Frank Emmert

Indiana University Indianapolis

The 2001 UN Convention on the Assignment of Receivables in International Trade attempts to provide uniform rules for receivables financing in international business transactions. In the absence of a convention, the governing law would be national law. This gets messy in international transactions because seller and buyer are typically in different countries and the financing party may be in yet another country. Thus, it is not clear which rules apply to which part of the financing transaction and different national rules may be in conflict with each other. Some countries still restrict future receivables from serving as collateral for financing, other countries require specification and/or notification that is impractical in the reality of business.

The 2001 UN Convention provides both a measure of substantive law harmonization and conflict-of-law rules for other questions, i.e. it would regulate some aspects of receivables financing and tell us where to look for the answers to other issues. Unfortunately, it has so far been ratified only by Liberia and requires five ratifications to enter into force. Even if four more countries ratify and it does enter into force, it applies only if an assignment is made in a Contracting State (Article 1) and unless the EU MSs and the US ratify, this may rarely happen.

My question is whether the parties to a trade financing transaction, in particular the bank or other financing organization (assignee), can stipulate the applicability of the Convention by agreement and override any national law that would otherwise apply.

Thank you in advance!