учебный год 2023 / Krupski, Connecting Security Rights in Receivables — A Canadian Perspective on the Rome Convention

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Historically, this solution is based on the overarching idea that debtor protection can only be achieved through uniformity of the law of the assignment.32 Such reading is also in keeping with the Common law conflict of laws rule according to which the assignability, the necessity of notifying the debtor, the question whether the equitable assignee is required to join the assignor in a suit, and the solution of priority conflicts between competing assignments or mortgage of claims are governed by the proper law of the assigned claim because only the law that has created the intangible can decide on its characteristics.33 Article 12(2) is therefore assumed to regulate the assignment altogether, including the assignment by way of security, and including the relation towards creditors of the assignor or competing assignees.

Although Articles 28, 29 and 30 of the Receivables Convention confirm a distinction between the assignment and the agreement to assign,34 this does not preclude arguments against the historic construction of this conflict of laws rule. In fact, Article 30 of this Convention clearly submits priority questions to the law of the location of the grantor in order to take those interests of creditors into account that have already been mentioned, and – obviously for reasons of debtor protection

– restricts the law of the receivable to the assignor-debtor relationship. With regard to the arguments mentioned above and the solution retained by the Receivables Convention, it appears that excessive protection of debtors might do them more harm than good if the cost of credit is too high.

Note continued

im neuen deutschen Internationalen Privatrecht’, RabelsZ 1989, p 462 at 467 et seq.; Hoge Raad (Dutch Supreme Court), 17 April 1964, NJ (Nederlandse Jurisprudentie) 1965, no 22; J. BASEDOW, ‘Internationales Factoring zwischen Kollisionsrecht und Unidroit-Konvention’, ZEuP (Zeitschrift für Europäisches Privatrecht) 1997, p 615 at 623; H.J. SONNENBERGER, ‘Affacturage (Factoring) und Zession im deutsch-französischen Rechtsverkehr’, IPRax 1987, p 221 at 222; G. KHAIRALLAH, Les Sûretés Mobilières en Droit International Privé, Economica, Paris 1984, at 278, para 320; H. BATIFFOL & P. LAGARDE, Droit International Privé, vol 2, 7th ed, L.G.D.J., Paris 1983, at 339; D. PARDOEL, Les conflits de lois en matière de cessions de créances et d’opérations analogues, L.G.D.J., Paris 1997.

32See STADLER, supra note 30 at 106 et seq.

33See Le Feuvre v. Sullivan (1855), 10 Moo P C 1 at 13. For the relevant precedents and doctrine, see DICEY & MORRIS, supra note 31 at 979, para 24-049; id, vol 2, 12th ed by L. COLLINS ET AL, Sweet & Maxwell, London 1993, at 981, r 120 and J.-G. CASTEL, Canadian Conflict of Laws, 4th ed, Butterworths, Toronto & Vancouver 1997, at 482 et seq., para 340; STEVENS, supra note 31; Ph.R. WOOD, Comparative Law of Security and Guarantees, Sweet & Maxwell, London 1995, at 191, para 13-24; KAYE, supra note 26 at 324; art 3120 CCQ, which provides: “The assignability of a claim and the relations between the assignee and the assigned debtor are governed by the law governing relations between the assigned debtor and the assignor”.

34Note that art VIII of the Aircraft Protocol, supra note 2, articulates a choice of law concerning “[c]ontractual rights and obligation[s]” of “the parties to an agreemen[t]”, too. From the conservative point of view of European jurisdictions that support the majority perspective cited above, it could certainly be argued that art. 1(4) of the Receivables Convention was brought in precisely to avoid any binding effect of such an argument. This approach is not only unfortunate. An overarching competency of the European Commission in the conflict of laws area (see note 72 and accompanying text, below) would also disallow any such declaration by an individual Member State.

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3.2 Lex contractus of the agreement to assign

A different stream of opinion uses an interpretation of the Giuliano/Lagarde Report in its application of Article 12(1) of the Rome Convention. Contrary to the explicit wording of Article 12(1), this provision is specified to also include the proprietary aspects of an assignment. Otherwise, the reference to “mutual obligations”, as opposed to the relationship to the debtor, would miss any implication. Neither would Article 12 have any significance beside Articles 3 and 4 of the Rome Convention conveying the general choice of law rule for contracts. Finally, without such explication Article 12 would lack any regulation of the relationship between the assignor, competing assignees and creditors of the assignor, from which follows that – a contrario – Article 12(1) could only be meant to co-ordinate these aspects as part of its general inclusion of proprietary aspects.35

This point of view facilitates assignments through the mechanism of choice of law. More specifically, it would favour a choice among different security mechanisms within those jurisdictions of the European Union that permit the assignment by way of security, or the pledge of a claim, only to varying degrees. The approach would benefit the free circulation of goods and services because it excludes vetoes of the law that would otherwise apply to secured transactions based on assignments.36 It would allow for a uniformity of the law applicable to obligations and proprietary aspects, which are indeed intimately linked.

However, it should be emphasized that the extent of this intimate link first and foremost depends on internal law, without conclusions to be drawn for situations involving an international element. Moreover, authors interpreting international instruments should be cautious using national legal thinking and refrain from attributing meanings to a supposed restatement of principles at Article 12(1). The Convention text is the lowest common denominator of conflicting legal systems and would therefore rather intend to speak for itself. By referring to assignment contracts, Article 12(1) uses language typically applied in Civil codes,37 but less operated in North American Common law jurisdictions, which traditionally refer to the

35See Hoge Raad, 16 May 1997, Brandsma qq curator faillissement Bechem Chemie BV v. Hansa Chemie AG, Nederlands Internationaal Privaatrecht 1997, no 209 and 45 NILR (Netherlands International Law Review) 1998, 129; STADLER, supra note 30 at 107 et seq.; D. EINSELE, ‘Das Internationale Privatrecht der Forderungszession und der Schuldnerschutz unter besonderer Berücksichtigung des englischen und französischen Rechts’, ZVglRwiss (Zeitschrift für vergleichende Rechtswissenschaft) 1991, p 1 at 17 et seq.; id, ‘Rechtswahlfreiheit im Internationalen Privatrecht’, RabelsZ 1996, p 417 at 430 et seq. Similarly, U. DROBNIG seems to include security agreements – at least inter partes – in art 12(1), overcoming the German separation between agreement and proprietary rights (supra note 30). See U. DROBNIG, ‘German Conflict Rules on Security Interests in Movable Assets’, in

Cross-Border Security, supra note 2, p 145 at 151.

36See STADLER, ibid.

37See, for example, the German Abtretungsvertrag, at § 398 BGB.

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manifest intention to make an assignment.38 Hence, although an assignment in Common law may be regarded as a contract (security agreement) and, therefore, the “proper law of the assignment”39 may apply answering Article 12(1), it is more probable that Anglo-Canadian jurisdictions outside the scope of the Rome Convention put to use the principle, in line with which the place of the assignment or the domicile of the parties decides the applicable law.40 In addition, reference should again be made to Article 28(1) of the Receivables Convention, in which only the agreement to assign – not the assignment itself – is relevant. Since this provision is modelled after Article 12 of the Rome Convention41 it appears that drafters do not share this interpretation of Article 12(1). The Analytical Commentary to the Receivables Convention unambiguously clarifies that proprietary aspects are not covered by the UNCITRAL equivalent.42 Finally, Article 29 of the Receivables Convention only refers to “contractual limitations” such as prohibition of assignment clauses (pacta de non cedendo), altering the wording of Article 12(2), and appears even less to hint at any form of security. Based on these assumptions it seems that debtor interests

– and only debtor interests – were the concern of drafters of the Rome Convention.

3.3 Lex rei sitae: the location of the debtor

Based on considerations of public policy,43 some jurisdictions apply the law of the location of the debtor as an exception to the principled use of the law of the original contract. They search for a method to give a fictional site to claims and security interests that do not have a physical situation. For contract debts, this is the place where the debtor is located.44

It would appear that under English law this situs prevails when debtor protection, notably the risk to pay twice, requires it, as in the case of attachments and

38See Restatement (Second) of the Law of Contracts, § 317(1) (1981), which stipulates: “An assignment of a right is a manifestation of the assignor’s intention to transfer it by virtue of which the assignor’s right to performance by the obligor is extinguished in whole or in part and the assignee acquires a right to such performance”. See also H. KÖTZ, ‘Rights of Third Parties. Third Party Beneficiaries and Assignment’, in A.T. VON MEHREN (ed.), International Encyclopaedia of Comparative Law, vol 7 – Contracts in General, c. 13, J.C.B. Mohr [Paul Siebeck], Tübingen; Martinus Nijhoff, Dordrecht Boston Lancaster 1992, at 57, s 64 and, for the distinction between assignment and the underlying contract, at 58, s 66.

39For formalities, the lex loci cessionis would come to the point.

40See CASTEL, supra note 33 at 483, para 340 with jurisprudence in note 68. This view finds support for cases of universal assignment of all rights and claims and the extended reservation of proprietary rights under German Law, e.g., by STOLL, ‘Sachenrecht’, supra note 19 at paras 291 et seq., quoted in KEGEL, supra note 31 at 655, § 18 VII 1.

41See UNCITRAL, Analytical Commentary on the Draft Convention on Assignment of Receivables in International Trade, G.A. doc. A/CN.9/489/Add.1, UNCITRAL Secretariat, Vienna 2001, online: UNCITRAL <www.uncitral.org> (date accessed: 22 July 2002) at 20, para 47.

42See UNCITRAL, Analytical Commentary on the draft Convention on Assignment of Receivables in International Trade, G.A. doc. A/CN.9/489, UNCITRAL Secretariat, Vienna 2001, online: UNCITRAL <www.uncitral.org> (date accessed: 22 July 2002) at 10, para 25, and G.A. doc. A/CN.9/489/Add.1, ibid at 19, para 45.

43See arts 7 and 16 of the Rome Convention, supra note 4.

44See WOOD, supra note 33 at 189, para 13-20.

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garnishments of a debt.45 A similar derogation with regard to third parties is practised in France, even under Article 12(2) of the Rome Convention (thèse dualiste), and Japan.46 Regardless of the habitual use of the law of the original contract,47 French and Japanese courts seem to insist on a formal debtor notification requirement when the debtor resides within their jurisdiction, regardless of the fact that the law applicable to the assigned claim is different.

This proposition acknowledges debtor notification as a form of publicity that is not only intended to protect the debtor of the receivable. What is more, in outward unison with modern law it is destined to protect an unsecured creditor against usury and apparent wealth (solvabilité apparente).

In truth, however, the location of the debtor might not be known to assignees who might rather expect the law at the location of the assignor to apply. The law of the situs of the receivable cannot yield a single governing law and imposes the burden to determine each situs separately on the assignee. Different priority rules would govern with regard to various claims in a pool of receivables. But in order for a creditor to keep the cost of credit low, he or she must be able to determine the applicable law easily. Finally, a rule referring to the location of the debtor merely uses a different situs of the claim, which could be anywhere. In sum, it would hinder assignability in a similar way as the lex contractus of the original claim does. As a result, the interests at stake should decide, which – as has been explained earlier – clearly point to the location of the assignor.

3.4 Lex fori

An alternative approach is conceivable for the mentioned schism among successive assignees. Some courts in the past have taken on the implementation of a “homeward trend” (Heimwärtsstreben)48 by falling back upon the lex fori.49 Indeed, this

45See DICEY & MORRIS, supra note 31 at 990 et seq., para 24-075; WOOD, ibid at 190, para 13-22.

46See WOOD, ibid at 191, para 13-23. For France, see B. AUDIT, Droit international privé, 2nd ed, Economica, Paris 1992, at 649, para 762; A. SINAY-CYTERMAN, ‘Les conflits de lois concernant l’opposabilité des transferts de créances’, Rev. crit. dr. int. pr. (Revue critique de droit international privé) 1992, p 35 at 42, and at 44 et seq. on French jurisprudence; P. LAGARDE, ‘Le nouveau droit international privé des contrats après l’entrée en vigeur de la Convention de Rome du 19 juin 1980’, Rev. crit. dr. int. pr. 1991, p 287 at 336 et seq.

47See, for a French example, Cass. civ. (French Supreme Court), 1 juillet 1981, Rev. crit. dr. int. pr.

1982, p 336 and J. dr. int. (Journal de droit international) 1982, p 148.

48I.e., the natural tendency to apply conflict rules to transnational facts of case in the light of the legal ideas that are familiar to the tribunal in the sense of “the mind sees what the mind has means of seeing”. See J.O. HONNOLD, Documentary History of the Uniform Law for International Sales, Kluwer, Deventer, Netherlands 1989, c. I. (General Introduction) B. (Tools for Uniformity in Application) at 1. The term “homeward trend” is attributed to A. NUSSBAUM, Deutsches Internationales Privatrecht, J.C.B. Mohr, Tübingen 1932, at 42 et seq.; A. FLESSNER, Interessenjurisprudenz im Internationalen Privatrecht, J.C.B. Mohr [Paul Siebeck], Tübingen 1990, at 117 et seq.; A. KADLETZ, Conflicts of Laws in Private International Air Law, LL.M. Thesis, McGill University Institute of Air and Space Law 1996 [unpublished], at 78 et seq.

49For the unclear ratio decidendi of Kelly v. Selwyn, [1905] 2 Ch 117, at 122, see CASTEL, supra note 33 at 483 note 71, para 340 and DICEY & MORRIS, supra note 33 at 981 note 98, r 120, and the central case Republica de Guatemala v. Nunez,[1927] 1 KB 669, CA.

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response can correspond to the parties’ interest in admitting only those priorities that are known at the location of the asset. In the case of a dispute the latter is assumed to be situated at the lex fori. In practice, however, this rule is likely to coincide with the location of the grantor if the jurisdiction rule actor sequitur forum rei is applied.50 Through the implementation of both the Cape Town and Receivables Conventions this aspect will be reduced to irrelevance. If courts employ the same law, then there is no basis for a lex fori anymore.

4.The solution: a triple connection of party relations

To the arguments militating against an inclusion of proprietary aspects, along with any form of security, some further reasons merit attention. They comprise aspects related to the genesis of the Rome Convention (see 4.1), to the form-substance divide (see 4.2.1) and to definition deficits (see 4.2.2), together with a plea to keep internal and private international law separate (see 4.2.3) and a reminder of the economic ownership idea (see 4.2.4).

4.1 The travaux préparatoires exclude third parties

In line with more convincing opinions in this area the comments by Giuliano should be put aside for a moment. Instead, reference should be made to a document of the travaux préparatoires, a Protocol of the Group “Private International Law”. This record reveals that the delegations were unable to agree on the regulation of the relationship to creditors of the assignor who had attached the claim, and to competing assignees, despite pressure exercised by German representatives. In the end, a proposal by the French delegation regulating only the relations between the account debtor and third persons was retained.51 This fact adds to the well-known removal

50See art 2 of the EC Regulation, supra note 5, and art 3 of THE HAGUE CONFERENCE ON PRIVATE INTERNATIONAL LAW, Interim text of the Convention on Jurisdiction and Foreign Judgements in Civil and Commercial Matters, Summary of the Outcome of the Discussion in Commission II of the First Part of the Diplomatic Conference 6 – 20 June 2001, Permanent Bureau of the Conference, Den Haag 2001 [unpublished]. This principle traces back to JUSTINIANUS I, Codex, AD 529, C. 3, 19, 3.

51See EC, COMMISSION, Doc. III/1366/77, EC, Brussels 1977 [unpublished]; KIENINGER, supra note 20 at 689 et seq. There is a catch to this approach, however useful it is in the search for a remedy. A Common law interpretation of art 12 must be careful having recourse to any form of travaux préparatoires. Extrinsic assistance may be sought in exceptional circumstances only. For England, see Pepper v. Hart, [1993] 1 All ER 42, CA. Curiously, the prevailing English findings as to the raison d’être of art 12 are identical to the German attitude. This may diminish the impact of methodological differences. My proposal weds civilian traditions, too. By contrast, it concludes using a methodology very much akin to the “golden” or “plain meaning” rules known from the Common law. See also R.J.C. MUNDAY, ‘The Uniform Interpretation of International Conventions’, 27 ICLQ (International & Comparative Law Quarterly) 1978, p 450.

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of third party relations from Article 16(2) of the earlier 1972 draft.52 As a consequence, it should be quite clear that proprietary aspects have not been dealt with, at least in this area.53

4.2 Proprietary aspects are excluded

In addition, proprietary aspects do not appear to be covered even between assignor and assignee. As a consequence, secured transactions seem to be excluded a priori. Giuliano confirms this understanding at Article 1, paragraph 2 of his comments on the scope of the Rome Convention.54

4.2.1 The legal form still prevails over economic substance

The circumstance that different European jurisdictions prohibit certain forms of security in claims despite their similar economic functions, or that they do not allow such type of security at all, is an argument for the assumption that the legal form of a security was a major concern at the time of the elaboration of the Rome Convention. The modern North American approach, which is also the substance of both Conventions, mentioned in the introduction to this study, and which assumes that economic substance should prevail over legal form was looked at in a quite sceptical manner. For Europeans, it makes still a tremendous difference that a security is created through a “retention of title”, a “fiduciary transfer”, a “subrogation”, a “pledge”, or a “hypothec”. It is therefore not unsurprising that Article 2(a) of the Receivables Convention “deems” security rights in receivables to be transfers for purposes of this Convention only, but does not define outright assignments or assignments by way of security.55 Instead, this provision recognizes “wide divergences existing among legal

52See O. LANDO, B. VON HOFFMANN & K. SIEHR (eds), European Private International Law of Obligations – Acts and Documents of an International Colloquium on the European Preliminary Draft Convention on the Law Applicable to Contractual and Non-contractual Obligations, J.C.B. Mohr, Tübingen 1975, at 235.

53See, for example, KIENINGER, supra note 20 at 689; R.M. GOODE, Commercial Law, 2nd ed, Penguin Books, Harmondsworth, UK 1995, at 1126; Macmillan Inc v. Bishopsgate Investments Trust Plc and Others (No. 3), [1995] 1 W L R 978, at 992 D, ChD, per MILLET J, and [1996] 1 All ER 585, at 616 C, CA, per ALDOUS LJ; M. MOSHINSKY, ‘The Assignment of Debts in the Conflict of Laws’, 108 L Q Rev (Law Quarterly Review) 1992, p 591 at 615 et seq.; LAGARDE, supra note 46 at 335; STRUYCKEN, supra note 26 at 345 et seq. and 350 note 25; SINAY-CYTERMAN, supra note 46 at 43 et seq. and 48; E. KAISER,

Verlängerter Eigentumsvorbehalt und Globalzession im IPR, Centaurus, Pfaffenweiler, Germany 1986, at 202 et seq. and 224 et seq.; W. POSCH, ‘Mehrfache Sicherungsabtretung im deutsch-österreichischen Rechtsverkehr – eine Quelle kollisionsrechtlicher Probleme’, IPRax 1992, p 51 at 54; EINSELE, supra note 35 at 431 (regarding art 12[2]).

54See GIULIANO, supra note 5 at 10.

55Even if art 2(a) of the Receivables Convention, supra note 3, assumed that assignment took place through transfer, this would not be problematic for the assignor because its right of redemption, i.e., the right to the surplus after enforcement, is protected by art 14(2), which provides: “The assignee may not retain more than the value of its right in the receivable”. See also s 9-608(a)(4) of the Revised UCC (2001), which reads: “A secured party shall account to and pay a debtor for any surplus, and the obligor is liable for any deficiency”. For the order of distribution of proceeds, see s 9-615 of the Revised UCC (2001).

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systems as to the classification of assignments”.56 Similarly, Article 1(b) of the Cape Town Convention, in line with definitions of the PPSAs, distinguishes the formal differences, but eliminates them for the economic purposes of the Convention: “[a]ssignment confers ... rights ... with or without transfer”.

4.2.2 Disharmony in the definition of assignment

The Rome Convention has not defined the term “assignment” either. It appears that no such need was felt because delegations assumed that assignment meant “transfer” of a property right, not contemplating, however, assignments by way of security. In France, for instance, such assignments were generally not available as a method of receivables financing until the enactment of the Loi Dailly,57 due to heavy formalities.58 And, the fiduciary character of an assignment by way of security appears suspect to many jurisdictions because of fears that the grantor’s equity of redemption would not be adequately safeguarded, even if this suspicion may not be as great in the area of receivables as it is for moveables.59 These considerations make an agreement on this issue appear unlikely.

Even if such did not preclude (implicit) agreement on the inclusion of secured transactions, a eurocentric approach ignoring important forms generic of security existing outside what is now the European Union – notably Article 9 UCC whose first official text was promulgated in 1951 and revised several times before 1980 – would appear to be based on the assumption that security can be granted only by transfer. Looking at the Canadian PPSAs, the CCQ hypothec or the Cape Town and Receivables Conventions, or even within Europe at the pledge of a claim in Article 3:239 NBW, this assumption is clearly out of step and cannot reasonably lay foundations for an argument including secured transactions within Article 12(2) of the Rome Convention.

After all, there are some systematic arguments. For example, it is recognized that personal subrogation can work as a functional equivalent to assignment by way

56See Analytical Commentary, doc. A/CN.9/489, supra note 42 at 11, para 27.

57See Loi n° 81-1 du 2 janvier 1981, facilitant le crédit aux entreprises, J.O. 3 January 1981, 150 as modified by Loi n° 84-46, relative à l’activité et au contrôle des établissements de crédit du 24 janvier 1984, J.O. 25 January 1984, 390; KÖTZ, supra note 38 at 79 et seq., s 88; id, Vertragsrecht, supra note 7 at 421 et seq., trans at 276 et seq.; ZWEIGERT & KÖTZ, supra note 30 at 448, trans at 451; P. CROCQ, Propriété et Garantie, L.G.D.J., Paris 1995, at 303 et seq., para 348.

58See KÖTZ, ibid at 75 et seq., ss 85 et seq. and 88; ZWEIGERT & KÖTZ, ibid at 445 et seq., trans at 448 et seq.

59For an explanation of the doctrine of fiduciary transfer, see, for example, B. JÄKEL, ‘Outline of Security Interests under German Law’, in Cross-Border Security, supra note 2, p 91 at 100 et seq. and 107 et seq. It would appear that in receivables financing there is not so much of a substantial difference between assignments through title transfer and the creation of a security interest in a claim at the enforcement level once it is clear that the assignee must be limited to her or his interest. This is guaranteed in jurisdictions advocating a fiduciary transfer, too. Instead, differences merely exist at the level of publicity for third party effects. Therefore, an in terrorum effect of a pacte commissoire, a clause de voie parée or complete foreclosure (see art 1801 CCQ and art 3:84(3) of the Nieuw Burgerlijk Wetboek, Dutch Civil Code, NBW), does not exist in reality. In fact, it appears to be the effect of the Loi Dailly to endorse the doctrine of fiduciary transfer.

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of security,60 and that it should ideally be integrated into the scheme of security interests. Yet, subrogation finds a formally separate regulation at Article 13 of the Rome Convention, as Article 38 of the Cape Town Convention demonstrates. And the Rome Convention does not cover assignments of documentary intangibles that can take different forms such as a mortgage, a contractual charge or a pledge.61

In essence, when Article 12 brings the expressions “assignment”, “cession” or “Übertragung” into play, these words would not appear to mean anything beyond their literal signification, which denotes an outright transfer. For example, a PPSA security interest or a CCQ hypothec is not “cédée” or “übertragen”. Instead, it is charged on a claim that stays with the grantor. Article 12 of the Rome Convention, by contrast, ignores this idea.

4.2.3 The circular application of Article 12(2)

Next, when we look at the usual technique of conflicts of laws rules, which is to determine substantive questions of law by reference to a particular domestic law including or excluding some form of renvoi, as the case may be, but without codifying substantive law – this is at least what the drafters of the Rome Convention appear to have had in mind – this idea does not seem to be continued at Article 12. Should the question as to whether the proprietary transfer of a claim is done through the law of obligations (solo consensu) or in rem,62 as the majority maintains, already be decided at the level of a conflict of laws rule by splitting the applicable law between Article 12(1) and (2), how can it possibly be left to the law of the receivable at Article 12(2) to decide afresh on the existence of such a distinction between the law of obligations and property law? Supposing that such law is the Common law or the law of a Romance jurisdiction, it appears to overrule the distinction made at Article 12. Does this mean that Article 12 will perform an exception to its own rule if the applicable law so decides?

This would amount to answering the same question twice in two different ways. Withal, it would in reality amount to an extraterritorial application of prior English Common law and Germanic concepts and to their intrusion into jurisdictions, with which they are entirely incompatible, before the primary question of the conflict of laws has actually been settled. It appears highly improbable that the delegates pondering the Rome Convention agreed upon such a solution. Preferably, it should be clear that the severage of a transaction would have to be decided by a single domestic statute, but not by a conflict of laws rule.

60See KÖTZ, supra note 38 at 80 et seq., s 89; arts 1249 et seq. as well as art 1251(3) Code civil, and art 1203(3) of the Italian Codice civile; GIULIANO, supra note 5 at 35 et seq. (report on art 13). Art 33 of the German EGBGB recognizes the intimate link between subrogation and assignment by addressing both situations within the same provision.

61See art 1(2)(c) of the Rome Convention, supra note 4.

62See MOSHINSKY, supra note 53 at 615.

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4.2.4 The impact of the notion of economic ownership

At the end of the day, the substantive differences between one solution and the other seem to rather revolve around the question of economic ownership. Even domestic German law recognises that the grantor remains economic owner of the claim prior to default because the fiduciary owner of the claim is bound to enforce a sum not exceeding his interest at the collection level.63 Due to the transfer of the right, after all, only the assignee will have the legal right to enforce the receivable or collect payments, and to receive amounts due as a result of his or her function as the new creditor. The validity of erroneous payments made in good faith merely serves to protect the account debtor. Only if the assignor gave notice to the account debtor, the latter might not reimburse the assignor collecting on behalf of the assignee.

By contrast, the Civil Code of Quebec and the PPSAs appear to enjoin the hypothecary debtor/assignor being a party to enforcement prior to notice.64 This may make sense from the perspective of economic ownership. But it is unthinkable in a system, in which a right must be transferred because no other form of granting a security in a claim than a fiduciary transfer is available (numerus clausus). And, the proprietary transfer is the usual mechanism to effectuate a form of economic transfer likewise. It appears therefore questionable even for “transfer jurisdictions” to direct proprietary transfers at an international level, without further discussion about a provision that appears to regulate “unproblematic”65 transfers involving economic ownership. Such is true when even today no agreement on the notion of assignment can be reached. Curiously, however, in Quebec a publicized authorization to retain economic ownership or a withdrawal of economic ownership may take place prior to default.66 This resembles a fiduciary assumption of both the legal right and the economic right from the outset, giving the Quebec chargee an apparently stronger position than German assignees have.

Notwithstanding, concepts as to what the term “economic ownership” really stands for appear to differ in this area, too. In Germany, it is used as a method to describe the assignee’s interest, although the assignee de facto already owns the rights in their totality, just as in the CCQ. Inasmuch as the assignee is limited to its

63See BGH 27.11.1997, NJW (Neue Juristische Wochenschrift) 1998, 671; BGH 28.6.1978, BGHZ 72, 141 at 146; BGH 7.4.1959, NJW 1959, 1223 at 1224 [Germany]; H. HEINRICHS, Legislative comment on § 398 BGB in O. Palandt, supra note 31 at 471, § 398 para 22; H. KADUK, Legislative comment – Einleitung zu §§ 398 et seq. in Staudinger, supra note 19 at paras 121 et seq.

64See, for example, art 2713 CCQ, which reads: “In all cases, either the creditor or the grantor may institute proceedings in recovery of a hypothecated claim, provided he impleads the other”. S 41(7, 8) of the New Brunswick PPSA, supra note 12, gives a similar indication. For the same approach under the Law of Property Act, 1925 (UK), 15 & 16 Geo 5, c. 20, see KAYE, supra note 26 at 325.

65Compare GIULIANO, supra note 5 at 35.

66See arts 2743 et seq. CCQ.

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interest in almost every jurisdiction,67 this may be an indication that the whereabouts of economic ownership are irrelevant as long as the relevant interests have been taken care of. Consequently, not too much weight should be attributed to these considerations, as the ensuing contention will explain.

4.3 The relevant interests must decide

The difficulties resulting from the majority’s global approach to Article 12 and the flip side of the coin, which would be the obligation to conceive of a different conflict of law rule, do not appear to differ for judges in practice. In such a situation, the relevant interests must decide, which have been explained above and were extensively contemplated by the international experts drafting the text of Article 28 of the Receivables Convention in relation the creditors of the assignor and competing assignees. Even though further proprietary interests have not been dealt with in the Conventions, it should be unequivocal that the rule retained at Article 12 of the Rome Convention cannot apply.

In this vacuum, it is opaque whether the law of the grantor has to bear upon secured transactions between the assignor and the assignee. Even so, this question does not need to be resolved if the rules in place shield economic interests of both creditor and debtor. In practice, ergo, the controversy whether secured transactions are covered is of less relevance from the moment a solution for priority conflicts is guaranteed.68 Committing the law of the location of the assignor alone can do this, as has been previously explained, especially if the defences of the account debtor are preserved. Only under this circumstance could Article 12 be interpreted to regulate secured transactions. As long as one were to assume that secured transactions are encompassed in contrariety with the views expressed here, such regime could certainly not apply in relation to jurisdictions using a PPSA, the CCQ or the UCC.

67See art 2747 CCQ. This provision reads: “The creditor remits to the grantor any sums collected over and above the obligation owed in capital, interest and expenses, notwithstanding any stipulation by which the creditor may keep them on any ground whatever”. See also s 60(2) of the New Brunswick PPSA, supra note 12: “If a security agreement secures an indebtedness and the secured party has dealt with the collatera[l]…,[t]he secured party shall account for any surplus and shal[l]…[p]ay any surplus in the following order t[o]…” For art 14(2) of the Receivables Convention, supra note 3, see supra note 55. Art 9(3) of the Cape Town Convention, supra note 2, stipulates: “The court shall grant an application under the preceding paragraph only if the amount of the secured obligation to be satisfied by such vesting is commensurate with the value of the object after taking account of any payment to be made by the chargee to any of the interested persons”. The German jurisprudence cited supra note 63, has the same effect.

68The argument that priority rules encompass inter partes proprietary aspects to some extent, as pointed out by WALSH, supra note 3 at 189, achieves a similar result.