Non-assignment clauses as obstacles to true sale securitisations

Péter Gárdos

doi:10.1556/2052.2021.00325

Abstract

Abstract The new European rules on securitisation entered into force in 2019 with a view to revitalising the securitisation market. By introducing public law rules, the regulation intends to avoid the re-creation of the risks that played a role in the 2008–2009 financial crisis. The regulation, however, does not contain private law rules. Consequently, the substantive rules pertaining to securitisation will remain to be formed by the national laws of the Member States of the European Union. This paper argues that the ways in which non-assignment clauses are regulated in Member States will have a significant impact on the availability of securitisation.

Highlights

Unauthenticated | Downloaded 02/24/22 09:55 AM UTCHungarian Journal of Legal Studies economy and spread risks across market participants, while avoiding the excesses that led to the financial crisis.’[1]
This paper argues that the ways in which nonassignment clauses are regulated in Member States will have a significant impact on the availability of securitisation
It is often argued that ‘[t]he securitization of subprime mortgages into mortgage-backed securities (MBS) and collateralized debt obligations (CDOs) was a major contributing factor in the subprime mortgage crisis.’[4]. As e.g. the U.S Financial Crisis Inquiry Commission Report concluded, ‘major financial institutions facilitated the growth in subprime mortgage–lending companies with [. . .] securitization.’[5]. An analysis of the European Parliamentary Research Service found that ‘[s]ecuritisation amplified the crisis by contributing to lengthening the intermediation chain, by creating conditions for incentives and interests between participants in the securitisation chain to be misaligned, by increasing the reliance on mathematical models and on external risk assessments and, by increasing both individual and systemic bank risks.’[6]

Summary

INTRODUCTION

Hungarian Journal of Legal Studies economy and spread risks across market participants, while avoiding the excesses that led to the financial crisis.’[1]. Whereas Darling J seemed to have accepted that the free transferability of receivables cannot be restricted by contract, arguing that non-assignment clauses ‘could no more operate to invalidate the assignment than it could to interfere with the laws of gravitation’ (Tom Shaw & Co. v Moss Emires Ltd (1890) 25 T.L.R. 190.), a century later, Lord Browne-Wilkinson stated in Linden Gardens Trust Ltd Respondent v Lenesta Sludge Disposals Ltd and Others Appellants ([1994] 1 AC 85, 107.) that ‘the restraints doctrine was limited to land because it is a finite resource He thought there was no public policy reason overriding a prohibition on the alienation of tangible property and no public need for a market in choses in action.’. The existing differences in the regulation of non-assignment clauses among EU member states still make true sale securitisation difficult

THE RELEVANCE OF NON-ASSIGNMENT CLAUSES FOR SECURITISATION

HISTORY OF ACCEPTING THE TRANSFERABILITY OF RECEIVABLES

TRADITIONAL APPROACH

NATIONAL AND INTERNATIONAL LAW REFORMS RELATING TO NONASSIGNMENT CLAUSES

POLICY CONSIDERATIONS

Findings

CONCLUSION