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slightly more ambitious but less clear-cut approach. Article 30(1) of the Convention states as the basic principle the effectiveness of the international interest in insolvency; article 30(3) exempts national rules on preferences and fraudulent transfers as well as powers of the insolvency administrator to limit the enforcement of security rights in the interests of the general body of creditors, for example, in order to facilitate a reorganisation.71 The Aircraft Protocol, article XI, contains two sets of additional rules on remedies in insolvency, a ‘hard’ alternative A and a ‘softer’ alternative B, the latter leaving a broad discretion to the court administering the insolvency to act in accordance with the applicable national law. Upon ratification, states have to declare which of the alternatives they are going to apply (Article XXX(3)). It remains to be seen whether contracting states will be pushed by the interested industries to adopt alternative A in order to get better access to credit.

Within the EU, it should probably be possible to go a step further than the Cape Town Convention and to define the insolvency remedies without granting the Member States any options. However, in the realm of preferences, powers of the administrator to limit the enforcement of security rights in favour of general creditors and priorities of certain preferred unsecured creditors, it appears most unrealistic to impose uniform rules; here, it will still be necessary to apply national insolvency law which would have to be determined, for example, by declaring the European Security Right as equivalent to a certain domestic interest. Nevertheless, it is suggested that such a limited unification will still be of considerable value to intra-community trade. A crucial task in drafting will be to separate with utmost clarity the area where national law applies from that of the uniform rules.

2. Main policy choices concerning the substantive rules

This evaluation is not the place to present in any detail a suggestion for substantive rules on a uniform European Security Right, therefore a few sentences on the main policy choices should suffice. In any event, the European institutions should take a close look at the draft legal guide on secured transactions currently under preparation at UNCITRAL.72

71In this last respect the wording of article 30(3) Cape Town Convention is not very clear, but see the official commentary by Goode (published on the website of UNIDROIT), article 30 para. 2 with illustrations 14 and 15.

72The current status of the drafts is published on the official website of UNCITRAL: www.uncitral.org.

It should also be borne in mind that if a European Security Right is going to be introduced as a supranational model and not as a replacement of national law, the European legislature should all the more be able to realise innovative concepts and have to pay less attention to the existing national law, which would be another advantage of this option.

(a) Uniform, functional approach

The present fragmentation of the law on security rights that has been observed in the European jurisdictions has its roots in historical evolution. It is a source of uncertainty and not infrequently gives rise to frictions within the jurisdictions themselves. It is hard to see any substantive merits justifying the retention of the present system. It is therefore suggested that a European Security Right should be introduced as a uniform, functionally defined interest, following the examples of Article 9 UCC and the EBRD Model Law. Such an interest would have to include retention of title and leasing agreements, which would, however, not necessarily mean that purchase-money security interests would be subjected to exactly the same rules as the rest (see infra, section (e)).

(b) Range of possible collateral

Limitations as to what kinds of assets can be charged are another feature of the present fragmentation and in some jurisdictions a consequence of the principle of specificity and/or the impossibility of charging future assets (or, in other words, after-acquired property) which in its turn is mostly due to publicity requirements which are ill-equipped to be satisfied before the assets exist. On the other hand, there is a clear tendency to enlarge the range of possible collateral in most EU jurisdictions.73 This latter approach should be followed and developed further. Following the seventh EBRD core principle74 and the approach of Article 9 UCC,75 it should be left to the parties to choose and define the collateral according to their business needs, be it present or future, a number of single, individually definable movables or an entity of constantly changing assets (e.g. stock-in-trade or assets of an enterprise as a whole). The concern that the ability to charge practically every asset of the debtor might lead to injustice towards later creditors seeking a security or unsecured

73 See supra, pp. 649 ff. 74 Cf. Dahan/Simspon, supra, chapter 5, p. 103. 75 Cf. Sigman, supra, chapter 3, p. 57.

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creditors should be met by the rules on publicity and priority but not by restricting the range of possible collateral from the outset.

(c) Publicity

As to publicity, we can presently find at least five different systems within the EU: a complete denial of publicity, as for example in Germany; reliance on notification as a means of publicity, as for example in France with respect to security assignments; asset-based registries as for example in France, Italy or Spain with respect to certain non-possessory charges in specific assets; debtor-based registries as for example in England with respect to the f loating charge; and, as a final category, registration systems which instead of providing publicity strictly speaking, aim rather at fixing the date of the transaction in question (e.g. Dutch silent pledge, Spanish and Italian ‘certain date’). The German system of hidden security rights, which functions reasonably well within a secluded national credit market, is ill-suited for a Common Market of now twenty-five Member States where personal reliance must be replaced by reliance on institutions. Notification is only possible with claims or other personal rights where someone exists who can be notified; but even then, a register appears to be a more reliable and more readily accessible source of information. Asset-based registries are certainly a reliable source of information, yet for a potential creditor who merely knows his future debtor but not his potentially encumbered assets, it is difficult if not impossible to find the right registries in which to look. If publicity in its strict sense is sought, tax registries and the like which cannot be searched by the interested public are even less equipped than the aforementioned sources to serve the purpose. To conclude, the only viable method seems to be a debtor-based registry. Since the European Security Right should be open to all kinds of parties, it is evident that it cannot be restricted to debtors, which, like companies, are registered anyway. In addition, such a register should reveal as much information on the debtor and the secured transaction as is necessary to alert the interested creditor and to enable him to obtain further particulars. As the filing system under Article 9 UCC shows, it is not necessary to exhibit any business secrets or anything other than the most basic particulars of the debtor and the encumbered assets. Restricting the registered information to an utmost minimum not only serves the legitimate interests of the parties to the secured transaction but -- together with the help of modern database systems -- also keeps the registry manageable. Compared to an asset-based registry, a debtor-based registry has the

additional advantage of creating fewer problems with respect to crossborder situations. In most cases, the interested party will know where the debtor is situated and can search a regionally organised registry (e.g. the registry of a certain Member State) accordingly. In contrast, an assetbased registry for security rights in movables either would have to be organised European-wide or its regime would need additional rules for moving an entry from one national registry to another (including grace periods) in the case where the movable is brought onto the territory of another Member State.

(d) Priority

The priority rules for conflicts between different secured creditors and between secured creditors and general unsecured creditors (i.e. creditors who do not enjoy a preferred status due to social or other public policy considerations) are closely linked to the publicity regime. If, as is suggested here, a debtor-based registry was introduced, the principal rule for conflicts among secured creditors would be that the creditor who registers first will be first in right.76 The time of registration could also determine priority as between a secured creditor and unsecured creditors in execution or insolvency, the crucial point in time being either the commencement of the seizure or the commencement of insolvency proceedings. As between a secured creditor and a good-faith purchaser, entry of a security right onto a debtor-based register would -- in contrast to an asset-based register -- provide no reason to deny good faith in an ordinary business situation. Any other solution would unnecessarily burden day-to-day business transactions.

(e) Special rules for purchase-money security interests

If retention of title and leasing are included within a uniform regime, the question arises of whether the suggested basic rules on registration and priority would need some modification in order to accommodate the special needs of creditors of purchase money, such special needs being reflected in the preferential treatment of retention of title and leasing in all European jurisdictions. A modification should be discussed in two respects. One is the requirement of registration for rendering the purchase money security interest enforceable with priority towards

76Cf. United Nations Convention on the Assignment of Receivables in International Trade of 12 Dec. 2001, Annex, section I article 1. As to the priority rules under

Article 9 UCC which basically follow the same approach, see Sigman, supra, chapter 3, pp. 71 ff.