PREPARATORY WORK

MODEL LAW ON FACTORING

The Model Law was developed by the Model Law on Factoring Working Group, chaired by Professor Henry Gabriel (UNIDROIT Governing Council Member) and composed of ten international legal experts in international secured transactions law, receivables finance, and factoring. The Working Group also included 24 institutional observers from 12 international, regional, industry and non-governmental organisations, and eight individual observers.

 

Members of the UNIDROIT Model Law on Factoring Working Group

    1. Henry GABRIEL — Professor of Law, Elon University, United States of America
    2. Giuliano CASTELLANO — Associate Professor, Asian Institute of International Finance Law (AIIFL), Hong Kong
    3. Neil COHEN — Professor of Law, ‘Jeffrey D Forchelli’ Brooklyn Law School, United States of America
    4. Michel DESCHAMPS — Université de Montréal, McCarthy Tetrault, Canada
    5. Marek DUBOVEC — Director of Law Reform Programs, United States of America
    6. Alejandro GARRO — Adjunct Professor of Law, Colombia Law School, United States of America
    7. Louise GULLIFER — Rouse Ball Professor of English Law, University of Cambridge, United Kingdom
    8. Megumi HARA — Professor of Law, Chuo University, Japan
    9. Catherine WALSH — Professor of Law, McGill University, Canada
    10. Bruce WHITTAKER — Senior Fellow, University of Melbourne, Australia

 

In addition, several international, regional and private organisations with expertise in factoring were invited to observe the Working Group:

    1. The World Bank Group
    2. The United Nations Commission for International Trade Law (UNCITRAL)
    3. The Kozolchyk National Law Centre (NatLaw)
    4. The European Bank for Reconstruction and Development (EBRD)
    5. The Organization of American States (OAS)
    6.  The African Export-Import Bank (AFREXIMBANK)
    7. Organisation for the Harmonisation of Business Law in Africa (OHADA)
    8. Industry Groups
      1. Factors Chain International (FCI)
      2. International Chamber of Commerce Banking Commission (ICC)
      3. Secured Finance Network (SFN)
      4. World of Open Account (WOA)

 

The Working Group negotiated the UNIDROIT Model Law on Factoring over six sessions and several dozen intersessional and subgroup meetings between February 2020 and March 2023. The instrument also underwent an intensive public consultation process between June and October 2022, which allowed hundreds of stakeholders around the world to review the instrument and submit comments.

The UNIDROIT Model Law on Factoring (MLF) was adopted by the UNIDROIT Governing Council at its 102nd session (Rome, 10-12 May 2023).

 

First Working Group Meeting (1 – 3 July 2020)

The first session of the Working Group took place via videoconference between 1-3 July 2020. The first session was attended by 32 participants.

The documents from the first session can be found below:

 

Second Working Group Meeting (14 – 16 December 2020)

The second Session of the Working Group took place between 14-16 December 2020. The second session was attended by 30 participants.

The documents from the second session can be found below:

 

Third Working Group Meeting (26 – 28 May 2021)

The third Session of the Working Group took take place between 26-28 May 2021. The third session was attended by 32 participants.

The documents from the third session can be found below:

 

Fourth Working Group Meeting (1 – 3 December 2021)

The fourth Session of the Working Group took take place between 1-3 December 2021. The fourth session was attended by 30 participants.

The documents from the fourth session can be found below:

 

Fifth Working Group Meeting (16 – 18 May 2022)

The fifth Session of the Working Group took take place between 16-18 May 2022.

The documents from the fifth session can be found below:

 

Public Consultation

At its 101st session (Rome, June 2022), the Governing Council approved the draft MLF for the purposes of launching a public consultation on the draft instrument and mandated the Secretariat to facilitate such consultation. UNIDROIT conducted a three-month consultation on the draft MLF between July and October 2022.

The purposes of the consultation were to:

    1. Raise awareness about the instrument;
    2. Ensure that the instrument is well suited to application in different contexts, including both civil law and common law jurisdictions, as well as developing economies, emerging markets and developed economies;
    3. Seek feedback from parties engaged in factoring on whether the instrument sufficiently addresses issues that arise under existing legal frameworks and will improve factoring arrangements in States that implement the Model Law; and
    4. Solicit comments on the drafting of the instrument itself.

The public consultation had three aspects:

    1. The launch of a dedicated webpage on the UNIDROIT website that allowed interested parties to access the draft Model Law on Factoring and facilitated the submission of comments (https://www.unidroit.org/instruments/factoring/modellaw-onlineconsultation/);
    2. The circulation of the draft Model Law on Factoring directly to interested parties, including UNIDROIT stakeholders, project stakeholders and industry stakeholders; and
    3. The organisation of consultation events to discuss the content of the draft instrument with stakeholders. On 12 October 2022, UNIDROIT held a virtual Question and Answer session on the MLF. Approximately 50 stakeholders from the factoring industry, government and academia participated in the virtual event. The event recording is available on the Institute’s YouTube channel (https://www.youtube.com/watch?v=9uian_qiWig). The draft MLF was also considered at a series of events organised by the FCI for stakeholders in Africa, Europe and Latin America.

Twenty-eight submissions were received during the consultation process, comprising 195 individual comments on the draft MLF. Submissions were received from stakeholders in twenty different countries, including twelve from Europe, six from Asia-Pacific, five from South America, four from North America and one from Africa.

UNIDROIT received fifteen submissions by private sector stakeholders, eight submissions from academic institutions and five submissions from Governments. The significant majority of the comments on the draft MLF received from stakeholders held a positive view of the draft MLF. Most stakeholders considered that the draft MLF provided a clear and effective legal framework that would better facilitate factoring transactions in their countries.

The full list of submissions is available here. The Secretariat also prepared an article-by-article summary for the Working Group. The Working Group considered the submissions received by stakeholders at its sixth session in November 2022 and made several revisions to the draft MLF.

Model Law on Factoring Online Consultation Paper: https://www.unidroit.org/wp-content/uploads/2022/08/Study-LVIII-A-draft-Model-Law-on-Factoring-consultation-document-29-July-1.pdf

 

Sixth Working Group Meeting (28 – 30 November 2022)

The sixth Session of the Working Group took place between 28-30 November 2022.

The documents from the sixth session can be found below:

 

Governing Council documents

The UNIDROIT Governing Council supervised the development of the UNIDROIT Model Law on Factoring. The relevant documents regarding the Model Law on Factoring considered by the Governing Council can be found here: