On Wednesday, 2 December, at the videoconference meeting of EU ministers of justice, the German Presidency will be presenting a third progress report on the work in the Council of the EU on the proposal for a Regulation on the law applicable to the enforceability of assignments of claims and not a compromise text.
Assignment of claims is a legal mechanism where a creditor (the assignor) transfers their right to claim a debt to another person (the assignee). The aim of the proposal, which was presented in March 2018, is to address the lack of clarity regarding third-party effects of assignments of claims in cross-border transactions (see EUROPE 11979/1).
The proposal has been causing Member States difficulties for more than two years, the European Parliament having adopted its position in February 2019 (see EUROPE 12193/3). The problem is partly the technical nature of the document, but particularly its link to the financial markets.
The difficulties have meant that the European Commission has had to clarify some parts of the proposal, including its scope (see EUROPE 12406/6) in order to help Member States comer to a clearer understanding.
However, there has been one progress report after another in successive Presidencies: the first version was presented during the Austrian Presidency (see EUROPE 12153/9) and the second during the Romanian Presidency (see EUROPE 12265/11).
Work during the Croatian Presidency was disrupted by the Covid-19 pandemic (see EUROPE 12475/18). The European ministers of justice nevertheless managed to hold a videoconference debate in June, which provided political guidance on maintaining the principle of universality, retroactive application and novation (see EUROPE 12499/12).
The third progress report, dated 20 November, a copy of which has been obtained by EUROPE, is no exception, concluding that “taking into account the complexity of the proposal, its possible impact on financial markets and its interrelation with other instruments of Union law, further work at technical level is required before the Council can take a political decision”.
It does nevertheless report some progress under the German Presidency, particularly with regard to exclusion from the scope of the transfer of transferable securities, money-market instruments and units in collective investment undertakings, and with regard to the exclusion of claims incorporated in a certificate or represented by a book-entry (see EUROPE 12539/11).
Which law to apply is one of the questions still open. The report states that, following a proposal by the Italian delegation, the Working Party discussed the merits of using the law of the assigned claim for the main rule on the applicable law and using the law of the habitual residence of the assignor as the connecting factor for assignments of future claims, assignments of multiple claims governed by different laws and factoring. However, while there was support for this proposal by several delegations, others voiced strong objections.
The document indicates that, at this stage, the general rule as proposed by the Commission - i.e. in conflict situations, the applicable law is the law of the country of habitual residence of the assignor when the transfer contract was concluded, with exceptions - is considered the most appropriate.
The report states that none of the solutions proposed so far has been unanimously accepted with regard to the third-party effects of the assignment of claims secured by immoveable property or registered assets, and concludes that a more thorough technical assessment is still required. (Original version in French by Marion Fontana)