62 3 Reduction of External Funding Needs
Security arrangements generally. Security arrangements are, to a large extent,
governed by the law of the place where assets are located and the laws of the court
having jurisdiction in insolvency proceedings (lex fori, see Volume II). It should
therefore be carefully examined how the security arrangements can be made
effective in the insolvency of the parties.
Governing laws. The legal framework can be governed by the laws of many
countries. This increases increases documentation risk and legal risk in general.
- The documentation is generally governed by the law chosen by the parties.^148
Because one of the purposes of the transaction is to issue bonds in the capital
market, the transaction is often governed by English law or the law of New
York. This can enable the parties to mitigate investors’ exposure to legal risk in
general as well as to increase the legal transparency of the transaction and make
the legal framework of the transaction more coherent. - However, the receivables to be assigned are in effect governed by the laws of
the originator’s and its customers’ home country under the Rome I Regulation.
Whether the receivables can be assigned depends on the law that governs the
receivables (customer - originator). - The assignment of the receivables (originator - SPV) is usually governed by the
law chosen to govern most contracts in the transaction. This could be English
law or the law of New York. - The bonds are usually governed by the securities market laws of the market
where they are issued, and the law that governs contractual issues is often Eng-
lish law or the law of New York. - Whether security rights are effective is governed not only by the law that gov-
erns contractual issues but also by the law of the place where the assets are si-
tuated. - The company law aspects are governed by the law of the country where each
company is registered. - All courts apply the procedural law of the country where the court is situated
(lex fori). Rights in insolvency are governed by lex fori. - Each country applies its own tax laws and administrative laws.
In Germany, the TSI securitisation platform provided by True Sale International
GmbH is a way to mitigate such legal risks. The TSI securitisation platform is a
standardised securitisation process open to all market participants. TSI SPVs and
securitisation transactions are based on German law. For this reason, German
banks do not need to use foreign SPVs.
Insolvency laws. All contractual arrangements should of course be effective
when it counts the most, that is, in insolvency. There are differences between
different countries’ insolvency laws.
Recharacterisation in general. Courts and administrative authorities can change
the way they interpret laws and administrative provisions, and also aspects of the
(^148) Article 3 of Regulation 593/2008 (Rome I).