Secured Transactions Law Research Articles

Transplanted Legal Controversies: Buyer Status Under Secured Transactions Law

Article 9 of the Uniform Commercial Code was transplanted into Canada as the Personal Property Security Act (PPSA) , and then a subsequently re-transplanted into New Zealand and Australia. The secured transactions regimes in all four of these countries contain an ordinary course buyer rule that permits a buyer to acquire goods free from a security interest granted by the seller. In all four countries, the same legal controversy has arisen. It concerns the point in time that a person acquires the status of a buyer so as to be able to invoke the ordinary buyer rule. The statutes are silent on this issue, and in each of the four countries the courts were asked to resolve the matter. This reveals some interesting aspects of legal transplants. The transplantation of a rule may result in the transplantation of a legal controversies that arise because of gaps and ambiguities in the transplanted rule. This raises four questions. The first concerns the source of law that will be used to fill if the gaps. The second concerns the role of courts in adapting and changing the legal principles in other areas of law in order to create a proper fit. The third concerns the use and persuasiveness of judicial decisions from other countries. The fourth is an inquiry as to why the drafters did not seek to legislatively resolve the issue instead of leaving it to be litigated afresh in the importing jurisdiction.

Secured Transactions Law Reform Project: Registration Discussion Paper

This paper was written as part of the policy paper series produced by the Secured Transactions Law Reform Project, which exists to consider the need for and shape of reform in this area of law in the UK, as well as to study and inform discussion about the reform of secured transactions law around the world. The paper is a working paper intended to stimulate discussion. The paper considers, in some detail, arguments relating to different registration systems and sets out for discussion two possible schemes: a notice filing scheme and a priority notice scheme. It is an attempt to articulate some of the arguments for and against these two different types of systems, and to identify further arguments relating to the shape and operation of a modern secured transactions register. It is assumed that the most modern technology would be available. Section 2 of the paper considers the rationales for registration, section 3 sets out the parameters resulting from the agreed core of a modern secured transactions law and the arguments for and against each parameter, and section 4 considers what information should be included in the register. Section 5 looks at two specific problems: identification (which arises particularly when non-corporate debtors are included) and empty filing (which arises particularly from advance filing). Section 6 compares document filing and notice filings, section 7 sets out the two schemes and section 8 concludes. The discussion, particularly in sections 5 and 7, is informed by comparative analysis of a number of notice filing systems. This analysis is included in four appendices, which account, in part, for the length of the paper.

Finding our way: secured transactions and corporate bankruptcy law and policy in America and England

ABSTRACTThis article is concerned with debate in England as to whether English law has tipped too far in favour of promoting corporate bankruptcy law’s policy concerns to the detriment of an effective secured transactions law regime, and debate in America as to whether reform to secured transactions law has tipped too far in favour of secured transaction law’s policy concerns to the detriment of an effective corporate bankruptcy regime. Through a detailed analysis of the evolutionary history of secured transactions and corporate bankruptcy law and policy in both America and England, the article analyses why each jurisdiction approaches balancing the policy objectives in a fundamentally different way, and the role which the very different institutional environments in corporate bankruptcy have played in mediating between them. It argues that this legal and institutional evolutionary history suggests relatively modest ongoing reform in both jurisdictions, closely adapted to local conditions.

The Reluctance of Civil Law Systems in Adopting the UCC Article 9 'Without Breach of Peace' StandarddEvidence from National and International Legal Instruments Governing Secured Transactions

One of the defining features of the Uniform Commercial Code Article 9 is the secured creditor’s ability to take possession of the collateral upon the debtor’s default “without breach of peace.” This standard is meant to protect the debtor from abusive secured creditors, the meaning of which has been shaped by courts on a case-by-case basis. In reforming their secured transactions laws to enhance access to credit, continental legal systems have shown great reception to Article 9 by adopting the unitary concept and functional approach to security interests, introducing private enforcement mechanisms, including various forms of self-help repossession. However, the “without breach of peace” standard seems to be rejected by most national laws and international legal instruments acceded to by civil law countries, to accommodate the supposedly alien idea of self-help repossession with civil law tradition. Based on comparative analysis of secured transactions laws of the US, the UK, Romania, and Hungary (representing national laws), and the Cape Town Convention on International Interests in Mobile Equipment along with the Aircraft Protocol and the Draft Common Frame of Reference (representing international legal instruments), this article demonstrates that continental European legal systems are generally apprehensive with the “without breach of peace” standard. Thus, they are reluctant to transplant it to their legislation and try to either modify it or replace it with different legal requirements. This article concludes that the alternatives of the “without breach of peace” standard prevailing in continental legal systems undermine the privilege of the secured creditor, pose enforcement problems (such as uncertainty of creditors’ rights and possible abuses against consumer-debtors), and restrain out-of-court enforcement.

Testing the Fitness of the Transplanted Ethiopian Personal Property Security Rightss Bill to the Local Context: A Critical Perspective

In what could be regarded as a defining moment in secured transactions law reform in Ethiopia, a new legal regime governing security interests has been drafted under the aegis of the International Finance Corporation (IFC), evidently based on Article 9 of the Uniform Commercial Code (UCC) of US or legal systems (instruments) influenced by it. Pending the approval of the draft law by the Ethiopian parliament, this article examines whether it is suitable to the Ethiopian local context. It argues that while the anatomy of the draft law and its general approach are consistent to the theme of enhancing access to credit which dictates secured transactions law reform across the globe, it suffers from shortcomings that must be addressed. First, the draft law mandates electronic collateral registration system in a country without the necessary perquisites/ for the successful operation of electronic registration system. Second, by adopting the Personal Property Security Right (PPSR) approach, the draft law unnecessarily excludes security rights in immovable property from its umbrella and defeats the purpose of comprehensive secured transactions law reform, i.e., implementing a legal regime that covers all types of assets, parties, and transactions. Third, the draft law has alarming terminological problems resulting from drafter(s) misapprehension of or insensitivity to the existing legal regime. Fourth, the unclarity of the provisions of the draft law on floating security interest could potentially lead to costly court litigation. Fifth, in departure from UCC Article 9 or recently reformed secured transactions laws, the draft law entitles the creditor to take possession of the collateral upon the debtor’s default, without putting in place the necessary tools to protect consumer debtors from potential abusive conducts of creditors. By empowering the Collateral Registry Office to order the police to assist the creditor in repossessing the collateral, it potentially subjects the debtor to extra-judicial deprivation of property right, with no judicial control mechanism. Based on comparative analysis of the key provisions and policies of UCC Article 9, the Draft Ethiopian PPSRs’ law along with the laws of other civil law jurisdictions to a limited extent, this article concludes that the draft law is ill-suited to the Ethiopian local context. The paper suggests that its approval by the parliament be delayed for further public scrutiny and debate among the relevant stakeholders. It proffers policy recommendations for revision.

Bridging the gap: the regulatory dimension of secured transactions law reforms

The lack of coordination between secured transactions law and capital requirements generates tensions in the legal framework governing extension of credit secured by movable assets. Contrary to common assumptions, secured transactions law reforms do not necessarily improve access to credit if regulatory considerations are not properly addressed. With primary reference to the Basel Capital Accords and the UNCITRAL Model Law, this article isolates the regulatory requisites for security rights in movable assets to reduce capital requirements. Moving from this analysis, this article then offers a regulatory strategy to sustain secured transactions law reforms at the national level.

Choice-of-law rules for secured transactions: an interest-based and modern principles-based framework for assessment

This essay examines the law applicable to secured transactions. It addresses in particular the codification of the choice-of-law rules for secured transactions (STCOL rules). These rules address the laws applicable to the creation, perfection, priority, and enforcement of security interests (security rights) — a form of legislative or statutory depecage. It draws on the 2016 UNCITRAL Model Law on Secured Transactions (Model Law) as well as relevant North American law (Uniform Commercial Code Article 9 and the Canadian provincial Personal Property Security Acts). The STCOL rules lie at the heart of the emerged and emerging modern principles of secured transactions law (Modern Principles) for personal property (movable assets). These Modern Principles are reflected by the Model Law and North American law as well as by various other model laws, other secured transactions ‘reforms’ over recent years, and laws that are currently being considered by various States. While disagreements exist, debates continue, and strict harmonization is unlikely, there is little doubt that there has emerged a global consensus as to a set of general principles to which secured transactions law should adhere. The STCOL rules and their relationship to substantive legal doctrine remain somewhat underdeveloped and undertheorized. This essay seeks to remedy this situation. It situates the STCOL rules as fundamental components of secured transactions law and central to understanding the normative principles and factual assumptions underpinning that important body of law. Its principal contribution is to offer a framework for assessing the existing STCOL rules and for the codification of future rules. The framework is based on the interests of stakeholders that participate in or are affected by secured transactions and the Modern Principles. These stakeholders include third parties in general, assignors and assignees of security rights, third-party obligors on assigned assets (such as debtors on an assignor’s receivables), and the States that enact and whose interests are affected by STCOL rules. This framework also illuminates the factual bases for its application. But it can evaluated only through its application and analysis, which necessarily produces an assessment of STCOL rules and conclusions as to the appropriate rules. While the conclusions reached here may represent only a modest contribution to the literature, the more important offering is the framework for assessment itself — the identification of the questions to be asked and answered.

A technological transformation of secured transactions law: visibility, monitoring, and enforcement

A technological transformation of secured transactions law: visibility, monitoring, and enforcement

Coordinated technical assistance: inter-organizational collaboration for better results in secured transactions law reform

Coordinated technical assistance: inter-organizational collaboration for better results in secured transactions law reform

Rethinking Ethiopian Secured Transactions Law through comparative perspective: lessons from the Uniform Commercial Code of the US

Various countries have reformed their secured transaction laws recognizing the significance of modern secured transactions law in enhancing access to credit and economic development. Ethiopia has not undertaken comprehensive secured transactions law reform, despite the demonstrable mismatch between the legal regime governing security interests and the country’s current political, economic and commercial realities. In-depth analysis of the Ethiopian secured transactions law is made in this article in the light of Uniform Commercial Code (UCC) Art 9, English, and French secured transactions laws and the EBRD (European Bank for Reconstruction and Development) Model law and the experience of civil law jurisdiction of Louisiana. I argue that secured transaction law reform in Ethiopia can be implemented based on UCC Art. 9 with some adjustment in light of Louisiana’s experience. The article uses the unitary concept of security interest and floating lien to exemplify the supremacy of the approaches and policies of UCC Art. 9 and its suitability as a model for potential secured transactions law reform in Ethiopia.Keywords: Credit market, UCC, unitary concept/theory, functional approach, floating lien, floating charge, security interest, self-help repossession, efficiency

The Challenges of the Mexican Intermediated Securities Holding System and Opportunities for Modernization

This article examines the legal institutions and doctrines underlying the current intermediated system for the holding of securities in Mexico. Rather than revamping the legal framework governing intermediated securities, Mexico’s legislature enacted several incremental changes in an attempt to align the framework with the practices and norms of the 21st century. These modifications were introduced without any coherent and consistent policy justifications, resulting in a framework inhospitable to transactions with intermediated securities, and especially secured loans. This framework also has many gaps, such as in the area of conflict of laws, which make it unsuitable for foreign investors. Given the recent successful efforts to modernize Mexico’s secured transactions law and the filing system, as well as the on-going digitization of the warehouse receipts system, using distributed ledger technologies (Blockchain), it is surprising that very little attention has been paid to modernizing the intermediated securities system. In its future modernization efforts, Mexico should seriously consider the recommendations of the UNIDROIT Legislative Guide on Intermediated Securities, adopted in May 2017, to align with the best international standards. The Legislative Guide is based on the principles underlying the U.S. Uniform Commercial Code Article 8, which would make the Mexican securities market more attractive for U.S. investors and lenders.

Introduction to the Colombian Secured Transactions Law

This essay is intended to explain the main provisions of the Colombian Secured Transactions Law in order to give national, foreign lawyers and investors a general sense of the current legal framework for secured transactions in Colombia. The present article is based mainly on the Colombian Secured Transactions Law, Law 1676/2013, yet, other sources were analyzed and consulted to explain the main provisions of the Colombian law, namely the Organization of American States' Model Inter-American Law on Secured Transactions, which was one of the main sources of the Colombian Secured Transactions Law. Even though the Colombian Secured Transactions Law was passed recently, some statistics provided by the Registry of Movable Property Security Interests suggest that creditors and debtors have widely accepted the new centralized registry. The Colombian Secured Transactions Law is a well-achieved law; however, some further actions need to be taken in order to produce a real revolution in access to credit in Colombia.

Towards Reforming Nigeria's Secured Transactions Law: The Central Bank of Nigeria's Attempt through the Back Door

AbstractIn response to the inability of micro, small and medium scale enterprises (MSMEs) to access credit to finance their business operations, the governor of the Central Bank of Nigeria passed the Central Bank of Nigeria (Registration of Security Interests in Movable Property by Banks and Other Financial Institutions in Nigeria) Regulations, No 1, 2015. The purport of this regulation is, among other things, to ensure that MSMEs can use items of personal property to create security. This article critically examines the regulation in the light of the building blocks of article 9 of the US Uniform Commercial Code, which is not only a paradigmatic piece of legislation but appears to be the model on which the Nigerian regulation is based. This critical examination leads the authors to conclude that, although the regulation represents the first steps to reform, much more remains to be done to ensure effectiveness.

Reforming the law of secured transactions: bridging the gap between the company charge and CBN Regulations security interests

ABSTRACTThe company charge represents a key component of the secured transactions law system in Nigeria. Notwithstanding, its usefulness has now been called into question due to the recent enactment of the Central Bank of Nigeria Registration of Security Interests in Movable Property by Banks and Other Financial Institutions (Regulation No 1, 2015) which provides a more attractive platform in the facilitation of credit for individuals and businesses to use movable assets as security. The company charge is not recognised as a security interest under this Regulation, and neither do the provisions of this Regulation apply to the company charge. This article provides a methodical analysis of the nature of security under both regimes, while specifically looking at the reasons why there should be a degree of harmonisation regarding the publicity of their existence. The approach taken is burdened by the need to embrace a uniform publicity set of rules in lieu of a transparent priority system as against a straightjacket integration of dissimilar, albeit, embedded functional legal doctrines.

Harmonising Secured Transactions Law in an Emerging Economy (Re CBN Collateral Registry Regulations)

The author examines the extent to which access to credit can be achievable for individuals and SMEs in an emerging economy. Here, the focus is on Nigeria, and different ways have been identified to reform its secured lending environment by analysing the recently passed Collateral Registry Regulations (CRR) by the CBN, and how useful it will be for business ventures and their creditors. The CRR is designed to provide for the use of moveable property as security, and also, to introduce modern methods of achieving this goal through the process of harmonising the secured transactions law as recognised in the lending sector. These secured transactions laws can be found in various statutes at State and Federal level with complicated provisions and uncoordinated registries. The CRR aims to harmonise the operations of these transactions to achieve predictability, transparency and consistency so long as they perform similar economic functions. This Article sets out and explains some of the recommendations outlined in the Cuming Report 2004 and the Draft Law 2009, and how some of these recommendations could be introduced and adopted by the CRR. Most importantly, international soft laws such as the EBRD Model Law and its Ten Core Principles, and UNCITRAL Legislative Guide on Secured Transactions have provided additional foresight in this quest for reform. The CRR provisions have been methodically benchmarked against these initiatives in the hope of producing a contemporary secured transactions law.

Super Priority for Asset Acquisition Financing in Secured Transactions Law: Formalism or Functionalism?

Secured credit is a well-known and deep-rooted phenomenon. The basic idea is an intuitively simple one. Security gives a creditor the right, should the debtor default, to satisfy its claim out of the value of those assets that the debtor previously agreed would be charged with security, in preference to the claims of the debtor's other creditors. This chapter addresses an issue that confronts policy makers in any regime that recognises a generic concept of security. When and to what extent should a subsequent secured creditor who finances the debtor's acquisition of assets enjoy super priority with respect to those assets as against the holder of a prior generic security interest that seeks to charge after acquired assets of the same genre?What has prevented convergence in relation to such a fundamental area of commercial practice in what is basically an integrated national credit financing market? Or is there an underlying de facto convergence despite the apparent rule diversity?

Reforming Non‐Possessory Secured Transactions Laws: A New Strategy?

Non‐possessory secured transactions are key components of market economies. National and international legal reform projects have been advanced to further their use and broaden access to credit. Yet reforms appear to be limited by practical obstacles posed by national legal categories. This article shifts the focus from domestically defined categories to the operational rules that allow secured transactions to perform their economic function of managing credit risk. This shift leads to a reconsideration of the rules governing publicity and an examination of the policy issues underpinning the evolution of publicity. The article argues that international publicity standards, based on a registry system, could offer a new strategy for reforming secured transactions laws. The recently adopted UNCITRAL's Registry Guide is analysed and considered as a possible tool for reforming national secured transactions laws.

Swimming in Tested Waters: Increasing Access to Credit in Nigeria Through a Reform of its Secured Transactions Law with Some Recipes of UCC Article 9

It is the view of many scholars that robust economic development of a country is heavily dependent on the sufficient availability of credit in the economy. Doing business leads to jobs-creation and poverty reduction – but that can only happen if sufficient credit is made available to both business and non-business entities. However, lenders of credit are in business and should obtain some form of security, of which proprietary (in rem) security plays a key role. An internet registry which displays all security interests and encumbrances in personal property, thereby providing notice to the public regarding a particular secured transaction is highly recommended for Nigeria. In addition, all personal property should be admissible as collateral, coupled with creditors’ self-help right to repossess and sell them in the event of default. The Nigerian legal framework on secured transactions is compartmentalized and insufficient to tackle today’s commercial realities, but UCC Article 9 which has so far escaped attention of lawmakers in Nigeria may offer a number of recipes for Nigeria’s secured transactions law reform.

Publicity in Secured Transactions Law

Publicity in Secured Transactions Law

Systemic and Topical Mapping of the Relationship of the Draft Common Frame of Reference and Arbitration

The work endeavors to blaze a trail to the uncharted relationship of the most meaningful recent product in the area of European private and commercial law – the Draft Common Frame of Reference (DCFR) – and international commercial arbitration. The focus is on three areas of private and commercial law – i.e., sales, franchise and secured transactions (collateral) law (systemic mapping) – and on the specific issues of culpa in contrahendo (liability for breaking the negotiations), remedies for breach of contracts and force majeure (topical mapping). The main findings of the paper are the following:First, as arbitration of sales disputes has become quite normal by now, the DCFR – especially the six-volumes of Comments thereto (Oxford University Press publication) – could turn into a valuable tool of orientation for laws of Europe. Secondly, Europe could learn from the rich experiences of the United States as far as the arbitration of franchise and financial contracts (including disputes related to self-help repossession) is concerned. This is of importance because the DCFR is recommending introduction of business format franchise as a nominated contract and out-of-court enforcement (self-help) as important building block of a new secured transactions law for Europe; both essentially stemming from the United States.Thirdly, primarily due to the backpedaling of the European Union, however, the advancement of the DCFR as a tool for arbitrators is doomed to be very slow. One of the problems is that, save some isolated efforts, nobody is really working on spreading the information on the DCFR, in particular in arbitral circles. Fourthly, the DCFR (esp. the Comments) might prove to be, however, a valuable tool for comparatively oriented scholars and for teaching European private and commercial law. Last but not least, perhaps the most important contribution of the DCFR are enshrined in Book IX and X, the two clearly most forward-looking parts of this soft law instrument. Inherent in these are two important recommendation for Europe: while the message of Book IX is that Europe should embrace the unitary model of secured transactions law originating in Article 9 of the Uniform Commercial Code, Book X stresses the need of the introduction of the concept of ‘trust.’