The United Nations Convention on the Assignment of Receivables in International Trade (the Convention) was adopted by the United Nations General Assembly and opened for signature by States in December 2001. The main objective of the Convention is to facilitate international receivables financing practices, such as asset-based lending, securitisation, factoring, for faiting and project finance relating to receivables. While the scope of application of the Convention extends to international assignments and international receivables, the rule is that the Convention does not apply to domestic assignments of domestic receivables. However, there are two exceptions to this rule. The Convention deals with certain effectiveness-related issues (e.g. statutory limitations and contractual limitations on the assignment of receivables) by way of substantive law rules. With respect to all other effectiveness-related issues, the Convention provides the law applicable thereto (arts. 22-23 and 26-32). Under the Convention, the assignor and the assignee may structure their transaction as they wish to address their particular needs. However, they may not affect the rights of third parties (art. 6). The Convention also recognizes trade usages agreed upon and trade practices established between the parties (art. 11). In order to fill gaps left in the assignment contract and to provide a list of issues to be addressed in the contract, the Convention contains a number of default rules dealing with matters, such as representations, notification and payment, and contractual rights to proceeds. Debtor’s discharge is based on written notification received by the debtor. Up to the time of receipt of notification, the debtor may discharge its debt by paying in accordance with the original contract. After receipt of notification, the debtor may obtain a valid discharge only by paying as instructed in the notification (art. 17 (1) and (2)). The Convention breaks new ground in centralizing all priority issues to the law of the assignor’s location. One of the most important achievements of the Convention may well prove to be the referral of priority in proceeds, covered by a so-called “lock-box arrangement,” to the law of the assignor’s location. This rule may well facilitate significantly receivables financing in countries in which property rights in proceeds are not recognized. The main rule of the Convention dealing with priority among competing claims is a private international law rule (art. 22). This reflects the fact that States were not prepared to agree on a substantive law priority rule (i.e. first to conclude the contract of assignment, first to notify the debtor or first to file a notice about the assignment in a public filing office). Deviating from the traditional approach, the Convention does not allow the substitution of the priority rules of the forum for the priority rules of the applicable law. The rationale underlying this approach is that such substitution would create uncertainty, which would negatively affect the availability and the cost of credit. Once the offensive priority rule of the applicable law is set aside, the balance of the applicable priority rules should apply (art. 23 (2)). There is one exception. Super-priority rules of the forum, such as, for example, rules in favour of the State for taxes or of employees for wages, may apply in the place of the displaced applicable priority rules (art. 23 (3)). The Guide may be interesting to note that States that wish to adopt priority rules based on the registration of a notice about the assignment in a public registry, are offered a choice between using an existing registration system, or a new national or international registration system (art. 42). In particular as to the international registration system, the Convention provides a mechanism for Contracting States to designate a supervising authority, appoint the first registrar and prepare the necessary reg...
The United Nations Convention on the Assignment of Receivables in International Trade (the Convention) was adopted by the United Nations General Assembly and opened for signature by States in December 2001. The main objective of the Convention is to facilitate international receivables financing practices, such as asset-based lending, securitisation, factoring, for faiting and project finance relating to receivables. While the scope of application of the Convention extends to international assignments and international receivables, the rule is that the Convention does not apply to domestic assignments of domestic receivables. However, there are two exceptions to this rule. The Convention deals with certain effectiveness-related issues (e.g. statutory limitations and contractual limitations on the assignment of receivables) by way of substantive law rules. With respect to all other effectiveness-related issues, the Convention provides the law applicable thereto (arts. 22-23 and 26-32). Under the Convention, the assignor and the assignee may structure their transaction as they wish to address their particular needs. However, they may not affect the rights of third parties (art. 6). The Convention also recognizes trade usages agreed upon and trade practices established between the parties (art. 11). In order to fill gaps left in the assignment contract and to provide a list of issues to be addressed in the contract, the Convention contains a number of default rules dealing with matters, such as representations, notification and payment, and contractual rights to proceeds. Debtor’s discharge is based on written notification received by the debtor. Up to the time of receipt of notification, the debtor may discharge its debt by paying in accordance with the original contract. After receipt of notification, the debtor may obtain a valid discharge only by paying as instructed in the notification (art. 17 (1) and (2)). The Convention breaks new ground in centralizing all priority issues to the law of the assignor’s location. One of the most important achievements of the Convention may well prove to be the referral of priority in proceeds, covered by a so-called “lock-box arrangement,” to the law of the assignor’s location. This rule may well facilitate significantly receivables financing in countries in which property rights in proceeds are not recognized. The main rule of the Convention dealing with priority among competing claims is a private international law rule (art. 22). This reflects the fact that States were not prepared to agree on a substantive law priority rule (i.e. first to conclude the contract of assignment, first to notify the debtor or first to file a notice about the assignment in a public filing office). Deviating from the traditional approach, the Convention does not allow the substitution of the priority rules of the forum for the priority rules of the applicable law. The rationale underlying this approach is that such substitution would create uncertainty, which would negatively affect the availability and the cost of credit. Once the offensive priority rule of the applicable law is set aside, the balance of the applicable priority rules should apply (art. 23 (2)). There is one exception. Super-priority rules of the forum, such as, for example, rules in favour of the State for taxes or of employees for wages, may apply in the place of the displaced applicable priority rules (art. 23 (3)). The Guide may be interesting to note that States that wish to adopt priority rules based on the registration of a notice about the assignment in a public registry, are offered a choice between using an existing registration system, or a new national or international registration system (art. 42). In particular as to the international registration system, the Convention provides a mechanism for Contracting States to designate a supervising authority, appoint the first registrar and prepare the necessary reg...
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