Conflict-of-laws rules on assignments of receivables in the United States and Canada
Abstract This article describes the conflict-of-laws rules of the USA and Canada on the effectiveness against third parties and priority of an assignment of trade receivables. Comparisons are also made with the rules proposed on these issues by the European Commission’s Proposal of 12 March 2018 and the UNCITRAL Model Law on Secured Transactions. The conflict-of-laws rules examined in the article generally designate the location of the assignor as the place whose law applies to the effectiveness against third parties and the priority of an assignment. The article shows however that the definition of the location of the assignor varies from one jurisdiction to another (statutory seat, chief executive office, state of constitution, etc.) Moreover, the US rules and certain Canadian rules define the location of a business corporation using a criterion which is different depending on the corporation’s jurisdiction of incorporation. In addition, the European Commission’s Proposal allows the parties to an assignment made in the course of a securisation transaction to deviate from the assignor’s location rule and select the law governing the receivable as the applicable law. All of these differences result in a lack of harmonization. The article also summarizes the analysis that a financier must conduct to identify the jurisdiction(s) where the financier would normally want that an assignment in its favour be recognized. The relevant jurisdictions are normally the jurisdiction(s) in which insolvency proceedings relating to the assignor may take place and the other jurisdiction(s) where the debtors of the receivables could be located; a dispute might sometimes occur in these other jurisdictions with a competing claimant attempting to claim priority (e.g. a judgement creditor who would seize receivables owed by the debtors located in those jurisdictions). As the insolvency jurisdiction(s) and the other jurisdiction(s) in which the debtors are located may have different conflict-of-laws rules, a prudent financier should examine the applicable rules of all relevant jurisdictions.