LUXEMBOURG Law and Practice Contributed by: Vassiliyan Zanev and Natalja Taillefer, Loyens & Loeff Luxembourg S.à r.l.
Structurally, securitisation undertakings are normally set up to eliminate any corporate con - nection with the originator in order to avoid a potential consolidation for the purpose of any bankruptcy, accounting or tax laws. For this rea - son, shares in an SPE would generally be held by an orphan; for example, a Dutch foundation ( stichting ) or an Anglo-American charitable trust. In Luxembourg, it is also possible to set up a compartmentalised SPE, as a result of which the estate of the SPE would effectively be segre - gated into different compartments, each repre - senting a distinct part of the assets and liabilities of the securitisation undertaking, ring-fenced by law, including in the event of its bankruptcy. Certain investors also require the appointment of an independent director on the board of the SPE. The recourse rights of the creditors are, as a rule, limited to the assets of the SPE. Where such rights relate to a specific compartment, the recourse of the relevant creditors is then limited The validity, enforceability and perfection of the transfer of financial assets are a matter of the applicable law determined pursuant to the Luxembourg conflict of law rules, which, in turn, depend on the types of assets being transferred. Conflict of Law Rules In regard to the assignment of, or security over, receivables, Article 14 of the Rome I Regulation provides that: • the relationship between the assignor/security provider and the assignee/security taker is to the assets of that compartment. 6.3 Transfer of Financial Assets
governed by the law applicable to the agree - ment between such parties; and • the law governing the underlying claims determines (i) the question of whether that claim can be assigned or made subject to a security interest, (ii) the relationship between the assignee/security taker and the debtor, (iii) the conditions under which the granting of an assignment of, or a security interest over, that claim can be enforced against the debtor, and (iv) the question of whether the debtor’s obligations under that claim have been paid and discharged in full. The Securitisation Law also contains certain conflict-of-law rules applicable in securitisa - tions. In particular, and in line with Article 14 of the Rome I Regulation, the following matters are subject to the law governing the receivable: • the transferrable nature of the receivable; • the relationship between the transferee and debtor; • the conditions of effectiveness of the transfer against the debtor; and • the satisfactory nature of the payment made by the debtor. While Article 14 of the Rome I Regulation does not provide for any conflict-of-law rules in rela - tion to the enforceability of an assignment of receivables vis-à-vis third parties, the Securiti - sation Law states explicitly that it is the law of the location of the transferor that governs the effectiveness of the assignment towards third parties. This solution offered by the Securitisa - tion Law is consistent with the approach adopt - ed in the EU Commission proposal of 12 March 2018 for a regulation on the law applicable to the third-party effects of assignments of claims (the “Proposal”). According to the Proposal, the third-party effects of an assignment of receiva -
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