Assignments of Receivables in Civil and Commercial Matters Under the Laws of the Slovak Republic

Abstract

Background: Receivables play an increasingly important role in the financing of particularly small and medium-sized businesses. This importance has been recognised by many international organisations, including UNIDROIT, which is slated to adopt a Model Law on Factoring in 2023. The purpose of the Model Law is to encourage States to modernise their legal frameworks for absolute and security assignments, as well as pledges of receivables. The EU has been struggling to find common ground with respect to a regulation on the law applicable to assignments that would build on the Rome I Regulation. A modern receivables regime rests on several key foundation blocks that include the ability to describe receivables generically, achievement of third-party effectiveness by registration, and predictable priority rules. Much of the law of assignments is of contractual nature, which is suitable to party autonomy. Party autonomy in the field of contractual obligations is a recognised institution under the national substantive law of the legal order of the Slovak Republic. In some respects, the Slovak legal regime would benefit from modernisation, such as in requiring all types of assignments and pledges to be registered, which facilitates the determination of priorities. This article examines the law governing assignments of receivables in civil and commercial matters in the Slovak Republic. It not only analyses the statutory law but also surveys the relevant case law that fills gaps in the legislation. Methods: The author uses traditional scientific methods: logical methods - the method of analysis, the method of synthesis, the method of analogy, the descriptive method, as well as comparative method. First, the descriptive method was used to familiarise the reader with the applicable statutory provisions governing assignments of receivables in civil and commercial matters in the Slovak Republic. Second, the author analyses specific provisions with regard to current developments and practical applications. Third, the author uses a comparative method in highlighting the practical needs that incentivise the modernisation of the current legislation in light of recent developments, especially the upcoming adoption of the UNIDROIT Model Law on Factoring. Results and Conclusions: The Slovak regime for absolute assignments of receivables is governed by the Civil Code, which also applies to assignments in commercial transactions. The Code also recognises a security assignment of receivable. The pledge law reform in 2002 introduced a registration system for pledges of receivables. Special laws continue to govern specific types of receivables. Case law has addressed several aspects of transfers of receivables, particularly in insolvency. However, no statutory provision provides a priority rule among the statutorily-recognised types of transfers. Several other aspects have been clarified in case law. For instance, the Supreme Court of Slovakia defined a description standard for future receivables, which must be identified by the name of the transferor, debtor, and a category, such as a receivable arising from the following contract. The degree of specificity is driven by doctrinal considerations rather than the needs of practice. Several important practical aspects are neither grounded in a statutory foundation nor case law. One example is the lack of recognition of transfers of partial interests in a receivable, a practice that is common in the Slovak market. The law recognises and enforces an anti-assignment clause that would make a transfer ineffective. However, such a clause would be ineffective in the insolvency of the transferor, so the insolvency estate would include the receivable. In this aspect, Slovak law falls short of the international standards that override the effect of anti-assignment clauses. Since the pledge law reform over two decades ago, no statutory changes concerning transfers of receivables have been introduced. The interpretation of the existing framework by the courts exacerbates uncertainty. The lack of certainty and predictability embedded in the statutory framework that falls short of international standards are good reasons to consider reforming the framework.