COMMISSION STAFF WORKING DOCUMENT EXECUTIVE SUMMARY OF THE IMPACT ASSESSMENT Accompanying the document Proposal for a Regulation of the European Parliament and of the Council on the law applicable to the third-party effects of assignments of claims Communication on the law applicable to the proprietary effects of transactions in securities
Date: 2018-03-12
Institutions: Directorate-General for Justice and Consumers, European Commission
Subjects: capital market, claim, commercial law, financial instrument, financial solvency, invoicing, principle of legal certainty, private international law

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 12.3.2018  SWD(2018) 53 final  COMMISSION STAFF WORKING DOCUMENT  EXECUTIVE SUMMARY OF THE IMPACT ASSESSMENT  Accompanying the document Proposal for a Regulation of the European Parliament and of the Council on the law applicable to the third-party effects of assignments of claims Communication on the law applicable to the proprietary effects of transactions in securities {COM(2018) 96 final} - {SWD(2018) 52 final}  
 
 
Executive Summary  

Impact assessment on a 

Proposal for a Regulation on the law applicable to the third-party effects of assignments of claims  

Communication on the law applicable to the proprietary effects of transactions in securities 

and a 

A. Need for action 

Why? What is the problem being addressed?  
The  problem  addressed  by  this  initiative  is  the  lack  of  legal  certainty  as  to  which  national  law  determines  the 
proprietary effects of cross-border assignments of claims and transactions in securities. Given that, in a cross-
border scenario, several national laws can potentially apply, market participants need clarity as to which of such 
laws they must observe in order to ensure that they acquire legal title over the claim or the security.  
Currently,  there  are  no  EU  conflict  of  laws  rules  on  the  proprietary  effects  of  assignments  of  claims  and  the 
Member  States'  conflict  of  laws  rules  are  inconsistent  and  unclear.  On  securities,  conflict  of  laws  rules  on  the 
proprietary effects of transactions in securities are laid down in the Financial Collateral Directive, the Settlement 
Finality  Directive  and  the  Winding-Up  Directive.  These  provisions  are  similar  in  that  they  all  designate  an 
applicable law based on the place of the relevant register or securities account. However, they differ in detail and 
the rules are not worded in an identical manner and are implemented differently across the EU.  
The current lack of legal certainty creates a legal risk in cross-border transactions. If market participants are not 
aware of the risk or choose to ignore it, they may end up facing unexpected losses; if they decide to mitigate the 
risk by seeking specific legal advice, they will incur higher transaction costs; if they are deterred by the legal risk 
and choose to avoid it, they may forego businesses opportunities and reduce market integration. 
The  assignment  of  claims  is  a  legal  mechanism  used  by  companies  to  have  access  to  finance.  Claims  are 
assigned  in  factoring  and  securitisation  and  as  collateral  in  order  to  obtain  credit.  The  factoring  market  was 
estimated  at  EUR  1,557  billion  in  2015;  about  25%  of  all  financial  market  transactions  financed  by  the 
Eurosystem  are  secured  by  credit  claims  as  collateral,  amounting  to  some  EUR  520  billion;  and  the  market 
volume of securitisation issuance was EUR 237.6 billion within the EU in 2016. An estimated 440 trillion of cross-
border transactions in securities took place in 2015. 
The  stakeholders  directly  affected  by  the  legal  risk  in  cross-border  transactions  in  claims  and  securities  are 
financial institutions (such as banks engaged in lending, factoring, collateralisation and securitisation), financial 
intermediaries that transact in securities and claims, end investors (funds, retail investors) and borrowers (retail 
customers and firms, including SMEs). 

What is this initiative expected to achieve?  
The  policy  objective  of  this  initiative  is  to  provide  legal  certainty  for  cross-border  transactions  in  claims  and 
securities  by  clarifying  which  national  law  should  govern  the  proprietary  effects  of  such  transactions  and, 
thereby,  foster  cross-border  investment  and  facilitate  access  to  credit.  This  initiative  aims  to  adopt  common 
conflict  of  laws  rules  applicable  to  the  proprietary  effects  of  assignments  of  claims  and  to  clarify  the 
Commission's views with regard to the existing EU conflict of laws rules on the proprietary effects of transactions 
in securities so that these rules are applied consistently throughout the EU.  

What is the value added of action at the EU level?  
There  is  clear  added  value  in  addressing  the  problems  described  at  EU  level.  On  claims,  the  current  legal 
uncertainty and the legal risk it creates are caused by inconsistent and unclear national conflict of laws rules. In 
respect of claims, 80% of the stakeholders consulted in the study contracted by the Commission and 70% of the 
stakeholders which expressed an opinion in the public consultation considered that EU action would have added 
value.  On  securities,  the  Communication  on  securities  will  deliver  on  the  objective  of  introducing  more  clarity, 
improving  transparency  of  the  existing  rules  across  the  EU  without  unsettling  the  existing  EU  acquis  that 
stakeholders warn against.  

B. Solutions 

What  legislative  and  non-legislative  policy  options  have  been  considered?  Is  there  a  preferred 
choice or not? Why?  
The  current  legal  uncertainty  and  ensuing  legal  risk  in  cross-border  assignments  of  claims  results  from  the 
absence of conflict of laws rules on the proprietary effects of assignments of claims at EU level and from the co-
existence  of  Member  State  conflict  of  laws  rules  which  are  inconsistent  and  unclear.  In  order  to  provide  legal 

EN 

  EN 

 
 
 
certainty for cross-border assignments of claims and thereby facilitate access to cheaper finance for companies, 
including SMEs, and consumers, the preferred option is the adoption of an EU legislative initiative harmonising 
conflict of laws rules on the effects on third parties of assignments of claims. By designating in a uniform manner 
which national law should apply to determine ownership rights over the claims assigned, any dispute concerning 
such ownership rights would be resolved in accordance with the same national law regardless of which Member 
State authority examined the case. 

In  the  area  of  conflict  of  laws  rules  on  the  proprietary  effects  of  transactions  in  securities,  both  legislative  and 
non-legislative  options  were  assessed.  The  preferred  policy  option  is  non-legislative,  namely  the  issuing  of  a 
Communication clarifying the Commission's views with regard to certain aspects of the three existing Directives. 
The  reasons  for  this  choice  are  the  following:  (1)  there  is  little  tangible  evidence  of  materialised  risks;  (2)  the 
Directives  already  address  the  main  legal  issues  within  the  EU,  although  not  at  international  level;  (3) 
stakeholder preferences are extremely divided; and (4) legislative action might not be able to take into account 
future international and technological developments. The preferred option of issuing a Communication clarifying 
the Commission's views of the existing conflict of laws provisions can provide more clarity without any negative 
consequences on any stakeholder groups or lock-in effects for future policy developments in this field. 

Who supports which option?  
With regard to claims, stakeholders were asked about their preferences as  to the law that should apply to the 
proprietary effects of cross-border assignments of claims in the study contracted by the Commission and in the 
public consultation. In the study contracted by the Commission, 44% of the stakeholders consulted favoured the 
law  of  the  assignor’s  habitual  residence  and  30%  favoured  the  law  of  the  assigned  claim.  In  the  public 
consultation,  out  of  the  stakeholders  which  expressed  an  opinion,  57%  favoured  the  law  of  the  assignor’s 
habitual residence and 43% favoured the law of the assigned claim. At a meeting of Member State experts on 
conflict of laws held in September 2017, Member States were divided as to their preferred applicable law. 
Regarding  securities,  in  the  public  consultation  no  legislative  action  was  the  preferred  option  of  Central 
Securities Depositories (CSDs) as well as other stakeholders. A review of the three Directives is supported by 
different  stakeholder  groups,  and  proposing  a  new  initiative  is  supported  by  a  number  of  other  stakeholders. 
However,  stakeholders  calling  for  legislative  action  are  strongly  divided  on  the  preferred  policy  option  (that  is, 
whether  designating  the  applicable  law  by  reference  to  the  place  of  the  relevant  intermediary  or  granting 
freedom of choice of law). At a meeting of Member State experts on conflict of laws held in November 2017, the 
vast  majority  of  Member  States  voiced  support  for  a  Communication  clarifying  the  Commission's  views  with 
regards to the existing EU conflict of laws rules.  

C. Impacts of the preferred option 

What are the benefits of the preferred option (if any, otherwise main ones)?                                       
Both the preferred options of adopting a legislative instrument on claims and issuing a Communication clarifying 
the Commission's views with regard to the existing EU conflict of laws rules on securities are expected to have a 
positive  impact  (albeit  to  a  different  extent  given  the  legal  nature  of  each  option)  on  the  economy,  both  on 
financial  markets  and  the  real  economy.  Adopting  EU  rules  on  the  law  applicable  to  the  third-party  effects  of 
cross-border  assignments  of  claims  and  clarifying  the  Commission's  views  on  the  existing  EU  conflict  of  laws 
rules  on  the  law  applicable  to  the  proprietary  effects  of  cross-border  transactions  in  securities  would  provide 
legal certainty and thereby lessen or eliminate the legal risk linked to cross-border transactions. Legal certainty 
would decrease the risk of financial losses, do away with the increased transaction costs resulting from legal due 
diligence  costs  and  promote  cross-border  investment  and  thus  market  integration.  Legal  certainty  would  also 
facilitate  access  to  cheaper  finance  by  companies,  in  particular  SMEs,  and  consumers,  as  the  assignment  of 
claims  is  a  mechanism  frequently  used  to  have  access  to  cheaper  credit  (for  example,  through  factoring  and 
collateralisation). Increased cross-border investment and access by companies to cheaper credit may also have 
an indirect positive social impact. No significant direct environmental benefit is expected. 

A quantification of benefits is difficult given that legal risks are not quantified. In the area of claims, information 
on  the  value  of  the  claims  assigned,  the  number  of  assignments  or  on  whether  the  assignments  were  cross-
border is either kept confidential by the industry or is not recorded. In the public consultation, both the authorities 
of Member States and stakeholder associations confirmed that a great deal of data on assignments of claims, for 
example  on  collateralisation  or  securitisation,  is  not  collected  either  by  public  authorities,  stakeholders  or 
stakeholder associations.  

EN 

  EN 

 
 
 
 
What are the costs of the preferred option (if any, otherwise main ones)?                                        
Neither the legislative initiative on claims nor the non-legislative initiative on securities is expected to cause any 
negative  economic,  social  or  environmental  effects.  To  the  contrary,  these  initiatives  will  have  a  positive 
economic and social impact through the provision of legal certainty. The adoption of uniform provisions on the 
third-party  effects  of  cross-border  assignments  of  claims  and  the  adoption  of  a  Communication  clarifying  the 
Commission's  views  on  the  existing  conflict  of  laws  provisions  on  the  proprietary  effects  of  cross-border 
transactions  in  securities  would  eliminate  legal  risk  and,  therefore,  the  risk  of  financial  losses,  the  increased 
transaction  costs  aimed  at  mitigating  the  legal  risk,  and  would  promote  cross-border  investment  and  market 
integration. The legislative initiative on claims may impose one-off adaptation costs on market participants (for 
example, if they need to change their legal documentation). The non-legislative initiative on securities should not 
lead to compliance costs. 

How will businesses, SMEs and micro-enterprises be affected?  
The  provision  of  legal  certainty  through  the  legislative  initiative  on  claims  and  the  non-legislative  initiative  on 
securities  will  have  a  direct  positive  impact  on  businesses.  In  particular,  the  legislative  initiative  on  claims  will 
benefit SMEs and micro companies as, in designating clearly and in advance which national law will apply to the 
ownership  effects  of  assignments  of  claims,  these  businesses  will  have  more  opportunities  to  choose 
mechanisms  that  enable  them  to  have  access  to  cheaper  finance  through  cross-border  factoring  and 
collateralisation.  Increased  cross-border  investment  and  access  by  businesses  to  cheaper  finance  may  also 
have an indirect positive impact on employment. On securities, the Communication will provide clarity for market 
participants  without  imposing  compliance  costs  that  could  be  disruptive  for  the  market.  These  benefits  would 
accrue  with  financial  intermediaries  and  might  be  passed  on  to  end  investors.  Improving  clarity  of  the  existing 
applicable  rules  will  also  help  to  decrease  any  cross-border  risks  related  to  legal  uncertainty  as  well  as 
transaction costs related to discovering the applicable law.  

Will there be significant impacts on national budgets and administrations?  
Neither the legislative initiative on claims nor the non-legislative initiative on securities will impose any significant 
costs on national administrations. Given that the proposed measures will bring legal certainty, they are expected 
to alleviate the work of courts. 

Will there be other significant impacts?  
Both the legislative initiative on claims and the non-legislative initiative on securities will have a positive effect on 
legal certainty concerning the ownership aspects of transactions in claims and securities, which is related to the 
fundamental  right  to  property.  Neither  the  legislative  initiative  on  claims  nor  the  non-legislative  initiative  on 
securities will affect third-country aspects or competition.  
Given that the preferred option in the legislative initiative on claims would be based on the law of the assignor's 
habitual  residence,  synergies  would  be  created  with  the  EU  Insolvency  Regulation,  based  on  a  compatible 
conflict of laws rule. Synergies would also be achieved at international level as the law of the assignor's habitual 
residence is also the law chosen by the 2001 UN Convention on the Assignment of Receivables in International 
Trade. 
On  securities,  the  Communication  will  allow  some  convergence  across  the  EU  and  possibly  avoid,  in  some 
specific cases, the applicable of multiple laws internationally. 

D. Follow up 

When will the policy be reviewed?  
The Commission will monitor the impacts and effectiveness of the proposed initiatives on claims and securities 
by way of a questionnaire sent to key stakeholders. This questionnaire may be part of a more comprehensive 
study which will examine developments  in the areas of cross-border transactions in claims and securities. The 
impact of the proposed initiative on claims will be evaluated in a report prepared by the Commission five years 
after the entry into force of the proposed instrument.  

EN 

  EN