Uniform Rules for Forfaiting

Uniform Rules for Forfaiting


  • Article 1 - Application of URF 

    Application of URF

    The Uniform Rules for Forfaiting ("URF") are rules that apply to a forfaiting transaction when the parties expressly indicate that their agreement is subject to these rules. They are binding on all parties thereto except so far as modified or excluded by agreement.

  • Article 2 - Definitions 

    Definitions

    For the purpose of these rules:

    availability date means the last day on which the seller must deliver to the buyer satisfactory documents and satisfy any other condition. If the availability date is described in the forfaiting confirmation or forfaiting agreement as 'immediately available' or similar terms, that means the day falling 10 business days after the trade date;

    business day means, in relation to an act to be performed under these rules, a day on which the place of business where that act is to be performed is regularly open for the performance of that type of act;

    buyer means the party purchasing the payment claim;

    condition means, in the primary market, a condition set out in the forfaiting agreement and, in the secondary market, a condition set out in either the secondary sale terms or the forfaiting confirmation or both;

    credit support document means any document evidencing an obligation of a person other than the primary obligor to make payment in respect of the payment claim;

    forfaiting agreement means the written agreement signed by the primary forfaiter and the initial seller setting out the terms of the forfaiting transaction;

    forfaiting confirmation means the secondary market document signed or to be signed by the seller and buyer setting out the secondary sale terms;

    forfaiting transaction means the sale by the seller and the purchase by the buyer of the payment claim on a without recourse basis on the terms of these rules;

    initial seller means:

    a. the seller that first sells the payment claim to the primary forfaiter; or

    b. a primary obligor that creates the payment claim and transfers it to the primary forfaiter;

    obligor means any of:

    a. the primary obligor; and

    b. any person that has an obligation under a credit support document;

    parties means the parties to the forfaiting transaction;

    payment claim means:

    a. the obligation of the primary obligor to make payment of a specified amount on a specified date or on demand; and

    b. all the rights, title and interest to receive or recover payment from the primary obligor;

    points of reserve means, where payment has been made under reserve, those obligations of the seller that the parties have agreed must be satisfied for payment to become final;

    primary forfaiter means the party that first purchased the payment claim from the initial seller;

    primary market means the market where the payment claim is purchased by the primary forfaiter from the initial seller;

    primary obligor means each person that has a primary obligation to make payment under the payment claim;

    purchase price means the amount (which may be calculated using an agreed formula) agreed between the seller and the buyer to be paid for a payment claim;

    repurchase terms means the terms on which the seller must repurchase any payment claim from the buyer if the points of reserve are not satisfied by the reserve date;

    required documents means, in respect of the forfaiting agreement or the forfaiting confirmation:

    a. the document evidencing the payment claim, together with any document issued by the primary obligor to supplement or accompany the payment claim;

    b. documents evidencing the authenticity and binding nature of the signatures of the obligors and the seller;

    c. any document that is, as at the settlement date, required to:

    i. transfer the payment claim and all rights under any credit support document; or

    ii. be presented when enforcing or exercising rights to receive payment under the payment claim or any credit support document;

    d. any credit support documents;

    e. any other document specified in the forfaiting agreement or the forfaiting confirmation, which may include documents relating to the underlying transaction; and

    f. any document the buyer is entitled to request, for a forfaiting transaction in the:

    i. primary market, under article 7e. or

    ii. secondary market, under article 10f.

    reserve date means the date by which the points of reserve must be satisfied by the seller;

    satisfactory documents means required documents that are satisfactory in accordance with the forfaiting agreement or forfaiting confirmation as determined in accordance with article 7c. or article 10c., as applicable;

    secondary market means the market where the payment claim is purchased by the buyer from the primary forfaiter or another seller;

    secondary sale terms means the terms of a forfaiting transaction agreed in the secondary market, orally or in writing or both, between the seller and the buyer on the trade date;

    seller means the party selling the payment claim;

    settlement date means the date agreed by the seller and the buyer for payment of the purchase price or, in the absence of agreement, the date falling three business days after determination by the buyer that it has received satisfactory documents or, where the buyer is precluded from claiming that it has not received satisfactory documents in accordance with article 10g. three business days after the day preclusion takes effect;

    trade date means:

    a. for a primary market forfaiting transaction, the date of the forfaiting agreement; or

    b. for a secondary market forfaiting transaction, the date on which the seller and buyer agree the secondary sale terms;

    under reserve means any payment made or to be made by the buyer that is specified as being conditional upon points of reserve;

    underlying transaction means the transaction pursuant to which the payment claim arises.

  • Article 3 - Interpretations 

    Interpretations

    For the purpose of these rules:

    a. where applicable, words in the singular include the plural and in the plural include the singular;

    b. all rules apply to the primary market and the secondary market except where they expressly provide otherwise;

    c. the word "person" includes any individual, firm, company, corporation, government, state or agency of a state, or any association, trust, joint venture, consortium or partnership (whether or not having separate legal personality);

    d. the word "signed" (and its derivations), when applied to a document, means that an original of that document is signed by or on behalf of its issuer, whether by an electronic signature that can be authenticated by the party to whom that document is presented or by handwriting, facsimile signature, perforated signature, stamp, symbol or other mechanical method.

    e. the words "after", and "within" when used to determine a period of time exclude the date mentioned;

    f. the word "transfer" (and its derivations) includes issue, assign, novate, endorse and, in the case of an initial seller that is a primary obligor, includes to become indebted.

  • Article 4 - Without recourse 

    Without recourse

    a. On the settlement date, the seller sells to the buyer and the buyer purchases from the seller the payment claim without recourse.The buyer will have no claim against the seller or any prior seller for the non-payment of any amount due in respect of the payment claim except as provided under article 13 or article 4b.

    b. If the seller is an obligor under the payment claim or any credit support document, nothing in these rules will affect the seller's obligations in its capacity as obligor.

  • Article 5 - Forfaiting agreements in the primary market  

    Forfaiting agreements in the primary market

    a. To create a forfaiting transaction in the primary market, there must be an agreement on the trade date between the primary forfaiter and the initial seller to sell the payment claim.

    b. It is recommended that the forfaiting agreement contains:

    i. details of the payment claim and any credit support documents including the amount, currency, due date and obligors;

    ii. a list of the required documents known by the parties at the date of the forfaiting agreement;

    iii. the availability date;

    iv. the purchase price;

    v. the settlement date or an anticipated settlement date; and

    vi. its governing law and jurisdiction provisions.

  • Article 6 - Conditions in the primary market 

    Conditions in the primary market

    a. Each party must satisfy all conditions applicable to it in accordance with the forfaiting agreement no later than the availability date.

    b. If any condition remains or will remain unsatisfied on the availability date the parties may agree to postpone the availability date.

    c. If the conditions are not satisfied in accordance with the forfaiting agreement on or before the availability date, the forfaiting agreement shall terminate. Any such termination of the forfaiting agreement will not prejudice either party's rights under the forfaiting agreement or applicable law.

  • Article 7 - Satisfactory documents in the primary market 

    Satisfactory documents in the primary market

    a. The initial seller must deliver the required documents to the primary forfaiter no later than the availability date.

    b. The primary forfaiter:

    i. must examine the documents delivered by the initial seller to determine whether they constitute the required documents; and

    ii. may disregard and return to the initial seller any document delivered that is not a required document.

    c. The primary forfaiter must:

    i. examine the required documents in accordance with market practice; and

    ii. determine whether they constitute satisfactory documents.

    d. In making its determination under article 7c. ii. the primary forfaiter is entitled to take into account, without limitation, whether:

    i. the required documents are supported by satisfactory evidence as to their authenticity;

    ii. each of the payment claim and the obligations in any credit support document is a legal, valid, binding and enforceable obligation of the relevant obligor;

    iii. payment of the payment claim will be made on the due date in full in the relevant currency without set-off or counterclaim or any deduction or withholding for tax or otherwise;

    iv. the payment claim and the rights under the credit support documents are freely transferable; and

    v. the required documents conform to the terms of the forfaiting agreement.

    e. If the primary forfaiter determines, in accordance with market practice, that:

    i. the documents delivered and examined are not satisfactory documents; or

    ii. additional documents are required,

    it must notify the initial seller of this, providing brief details of the grounds for its determination and state any additional documents required.

    f. The primary forfaiter must notify the initial seller when it has determined that it has received satisfactory documents. Payment of the purchase price constitutes notice unless payment is made under reserve.

    g. Any determination or payment of the purchase price by the primary forfaiter is without prejudice to the liability of the initial seller under article 13.

  • Article 8 - Forfaiting confirmations in the secondary market  

    Forfaiting confirmations in the secondary market

    a. To create a forfaiting transaction in the secondary market there must be an agreement on the trade date between the primary forfaiter or a subsequent buyer and another buyer to sell the payment claim.

    b. The seller must deliver to the buyer a signed forfaiting confirmation within two business days of the trade date. If the seller fails to deliver the forfaiting confirmation within that period, the buyer may, in its sole discretion, not proceed with the forfaiting transaction by notice to the seller. If the buyer does this, it will not prejudice the buyer's rights under the secondary sale terms or applicable law.

    c. The forfaiting confirmation must set out the secondary sale terms as such terms may have been amended after the trade date.

    d. The buyer must, within two business days of receipt of the forfaiting confirmation, either:

    i. sign and return it to the seller; or

    ii. notify the seller of its disagreement with the terms of the forfaiting confirmation including details of the points of disagreement.

    e. If the buyer fails to comply with article 8d. above, the seller may, in its sole discretion, not proceed with the forfaiting transaction by notice to the buyer. If the seller does this, it will not prejudice its rights under the secondary sale terms or applicable law.

    f. If:

    i. the buyer notifies the seller under article 8d. ii. above; and

    ii. the parties fail to agree a revised forfaiting confirmation within two business days of the seller's receipt of the buyer's notice,

    the forfaiting transaction will not proceed. Any such failure of the forfaiting transaction to proceed will not prejudice either party's rights under the secondary sale terms or applicable law.

    g. The parties may satisfy article 8 at any time by signing a forfaiting confirmation.

  • Article 9 - Conditions in the secondary market 

    Conditions in the secondary market

    a. Each party must satisfy all conditions in accordance with the forfaiting confirmation no later than the availability date.

    b. If any condition remains or will remain unsatisfied on the availability date, the parties may agree to postpone the availability date.

    c. If the conditions are not satisfied in accordance with the forfaiting confirmation on or before the availability date, the forfaiting confirmation shall terminate. Any such termination of the forfaiting confirmation will not prejudice either party's rights under the forfaiting confirmation or applicable law.

  • Article 10 - Satisfactory documents in the secondary market 

    Satisfactory documents in the secondary market

    a. The seller must deliver the required documents to the buyer no later than the availability date.

    b. The buyer:

    i. must examine the documents delivered by the seller to determine whether they constitute the required documents; and

    ii. may disregard and return to the seller any document delivered that is not a required document.

    c. The buyer must

    i. examine the required documents in accordance with market practice; and

    ii. determine whether they constitute satisfactory documents.

    d. In making such determination under article 10c.ii. the buyer may only take into account whether or not:

    i. the required documents are supported by satisfactory evidence as to their authenticity;

    ii. each of the payment claim and the obligations contained in any credit support document is a legal, valid, binding and enforceable obligation of the relevant obligor;

    iii. payment of the payment claim will be made on the due date in the relevant amount and currency in full without set-off or counterclaim or any deduction or withholding for tax or otherwise;

    iv. the payment claim and the rights under the credit support documents are freely transferable; and

    v. the required documents conform to the terms of the forfaiting confirmation.

    e. The seller may notify the buyer requiring it to finish its examination within a stated period, which must end at least five business days after the date of receipt of the notice.

    f. If, based solely on the factors in article 10d. the buyer determines, in accordance with market practice, that:

    i. the documents delivered and examined are not satisfactory documents; or

    ii. additional documents are required,

    it must notify the seller of this, providing brief details of the grounds for its determination and state any additional documents required.

    g. If:

    i. the seller has delivered a notice under article 10e. and

    ii. the buyer does not deliver a notice under this article by the end of the period the seller specifies in its notice under article 10e.

    from the end of that period the buyer will be precluded from claiming that the documents delivered are not satisfactory documents.

    h. The buyer must notify the seller when it has determined that it has received satisfactory documents. Payment of the purchase price constitutes notice unless payment is made under reserve.

    i. Any determination or payment of the purchase price by the buyer, or preclusion of the buyer under article 10g. is without prejudice to the liability of the seller pursuant to article 13.

  • Article 11 - Payment 

    Payment

    a. The buyer must pay the purchase price to the seller on the settlement date.

    b. Payment must be made in the currency specified in the forfaiting agreement or forfaiting confirmation without deduction or counterclaim.

    c. Payment must be made in immediately available funds at the place stated in the forfaiting agreement or forfaiting confirmation, provided the due date for payment is a business day in that place. If the due date for a payment is not a business day, payment must be made on the first business day in that place after its due date.

  • Article 12 - Payment under reserve  

    Payment under reserve

    a. If the parties agree that payment by the buyer may be made under reserve, the forfaiting agreement or the forfaiting confirmation must specify or be amended to specify:

    i. the points of reserve;

    ii. the reserve date; and

    iii. the repurchase terms, using the rate determined under the original sale terms.

    b. The seller must satisfy the points of reserve by the reserve date.

    c. If by the end of the reserve date:

    i. the points of reserve are not satisfied; and

    ii. the parties have not agreed to postpone the reserve date,

    the buyer will be entitled to require the seller to repurchase on the repurchase terms by notice to the seller.

    d. If the buyer requires the seller to repurchase in accordance with article 12c. the seller must, within five business days of receipt of the buyer's notice, complete the repurchase on the repurchase terms and pay the relevant amount to the buyer in accordance with articles 11b. and 11c.

    e. Within five business days of receipt of payment from the seller, the buyer must:

    i. return to the seller all documents received from the seller; and

    ii. take all actions and sign all documents necessary to ensure that the rights to the payment claim, the credit support documents and other required documents are re-transferred to the seller.

  • Article 13 - Liabilities of the parties 

    Liabilities of the parties

    a. Each party is liable to the other party if either of the following events happens:

    i. it does not have the authority to execute and perform its obligations under the forfaiting agreement, the secondary sales terms or the forfaiting confirmation or has failed to take such action as is necessary to ensure proper execution and performance;

    ii. its obligations under or in connection with the forfaiting agreement, the forfaiting confirmation or, prior to signature of the forfaiting confirmation, the secondary sale terms, do not constitute its legal, valid, binding and enforceable obligations.

    b. In addition to article 13a. an initial seller is also liable to the primary forfaiter if any one or more of the following events happens:

    i. it knew or ought to have known on the settlement date of any event or circumstance relating to the payment claim, any credit support document or the underlying transaction that could affect:

    a) the existence of the payment claim on its due date; or

    b) the existence of any rights and obligations under any credit support document,

    and did not disclose this to the primary forfaiter before the trade date;

    ii. when it transfers the payment claim and the rights under any credit support document to the buyer, it is not the sole legal and beneficial owner of the payment claim and those rights, which in both cases must be free from third party claims or rights;

    iii. the payment claim and the rights under any credit support documents have not been irrevocably and unconditionally transferred to the primary forfaiter on or before the settlement date;

    iv. it has not, whether before or after the settlement date, complied with or has breached any obligation binding on it under the payment claim, any credit support document or the underlying transaction that affects the existence of the payment claim on its due date, or the existence of any rights and obligations under any credit support documents;

    v. there has been, whether before or after the settlement date, a fraud in relation to either the payment claim or the underlying transaction that affects the existence of the payment claim or the existence of any obligation under any credit support document.

    c. In addition to article 13a., a primary forfaiter is also liable to its buyer if any one or more of the following events happens:

    i. it did not disclose on or before the trade date any information received from the initial seller relating to the payment claim, the credit support documents or the underlying transaction about an event or circumstance that affects the existence of the payment claim, or the existence of the rights and obligations under the credit support documents;

    ii. when it transfers the payment claim and the rights under any credit support document to the buyer, it is not the sole legal and beneficial owner of the payment claim and those rights, which in both cases must be free from third party claims or rights;

    iii. the payment claim and the rights under the credit support documents have not been irrevocably and unconditionally transferred to the buyer on or before the settlement date;

    iv. when it purchased the payment claim, it did not take appropriate steps in accordance with market practice to determine that the payment claim and any credit support document is legal, valid, binding and enforceable against the relevant obligor and that the payment claim and the rights under the credit support documents are capable of being irrevocably and unconditionally transferred;

    v. when it purchased the payment claim, it did not take appropriate steps in accordance with market practice to determine that the required documents reflect the underlying transaction.

    d. In addition to article 13a., a seller in the secondary market that is not a primary forfaiter is also liable to its buyer if any one of more of the following events happens:

    i. it did not disclose on or before the trade date any information received from its seller relating to the payment claim, the credit support documents or the underlying transaction about an event or circumstance that affects the existence of the payment claim, or the existence of the obligations under the credit support documents;

    ii. when it transfers the payment claim and the rights under any credit support document to the buyer, it is not the sole legal and beneficial owner of the payment claim or the rights under the credit support documents, which in both cases must be free from third party claims or rights;

    iii. either the payment claim or the rights under the credit support documents have not been irrevocably and unconditionally transferred to the buyer on or before the settlement date.

    e. The parties may agree to modify or exclude any of the liabilities in article 13.

    f. A seller is only liable to its immediate buyer but it may agree that it shall be liable to subsequent buyers in respect of all or any of the above agreed events either by stating that liability for such events are for the benefit of such future buyers or by permitting assignment of the liability for such events or by any other legally effective means.

  • Article 14 - Notices 

    Notices

    a. Any notice or document in respect of the forfaiting transaction may be delivered by agreed electronic means, fax or letter to the relevant contact numbers and addresses set out in the forfaiting agreement or the forfaiting confirmation.

    b. Any notice or document sent, including any forfaiting confirmation, shall be deemed to have been received:

    i. if sent electronically when it enters the information system of the applicable recipient in a form capable of being accepted by that system;

    ii. if sent by fax, with a confirmed receipt of transmission from the sending machine, on the day on which transmitted; and

    iii. if sent by mail, on actual delivery.

    c. A notice or document delivered in accordance with article 14b. but received on a day that is not a business day or after normal business hours in the place of receipt shall be deemed to have been received on the next business day.

    d. Any receipt or acknowledgement of receipt does not imply acceptance or refusal.