The assignment of receivables in international contracts holds great importance in international trade, as it often constitutes one of the essential elements of international trade financing. For example, in debt-collection transactions, the supplier of goods or services assigns his rights arising from his commercial activity to a financial institution (collector), which in turn contacts the debtors and collects the receivables, bearing in doing so a portion of the risks of non-payment by the debtor (1).
The assignment of receivables in international trade has faced several legal problems, the most important of which are:
- The divergence of national legislations in this regard and the lack of modern rules compatible with the needs of international trade.
- The divergence of legislations as to the requirements for assignment to be legally valid and enforceable against the debtor.
- Conflicts of priority between the assignee and another creditor who claims entitlement to the assigned receivable, and likewise conflicts arising when the same receivable is assigned to more than one assignee.
Such problems have prompted the United Nations Commission on International Trade Law to exert efforts to develop provisions suitable to the needs of international trade regarding the assignment of receivables and capable of dealing with the aforementioned legal problems and obstacles (2).
Accordingly, the United Nations Convention on the Assignment of Receivables in International Trade (New York 2001) (3).
The objective of this Convention is to promote the movement of goods and services across national borders by facilitating increased access to low-cost credit, and to eliminate legal obstacles hindering receivables-based financing, which in turn leads to increased economic development (4).
Meaning of Assignment
Assignment is defined in Article 2 of the United Nations Convention on the Assignment of Receivables in International Trade as follows: A person (the assignor) transfers to another person (the assignee), in whole or in part, by agreement between them, the assignor’s contractual right to claim a monetary sum “receivable” from a third party “the debtor”, or any undivided interest therein, and the creation of rights in receivables by way of security for indebtedness or for another obligation shall constitute a transfer.
The Explanatory Note to the Convention also defines “assignment” as the transfer of receivables by agreement, and assignment may be a contractual substitution or a transaction of a pledge-like nature, while it may not constitute a transfer by operation of law (legal substitution). The term “transfer” in this definition includes the creation of security rights in receivables and the transfer of full ownership of receivables, whether for security purposes or otherwise (5).
The Convention distinguishes between an international receivable and an international assignment: a receivable is international if the places of business of the assignor and the debtor are situated in two different States at the time of the conclusion of the original contract, whereas the assignment is international if the places of business of the assignor and the assignee at the time of the conclusion of the assignment agreement are situated in two different States (6).
Definitions of Certain Terms of the Convention
Article (5) of the Convention includes definitions of its terminology for the purposes of the Convention. We limit ourselves to mentioning some of them as follows:
- Original contract (7): means the contract concluded between the assignor and the debtor in which the assigned receivable arises.
- Existing receivable (8): means the receivable that arises when the assignment agreement is concluded or before its conclusion.
- Future receivable (8): means the receivable that arises after the assignment agreement is concluded.
- Notice of assignment (9): means a written communication that reasonably identifies the assigned receivables and the identity of the assignee.
- Priority (10): means a person’s right to enjoy precedence over the right of another person, and includes—to the extent relevant to that purpose, determining whether the right is a personal right or a proprietary right, whether the right is a security right for indebtedness or another obligation or not, and whether the necessary requirements for making the right effective against a competing claimant have been satisfied.
- Competing claimant (11): means an assignee to whom the same receivable has been assigned by the same assignor, including a person who claims, by operation of law, a right in the assigned receivable as a result of his right in the other assets of the assignor, even if the receivable is not an international receivable and even if the assignment to that assignee is not an international assignment, or a creditor of the assignor or an insolvency administrator.
- Insolvency administrator (12): means a person or body, including an interim person or body, authorized in insolvency proceedings (bankruptcy) to administer the reorganization or liquidation of the assignor’s assets or business.
- Proceeds means everything received in respect of an assigned receivable, whether by full or partial payment or by any other performance of the receivable, and this term includes everything collected in respect of the proceeds, and excludes returned goods.
Scope of Application of the Convention
The Convention applies to assignments of international receivables and international assignments of receivables, if the place of business of the assignor is located in a Contracting State at the time of the conclusion of the assignment agreement (13). The Convention also applies to subsequent assignments provided that a prior assignment is subject to the provisions of this Convention (14). The Convention applies to any subsequent assignment meeting the criteria specified in paragraph (a) of Article (1), even if it does not apply to any prior assignment of the same receivable (15).
The Convention does not affect the debtor’s rights and obligations unless the debtor’s place of business at the time of the conclusion of the original contract was located in a Contracting State or the law governing the original contract is the law of a Contracting State (16).
This Convention does not apply to assignments made to an individual for personal, family, or household purposes, nor to assignments made as part of the sale of the business out of which the receivables arose or a change in its ownership or legal status. It also does not apply to assignments of receivables arising in the context of transactions on an organized exchange, foreign exchange transactions, bank deposits, letters of credit, or independent guarantees (17).
Rights and Obligations of the Assignor and the Assignee
The Convention grants both the assignor and the assignee the freedom to define and structure their mutual rights and obligations to meet their respective special needs, pursuant to the agreement concluded between them, including any general rules or conditions referred to therein (18).
The assignor and the assignee are also bound by any customs or practices they have agreed to follow, unless they agree otherwise (19).
The assignor and the assignee are also bound by widely known international customs in international trade and by applying them consistently (20).
The Convention obliges the assignor, at the time of the conclusion of the assignment agreement, to acknowledge the following:
- That the assignor has the right to assign the receivable.
- That the assignor has not previously assigned the receivable to another assignee.
- That the debtor does not have and will not have any defenses or rights of set-off (21).
However, the assignor is not required to acknowledge that the debtor has, or will have, the financial ability to pay (22).
The Convention grants both the assignor and the assignee (as the new creditor) the right to notify the debtor and demand payment, provided that once notice has been sent, no one other than the assignee may demand payment from the debtor or send a request for payment (23).
If payment is made to the assignee, he is entitled to retain the proceeds and the returned goods (24).
If payment is made to the assignor, the assignee is entitled to collect the proceeds and the goods returned to the assignor (25).
If payment is made to another person, the assignee shall have priority over that person and shall be entitled to collect the proceeds and the returned goods (26). In all cases, the assignee may not retain more than the value of his right in the receivable (27).
How does the Convention define an assignment, and does it include the creation of security rights?
Under Article 2 of the United Nations Convention on the Assignment of Receivables in International Trade, an assignment is defined as an agreement where one person (the assignor) transfers their contractual right to claim a monetary sum—the “receivable”—from a third party (the debtor) to another person (the assignee). This transfer can be made in whole or in part, or involve an undivided interest in the receivable.
Yes, the definition explicitly includes the creation of security rights. The sources provide the following details regarding this:
- Inclusion of Security: The Convention states that the creation of rights in receivables as security for indebtedness or other obligations constitutes a transfer under its terms.
- Nature of the Transfer: The term “transfer” within this definition is broad; it encompasses both the transfer of full ownership of receivables and the creation of security rights, whether those rights are for security purposes or otherwise.
- Pledge-like Transactions: According to the Convention’s Explanatory Note, an assignment can take the form of a contractual substitution or a transaction of a “pledge-like nature”.
- Exclusion: It is important to note that while contractual transfers are covered, the definition of assignment does not include transfers that occur by operation of law, such as legal substitution
What are the main objectives the Convention seeks to achieve for international trade and economic development?
The main objectives of the United Nations Convention on the Assignment of Receivables in International Trade center on streamlining international commerce and improving financial accessibility. According to the sources, the primary goals are:
- Promoting the Movement of Goods and Services: The Convention aims to facilitate the flow of commerce across national borders.
- Facilitating Access to Low-Cost Credit: By providing a clear legal framework, the Convention seeks to increase the availability of credit at lower costs.
- Eliminating Legal Obstacles: A key objective is to remove legal barriers that hinder receivables-based financing. This includes addressing issues like the lack of modern, uniform rules and the divergence of national legislations regarding the validity and enforceability of assignments.
- Resolving Legal Conflicts: The Convention was developed to provide provisions capable of handling specific legal problems, such as conflicts of priority between different creditors or assignees claiming entitlement to the same receivable.
- Increasing Economic Development: Ultimately, by facilitating easier financing and cross-border trade, the Convention is intended to lead to increased global economic development.
Overview of the United Nations Convention on the Assignment of Receivables in International Trade
The United Nations Convention on the Assignment of Receivables in International Trade serves as a comprehensive legal framework designed to modernize and unify rules for cross-border debt transfers. By addressing discrepancies between national laws, the treaty aims to reduce legal uncertainty and lower the cost of credit to stimulate global economic development. The text details essential definitions, such as distinguishing between international receivables and assignments, while outlining the specific rights and obligations of assignors and assignees. It also establishes clear priority rules to resolve conflicts between competing claimants and ensures that debtors are protected during the collection process. However, the convention’s scope of application is limited to commercial transactions, excluding personal assignments and specific financial instruments like bank deposits or letters of credit. Ultimately, this international agreement provides the stability necessary for businesses to use their contractual rights to payment as a reliable tool for securing financing.
Sources:
1- Memorandum of the United Nations Commission on International Trade Law – on Assignment of Receivables – Twenty-Sixth Session dated 23/7/1993 – p. 2 published on Document Viewer website, accessed 23/9/2025 at 3:00 PM.
2- Memorandum of the United Nations Commission on International Trade Law – on Assignment of Receivables – Twenty-Sixth Session dated 23/7/1993 – p. 4 published on Document Viewer website, accessed 23/9/2025 at 3:00 PM.
3- United Nations Convention on the Assignment of Receivables in International Trade (New York 2001), adopted 12/12/2001, published on United Nations Convention on the Assignment of Receivables in International Trade (New York, 2001) | UNCITRAL website, accessed 23/9/2025 at 5:36 PM.
4- Purpose of the Convention published on United Nations Convention on the Assignment of Receivables in International Trade (New York, 2001) | UNCITRAL website, accessed 23/9/2025 at 5:56 PM.
5- Dr. Ilham Abdel-Halim Mohamed Mabrouk – The International Factoring Contract between Egyptian Law and the Rules of the United Nations Convention on the Assignment of Receivables in International Trade and the UNIDROIT Model Factoring Law 2023 – The Legal Journal – specialized periodical for legal studies and research – peer-reviewed academic journal – p. 3099 published at Contract of International Factoring between Egyptian Law and the Rules of the United Nations Convention on the Assignment of Receivables in International Trade.pdf, accessed 24/9/2025 at 2:12 PM.
6- Article 3 of the United Nations Convention on the Assignment of Receivables in International Trade (New York 2001), adopted 12/12/2001.
7- Article 5(a) of the same Convention.
8- Article 5(b) of the same Convention.
9- Article 5(d) of the same Convention.
10- Article 5(g) of the same Convention.
11- Article 5(m) of the same Convention.
12- Article 5(e) of the same Convention.
13- Article 1(a) of the same Convention.
14- Article 1(b) of the same Convention.
15- Article 1(2) of the same Convention.
16- Article 1(3) of the same Convention.
17- Article 4 of the same Convention.
18- Article 11(1) of the same Convention.
19- Article 11(2) of the same Convention.
20- Article 11(3) of the same Convention.
21- Article 12(1) of the same Convention.
22- Article 12(2) of the same Convention.
23- Article 13(1) of the same Convention.
24- Article 14(1)(a) of the same Convention.
25- Article 14(1)(b) of the same Convention.
26- Article 14(1)(c) of the same Convention.
27- Article 14(2) of the same Convention.
