Which Law Applies When Determining the Validity of an Assignment of Receivables Cross-Border? Update
The validity of an assignment of receivables cross-border depends on the law that applies to the assignment.
What might amount to a valid assignment in one jurisdiction does not mean that it is valid in another, and where there are competing claims to the receivables and competing jurisdictions, the question of which law applies – and therefore whether there has been a valid assignment – significantly affects the ability of the assignee to rely on the assignment.
In our previous blog we considered this question and whether the proposed EU Assignment Regulation helps determine the answer.
Since writing that blog, on 20 February 2020, the German Higher Regional Court (Oberlandesgericht) of Saarbrücken has held, that in Germany at least, the law that is expressed to govern the contract from which the assigned receivable arises is the decisive law and not the law of the jurisdiction where the assignor is situated, nor the law chosen by the assignor and the assignee to govern their receivables sale contract. Whether this will remain the case, remains to be seen, because the Oberlandesgericht Saarbrücken allowed an appeal to the German Federal Supreme Court (BGH). Should the position change, following the appeal, we will write a further update.
Equally, the EU Assignment Regulation once adopted, should determine the position for all Member States of the European Union and clarify the position. However the legislative process on the EU Assignment Regulation is still progressing and it may be some time until that clarity is received.