The European Commission has now released a Proposal for a Regulation of the European Parliament and of the Council on the law applicable to the third-party effects of assignments of claims (12 March 2018, COM/2018/096 final – 2018/044 (COD)).
The proposal chooses the law of the assignor’s habitual residence as a general rule but with certain assignments subject, as an exception, to the law of the assigned claim and with a choice of law possibility for securitisation. The proposal does not deal with relationships between the parties to a contract but with the rights of third parties.
It may be found here.
“Development of the conflict of laws rules on assignments of claims
With the increasing interconnectivity of national markets, assignments of claims often involve a cross-border element (for example, the assignor and the assignee, or the assignee and the debtor, are located in different countries). The laws of several countries can thus potentially apply to the assignment. Conflict of laws rules laid down at Union or Member State level must determine which national law applies to the various elements of a cross-border assignment of claims.
Conflict of laws rules on cross-border assignments of claims concern two elements: (1) the contractual element, which refers to the parties’ obligations towards each other; and (2) the proprietary element, which refers to the transfer of property rights over the claim and which can therefore affect third parties.
The Rome I Regulation on the law applicable to contractual obligations harmonised conflict of laws rules at Union level with regard to the contractual elements of the assignment of claims. The Regulation thus contains uniform conflict of laws rules with regard to (i) the relationship between the parties to the assignment contract – the assignor and the assignee , and (ii) the relationship between the assignee and the debtor . The conflict of laws rules of the Rome I Regulation also apply to the relationship between the original creditor (the assignor) and the debtor .
In contrast, there are no conflict of laws rules at Union level with regard to the proprietary elements of the assignment of claims. The proprietary elements or third-party effects of an assignment of claims refer in general to who has ownership rights over a claim and, in particular, to: (i) which requirements must be fulfilled by the assignee in order to ensure that he acquires legal title over the claim after the assignment (for example, registration of the assignment in a public register, written notification of the assignment to the debtor), and (ii) how to resolve priority conflicts, that is, conflicts between several competing claimants as to who owns the claim after a cross-border assignment (for example, between two assignees where the same claim has been assigned twice, or between an assignee and a creditor of the assignor).
The question of which law should govern the third-party effects of assignments of claims was first considered when the 1980 Rome Convention was being converted into the Rome I Regulation and then during the legislative negotiations leading to the adoption of the Rome I Regulation. The Commission proposal for the Rome I Regulation chose the law of the assignor’s habitual residence as the law that should apply to the third-party effects of the assignment of claims . Ultimately, no conflict of laws rule on the third-party effects of assignments was included in the Regulation due to the complexity of the matter and the lack of time to deal with it in the required level of detail.
However, Article 27(2) of the Rome I Regulation acknowledged the significance of this unresolved issue by requiring the Commission to present a report on the question of the effectiveness of assignments of claims against third parties accompanied, if appropriate, by a proposal to amend the Regulation . To this end, the Commission contracted an external study and, in 2016, adopted a report presenting possible approaches to the matter . In its report, the Commission noted that the absence of uniform conflict of laws rules determining which law governs the effectiveness of an assignment of a claim against third parties and the questions of priority between competing claimants undermines legal certainty, creates practical problems and results in increased legal costs”.