My honourable friend the Economic Secretary to the Treasury (John Glen) has today made the following Written Ministerial Statement.
The Government has decided not to opt in (under the UK’s JHA opt-in protocol) to the proposal for a Regulation on the law applicable to the third-party effects of assignments of claims.
In the proposed regulation, the competence for the EU to act stems from Article 81(2) of the Treaty on the Functioning of the European Union. As such, the entire Regulation represents Justice and Home Affairs obligations, thereby triggering the UK’s opt-in.
The proposal applies a general rule that the law of the country where the assignor has their habitual residence governs the third-party effects of the assignment of claims (“law of the habitual claim”), but carves out three exceptions to the above rule, applying the law of the assigned claim to (i) the assignment of cash credited to a bank account; (ii) the assignment of claims arising from certain types of derivatives; and (iii) in certain circumstances to securitised entities. This is different to current market practice in significant parts of UK financial services, where the law governing a claim is determined by contractual agreement (“law of the assigned claim”).
The Government has concluded that it is in the UK’s interest not to opt in to this Regulation. Its provisions would have significant unintended consequences for financial services market practices in the UK. It would create uncertainty for financial services transactions, could require changes to business as usual functions, and introduces an applicable law test that may contradict existing applicable law provisions such as those relating to securities.
Until the UK leaves the EU it remains a full and participating member. We will continue to work with the EU institutions, with the aim of ensuring that UK objectives are preserved as the negotiations progress on any compromise text. The Government will also continue to consider the application of the UK’s right to opt in to, or opt out of, forthcoming EU legislation in the area of Justice and Home Affairs on a case by case basis.
This statement has also been made in the House of Commons: