Legislative reversal regarding the nullity of clauses limiting the assignment of receivables

 

Recently, the Law No. 2020-1508 of 3 December 2020 containing various provisions adapting to European Union law on economic and financial matters (so-called “DDADUE law”) dated 3 December 2020 has empowered the government to implement several European directives in the field of financial law into national law but has also brought a legislative shift in relation to the assignment of receivables. The law indeed restores the nullity of clauses limiting the assignment of commercial receivables, which had been repealed by the reform dated 24 April 2019.

STATE OF PLAY OF THE LAW PRIOR TO THE 2019 REFORM

Prior to the reform of 24 April 2019, Article L442-6 II c) of the French Commercial Code stated the nullity of clauses or contracts providing the possibility of prohibiting the contracting party from assigning to third parties the receivables it holds against such party. Thus, under the old regime, professional assignors and assignees could mobilise their receivables under French law without worrying about the existence of clauses prohibiting such assignments, as the latter were automatically null and void. This provision of the French Commercial Code was then of great interest in international transactions because receivables governed by French law could be easily mobilised.

UNEXPECTED CHANGE IN THE AREA OF CLAUSE LIMITING THE ASSIGNMENT OF RECEIVABLES

Surprisingly, Ordinance No. 2019-359 dated 24 April 2019 deleted Article L442-6 II c) of the French Commercial Code. This removal was unexpected in the legal world and some authors thought that it was not a voluntary act of the legislator. Nevertheless, since the restrictive assignment clauses are no longer null and void, assignors and assignees of receivables have had to consider their effects.

As a result, legal professionals have come to apply paragraph 4 of Article 1321 of the French Civil Code (resulting from Ordinance n°2016-131 of 10 February 2016), which states that the assignment of a receivable does not require the consent of the assigned debtor, unless the debt has been stipulated to be non-assignable. This provision made it possible to mitigate the effects of the removal made by the legislator.

However, this mechanism was more burdensome for assignors and assignees. Indeed, the latter had to pay particular attention to contracts in order to verify the absence of non-assignability clauses which could produce effects against them. Assignments of receivables thus generated a lot of legal uncertainty and insecurity.

RETURN AND ENLARGEMENT OF THE PREVIOUS SYSTEM

Recently, the legislator came to reinstate the regime prior to the reform of 24 April 2019. Article 18 of the DDADUE law dated 3 December 2020 restores, in Article L442‑3 of the French Commercial Code, the regime of nullity of clauses or contracts providing for the possibility for a person to prohibit the assignment to the third party of receivables such contractor holds against it. This new article now provides for rules that are almost identical to those of the former nullity regime.

However, the scope of application of the article is extended to any person exercising an economic activity. It now concerns clauses and contracts stipulated for the benefit of “persons exercising production, distribution and service activities” and not only for the benefit of a “producer, merchant, industrialist or person registered in the trade register”, as it was the case in the former Article L442-6 of the French Commercial Code.

WHAT ABOUT THE APPLICATION OF THE LAW RATIONAE TEMPORIS?

It may be wise to provide an answer to the question of the application of this law rationae temporis in relation to the contracts already concluded and those that will be concluded in the future. Under the principle of non-retroactivity of the law, contracts concluded before the entry into force of the Ordinance of 24 April 2019 will be subject to the former Article L442-6 II of the French Commercial Code. Contracts concluded between 25 April 2019 and 3 December 2020 will be subject to the provisions of Article 1321 paragraph 4 of the Civil Code. Finally, the new provisions of Article L.442-3 of the French Commercial Code created by the DDADUE law should only apply to contracts entered into after 3 December 2020.

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