The European Commission is trying to help the Member States clarify the proposal for a Regulation concerning the law applicable to the opposability of assigned claims (see EUROPE 11979/1). In a non-paper dated 15 January, a copy of which was received by EUROPE, it provides them with clarifications and proposes several solutions for those aspects of the proposal that relate to the financial markets.
Presented in March 2018, the proposal aims to remedy the lack of clarity regarding the opposability of assigned claims in cross-border transactions.
An assigned claim is a legal mechanism by which a creditor (transferor) transfers their right to claim a debt to another person (transferee). Some companies use this mechanism to obtain liquidity and access credit.
Last June, EU Justice Ministers took note of a second progress report on the work in the EU Council, which underlined the complexity of the proposal, its possible effect on financial markets and its connections to other acts of Union law.
The 50-page document, commissioned by the Finnish Presidency of the EU Council in June 2019, seeks clarification from the Commission on the scope of the text, but above all on applicable law, for which the EU Council has not yet been able to determine its position.
The Commission proposed adopting a general rule whereby, when there is a conflict, the applicable law would be that of the country in which the transferor has their established residence.
Nevertheless, the text provides for two exceptions to this general rule, for money deposited into a bank account and for debts arising from financial instruments, such as derivatives, for which the law of the country of the assigned claims applies.
The document states that, during the discussions in the EU Council Working Party, several Member States argued that applying the law of assigned claims only to funds deposited in the account of a credit institution would be insufficient because, in capital markets, cash is held not only by credit institutions but also by other market participants, such as central counter-parties, central securities depositories, payment systems used to settle financial transactions and investment firms.
The Commission departments do not seem to see any obstacle to extending the exception to all these actors and suggest that the EU Council delete the reference to credit institutions from the text while adding a definition of cash.
During discussions in the EU Council Working Party, Member States also considered whether it would be justified for assigned claims relating to covered bonds to be subject to the same applicable law as securitisation transactions, given the similarities in their structure.
The Commission has proposed that, for securitisation transactions, a choice can be made between the law of the country of the transferor and the law of the country of the assigned claims. In its paper, it replies that in principle, this solution could also apply to covered bonds, while mentioning some specific considerations to be taken into account.
Finally, the document also clarifies the interactions between this proposal and other financial and banking legislation, such as the ‘BRRD’ Directive, the ‘CRR’ Regulation and the ‘CRD IV’ Directive.
These clarifications and potential solutions should allow Member States to advance their work. In its work programme, the Croatian Presidency of the EU Council has in any case indicated its intention to make progress on this proposal (see EUROPE 12396/12).
According to its provisional timetable, a political agreement (‘general approach’) could be reached at the June ‘Justice’ Council. (Original version in French by Marion Fontana)