Amendment to the anti-assignment law (conditional lifting of assignment ban) takes effect

On 23.11.2022, it was announced In the Official Gazette, the text of the law dated November 4, 2022. On amending the Law on Counteracting Excessive Delays in Commercial Transactions and the Law on Public Finance, under which, the so-called anti-assignment law was amended with regard to the prohibition of assignment. The final version of the legislation is far from the demands and expectations of the factoring industry.

The law enters into force for most on 8/12/2022 and changes the current legal state of affairs providing for the permissibility of a non-assignment clause in contractual relations. However, the scope of the law is severely limited (commercial transactions, asymmetrical, without a public entity as a debtor).

As a result of amendments in the anti-embolism law (On preventing excessive delays in commercial transactions)  after Article 9, Article 9a was added, which reads:

Article 9a. (1) In commercial transactions in which the debtor is a large entrepreneur and the creditor is a micro-entrepreneur, small entrepreneur or medium-sized entrepreneur, a contractual stipulation excluding or limiting the creditor's right to transfer a claim shall become ineffective if payment is not made within the period specified in the contract, and if this period is not specified in the contract - from the date of maturity of the monetary performance.

(2) The provision of paragraph (1) shall not apply to commercial transactions in which the debtor is a public entity...;

Transitional provisions provide that:

Article 3 (1) The current provisions shall apply to commercial transactions concluded before the date of entry into force of this Law.

(2) In the case of commercial transactions concluded as a result of public procurement procedures under the Act of September 11, 2019. - Public Procurement Law (Journal of Laws of 2022, item 1710, 1812, 1933 and 2185), initiated before the date of entry into force of this Law, the current provisions shall apply.

(3) The provision of Article 9a of the Law amended by Article 1, shall not apply to commercial transactions concluded before the date of entry into force of Article 1 item 4 of this Law, as well as commercial transactions concluded as a result of public procurement procedures under the Law of September 11, 2019. - Public Procurement Law, initiated before that date.

Thus, the new wording provides for the ineffectiveness of a contractual stipulation excluding or limiting a creditor's right to assign a claim, in asymmetrical transactions, subject to the expiration of the maturity date.

The conditional construction of the ineffectiveness of the non-assignment clause as it stands is problematic and unattractive to the factoring industry, and creates a number of potential problems (perhaps some of which are unfounded concerns), among which it is worth pointing out here such as:

1. Limited scope of application (asymmetric transactions);
2. collection of statements on the status of entrepreneurs;
3. The risk of misjudging the status of an entrepreneur by himself;
4. Increased intensification of interest in commercial contracts, including their debt maturity provisions;
5. Verification of the maturity of receivables (contract vs invoice);
6. Determining the date of ineffectiveness of the prohibition on assignment;
7. the possible issue of disclosure of the assignment and the timing (conditional notice vs. post-conditional notice);
8. the problem of commercial contracts entered into before the entry into force of the law and receivables of a very different nature (e.g., an invoice from a supply vs. a milestone payment from a construction contract) including their treatment;
9. lack of automaticity characteristic of large-scale operations due to the number of uncertainties.

The above is undoubtedly a problematic construction, especially from the point of view of factoring financing of such transactions (after all, factoring by its very nature includes financing of unmatured and undisputed receivables, and here we are confronted with a receivable whose assignment is conditional, and fulfillment of the condition means maturity, which makes such a construction closer to a collateral assignment / custodial collection, than to a global assignment from classic factoring). The above rather steers this provision productively towards a collateral product rather than a classic one, unless in the form of a hybrid with a silent assignment. Yet here we ourselves are curious in what direction the product developers will go.