On Thursday, 6 June, in Luxembourg, European Ministers of Justice will note a second progress report on the EU Council’s work on the proposal for a regulation on the law applicable to the third-party effects of assignments of claims (see EUROPE 11979/1).
Presented in March 2018, the proposal aims to remedy the lack of clarity regarding the effects of an assignment of claims in a cross-border transaction.
An assignment of claims is a legal mechanism by which a creditor (assignor) transfers his right to enforce a claim to another person (assignee). Some companies use this mechanism to obtain liquidity and access credit.
The ministers had already discussed an initial progress report highlighting the complexity of the proposal, its possible impact on financial markets, and its interrelation with other pieces of Union law in December 2018 (see EUROPE 12153/9).
In this new report dated 24 May, the Romanian Presidency of the Council explains that, in recent months, the working party has particularly focused on obtaining clarifications from the Commission regarding the financial aspects of the proposal.
“While important progress has been achieved during the Romanian Presidency, delegations continue to analyse in-depth the content of the proposal and to examine the Presidency text”, states the report, specifying that further work at the technical level is still required before any political decision can be taken.
In fact, the EU Council has not yet succeeded in establishing its position on the applicable law. The Commission proposed adopting a general rule whereby, in conflict situations, the applicable law is that of the country in which the assignor has his habitual residence.
Nevertheless, its text provides for two exceptions to this general rule for money deposited into a bank account and for claims arising from financial instruments, such as derivatives, in which the law of the country of the assigned claim applies. Moreover, for securitisation transactions, the Commission proposes that a choice be made between the law of the country of the assignor and the law of the country of the assigned claim.
In the EU Council, a number of delegations would like to reverse the general rule—which prefers to apply the law of the assigned claim—with several exceptions. Other Member States are reportedly in favour of the general rule as proposed by the Commission but would like to introduce more exceptions. A third group of countries are reportedly not convinced that the legislation is needed; some of them believe that the multiplicity of exceptions could run counter to the proposal’s original objective and could even create even more conflicts of laws.
According to the report, the working party’s discussions are converging, in any case, towards the applicability of the new instrument only to assignments of claims where the assignment contract has been concluded on or after the date of application of the regulation.
Beyond the debate on the merits of the proposed rule, there are several technical issues, such as its interrelation with other legislative texts, for which the Commission must come up with solutions, explained a European source on Tuesday, 28 May. No in-depth discussions are reportedly expected during the June Justice Council, and a political agreement in principle under the Finnish Presidency of the Council of the EU is reportedly not guaranteed either, she said.
See the report: https://bit.ly/2WrTWWs. (Original version in French by Marion Fontana)