United Nations
Convention on the Assignment
of Receivables in International Trade
Article 4. Exclusions
and other limitations
2. This Convention does not apply
to assignments of receivables arising under or from:
(e) The transfer of
security rights in, sale, loan or holding of or agreement to repurchase
securities or other financial assets or instruments held with an intermediary;
[[Understanding: The United States understands
that paragraph (2) of article 4 (with respect to clause (e)) (i) excludes from the scope of the Convention
the assignment of the
assignor’s rights as against the intermediary, to the extent that the rights
are receivables, with respect to the following, when such property is held by
the assignor with an intermediary: securities, other financial assets, and
instruments, (ii) does not exclude from the scope of the Convention the
assignment of the following rights, to the extent that the rights are
receivables, when held by the assignor other than with an intermediary:
securities, other financial assets, and instruments, and (iii) except as
described in clause (i), does not exclude from the scope of the Convention the
assignment of a receivable owing to the assignor and arising out of the
transfer by the assignor of a security, other financial asset, or ana receivable (i) that is a security, regardless of
whether the security is with an intermediary, and (ii) that is not a security
and is a financial asset or instrument, even if the security, other financial asset,financial asset or instrument is held with
an intermediary.]] [Note to drafting group: I have left in the
understanding for the moment, in case we change our collective minds again]
[The Senate Report will explain that the understanding does not address
whether the Convention does not applyapplies to the assignment of a
receivable if (i) it is a security, (ii) it is a financial asset or
instrument that is not a security, if the financial asset or instrument is held
with an intermediary, and (iii) it arises from the assignment of (a) a
security, or (ii) a financial asset or instrument held with an intermediary. The exclusion of securities that are
receivables applies to securities (i) held with an intermediary, and (ii) not
held with an intermediary.]
Article 5. Definitions and rules of
interpretation
For the
purposes of this Convention:
(h) A person is located in the State in which it
has its place of business. If the
assignor or the assignee has a place of business in more than one State, the
place of business is that place where the central administration of the
assignor or the assignee is exercised. If the debtor has a place of business in
more than one State, the place of business is that which has the closest
relationship to the original contract. If a person does not have a place of
business, reference is to be made to the habitual residence of that person;
[Understanding: The United States understands
that the phrase “that place where the central administration of the assignor or
the assignee is exercised” as used in paragraph (h) of article 5 has a meaning
equivalent to the phrase “the chief executive office of the assignor or
assignee”.]
[Note in Senate explanation: (i) the phrase in paragraph (h) of article 5
does not mean the “principal place of business”, “chief place of business”,
“registered seat”, “place of organization”, or “centre of main interests” of
the assignor or the assignee, and (ii) the phrase “chief executive office” is
used in Article 9 of the Uniform Commercial Code and there is substantial case
law and commentary explaining its meaning. ]
Article
9. Contractual limitations on assignments
1. An
assignment of a receivable is effective notwithstanding any agreement between
the initial or any subsequent assignor and the debtor or any subsequent
assignee limiting in any way the assignor’s right to assign its receivables.
2.
Nothing
in this article affects any obligation or liability of the assignor for breach
of such an agreement, but the other party to such agreement may not avoid the original contract or the assignment contract on
the sole ground of that breach. A
person who is not party to such an agreement is not liable on the sole
ground that it had knowledge of the agreement.
3.
This article applies only to assignments of receivables:
(a)
Arising from an original contract that is a contract for
the supply or lease of goods or services other than financial services, a
construction contract or a
contract for the sale or lease of real property;
(b) Arising from an
original contract for the sale, lease or licence of industrial or other
intellectual property or of proprietary information;
(c)
Representing the payment obligation for a
credit card transaction; or
(d)
Owed to the assignor upon net settlement of
payments due pursuant to a netting agreement involving more than two
parties.
Article 10. Transfer of security rights
1. A personal or property right securing payment of the
assigned receivable is transferred to the assignee without a new act of
transfer. If such a right, under the law governing it, is transferable only
with a new act of transfer, the assignor is obliged to transfer such right and
any proceeds to the assignee.
2. A right securing payment of the assigned receivable is
transferred under paragraph 1 of this article notwithstanding any agreement
between the assignor and the debtor or other person granting that right,
limiting in any way the assignor’s right to assign the receivable or the right
securing payment of the assigned receivable.
3. Nothing in this article affects any obligation or
liability of the assignor for breach of any agreement under paragraph 2 of this
article, but the other party to that agreement may not avoid the original
contract or the assignment contract on the sole ground of that breach. A person
who is not a party to such an agreement is not liable on the sole ground that
it had knowledge of the agreement.
4. Paragraphs 2 and 3 of this article apply only to
assignments of receivables:
(a) Arising from an original contract that is a contract
for the supply or lease of goods or services other than financial services, a
construction contract or a contract for the sale or lease of real property;
(b) Arising from an original contract for the sale, lease
or licence of industrial or other intellectual property or of proprietary
information;
(c) Representing the payment obligation for a credit card
transaction; or
(d) Owed to the assignor upon net settlement of payments
due pursuant to a netting agreement involving more than two parties.
5. The transfer of a possessory property right under
paragraph 1 of this article does not affect any obligations of the assignor to
the debtor or the person granting the property right with respect to the
property transferred existing under the law governing that property right.
6. Paragraph 1 of this article does not affect any
requirement under rules of law other than this Convention relating to the form
or registration of the transfer of any rights securing payment of the assigned
receivable.
[Note in Senate
explanation in connection with definition of “receivable”: The rights of a
licensee of intellectual property (e.g. copyrights, patents, and trademarks)
are not a “receivable” as defined in the Convention. However, a contractual
right to the payment of a monetary sum arising from a license, assignment, or
other transfer of intellectual property is a “receivable” as defined in the
Convention.]
Article 23. Public
policy and mandatory rules
1. The application
of a provision of the law of the State in which the assignor is located may be
refused only if the application of that provision is manifestly contrary to the
public policy of the forum State.
2. The rules of the
law of either the forum State or any other State that are mandatory
irrespective of the law otherwise applicable may not prevent the application of
a provision of the law of the State in which the assignor is located.
3. Notwithstanding
paragraph 2 of this article, in an insolvency proceeding commenced in a State
other than the State in which the assignor is located, any preferential right
that arises, by operation of law, under the law of the forum State and is given
priority over the rights of an assignee in insolvency proceedings under the law
of that State may be given priority notwithstanding article 22. A State may
deposit at any time a declaration identifying any such preferential right.
[Declaration: Pursuant to article 23, the
United States declares that rights that arise by operation of law under the
following provisions of the United States Bankruptcy Code, 11 U.S.C.A. §§ 101
et seq., may be given priority over the rights of an assignee in an insolvency
proceeding in which the assignor is a “debtor” under and as defined in the
Bankruptcy Code: Bankruptcy Code §§ 364(d) and 506(c). This declaration is not a complete list of
all rights that arise by operation of law that might be given priority over the
rights of an assignee in an insolvency proceeding.]
[Note in Senate explanation: (i) this article
does not contemplate that a State would list avoidance powers arising in
insolvency proceedings, such as the power to avoid a preference or a fraudulent
transfer,, and (ii) there may be other priority rights arising by operation of
law that might be given priority over the rights of an assignee in proceedings
under the Bankruptcy Code or under other insolvency proceedings under the law
of the United States or a territorial unit of the United States.]
Article 24. Special rules on proceeds
1. If proceeds are received by the assignee, the
assignee is entitled to retain those proceeds to the extent that the assignee’s
right in the assigned receivable had priority over the right of a competing
claimant in the assigned receivable.
2. If proceeds are received by the assignor, the
right of the assignee in those proceeds has priority over the right of a competing claimant in those
proceeds to the same extent as the assignee’s right had priority over the right
in the assigned receivable of that claimant if:
(a) The assignor has received the proceeds under
instructions from the assignee to hold the proceeds for the benefit of the
assignee; and
(b) The proceeds are held by the assignor for the
benefit of the assignee separately and are reasonably identifiable from the
assets of the assignor, such as in the case of a separate deposit or securities
account containing only proceeds consisting of cash or securities.
3. Nothing in paragraph 2 of this article
affects the priority of a person having against the proceeds a right of set-off
or a right created by agreement and not derived from a right in the receivable.
[Understanding: The United States understands
that article 24 provides minimum rights and benefits to an assignee with
respect to proceeds and does not derogate from any additional rights or
benefits that an assignee may have with respect to proceeds under law other
than the Convention.]
[Note in Senate explanation: The Senate
explanation will note that articles 9 (Contractual limitations on assignments)
and 10 (Transfer of security rights) invalidate certain restrictions on or requirements
concerning assignments that would otherwise be valid and do not limit any similar rules of invalidation
that an assignee may have under law other than the Conventionvalidate
restrictions on assignment that are invalidated under applicable law (e.g.
under Uniform Commercial Code §§ 9-406 – 9-408). The Senate explanation will also note that similarly article 13 (Right to notify
the debtor) provides minimum rights and benefits to an assignee and does not
derogate from any additional rights or benefits that an assignee may have under
law other than the Convention.]
CHAPTER VI. FINAL PROVISIONS
Article 33. Depositary
The Secretary-General of the United Nations is the depositary of this Convention.
Article 34.
Signature, ratification, acceptance,
approval, accession
1.
This
Convention is open for signature by all States at the Headquarters of the United Nations in New York until 31
December 2003.
2.
This Convention is subject to ratification, acceptance or
approval by
the signatory States.
3.
This Convention is open to accession by all States that
are not signatory
States as from the date it is open for signature.
4.
Instruments of ratification, acceptance, approval and
accession are to be deposited with the Secretary-General of the United Nations.
Article
35. Application to territorial units
1.
If a State has two or more territorial units in which
different systems of law are applicable in relation to the matters dealt with
in this Convention, it may at any time declare that this Convention is to
extend to all its territorial units or only one or more of them, and may at any
time substitute another
declaration for its earlier declaration.
2.
Such
declarations are to state expressly the territorial units to which this Convention extends.
3.
If, by virtue of a declaration under this article, this
Convention does not extend to all territorial units of a State and the assignor
or the debtor is located in a territorial unit to which this Convention does
not extend, this location is
considered not to be in a Contracting State.
4.
If,
by virtue of a declaration under this article, this Convention does not extend
to all territorial units of a State and the law governing the original contract
is the law in force in a territorial unit to which this Convention does not
extend, the law governing the original contract is considered not to be the law
of a Contracting State.
5. If a State
makes no declaration under paragraph 1 of this article, the Convention is to extend to all territorial units of
that State.
Article
36. Location in a territorial unit
If a
person is located in a State which has two or more territorial units, that person is located in the territorial unit in
which it has its place of business. If the assignor or the assignee has a place
of business in more than one territorial unit, the place of business is that
place where the central administration
of the assignor or the assignee is exercised. If the debtor has a place
of business in more than one territorial unit, the place of business is that which has the closest relationship to the
original contract. If a person does not have a place of business, reference is
to be made to the habitual residence
of that person. A State with two or more territorial units may specify by declaration at any time other rules for
determining the location of a person within that State.
[Declaration: Pursuant to article 36, the
United States declares that for purposes of the Convention an assignor that is
located of the United States under article 5 is located in the territorial unit
determined under article 36 without regard to this declaration.36. However, if, under the law as provided under Article 9 of the
Uniform Commercial Code in force in that territorial unit, the assignor is
located in a different territorial unit of the United States, then for purposes
of the Convention and with respect to transactions governed by Article 9 of the
Uniform Commercial Code in force in the relevant territorial unit, the assignor
is located in the different territorial unit.]
Article
37. Applicable law in territorial units
Any reference in this Convention to the law of a State
means, in the case of a State which has two or more territorial units, the law
in force in the territorial unit. Such a State may specify by declaration at any time
other rules for determining the applicable law, including rules that render
applicable the law of another
territorial unit of that State.
[Declaration: Pursuant to article 37, the
United States declares that for purposes of the Convention the law of the
United States means the law in force in the territorial unit determined under
article 3636. The determination under article 36 is made without regard to the
declaration of the United States made pursuant to article 36. However, to the extent that, under the choice-of-law
rules in force in
that territorial unit as provided under Article 9 of the Uniform
Commercial Code in force in that territorial unit, the law of a different
territorial unit of the United States would govern as to the relevant matter,
then for purposes of the Convention and with respect to transactions governed
by Article 9 of the Uniform Commercial Code in force in the relevant
territorial unit, the law in force in the different territorial unit shall
apply.]
Article
38. Conflicts with other international agreements
1. This Convention does not prevail over any international
agreement that has already been or may be entered into and that specifically
governs a transaction
otherwise governed by this Convention.
2. Notwithstanding paragraph 1 of this article, this
Convention prevails over the Unidroit Convention on International Factoring
(“the Ottawa Convention”). To the extent that this Convention does not apply to
the rights and obligations of
a debtor, it does not preclude the application of the Ottawa Convention with
respect to the rights and obligations of that debtor.
Article
39. Declaration on application of chapter V
A State may declare at any time that it will
not be bound by chapter V.
[Pursuant to article 39, the United States declares that it
will not be bound by chapter V.]
Article 40.
Limitations relating to Governments
and other public entities
A State may declare at any time that it will not be bound
or the extent to which it will not be bound by articles 9 and 10 if the debtor
or any person granting a personal or property right securing payment of the
assigned receivable is located in that State at the time of conclusion of the
original contract and is a Government, central or local, any subdivision
thereof, or an entity constituted for a public purpose. If a State has made
such a declaration, articles 9 and 10 do not affect the rights and obligations
of that debtor or person. A State may list in a declaration the types of entity that are
the subject of a declaration.
1.
A
State may declare at any time that it will not apply this Convention to
specific types of assignment or to the assignment of specific categories of
receivables clearly described in a declaration.
2.
After a declaration under paragraph 1 of this
article takes effect:
(a)
This Convention does not apply to such types of
assignment or to the
assignment of such categories of receivables if the assignor is located at the
time of conclusion of the contract of assignment in such a State; and
(b)
The
provisions of this Convention that affect the rights and obligations of the
debtor do not apply if, at the time of conclusion of the original contract, the debtor is located in such a State or
the law governing the original contract is the law of such a State.
3. This article does not apply to assignments of receivables listed in article 9, paragraph
3.
[Alternative 1] [Declaration: Pursuant to article 41, the
United States declares that it will not apply this Convention to the assignment
of receivablesa
receivable if the debtor (i) is a Government, central or local, any subdivision
thereof, or an entity constituted for a public purpose, and (ii) is located in
the United States at the time of conclusion of the original contract.]
[Alternative 2]
[Declaration: Pursuant to article 41, the
United States declares that it will not apply this Convention to the assignment
of a receivable so as to affect the rights and
obligations of athe debtor if the debtor is located in the United States at the time of
conclusion of the original contract and the debtor(i) is a Government, central or
local, any subdivision thereof, or an entity constituted for a public purpose, and (ii) is located in the United States at the time of
conclusion of the original contract.]
[Note to drafting
group: the
“government” list is taken from article 40, which provides forThis
declaration contains alternative formulations.
The first excludes Government receivables (to varying degrees) when the
debtor is located in the U.S. This
alternative would have the two effects specified in article 41: (i) The
Convention would not apply to an assignment of a Government receivable if the
assignor is located in the U.S. at the time of the conclusion of the contract
of assignment (see article 41(a)), and (ii) the provision of the Convention
that affect the rights and obligations of the Government debtor (account
debtor) would not apply to the receivable, even if the assignor is not located
in the U.S. at the time of the conclusion of the contract of assignment (see
article 41(b)).
[The Senate
report will explain that a declaration
declaring that articles 9 and 10 do not apply to the debtor.
A declaration under that article does not seem sufficient to protect the
government debtor from notices given under articles 16 and 17. We have to consider further (including
getting input from Sandy Rocks) how much we need this declaration, given (i)
the exclusion of securities held with an intermediary, and (ii) 9 and 10 only would not
be sufficient because articles 9 and 10
override only
contractual anti-assignment clauses (and not those in a law).
In addition, one may question the usefulness of this declaration because
it cannot and it is desired also to override articles 16 and
17, concerning the effect of a notice to the debtor when the debtor is a
Government. This declaration will not apply
to assignments of receivables listed in article 9(3), such as receivables arising when a Government
purchases goods (sometimes referred to as “trade receivables”). The Senate report will also explain that most
Government receivables will be excluded from the scope of the Convention by
paragraph (2) of article 4 (with respect to clause (e)), concerning (i)
“securities”, and (ii) other financial assets and instruments held with an intermediary.]
Article
42. Application of the annex
1. A State may at any
time declare that it will be bound by:
(a)
The
priority rules set forth in section I of the annex and will participate in the
international registration system established pursuant to section II of the
annex;
(b)
The
priority rules set forth in section I of the annex and will effectuate such rules by use of a registration system
that fulfils the purposes of such rules, in which case, for the purposes of
section I of the annex, registration pursuant to such a system has the
same effect as registration pursuant to section II of the annex;
(c)
The priority rules set forth in section III of the annex;
(d) The
priority rules set forth in section IV of the annex; or (e) The priority rules
set forth in articles 7 and 9 of the annex.
2. For the purposes of
article 22:
(a)
The law of a State that has made a declaration pursuant
to paragraph
1 (a) or (b) of this article is the set of rules set forth in section I of the annex, as
affected by any declaration made pursuant to paragraph 5 of this article;
(b)
The law of a State that has made a declaration pursuant
to paragraph
1 (c) of this article is the set of
rules set forth in section III of the annex, as affected by any declaration
made pursuant to paragraph 5 of this article;
(c)
The law of a State that has made a declaration pursuant
to paragraph
1 (d) of this article is the set of
rules set forth in section IV of the annex, as affected by any declaration made
pursuant to paragraph 5 of this article; and
(d)
The law of a State that has made a declaration pursuant
to paragraph
1 (e) of this article is the set of
rules set forth in articles 7 and 9 of the annex, as affected by any declaration
made pursuant to paragraph 5 of this article.
3.
A
State that has made a declaration pursuant to paragraph 1 of this article may
establish rules pursuant to which contracts of assignment concluded before the declaration takes effect become
subject to those rules within a reasonable time.
4.
A
State that has not made a declaration pursuant to paragraph 1 of this article may, in accordance with priority
rules in force in that State, utilize the registration system established
pursuant to section II of the annex.
5. At the time a State makes a declaration pursuant to
paragraph 1 of this article
or thereafter, it may declare that:
(a)
It
will not apply the priority rules chosen under paragraph 1 of this article to
certain types of assignment or to the assignment of certain categories of
receivables; or
(b) It will apply those priority rules with
modifications specified in that declaration.
6. At
the request of Contracting or Signatory States to this Convention comprising not less than one third of the
Contracting and Signatory States, the depositary shall convene a conference of
the Contracting and Signatory States to designate the supervising authority and
the first registrar and to prepare or revise the regulations referred to
in section II of the annex.
[Declaration:
The United States declares that, for assignments of receivables within the
scope of Article 9 of the Uniform Commercial Code in force in a territorial
unit of the United States, the territorial unit has substantially implemented
the principles of the priority rules set forth in section I of the annex and
the registration system set forth in section II of the annex through the
adoption by the territorial unit of the United States of Article 9 of the
Uniform Commercial Code as in force in the territorial unit, except to the
extent that Article 9 sets forth different priority rules for assignments of
"chattel paper", "instruments", "payment
intangibles", or other particular categories or types of receivables.]
[Note
for Senate report: the report will (i) generally indicate that the Convention
is highly comparable and consistent with Article 9, (ii) the Convention differs
in only a limited way with Article 9, primarily with respect to certain
conflict of laws rules, (iii) discuss, on a section-by-section basis, how the
rules of the Convention are similar (where they are) with Article 9, and (iv)
explain how the Convention works. In
addition, the Senate report can give many examples (with full explanations),
such as the chart that Steve W. did, of where the Convention yields the same or
different results than would Article 9 under the Convention’s conflict of laws
rules.]
Article
43. Effect of declaration
1.
Declarations made under articles 35, paragraph 1, 36, 37
or 39 to 42 at the time of signature are subject to confirmation upon
ratification, acceptance or
approval.
2.
Declarations and confirmations of declarations are to be
in writing and to be formally notified to the depositary.
3.
A declaration takes effect simultaneously with the entry
into force of this Convention in respect of the State concerned. However, a
declaration of which the depositary receives formal notification after such entry
into force
takes effect on the first day of the month following the expiration of six months after the date of its receipt
by the depositary.
4.
A State that makes a declaration under articles 35,
paragraph 1, 36, 37 or 39 to 42 may withdraw it at any time by a formal
notification in writing addressed to the depositary. Such withdrawal takes
effect on the first day of the
month following the expiration of six months after the date of the receipt of
the notification by the depositary.
5. In the case of a declaration under articles 35,
paragraph 1, 36, 37 or 39 to 42 that takes effect after the entry into force of
this Convention in respect of the State concerned or in the case of a
withdrawal of any such declaration,
the effect of which in either case is to cause a rule in this Convention,
including any annex, to become applicable:
(a) Except as provided in paragraph 5 (b) of this article, that rule is applicable only to assignments
for which the contract of assignment is concluded
on or after the date when the declaration or withdrawal takes effect in respect of the Contracting State
referred to in article 1, paragraph 1 (a);
(b) A rule that deals with
the rights and obligations of the debtor applies only in respect of original contracts concluded on or
after the date when the declaration or withdrawal takes effect in respect of
the Contracting State referred to in article 1, paragraph 3.
6. In the case of a declaration under articles 35,
paragraph 1, 36, 37 or 39 to 42 that takes effect after the entry into force of
this Convention in respect of the State concerned or in the case of a
withdrawal of any such declaration,
the effect of which in either case is to cause a rule in this Convention,
including any annex, to become inapplicable:
(a)
Except
as provided in paragraph 6 (b) of
this article, that rule is inapplicable to assignments for which the contract
of assignment is concluded on or after the
date when the declaration or withdrawal takes effect in respect of the
Contracting State referred to in article 1, paragraph 1 (a);
(b) A rule that deals with the rights and
obligations of the debtor is inapplicable in respect of original contracts
concluded on or after the date when the declaration or withdrawal takes effect
in respect of the Contracting State referred to in article 1, paragraph 3.
7. If a rule rendered applicable or inapplicable as a
result of a declaration or withdrawal referred to in paragraph 5 or 6 of this article is
relevant to the determination of priority with respect to a receivable for
which the contract of assignment is concluded before such declaration or
withdrawal takes effect or with respect to its proceeds, the right of the assignee
has priority
over the right of a competing claimant to the extent that, under the law that would
determine priority before such declaration or withdrawal takes effect, the right of the assignee
would have priority.
No reservations
are permitted except those expressly authorized in this Convention.
Preliminary list
of UCC Article 9 sections where there would be a Comment that refers to the
Convention and/or explains how the Convention interacts with Article 9:
Ideally there would be either one lengthy Comment (or set of
Comments) that discusses in one place the effect of the Convention on Article
9, with cross references in the Comments to the affected sections. A similar approach would be a PEB Commentary
that explains how the Convention affects Article 9, with references in the
appropriate Comments to the PEB Commentary.
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