The EC Commission's 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 has been published.
This is of interest to Financial institutions involved in
factoring, collateralisation and securitisation both prior to and
It is part of the general Commission mandate to simplify private
international law and its application within the EU.
This Regulation is part of the proposed Capital Markets Union
(CMU), which is to be in place by 2019.
There is no doubt that it is important to capital markets
adjacent to the CMU, such as the UK and the Crown Dependencies.
These will be affected by this indirectly, as there will be a
significant shift in emphasis following this Regulation. Post
Brexit it will affect all forms of factoring, collateralisation,
securitisation or other forms of self-financing and leverage in the
context of the comparative complexity of enforcement by an assignee
coupled wih the withdrawal of the UK from the Brussels I
To be specific, securitisation tends to take place in relation
to consumer credit such as automobile and domestic consumer items.
Given the ERU's eports t he UNioetd Kingomd, it is likely
that a significant amount of consumer credit will not only be
granted by EU groups' own financial subsidiaries, but also through
specific securitisation vehicles and contracts giving the ability
to offload tranches into the local consumer's financial market. Any
change in the law undergirding these transfer transactions is
likely to increase costs as much as reduce them.
The specific objective of this proposal is to help to increase
cross-border transactions in claims by providing legal certainty
through the adoption of uniform conflict of laws rules at Union
To quote the Commission: "The specific objective of this
proposal is to help to increase cross-border transactions in claims
by providing legal certainty through the adoption of uniform
conflict of laws rules at Union level."...
"....in order to increase cross-border transactions in claims
and securities, clarity and predictability as to which country's
law applies to determine who owns a claim or a security after a
cross-border transaction are essential. Legal uncertainty as to
which national law determines who owns an asset further to a
cross-border transaction means that, depending on which Member
State's courts or authorities assess a dispute concerning the
ownership of a claim or a security, the cross-border transaction
may or may not confer the expected legal title. In case of
insolvency, when the questions of ownership and enforceability of
rights resulting from cross-border transactions are put under
judicial scrutiny, legal risks stemming from legal uncertainty may
result in unexpected losses.
The uniform rules laid down in this proposal will designate which
national law should determine the ownership of a claim after it has
been assigned on a cross-border basis and, thereby, eliminate legal
risk and potential systemic consequences. The introduction of legal
certainty will promote cross-border investment, access to cheaper
credit and market integration.
The assignment of claims is a mechanism used by companies to
obtain liquidity and have access to credit, as in factoring and
collateralisation, and by banks and companies to optimise the use
of their capital, as in securitisation."
This is of interest to any financial institution involved in
factoring, collateralisation and securitisation finance seeking to
have access to the CMU, or financing credit out of the CMU into the
United Kingdom, and also to cross-border insolvency
There may be post-Brexit possibilities for linkage between
Ireland, and the Crown Dependencies in this area.
However, the Dutch jurisdictional domination of the
insolvency market under the current Regulation, and the exclusion
of creditors claims against Duitch companies in liquidation will be
a force to be reckoned with.
The link to the proposal can be found
Please contact me with any queries.