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Convention in a way that enables parties to an international assignment to choose the applicable law even with respect to third parties (including the insolvency administrator) so that these parties can make use of legal regimes which, like German law, are more favourable to security assignments.21

4. Limiting the rights of secured creditors in insolvency

Another common tendency, which partly runs counter to and partly supplements the move just mentioned (under section 3), lies in the tendency to diminish the powers of the secured party, especially in insolvency. Various reports have pointed out that insolvency administrators or courts surveying the proceedings can opt for a moratorium during which secured creditors are unable to enforce their rights.22 Such a stay enables the insolvency administrator to let the business carry on as a going concern while exploring the possibilities for reconstruction or the most efficient way for a liquidation. Another example is the introduction of a contribution to the costs of realising the security in German insolvency law in the course of its 1999 reform.23

5. Decline of the significance of possession

A further common tendency on a general level lies in the decline of the significance of possession and the gradual disappearance of the doctrine of ostensible or apparent ownership. This doctrine rests on provisions like article 2279 (French and Belgian) C.civ.: ‘En fait de meubles la possession vaut titre.’24 The rule is regarded not only as the foundation of the principle governing the acquisition of ownership in good faith from a nonowner but also as the cornerstone of the doctrine according to which third parties are entitled to rely on the fact of possession when trying to evaluate their business-partner’s creditworthiness. This consideration lies at the heart of the principle of publicity through (direct) possession

21Hoge Raad 16 May 1997, Rechtspraak van de Week 1997, no 126 c. See Struycken, Lloyd’s Maritime and Commercial Law Quarterly 1998, 345.

22See Dutch report, cases 1(a) and 3(a); German report, case 3(a); French report, case 1(a).

23See German report, case 6(b).

24Translation: ‘With respect to movables possession equals title.’ See also article 464 C.c. (Spain): ‘La posesión de los bienes muebles, adquirida de buena fe, equivale al título.’ (‘The possession of movables, acquired in good faith, equals title.’) § 1006 (1) BGB: ‘Zugunsten des Besitzers einer Sache wird vermutet, daß er Eigentümer der Sache sei.’ (‘In favour of the possessor of a thing, it is assumed that he owns it.’)

and is thus also the foundation of the requirement that a pledge can only be constituted through a transfer of possession from the pledgor to the pledgee. In France and Belgium, the doctrine of apparent ownership has for a long time been the basis for denial of the validity of (simple) title retention in the buyer’s insolvency.25

The significance of possession fades away once a jurisdiction admits non-possessory security interests without compensating the lack of a transfer of possession through other, effective means of publicity. Such a development can be seen most prominently in German law. Here, a doctrine of apparent ownership that would have prevented the creation of non-possessory, non-publicised security rights never developed under the BGB. But the decline of the significance of possession is affecting the second function of § 1006 BGB,26 namely its function to provide a basis for bona fide acquisition. With the increasing use of ownership-based, non-possessory security interests (retention of title with various extensions, security transfer of ownership) the question arises of whether purchasers today can still believe that movables which they find in the possession of the seller are in fact owned by the latter. In 1980, the BGH decided that in those business sectors where practically all goods are sold under retention of title, purchasers can no longer trust that the goods which the seller possesses are in fact his property.27 It should be noted, however, that the BGH has not yet drawn the general conclusion that possession has completely lost its decisiveness for the solution of proprietary conflicts, but decides each case on its merits.28

The admission of hidden, non-possessory security rights is not the only reason for the decline of the significance of possession and the doctrine of apparent ownership. Other factors undermine the practicability of inferring creditworthiness from the fact of possession. First, besides non-possessory security rights, there are also contractual relationships

25See, for France, infra, n. 29; for Belgium, Cass. 9 Feb. 1933, Pasicrisie 1933, I, 103.

26See supra, note 24.

27BGH 18 June 1980, BGHZ 77, 274. The BGH held that in the course of economic development, the decisiveness of factual possession, which forms the basis for the statutory provisions on bona fide acquisition, had lost its meaning to a considerable extent. This applied to all movables which are normally purchased on credit and therefore delivered under retention of title. According to the BGH, in this area, possession points to ownership only to a very limited extent.

28See BGH 9 July 1990, ZIP 1991, 176 (178): ‘Although one has to acknowledge the eminent importance of retention of title in today’s business, the statutory principle laid down in §§ 932, 935 BGB should not be lost sight of. This principle says that whoever voluntarily gives up possession of his things takes the risk that another acquires ownership in them.’

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which allow possession and ownership to be distributed among different persons, such as leasing or hire purchase. In addition and even more importantly, credit in today’s business reality is no longer granted because of the physical existence of assets on the debtor’s premises. It was for both reasons that in 1980, the French legislature provided for the validity of retention of title in the buyer’s insolvency. The draft of the so-called Loi Dubanchet, which brought the change, was put rather ironically: ‘Il faut ajouter que, du point de vue commercial, le crédit apparent -- fondé sur l’aspect des marchandises en magasin --, s’il a peut-ˆetre été une réalité du temps de Balzac, n’est absolument plus pris en considération depuis si longtemps qu’aucun commerçant actuel n’a l’idée saugrenue d’aller visiter les magasins d’un collègue en vue de lui faire crédit.’29 It was for the same reasons that in 1998 Belgium followed France and introduced the validity of retention of title not only vis-à-vis third-party creditors executing against the buyer’s assets (which in Belgium, in contrast to France, had been denied before the reform) but also in the latter’s insolvency. So even in those two jurisdictions, where the doctrine of apparent ownership had developed and long been upheld, it has today lost much of its original significance.

6. The rise of contractual devices coupled with title-based security rights

A final common tendency lies in the growing use of types of contracts such as leasing, sale under retention of title and factoring which operate, functionally, as security interests through their effects on the location of ownership. It seems to be easier to acknowledge a non-possessory, non-publicised functional security right if it is supplemented by some contractual elements or goals in addition to the pure security function. The prime example is retention of title which will be more closely examined on pp. 658 f. As far as leasing is concerned, the national solutions to case 14 show that, with the exception of Greece and France, the restrictions placed on non-possessory security rights strictly speaking

29Proposition de loi presentée par M. F. Dubanchet et plusieurs de ses collègues, Sénat, no. 407 (1977--1978), Exposé des Motifs, 5. Translation: ‘One must add that -- from a commercial point of view -- the notion of ‘‘crédit apparent” founded upon the actual existence of goods on someone’s premises was perhaps a reality at the time of Balzac; but that this is no longer the case since no merchant or businessman today has the absurd idea of going to visit the premises of a colleague before giving him credit.’