Survey of 2019 Developments In International Law in Connecticut, 061821 KYWC, 93 CBJ 275

AuthorBy Houston Putnam Lowry and Genevieve H. Harte
PositionCLAIM 93 CBJ 275


CLAIM NO. 93 CBJ 275

Connecticut Bar Journal

June 18, 2021

By Houston Putnam Lowry [*] and Genevieve H. Harte [**]

After a hiatus, the annual survey article on recent developments on international law in Connecticut returns to the Connecticut Bar Journal. While some viewed the topic of international law as esoteric, many practitioners have found utility in knowing how to serve process outside the United States and to recover custody of minor children wrongfully removed from the United States. We hope to continue this practical discussion.

I. New Conventions

A. United Nations Convention on the Assignment of Receivables in International Trade (New York, 2001) [1]

This convention ("Receivables Convention") was issued by the United Nations Commission on International Trade Law ("UNCITRAL") on December 12, 2001. The Receivables Convention was designed to lower the cost of credit by validating the assignment of future receivables (one at a time or in bulk) and clarifying the effect of an assignment on an account debtor (and other possible third parties with a claim to the account receivable). The United States signed the Receivables Convention on December 30, 2003. As so often happens in international law (especially private international law), the process of ratification moves slowly. The Senate gave its advice and consent to the convention on January 2, 2019.2

The United States deposited its instrument of ratification on October 15, 2019, becoming the second state party to the Receivables Convention (after Liberia). While Luxemburg and Madagascar have signed the convention, they have not yet ratified their signatures. The Senate believes the Receivables Convention is self-executing and the instrument of ratification reflects this belief.3 There will be no implementing United States legislation once the convention comes into force.

According to Receivables Convention Article 45, the convention does not enter into force until the first of the month following six months after the deposit of the fifth instrument of ratification. This means the convention is not yet in force, although the parties can certainly incorporate it by reference into any contract between them. Contracting states may agree to have the convention come into force early between themselves, but none have done so.[4] This is not likely to happen unless it is in connection with another treaty, such as a free trade area.

The United States made the following understandings when its instrument of ratification was deposited with the United Nations Secretary General:5

(1) It is the understanding of the United States that paragraph (2)(e) of Article 4 excludes from the scope of the Convention the assignment of-

(A)receivables that are securities, regardless of whether such securities are held with an intermediary; and

(B) receivables that are not securities, but are financial assets or instruments, if such financial assets or instruments are held with an intermediary.

(2) It is the understanding of the United States that the phrase "that place where the central administration of the assignor or the assignee is exercised," as used in Articles 5(h) and 36 of the Convention, has a meaning equivalent to the phrase, "that place where the chief executive office of the assignor or assignee is located.'"

(3) It is the understanding of the United States that the reference, in the definition of "financial contract"' in Article 5(k), to "any other transaction similar to any transaction referred to above entered into in financial markets'" is intended to include transactions that are or become the subject of recurrent dealings in financial markets and under which payment rights are determined by reference to-

(A) underlying asset classes; or

(B) quantitative measures of economic or financial risk or value associated with an occurrence or contingency. Examples are transactions under which payment rights are determined by reference to weather statistics, freight rates, emissions allowances, or economic statistics.

(4) It is the understanding of the United States that because the Convention applies only to "receivables,"' which are defined in Article 2(a) as contractual rights to payment of a monetary sum, the Convention does not apply to other rights of a party to a license of intellectual property or an assignment or other transfer of an interest in intellectual property or other types of interests that are not a contractual right to payment of a monetary sum.

(5) The United States understands that, with respect to Article 24 of the Convention, the Article requires a Contracting State to provide a certain minimum level of rights to an assignee with respect to proceeds, but that it does not prohibit Contracting States from providing additional rights in such proceeds to such an assignee.

The following declarations were made:6

(1) Pursuant to Article 23(3), the United States declares that, in an insolvency proceeding of the assignor, the insolvency laws of the United States or its territorial units may under some circumstances-

(A) result in priority over the rights of an assignee being given to a lender extending credit to the insolvency estate, or to an insolvency administrator that expends funds of the insolvency estate for the preservation of the assigned receivables (see, for example, title 11 of the United States Code, sections 364(d) and 506(c)); or

(B) subject the assignment of receivables to avoidance rules, such as those dealing with preferences, undervalued transactions and transactions intended to defeat, delay, or hinder creditors of the assignor.

(2) Pursuant to Article 36 of the Convention, the United States declares that, with respect to an assignment of receivables governed by enactments of Article 9 of the Uniform Commercial Code, as adopted in one of its territorial units, if an assignor's location pursuant to Article 5(h) of the Convention is the United States and, under the location rules contained in section 9-307 of the Uniform Commercial Code, as adopted in that territorial unit, the assignor is located in a territorial unit of the United States, that territorial unit is the location of the assignor for purposes of this Convention.

(3) Pursuant to Article 37 of the Convention, the United States declares that any reference in the Convention to the law of the United States means the law in force in the territorial unit thereof determined in accordance with Article 36 and the Article 5(h) definition of location. However, to the extent under the conflict-of-laws rules in force in that territorial unit, a particular matter would be governed by the law in force in a different territorial unit of the United States, the reference to "law of the United States" with respect to that matter is to the law in force in the different territorial unit. The conflict-of-laws rules referred to in the preceding sentence refer primarily to the conflict-of-laws rules in section 9-301 of the Uniform Commercial Code as enacted in each State of the United States.

(4) Pursuant to Article 39 of the Convention, the United States declares that it will not be bound by chapter V of the Convention.

(5)Pursuant to Article 40, the United States declares that the Convention does not affect contractual anti-assignment provisions where the debtor is a governmental entity or an entity constituted for a public purpose in the United States.

The Senate's advice and consent under section 1 is subject to the following declaration: This Convention is self-executing.

The Receivables Convention covers a number of topics, including asset-based lending (which would be otherwise covered by Uniform Commercial Code Article 9 domestically) and factoring (the sale of receivables, either with or without recourse). Some of the topics would seem settled under domestic United States law (although they are not well settled under the laws of every country).

First, receivables maybe assigned. In some countries, this is not permitted.7 The sale of existing receivables has long been permitted in the United States. Receivables may either be individually assigned or assigned in bulk. While the sale of receivables was supposedly permitted under The Code of Hammurabi,8 not all countries have followed this venerable precedent.

Second, it is not necessary to assign only existing receivables one at a time. Receivables may be assigned in bulk. Future receivables may also be assigned (and obviously have to be assigned in bulk because they cannot be identified before they exist). An undivided interest in receivables may also be assigned.9 This makes it rather clear receivables may be sold before they come in to existence. A lender may take a collateral interest in receivables that do not yet exist under Uniform Commercial Code Article 9. It is unclear under existing US domestic law if a receivable can be sold before it comes into existence. Once the convention comes into force, this issue will be considered resolved domestically (at least for international receivables).

B. Hague Convention on the Recognition and Enforcement of Foreign Judgments in Civil or Commercial Matters (2019)[1]

After many years of considering the issue, the Hague Conference on Private International Law drafted and adopted the Hague Convention on the Recognition and Enforcement of Foreign Judgments in Civil or Commercial Matters ("Hague Judgments Convention") on July 2, 2019.[11] While the convention has only been signed by Uruguay, it is expected the United States will likely sign the convention in the fairly near future.12

The United States is not currently a party to any bilateral or multilateral...

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