Yesterday’s CLLS paper strongly criticises the proposed EU Regulation on the proper law to determine validity, priority and perfection issues concerning the assignment of claims. The default position proposed in cases where there are two competing assignments is that the law of the assignor’s habitual residence should govern priority, because that is probably where the main insolvency proceedings would, subject to exclusions for:
- bank deposits
- claims derived from financial instruments, such as derivatives
- securitisations (where parties can choose the law of either the assignor or the assigned claim)
- assignments of claims relating to trusts.
The CLLS vehemently criticises this as “misconceived”, and argues powerfully that if there is to be a default position it should be the law of the claim which determines priority. It identifies illogicalities, including vis a vis how it would apply to a competing assignment of a claim and a transfer by novation of that claim (such as in typical syndicated loan transfer mechanisms). It concludes: “We strongly urge the European Commission to amend substantially or abandon this proposal. As it currently stands, we strongly recommend that the UK exercises its right not to opt into this civil justice proposal”