Evaluation: a common core? Convergences, subsisting differences and possible

ways for harmonisation

e v a - m a r i a k i e n i n g e r

Each of the fifteen cases has been concluded with comparative observations trying to take stock of the national solutions and to find reasons for at least some of the differences. The purpose of the present evaluation is neither to present a summary of these comparisons nor to give another overview of the law relating to security rights in the different jurisdictions under consideration. Rather, these final remarks aim at drawing a few more general conclusions in view of the need for some measure of European harmonisation that has been identified in the Introduction. Therefore, I will seek to identify common tendencies as well as subsisting differences both with respect to general principles and in relation to specific security devices. The evaluation will conclude with some suggestions as to possible ways for harmonisation.

A. General tendencies

I. Common developments

1. Evolution of secured transactions law outside the Civil Codes

A first, very general, but nonetheless significant common element lies in the fact that the development of secured transactions law on the Continent largely took place (and continues to take place) outside the national Civil Codes. The legal regime is either entirely based on case law, as for example in Germany, or contained in special, fragmented legislation as, for example, in France, Italy and Spain. Even the text of

Thanks are due to Michael Bridge, Eric Dirix, Michele Graziadei and Harry Sigman for their discussion of an outline of this evaluation at the 7th General Meeting of the Common Core Project (12--14 July 2001) and many helpful suggestions.

647

648 e v a - m a r i a k i e n i n g e r

the Dutch Civil Code of 1992, which certainly made an attempt to regain ground, has already partly lost its significance in light of the case law on leasing1 and on the use of so-called master-lists for creating a stil pandrecht in claims.2 Overall, one can say that by reading the property law provisions of the respective Civil Codes one will not be able to get a clear picture, and in some cases not even a faint conception, of the reality of the law on secured transactions.

2. No unitary, functional approach to security rights

A second common feature is connected with the fragmentation of the legal sources just mentioned. In contrast to US law3 and the EBRD Model Law,4 none of the jurisdictions of the EU Member States has developed a comprehensive, functional approach to security rights in movables.5 Instead, there exists in each jurisdiction a wide range of security devices, which differ from each other with respect to the character of the secured debt, the collateral that may be used, and the legal concept on which the security rights are based: title-based security rights such as retention of title, security transfer of ownership or leasing exist side by side with the possessory pledge and various devices that are based on the idea of the pledge such as non-possessory registered charges in individualised property or entities of assets.6

The lack of a functional approach goes hand in hand with such fragmentation. The economic function of providing security is often either not recognised with respect to title-based security devices such as retention of title or leasing or such recognition remains without legal consequences, the latter alternative being far more frequent. For example, the House of Lords in Armour v Thyssen clearly denied the security character of an all-monies retention of title, declaring it to be simply retained ownership within the meaning of section 19 of the Sale of

1 See Dutch report, case 10(b).

3 See Sigman, supra, pp. 54 ff.

4See Dahan/Simpson, supra, pp. 98 ff.; cf. further Röver, Vergleichende Prinzipien dinglicher Sicherheiten 183 ff.

5The only jurisdiction which may be said to have at least developed a comprehensive security device resting on a single legal concept is Germany which practically knows only retention of title and security ownership or security assignments.

6 For a short overview of the main divergences, see Introduction, pp. 9 ff.

Goods Act 19797 and thus exempting it from the registration requirement for charges over companies’ assets. Generally speaking, in none of the European jurisdictions covered in this study is (simple) retention of title subjected to publicity requirements comparable to those existing for non-possessory charges, despite its evident security function. Another -- rather extreme -- example of the lack of a functional approach is provided by Belgian law which submits charges over claims to exactly the same requirements as assignments, yet treats the charge over a claim as valid but the identical transaction framed as a security assignment as invalid.8

3. Enlarging the range of security rights

In most jurisdictions there is a noticeable and continuing tendency to enlarge the range of security rights that are available for the parties, thereby also enlarging the range of possible collateral. Three examples illustrate this point.

The first example relates to security rights in claims. Before 1981, France and Belgium strictly required a formal notification of the debitor cessus or an acceptance formally declared by the latter in order for an assignment to become valid as against third parties in general (so-called signification, laid down in article 1690 C.civ.).9 This rule effectively barred any attempt to use claims as collateral. In 1981, France introduced special legislation on the assignment of professional debts to financial institutions (Loi Dailly); such professional claims could hitherto be assigned by simply entering them on a document called ‘bordereau Dailly’. A subsequent change to the relevant Act in 198410 opened up the possibility to assign future claims, too. Thus, today, at least financial institutions can take security rights in claims, the general mistrust of security transfers never having been extended to security assignments. A similar but slightly different development took place in Belgium. Rather than introducing special legislation in favour of specific claims

7Armour and another v Thyssen Edelstahlwerke AG [1990] 3 All ER 481 (485) G (per Lord Keith): ‘I am, however, unable to regard a provision reserving title to the seller until payment of all debts due to him by the buyer as amounting to the creation by the buyer of a right of security in favour of the seller.’

8 See Belgian report, case 5(c) and comparative observations, case 5(c) (ii) and (iii).

9 For the following see French report, cases 12(a) and 13(a); Belgian report, case 12(a). 10 L. 84-46 of 24 Jan. 1984, articles 61 ff.

650 e v a - m a r i a k i e n i n g e r

and/or parties to an assignment, Belgium altered its article 1690 C.civ. in 1994. It no longer requires the formal signification for the validity of the assignment as against third parties in general; only with respect to the rights of the assignee towards the debitor cessus does a formless notification remain necessary. Although, as has already been mentioned under section 2, Belgian law still considers the security assignment of claims to be invalid, it allows a charge over claims to take place under the same prerequisites as an assignment. Thus, parties seeking to establish a security right in claims can make use of the reformed article 1690 C.civ. provided that they frame their transaction as a charge rather than an assignment. In Austrian law, the requirements for a valid charge over a claim are likewise extended to the security assignment of claims. The parties to the assignment can choose between notification of the debitor cessus or an entry of the assignment in the books of the assignor. In order to make the security assignment more practicable in business reality, a recent change in the predominant doctrine has opened up the possibility to enter assignments into the assignor’s books and thus also to fulfil the publicity requirement before the respective claims have come into existence and even before their individual debtors are known.11

The rise of the enterprise charge provides a second example of the overall tendency to enlarge the possible range of available security rights and the range of potential collateral. The English f loating charge, which enables the creditor to take a security interest in a constantly changing entity of tangible and intangible property, has been exported to various civil law jurisdictions, albeit with differing degrees of similarity to the original. Certainly, the closest proximity exists with the f loating charge under Scots law which was introduced by legislation in 1961.12 Sweden introduced the enterprise charge in 1984.13 However, by contrast to the English f loating charge, the range of collateral that can be included in a Swedish enterprise charge is more limited. A number of (rather valuable) assets cannot be charged: for example, immovable property, shares and claims against banks. Finland also knows the enterprise charge, yet its commercial significance is lessened by the rule that, in insolvency, the rights of the chargee extend only to 50 per cent of the charged property.14 The most recent example of the transplantation of the f loating charge is provided by Greek law which has just