal certainty in cases of cross-border mobilisation of credit claims as collateral.
(8) On 29 September 2016 the Commission adopted a report on the question of the effectiveness of an assignment or subrogation of a claim against third parties and the priority of the assigned or subrogated claim over the right of another person. The report concluded that uniform conflict of law rules governing the effectiveness of assignments against third parties as well as questions of priority between competing assignees or between assignees and other right holders would enhance legal certainty and reduce practical problems and legal costs relating to the current diversity of approaches in the Member States.
(9) The substantive scope and the provisions of this Regulation should be consistent with Regulation (EC) No 864/2007 on the law applicable to non-contractual obligations (Rome II),39 Regulation (EC) No 593/2008 on the law applicable to contractual obligations (Rome I),40 Regulation (EU) No 1215/2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (recast),41 and Regulation (EU) 2015/848 on insolvency proceedings.42 The interpretation of this
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COM(2015) 63 final.
COM(2015) 468 final.
COM(2016) 430 final.
Regulation (EC) No 864/2007 of the European Parliament and of the Council of 11 July 2007 on the
law applicable to non-contractual obligations (Rome II), OJ L 199, 31.7.2007, p. 40-49.
Regulation (EC) No 593/2008 of the European Parliament and of the Council of 17 June 2008 on the
law applicable to contractual obligations (Rome I), OJ L 177, 4.7.2008, p. 6-16.
Regulation (EU) No 1215/2012 of the European Parliament and of the Council of 12 December 2012 on
jurisdiction and the recognition and enforcement of judgments in civil and commercial matters, OJ L
351, 20.12.2012, p. 1-32.
Regulation (EU) 2015/848 of the European Parliament and of the Council of 20 May 2015 on
insolvency proceedings, OJ L 141, 5.6.2015, p. 19-72.
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Regulation should as much as possible avoid regulatory gaps between these instruments.
(10) This Regulation implements the Capital Markets Union Action Plan. It also fulfils the requirement laid down in Article 27(2) of the Rome I Regulation that the Commission should publish a report and, if appropriate, a proposal on the effectiveness of an assignment of a claim against third parties and the priority of the assignee over the right of another person.
(11) Conflict of laws rules governing the third-party (or proprietary) effects of assignments of claims do not currently exist at Union level. These conflict of laws rules are laid down at Member State level, but they are inconsistent and often unclear. In crossborder assignments of claims, the inconsistency of national conflict of laws rules leads to legal uncertainty as to which law applies to the third-party effects of the assignments. The lack of legal certainty creates a legal risk in cross-border assignments of claims which does not exist in domestic assignments as different national substantive rules may be applied depending on the Member State whose courts or authorities assess a dispute as to the legal title over the claims.
(12) If assignees are not aware of the legal risk or choose to ignore it, they may face unexpected financial losses. Uncertainty about who has legal title over the claims assigned on a cross-border basis can have knock-on effects and deepen and prolong the impact of a financial crisis. If assignees decide to mitigate the legal risk by seeking specific legal advice, they will incur higher transaction costs not required for domestic assignments. If assignees are deterred by the legal risk and choose to avoid it, they may forego business opportunities and market integration may be reduced.
(13) The objective of this Regulation is to provide legal certainty by laying down common conflict of laws rules designating which national law applies to the third-party effects of assignments of claims.
(14) A claim gives a creditor a right to the payment of a sum of money or the performance
of an obligation by the debtor. The assignment of a claim enables the creditor
(assignor) to transfer his right to claim the debt against a debtor to another person
(assignee). The laws that govern the contractual relationship between the creditor and
the debtor, between the assignor and the assignee and between the assignee and the
debtor are designated by the conflict of laws rules laid down in the Rome I Regulation43.
(15) The conflict of laws rules laid down in this Regulation should govern the proprietary effects of assignments of claims as between all parties involved in the assignment (that is, between the assignor and the assignee and between the assignee and the debtor) as well as in respect of third parties (for example, a creditor of the assignor).
(16) The claims covered by this Regulation are trade receivables, claims arising from financial instruments as defined in Directive 2014/65/EU on markets in financial instruments44 and cash credited to an account in a credit institution. Financial instruments as defined in Directive 2014/65/EU include securities and derivatives
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In particular Articles 3, 4 and 14.
Directive 2014/65/EU of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments and amending Directive 2002/92/EC and Directive 2011/61/EU, OJ L 173, 12.6.2014, p. 349–496.
traded on financial markets. While securities are assets, derivatives are contracts which include both rights (or claims) and obligations for the parties to the contract.
(17) This Regulation concerns the third-party effects of the assignment of claims. It does not cover the transfer of the contracts (such as derivative contracts), in which both rights (or claims) and obligations are included, or the novation of contracts including such rights and obligations. As this Regulation does not cover the transfer or the novation of contracts, trading in financial instruments, as well as the clearing and the settlement of these instruments, will continue to be governed by the law applicable to contractual obligations as laid down in the Rome I Regulation. This law is normally chosen by the parties to the contract or is designated by non-discretionary rules applicable to financial markets.
(18) Matters governed by the Financial Collateral Directive45, the Settlement Finality Directive46, the Winding-Up Directive47 and the Registry Regulation48 should not be affected by this Regulation.
(19) This Regulation should be universal: the law designated by this Regulation should apply even if it is not the law of a Member State.
(20) Predictability is essential for third parties interested in acquiring legal title over the assigned claim. Applying the law of the country where the assignor has its habitual residence to the third-party effects of assignments of claims enables the third parties concerned to easily know in advance which national law will govern their rights. The law of the assignor’s habitual residence should thus apply as a rule to the third-party effects of assignments of claims. This rule should apply, in particular, to the third-party effects of the assignment of claims in factoring, collateralisation and, where the parties have not chosen the law of the assigned claim, securitisation.
(21) The law chosen as a rule to apply to the third-party effects of assignments of claims should enable the determination of the applicable law where future claims are assigned, a common practice where multiple claims are assigned, such as in factoring. The application of the law of the assignor’s habitual residence enables the determination of the law applicable to the third-party effects of the assignment of future claims.
(22) The need to determine who has legal title over an assigned claim often arises when defining the insolvency estate where the assignor becomes insolvent. Coherence between the conflict of laws rules in this Regulation and those laid down in Regulation (EU) 2015/848 on insolvency proceedings is therefore desirable. Coherence should be achieved through the application as a rule of the law of the assignor’s habitual residence to the third-party effects of assignments of claims, as the use of the assignor’s habitual residence as connecting factor coincides with the debtor’s centre of main interest used as connecting factor for insolvency purposes.
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Directive 2002/47/EC of the European Parliament and of the Council of 6 June 2002 on financial
collateral arrangements, OJ L 168, 27.6.2002, p. 43–50.
Directive 98/26/EC of the European Parliament and of the Council of 19 May 1998 on settlement
finality in payment and securities settlement systems, OJ L 166, 11.6.1998, p. 45–50.
Directive 2001/24/EC of the European Parliament and of the Council of 4 April 2001 on the
reorganisation and winding up of credit institutions, OJ L 125, 5.5.2001, p. 15–23.
Commission Regulation (EU) No 389/2013 of 2 May 2013 establishing a Union Registry pursuant to
Directive 2003/87/EC of the European Parliament and of the Council, Decisions No 280/2004/EC and
No 406/2009/EC of the European Parliament and of the Council and repealing Commission Regulations
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(23) The 2001 United Nations Convention on the Assignment of Receivables in International Trade provides that the priority of the right of an assignee in the assigned receivable over the right of a competing claimant is governed by the law of the State in which the assignor is located. The compatibility between the Union conflict of laws rules laid down in this Regulation and the solution favoured at the international level by the Convention should facilitate the resolution of international disputes.
(24) Where the assignor changes its habitual residence between multiple assignments of the same claim, the applicable law should be the law of the assignor’s habitual residence at the time at which one of the assignees first makes his assignment effective against third parties by completing the requirements under the law applicable on the basis of the assignor's habitual residence at that time.
(25) In accordance with market practice and the needs of market participants, the third-party effects of certain assignments of claims should, as an exception, be governed by the law of the assigned claim, that is, the law that governs the initial contract between the creditor and the debtor from which the claim arises.
(26) The law of the assigned claim should govern the third-party effects of the assignment by an account holder of cash credited to an account in a credit institution, where the account holder is the creditor/assignor and the credit institution is the debtor. Greater predictability is provided to third parties, such as creditors of the assignor and competing assignees, if the law of the assigned claim applies to the third-party effects of these assignments as it is generally assumed that the claim that an account holder has over cash credited to an account in a credit institution is governed by the law of the country where the credit institution is located (rather than by the law of the habitual residence of the account holder/assignor). This law is normally chosen in the account contract between the account holder and the credit institution.
(27) The third-party effects of the assignment of claims arising from financial instruments should also be subject to the law governing the assigned claim, that is, the law governing the contract from which the claim arises (such as a derivative contract). Subjecting the third-party effects of assignments of claims arising from financial instruments to the law of the assigned claim rather than the law of the assignor’s habitual residence is essential to preserve the stability and smooth functioning of financial markets. These are preserved as the law that governs the financial instrument from which the claim arises is the law chosen by the parties to the contract or the law determined in accordance with non-discretionary rules applicable to financial markets.
(28) Flexibility should be provided in the determination of the law applicable to the third-party effects of assignments of claims in the context of a securitisation in order to cater for the needs of all securitisers and facilitate the expansion of the cross-border securitisation market to smaller operators. Whilst the law of the assignor’s habitual residence should apply as the default rule to the third-party effects of assignments of claims in the context of a securitisation, the assignor (originator) and the assignee (special purpose vehicle) should be able to choose that the law of the assigned claim should apply to the third-party effects of the assignment of claims. The assignor and the assignee should be able to decide that the third-party effects of the assignment of claims in the context of a securitisation should remain subject to the general rule of the assignor’s habitual residence or to choose the law of the assigned claim in function of the structure and characteristics of the transaction, for example the number and location of the originators and the number of laws which govern the assigned claims.
(29) Priority conflicts between assignees of the same claim may arise where the third-party effects of the assignment have been subject to the law of the assignor’s habitual residence in one assignment and to the law of the assigned claim in another assignment. In such cases, the law applicable to resolve the priority conflict should be the law applicable to the third-party effects of the assignment of the claim which has first become effective against third parties under its applicable law.
(30) The scope of the national law designated by this Regulation as the law applicable to the third-party effects of an assignment of claims should be uniform. The national law designated as applicable should govern in particular (i) the effectiveness of the assignment against third parties, that is, the steps that need to be taken by the assignee in order to ensure that he acquires legal title over the assigned claim (for example, registering the assignment with a public authority or registry, or notifying the debtor in writing of the assignment); and (ii) priority issues, that is, conflicts between several claimants as to who has title over the claim (for example, between two assignees where the same claim has been assigned twice, or between an assignee and a creditor of the assignor).
(31) Given the universal character of this Regulation, the laws of countries with different legal traditions may be designated as the applicable law. Where, further to the assignment of a claim, the contract from which the claim arises is transferred, the law designated by this Regulation as the law applicable to the third-party effects of a claim assignment should also govern a priority conflict between the assignee of the claim and the new beneficiary of the same claim further to the transfer of the contract from which the claim arises. For the same reason, the law designated by this Regulation as the law applicable to the third-party effects of a claim assignment should also apply, where novation is used as a functional equivalent of the transfer of a contract, to resolve a priority conflict between an assignee of a claim and the new beneficiary of the functionally equivalent claim further to the novation of the contract from which the claim arises.
(32) Considerations of public interest justify giving the courts of the Member States the possibility, in exceptional circumstances, of applying exceptions based on public policy and overriding mandatory provisions, which should be interpreted restrictively.
(33) Respect for international commitments entered into by the Member States means that this Regulation should not affect international conventions to which one or more Member States are parties at the time when this Regulation is adopted. To make the rules more accessible, the Commission should publish the list of the relevant conventions in the Official Journal of the European Union on the basis of information supplied by the Member States.
(34) This Regulation respects the fundamental rights and observes the principles recognised in the Charter of Fundamental Rights of the European Union. In particular, this Regulation seeks to promote the application of Articles 17 and 47 concerning, respectively, the right to property and the right to an effective remedy and to a fair trial.
(35) Since the objectives of this Regulation cannot be sufficiently achieved by the Member States and can rather, by reason of the scale and effects of this Regulation, be better achieved at Union level, the Union may adopt measures, in accordance with the principle of subsidiarity as set out in Article 5 of the Treaty on the European Union. The desired uniformity of the conflict of laws rules on the third-party effects of assignments of claims can only be achieved through a Regulation as only a Regulation
ensures a consistent interpretation and application of the rules at national level. In accordance with the principle of proportionality, as set out in that Article, this Regulation does not go beyond what is necessary in order to achieve that objective.
(36) In accordance with Article 3 and Article 4a(1) of Protocol No 21 on the position of the United Kingdom and Ireland in respect of the area of freedom, security and justice, annexed to the Treaty on European Union and the Treaty on the Functioning of the European Union, the [United Kingdom] [and] [Ireland] [have/has notified their/its wish to take part in the adoption and application of the present Regulation] [are/is not taking part in the adoption of this Regulation and are/is not bound by it or subject to its application].
(37) In accordance with Articles 1 and 2 of Protocol No 22 on the position of Denmark, annexed to the treaty on European Union and the Treaty on the Functioning of the European Union, Denmark is not taking part in the adoption of this Regulation and is not bound by it or subject to its application.