or protection as they may deem necessary, but only if one of the parties chooses to do so. Otherwise, the secured party may realize upon the collateral by disposing of it without judicial or administrative involvement, albeit subject to the obligations to act in good faith and in a commercially reasonable manner. Availability of efficient and speedy remedies makes the legal regime effective, and resort to judicial involvement in the realization process is relatively rare.

This discussion is not intended to assert that Article 9 offers the only effective movables security typology. There can be no doubt that the Eigentumsvorbehalt (especially when verlängerter Eigentumsvorbehalt and erweiterter Eigentumsvorbehalt), as judicially developed in Germany during the twentieth century, is a very powerful device for sellers, highly successful in the prevailing economic and social conditions and legal structure. Indeed, that device is far more powerful than its counterparts in other European countries, although in France and Belgium title retention has been made more effective during the last two decades. Efforts during that period toward unification of law on title retention on the European level have, however, thus far not been successful. Likewise, especially in tandem with the current insolvency law and practice in England, fixed and floating charges are highly potent and flexible, if somewhat technical, tools for the extension of secured credit in England.

History and context

A discussion of the history and context of Article 9 may be informative to the European reader, to explain how Article 9 came to be what it is, to provide a contrast in the lawmaking process, and to facilitate further research into Article 9.

Under the US federal system, generally speaking, property and contract law are matters left to the states. Certain specified subjects are allocated by the US Constitution to federal law, including (relevant to our subject) bankruptcy law, patent and copyright law and, to the extent determined by Congress, certain matters affecting interstate commerce. Under this structure, movables security law is determined by the states, but, in some contexts, federal law may interact with or, to the extent determined by Congress, supersede state law. The UCC is not a single federal law, but rather a law separately enacted by each state; Article 9 is currently in force in all states in essentially identical form.

The UCC was developed by a cooperative effort of the National Conference of Commissioners on Uniform State Laws and the American Law Institute. The former, over 100 years old and composed of persons designated by officials of each state, drafts model acts but has no legislative power. The latter is a national membership organization, over seventyfive years old and composed of respected judges, academics and practitioners, dedicated to the task of organizing and reforming law. In addition to its participation in the formulation of the UCC, the Institute engages in other projects, the best known of which is the production of the highly influential Restatements of the Law (e.g., Contracts, Torts, Conflict of Laws and, more recently, Suretyship and Guaranty) that broadly synthesize the law in various subjects as it has developed over time throughout the country. For over a century, the Conference has drafted and presented to the states for consideration uniform laws on many subjects; these proposals have met with varying degrees of success. Shortly before World War II, while the Conference was drafting an updated version of the Uniform Sales Act, it was determined to broaden the scope of the project; it was also determined to collaborate on this project with the Institute. These decisions ultimately led to the UCC, first enacted in 1953, in Pennsylvania.

The UCC is not a systematic statement of general principles. Rather, it is drafted in more standard legislative format and deals with several subjects in varying degrees of comprehensiveness and detail. Initially, it was comprised of nine articles, each containing numerous, often lengthy and complex, sections. Article 1 consists of general principles and definitions applicable throughout the rest of the UCC. Article 2 deals with transactions in goods and is the successor to the earlier Uniform Sales Act (which itself was based on the English Sale of Goods Act 1893). Article 3 deals with negotiable instruments; it also was the successor to an earlier uniform law, the Uniform Negotiable Instruments Law. Article 4 deals with the check collection process. Article 5 deals with letters of credit. Article 6, subsequently repealed in most states, deals with bulk transfers, essentially the uniform law successor to statutes adopted by many states in the late nineteenth century which were intended to thwart bulk sales of inventory designed to defraud the seller’s creditors. Article 7 deals with documents of title (warehouse receipts, bills of lading and the like). Article 8 deals with investment property, primarily concerned with rights and obligations among issuers, issuees and transferees of securities (substantive investor protection and trading regulation

are dealt with in federal and other state laws). Finally, Article 9 covers secured transactions involving personal property collateral.

During the 1950s and 1960s, the UCC was enacted in virtually all states. Enactment in Louisiana came somewhat later, although the deferment of adoption of Article 9 was due to local politics concerning the management of the filing system and had nothing to do with Louisiana movables security law having originated in the civil law tradition.

Since the late 1980s, the UCC has undergone several changes. Repeal of Article 6 was recommended; Articles 3 and 4 were significantly revised; Article 8 underwent two revisions, the latter (1994) making it a very modern flexible tool in an age of dematerialized and indirectly held securities (European recognition of the need for modernization of the law in this area is seen in the current preparation of a Directive on the cross-border use of such collateral and in the Hague Conference on Private International Law draft Convention on ‘‘the law applicable to certain rights in respect of securities held with an intermediary”); Article 5 was revised to coordinate more clearly with the International Chamber of Commerce’s Uniform Customs and Practices and to take into account the substantial growth of the use of standby letters of credit; and Article 2A, dealing with ‘‘true” leases of goods, and Article 4A, dealing with electronic funds transfers, were added. A revised version of Article 1 was approved by the sponsors recently, and the enactment effort will begin shortly. References in this chapter to Article 1 are to the original version.

Article 9 was recently substantially revised (there had been rather modest amendments in 1972). The substantive discussion of Article 9 in this chapter is based on the 2000 Official Text of Revised Article 9 (it was initially approved by the sponsors in 1998 and was slightly amended in 2000), which is currently in effect in all fifty states.

It is worthwhile to elaborate on both the nature of the revisions to Article 9 and the revision process. The process had a profound impact on the substance. The Drafting Committee consisted of practitioners (one of whom was a bankruptcy court judge) of great experience and expertise in the subject, as well as several academics, all of whom were designated by the UCC’s two sponsors, the Conference and the Institute. All of its proceedings were public, the drafts were posted on the internet and were the subject of programs for practicing lawyers, paralegals, bankers, filing officers and others. Interested groups were invited to attend meetings and send comments, although anyone could attend without invitation. Funding was provided to enable representatives of consumer interests to

attend and participate in the drafting process. Drafts were reviewed by the membership of the sponsor organizations and finally approved by them at their respective annual meetings. The openness of the process, and the participation by those reflecting affected interests, on both the debtor and the creditor sides, served to assure not only acceptance and support but also balance in the adoption of practical solutions desired by affected interests.

In the short time since its promulgation by the sponsoring organizations, Revised Article 9 has already been adopted by every state and the District of Columbia. In an effort to minimize transition issues and conflict of laws problems, the sponsors suggested a nationwide uniform effective date of 1 July 2001. Revised Article 9 became effective simultaneously on 1 July 2001 in forty-six states, and since 1 January 2002, has been in effect in all states.

This is remarkable in at least three respects: (1) Article 9 has been enacted with almost perfect uniformity (such local tinkering as has occurred has been minor and at the margins, generally adding some narrow exclusions from the scope of Article 9’s coverage); thus, national uniformity has essentially been achieved despite this body of law being enacted by the states rather than by Congress; (2) in the past, several years passed before all the states had enacted the various revised articles or other uniform laws, while in this case, the entire enactment process has been accomplished within three legislative sessions; and

(3) an agreed deferred uniform effective date has been successfully used for the first time in the history of uniform laws in the US, thereby dramatically lessening the cost of change in the law.

It is noteworthy that despite the risks of nonuniformity inherent in the fact that Article 9 is state rather than federal law -- to wit, it might be enacted with significant local variations and it might be interpreted differently by the courts of different states -- neither of these risks has materialized to any significant extent, and the risks are even smaller under Revised Article 9, based on the success in the enactment process and the conscious effort to leave even less for judicial development.

Substantively, Revised Article 9 left intact all of the fundamental principles and policies found in the prior version. It did expand the scope, reorganize the statutory structure somewhat, introduce some new terminology, and modernize and make the filing system more efficient, uniform and transparent, by, inter alia, further limiting the role of the filing office to a more clearly ministerial function. The revisions also rendered Article 9 more responsive to technological developments,