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International assignment of receivables: specific problems.
Oct 26, 2021

As we know (Vid. Iuris@Lex, April 2018), a new Regulation on the law applicable to the effects vis-à-vis third parties of assignments of claims is currently under negotiation within the European Union in the field of judicial cooperation in civil matters. The future instrument complements Regulation (EU) 598/2008 (Rome I) by establishing conflict-of-law rules for effects not covered by Article 14 of the latter. The proposal is a short text consisting of only 15 articles. Despite this, the difficulties in making progress in the negotiations have already become apparent. The reason lies in the conceptual complexity of its content, which is of a financial nature, but analysed from a purely legal perspective.

On the one hand, the proposal deals with the economic concept of the assignment of a contractual position, which can take the form not only of an active subjective modification - change of creditor - but also other formulas that lead to the same economic result, such as the objective novation of the contract, its integral assignment in those legal systems that admit it or the creation of guarantees on the credit, accessory to it.

In this context, a plurality of possible norms emerges, a dépeçageThis is difficult to articulate in practice with respect to the position of the obligor. The debtor, although he may be clearly affected by the change of the creditor - for example by the loss of the future possibility to set off his performance or by a possible relocation of his legal actions - is alien to the assignment and can never be considered a third party (Art. 5a). His relationship with successive creditors is considered contractual and will always be governed by the Rome I Regulation, i.e. by the law of the original contract, generally that agreed with the first creditor. In this design, where consents, conditional or not, to future assignments will be frequently established, contractual good faith plays an important role. This is why the Commission is considering introducing a minimum formal requirement, but one that is very difficult or impossible to articulate in a universally applicable Regulation. It should be remembered that this debtor will never be a consumer, as the proposal refers to B2B contracting.

The main connection chosen in the new instrument - the law of the transferor's habitual residence - also shows its inadequacy as a basic rule. The Commission is making a political decision in its favour, even though it can lead, as in any European instrument on the applicable law, to the application of the law of a third country. In the original proposal, it admits only two exceptions: in favour of the law of the assigned credit (assignments of cash in accounts of credit institutions or financial instruments) or in favour of the law chosen for assignments in view of a securitisation. However, in order to reach an agreement, the exceptions will have to become much more important, to the extent that they can be reversed, de factothe main rule.

The inefficiency and lack of legal certainty of the assignor's habitual residence rule, at least in the case of syndicated loans and secondary market loans, has been demonstrated in practice to be ineffective.

Another specific problem is the determination of concepts. The assumption "in view of a securitisation"In addition to being an open and therefore insecure rule, Article 4.3 requires a definition, which the Proposal lacks and which should reasonably lead to Regulation (EU) 2017/2402, which will apply from 1 January 2019. In general, any definition used in the regulation, as is also the case for the concept of "...", is not a definition of the concept of "electronic communications".Credit institution"(4.2) is difficult to transpose to third countries, including the UK when it becomes a third country after 29 March 2019 and its rules evolve. It is important for the UK-EU27 relationship to achieve clarity in the rules of a market in which the agreement in favour of English law may in turn entail the application of the same law in all the cases separated from the rule of the habitual residence of the transferor, which is relevant in itself.

In addition, the relationship of the proposal with the Directives in the FISNA field (financial collateral arrangements (2002/47/EC); finality (98/26/EC) and the reorganisation and winding-up of credit institutions (2001/24/EC), proves to be more difficult than envisaged by the Commission. These directives, transposed in the Member States, added to the application of Regulation (EU) 2015/848 on insolvency proceedings, present rules on the applicable law that cannot be ignored, in the harmonious whole that the single European financial market requires. The Directives are also referred to, as we know, in the Communication of 12 March 2018 on applicable law for third party effects of cross-border securities transactions, which runs parallel to the proposal. Of particular interest in insolvency matters is the relationship between the COMI, the debtor's main centre of interest, and the habitual residence of the creditor, and especially the relationship of Article 8 of R. 2015/848, relating to the non-application, and therefore preference, of the law applicable to rights in rem over the insolvency forum.

A new dépeçage is also observed in relation to the right of ownership. The effects vis-à-vis third parties do not include the right of ownership, which is governed by their respective rules, among which, in the case of claims secured by immovable property, the following rules apply the lex rei sitae. A new exception in the form of a special rule should therefore be included for these claims.

In the relationship with other European instruments, the future directive introducing a new B2B enforcement order, known as the AECE (Accelerated Extrajudicial Collateral Enforcement) whose procedure is under negotiation and will apply to any asset located in a Member State.

In this context, it should be noted that there is an increase in the number of waivers of the mortgage guarantee of the assignee of mortgage credits in Spain, - leaving aside problems of causality in the cancellation and its relationship with insolvency - The difficulty of obtaining enforceable titles is not an argument for this, as it is facilitated after the resolutions of the DGRN of 19 May and 28 June 2018.

Therefore, the waiver of direct action by the assignee creditor leads to a perceived loss of economic value of the security interest, especially, but not only, in relation to consumer credit portfolios. It is therefore vital that the assignment of claims between professionals and their eventual enforcement present a clear and secure legal framework for all parties.