- •Contents
- •General editors’ preface
- •Preface
- •Contributors
- •Table of cases cited by name
- •England
- •Ireland
- •Netherlands
- •New Zealand
- •Scotland
- •South Africa
- •United States of America
- •Table of legislation
- •Austria
- •Belgium
- •Denmark
- •England
- •Finland
- •France
- •Germany
- •Greece
- •Ireland
- •Italy
- •Netherlands
- •Portugal
- •Scotland
- •South Africa
- •Spain
- •Sweden
- •Abbreviations
- •1 Introduction: security rights in movable property within the common market and the approach of the study
- •A. A short survey of the status quo
- •I. Economic reasons for the existence of security rights
- •II. Security rights in movable property: main divergencies
- •III. Private international law
- •1. Tangible movables: lex rei sitae and the limits of the doctrine of transposition
- •2. Claims: article 12 of the Rome Convention and its various interpretations
- •IV. The need for harmonisation within the EU
- •V. Attempts at harmonisation or unification: past and present
- •1. European Union
- •2. UNCITRAL
- •3. UNIDROIT
- •4. European Bank for Reconstruction and Development
- •B. The approach and purpose of the study
- •I. The ‘Common Core methodology’ as applied to secured transactions
- •II. Surveying the legal landscape against the background of a need for harmonisation
- •III. The genesis of the book
- •1. Narrowing down the topic
- •2. On terminology and the glossary
- •3. Order of the national reports
- •Bibliography
- •2 A labyrinth of creditors: a short introduction to the history of security interests in goods
- •1. Introduction
- •2. Justinian Roman law
- •3. Later developments in the European ius commune
- •4. Security interests in movables in the continental European codes
- •5. Common law and civil law
- •Bibliography
- •Brief description of key features of Article 9
- •History and context
- •Article 9 in depth
- •Creation, attachment and enforceability of a security interest
- •Scope of Article 9’s coverage
- •Perfection
- •How is perfection achieved?
- •Priority rules
- •Third-party rights
- •The filing system
- •Post-default rights and remedies
- •Conclusion
- •A. Article 9 through the eyes of an English lawyer
- •B. The values of English law
- •C. The future of English law
- •D. Summary
- •Postscript
- •Bibliography
- •5 The European Bank for Reconstruction and Development’s Secured Transactions Project: a model law and ten core principles for a modern secured transactions law in countries of Central and Eastern Europe (and elsewhere!)
- •Introduction
- •The EBRD Model Law on Secured Transactions: four objectives
- •The EBRD Ten Core Principles
- •How does the Model Law score? Answers to the questionnaire
- •Cases 1 and 2
- •Case 3
- •Case 4
- •Cases 5 and 6
- •Cases 7 and 8
- •Cases 9 and 11
- •Cases 10 and 14
- •Cases 12 and 13
- •Case 15 and a conclusion
- •Abbreviations
- •Germany
- •Austria
- •Greece
- •France
- •Belgium
- •Portugal
- •Spain
- •Italy
- •The Netherlands
- •England
- •Ireland
- •Scotland
- •South Africa
- •Denmark
- •Sweden
- •Finland
- •Evaluation/Comparative observations
- •Bibliographies
- •Germany
- •Austria
- •Greece
- •France
- •Belgium
- •Portugal
- •Spain
- •Italy
- •The Netherlands
- •England
- •Scotland
- •South Africa
- •Denmark
- •Sweden
- •Finland
- •Comparative observations
- •Glossary
- •I. Introduction
- •Questions
- •Discussions
- •Effects of bankruptcy
- •General remarks on transfer of ownership
- •Comparative observations
- •part (a)
- •Passing of ownership
- •part (b)
- •part (c)
- •Case 2: The deceived seller
- •Question
- •Discussions
- •Comparative observations
- •Abstract and causal systems
- •Protection of third parties
- •Case 3: Machinery supplied to be used by the buyer
- •Questions
- •Discussions
- •Comparative observations
- •Parts (a) and (e)
- •Part (b)
- •Part (c)
- •Part (d)
- •Case 4: Jackets for resale
- •Question
- •Discussions
- •Comparative observations
- •Case 5: Motor cars supplied and resold (I)
- •Questions
- •Discussions
- •Comparative observations
- •Part (a)
- •Part (b)
- •Part (c)
- •(i) Solutions which do not require additional clauses or transactions
- •(iii) Assignment of the proceeds
- •(v) Contracts other than sale under retention of title (consignment and commission)
- •(vi) Rights in the sold goods other than retention of title
- •(vii) Summary
- •Case 6: Motor cars supplied and resold (II)
- •Questions
- •Discussions
- •Comparative observations
- •Part (a)
- •Part (b)
- •Case 7: Supply of material to manufacturer (I)
- •Questions
- •Discussions
- •Comparative observations
- •Part (a)
- •Part (b)
- •Part (c)
- •Part (d)
- •Case 8: Supply of material to manufacturer (II)
- •Questions
- •Discussions
- •Comparative observations
- •Parts (a) and (b)
- •Part (c)
- •Part (d)
- •Case 9: Too many toasters
- •Questions
- •Discussions
- •Comparative observations
- •Part (a)
- •(i) Validity of all-sums clauses
- •(ii) Invalidity of all-sums clauses
- •(iii) All-sums clauses and commingling
- •(iv) Invalidity of simple retention of title
- •Part (b)
- •Part (c)
- •Questions
- •Discussions
- •(i) Principle of publicity
- •(iii) Unconscionability
- •Comparative observations
- •Parts (a)--(c)
- •(i) Use of ownership for security purposes
- •(ii) Security rights based on the idea of a pledge without dispossession
- •Part (d)
- •Case 11: Bank loan for a wholesaler
- •Questions
- •Variation
- •Discussions
- •Stock-in-trade containing goods sold under retention of title
- •Variation
- •Variation
- •Variation
- •Variation
- •Variation
- •Variation
- •Variation
- •Variation
- •Variation
- •Variation
- •Variation
- •Variation
- •Variation
- •Variation
- •Variation
- •Variation
- •Comparative observations
- •Parts (a)--(c)
- •Part (d)
- •Variation
- •Case 12: Bank loan on the basis of money claims (I)
- •Questions
- •Discussions
- •Comparative observations
- •(iii) Further requirements
- •Case 13: Bank loan on the basis of money claims (II)
- •Questions
- •Discussions
- •Comparative observations
- •Parts (a)--(c)
- •Part (d)
- •Case 14: Finance leasing of computers
- •Questions
- •Discussions
- •Comparative observations
- •Part (a)
- •Part (b)
- •Part (c)
- •Part (d)
- •Case 15: Indebted businessman sells business to brother
- •Questions
- •Discussions
- •Comparative observations
- •Part (a)
- •Parts (b) and (c)
- •A. General tendencies
- •I. Common developments
- •1. Evolution of secured transactions law outside the Civil Codes
- •2. No unitary, functional approach to security rights
- •3. Enlarging the range of security rights
- •4. Limiting the rights of secured creditors in insolvency
- •6. The rise of contractual devices coupled with title-based security rights
- •II. Persisting differences
- •1. General attitude towards security rights in movables
- •B. Convergences and divergences in relation to specific security rights
- •I. Security rights with strong convergence
- •1. Simple retention of title
- •2. Leasing
- •II. Security rights where some elements of convergence are present but where significant differences continue to subsist
- •1. Security rights in entities of property -- enterprise charge
- •2. Security assignment of claims or charge over claims (outside retention of title)
- •3. Extensions of retention of title
- •4. Non-possessory security rights in individualised property (other than retention of title and leasing)
- •C. Possible ways towards harmonisation
- •I. Simple retention of title
- •II. Harmonisation or unification beyond simple retention of title
- •1. Form, scope and context
- •2. Main policy choices concerning the substantive rules
- •(a) Uniform, functional approach
- •(b) Range of possible collateral
- •(c) Publicity
- •(d) Priority
- •(e) Special rules for purchase-money security interests
- •Bibliography
- •Index by country
- •Index by subject
528 s e c u r i t y r i g h t s i n m o va b l e p r o p e r t y
(2)The principle of specificity. In a number of countries a rather strict view is taken on the issue of the determinability of those assets which are to be the subject of a security right. Therefore, future stock cannot be included. This is the case in France, Portugal and South Africa.
As compared to the previous cases, case 11 has probably brought out the most significant differences, especially as between the common law jurisdictions, which have developed or adopted the f loating charge,126 and the civil law systems. However, the introduction of enterprise charges which closely approximate the f loating charge in Sweden and Finland, the anticipated introduction of the f loating charge in Greek law and the ways in which German and Dutch law have watered down the principle of specificity may provide useful examples of how rapprochement and midway solutions might be achieved.
Part (d)
The question of whether there are any limits as to the value of the collateral in relation to the amount of the secured claim can arise in any regime of security rights. It is, however, more relevant in connection with security rights in assets which are subject to change. Where the collateral remains fixed, one can apply the principle of party autonomy: if the debtor accepts that his property is being charged even though its value significantly exceeds the secured claim, it is his bargain. The only possible reason for legal intervention would lie either in the possible detriment to unsecured creditors of the same debtor or in the protection of parties who are in a weaker bargaining position, such as, for instance, consumers. By way of contrast, there is a special risk of ‘oversecurity’ in relation to security rights in constantly changing collateral.
The English report points out that oversecurity is a rare event, if the term is confined to the situation where the proceeds of the collateral’s realisation in the insolvency of the debtor exceed the amount of the secured debt. Obviously, this is the perspective of English, Irish and Scots law. But ‘oversecurity’ may also be used in a wider sense; such as, for example, in the meaning attributed to the term under German law. There, a state of ‘oversecurity’ can exist when the debtor is still solvent. Oversecurity occurs when the value of the collateral, assessed by reference to the value of the debtor’s business as a going concern, exceeds that of the secured debt by more than a specified percentage.
126 In this sense, Scotland is regarded as a common law jurisdiction.
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This view of oversecurity looks less to the interests of the insolvency creditors and more to the debtor’s freedom to enter into new security agreements, although obviously, the doctrine can also benefit unsecured creditors. ‘Oversecurity’ in this sense presents a problem especially in systems which resort largely or exclusively to security devices based on ownership. Where the debtor has given away full ownership to the secured creditor one should assume that the former has no possibility to grant a junior security right to a subsequent lender. However, under German law, this assumption is not entirely correct. Because German courts have classified as a real right the expectancy of a buyer under retention of title to eventually receive ownership upon full payment (Anwartschaftsrecht),127 this real right can itself be made the subject of a security right, for example, a security transfer of ownership.128 Therefore, even this explanation is less than entirely satisfactory.
The general restrictions imposed by Belgian law (only 50 per cent of the stock can be charged under a pand op de handelszaak/gage sur fonds de commerce) and Finnish law (only 50 per cent of the collateral can be realised for the benefit of the creditor)129 can also be seen as a means of avoiding oversecurity, but rather with a view to protecting unsecured creditors.
Variation
Any survey of the law relating to security rights would be incomplete if it did not mention the possibility of avoiding or setting aside transactions entered into either with a fraudulent intent, or gratuitously, or in a defined period prior to the commencement of insolvency proceedings. These three elements (fraud, gifts, suspect period) are in fact the main grounds on which avoidance can be sought in the various jurisdictions under consideration.130 However, apart from this commonality, the reports reveal a large degree of variety, which is impossible fully to reflect in any short summary.
The most striking difference is perhaps the variation in the time periods during which avoidance can be sought. As a general rule, however, fraudulent transactions are subjected to the threat of avoidance for a
127See supra, German report, cases 3(c) and 11(a).
128See Bülow, Recht der Kreditsicherheiten n. 1099.
129The possibility of introducing a similar requirement to that obtaining in Finland has also been mooted in Sweden: see Swedish report, supra.
130See also Wood, Principles of International Insolvency paras. 4--5.
530 s e c u r i t y r i g h t s i n m o va b l e p r o p e r t y
much longer time than gratuitous transactions or the grant of an incongruous security. For example, the time-limit relating to the avoidance of a preference intentionally given to a particular creditor varies from six months under South African law to an unlimited period under Belgian law.
The complexity of this area of the law is also reflected in the fact that most reporters were unable to give a definite answer as to the outcome of the case. In most jurisdictions, additional information would be needed to reach such a determination.
Returning to the subject of security rights and their possible harmonisation, it is evident that any attempt to harmonise the law on the actio Pauliana in this context would prove to be impossible. However, it is submitted that there is no necessary link. For a uniform regime of security rights, the simple statement of their enforceability in insolvency or execution, together with rules on the secured party’s principal remedies, would be sufficient. There is no reason why the treatment of fraudulent transactions or contracts made within a suspect period could not be left to the national laws of the Member States or to harmonisation at a later stage. This is also the approach of the Cape Town Convention on International Interests in Mobile Equipment of 16 November 2001.131 Under ‘Effects of Insolvency’, article 30(3) states: ‘Nothing in this Article affects
(a) any rules of law applicable in insolvency proceedings relating to the avoidance of a transaction as a preference or a transfer in fraud of creditors or (b) any rules of insolvency procedure relating to the enforcement of rights to property which is under the control or supervision of the insolvency administrator.’
131 See supra, ‘Introduction’, at p. 25.