The Law Applicable to the Cross-border Loan Agreements

Abstract to the master dissertation on topic “The Law Applicable to the Cross-border Loan Agreements” This master dissertation is aimed at examining the legal nature and specific features of cross-border loan agreements between private individuals and entities as an independent institution of private international law, including consideration of certain problems related to the choice of applicable law to cross-border loan agreements; existing legal risks for parties to cross-border loan agreements in the context of private international law; and backgrounds for a potential limitation on party autonomy in cross-border loan agreements in Russia, caused by recent amendments to Russian currency legislation, including examination of similar restrictions in the People's Republic of China. The master dissertation consists of an introduction, three chapters, six paragraphs, a conclusion and a bibliography. Chapter I examines the concept and features of a cross-border loan agreement, its definition, as well as the specifics of the parties involved. Chapter II analyzes the particular terms and conditions of cross-border loan agreements between private individuals and entities and features of its private international law (conflict of law) regulation. Chapter III examines legal risks of the lender in cross-border lending in the context of private international law and legal tools used to mitigate these risks, as well as backgrounds for a potential limitation on party autonomy in cross-border loan agreements in Russia. Based on this research the following conclusions were made: firstly, there are various foreign elements in a cross-border loan agreement, but the main and independent foreign element in a cross-border loan agreement in the field of is its parties – subjects of different jurisdictions states; secondly, the main parties to a cross-border loan agreement are banks and corporations, at the same time individuals participate in these relations indirectly, acting as guarantors, pledgers or beneficial owners of businesses; thirdly, foreign currency as an object of a cross-border loan agreement is only its supplementary foreign element and do not independently puts loan agreements in the scope of private international law; fourthly, in limited cases, when there is a question of the par value and the circulation of foreign currency which is the object of a loan agreement, the law of the country that issued this currency can still be applied to such aspects. This right is called lex monetae; fifthly, party autonomy in a cross-border loan agreement cannot totally exclude the application of peremptory norms of a country, different from the norms of the country chosen by the parties. The effect of party autonomy in cross-border loan agreements may be limited in certain cases; sixthly, cross-border loan agreements have specific risks that are imposed, first of all, on the lender, namely the risk of enforcement and the risk of change of legislation (regional risks). Practical ways to mitigate these risks include, among other tools, a guarantee from a foreign company affiliated with the borrower, a pledge of the borrower's foreign assets and political risk insurance; seventhly, recent amendments to Russian currency regulation related to the obligation to repatriate foreign currency under loan agreements with non-residents may potentially limits the scope of party autonomy in loan agreements and the possibility of applying foreign law to cross-border loan agreements in Russia.