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Principles of European Law

Proprietary Security in Movable Assets

Bearbeitet vonUlrich Drobnig

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Principles of European LawStudy Group on a European Civil Code

| Proprietary Security in Movable Assets(PEL Prop. Sec.)



Principles of European LawStudy Group on a European Civil Code

| Proprietary Security in Movable Assets(PEL Prop. Sec.)

prepared by

Ulrich Drobnig Ole Böger

with advice from the Advisory Council and the Drafting Committee approved by the

Co-ordinating Group

s |e | l |psellier european law publishers


The Hamburg Working GroupMembers of the Study Group on a European Civil Code’s Hamburg Working Group onPersonal and Proprietary Security under the direction of the senior author, ProfessorUlrich Drobnig, were:

Christopher Bisping, LL.M. (2000–2003),Luca Bizarri (2004),Dr. Ole Böger, LL.M. (2003–2008),Cristiana Cicoria (2003–2004),Dr. Francesca Fiorentini (2004–2008),Alessio Greco (2004),Judith Hauck, LL.M. (2001–2009),Menelaos Karpathakis (1999–2003),Caroline Lebon (2000–2002),Birte Lorenzen (1999–2000),Dr. Alumudena de la Mata Munoz (1999–2003),Teresa Pereira (2003), Frank Seidel (2000–2002),Dr. Malene Stein Poulsen, LL.M. (2000–2009),Yves Thiery (2002).

The Advisory CouncilThe Working Group had the benefit of discussions with and advice from an AdvisoryGroup consisting of Professor Hugh Beale (Warwick), Professor Michael G. Bridge(London), Professor Angel Carrasco Perera (Toledo), Professor Pierre Crocq (Paris),Justitierådet Professor Torgny Håstad (Stockholm), Professor Matthias Storme (Leuven),Professor Luboš Tichý (Prague), ProfessorAnna Veneziano (Rome) and Professor FryderykZoll (Cracow).

The Co-ordinating GroupProfessor Guido Alpa (Genua/Rome, until May 2005), Professor Kaspars Balodis(Riga, December 2004 until December 2006), Professor Christian von Bar (Osnabrück),Professor Maurits Barendrecht (Tilburg, until May 2005), Professor Hugh Beale(Warwick), Dr. Mircea-Dan Bob (Cluj Napoca, since June 2007)Professor Michael Joachim Bonell (Rome), Professor Mifsud G. Bonnici (Valetta, sinceDecember 2004), Professor Carlo Castronovo (Milan), Professor Eric Clive (Edinburgh),Professor Eugenia Dacoronia (Athens), Professor Ulrich Drobnig (Hamburg),Professor Bénédicte Fauvarque-Cosson (Paris),Professor Marcel Fontaine (Louvain La Neuve, until December 2003),Professor Andreas Furrer (Luzern, since December 2003),Professor Jacques Ghestin (Paris), Professor Sir Roy Goode (Oxford, until December 2002),Professor Viggo Hagstrøm (Oslo, since June 2002),Professor Arthur Hartkamp (The Hague, until December 2002),Justitierådet Professor Torgny Håstad (Stockholm), Professor Johnny Herre (Stockholm),Professor Martijn Hesselink (Amsterdam), Professor Ewoud Hondius(Utrecht, until May 2005), Professor Jérôme Huet (Paris), Professor Giovanni Iudica(Milan, since June 2004), Dr. Monika Jurčova (Trnava, since June 2006),


Professor Konstantinos Kerameus (Athens),Professor Ole Lando (Copenhagen), Professor Kåre Lilleholt (Bergen, since June 2003),Professor Brigitta Lurger (Graz), Professor Hector MacQueen (Edinburgh),Professor Denis Mazeaud (Paris, since June 2005), Professor Ewan McKendrick (Oxford),Professor Valentinas Mikelenas (Vilnius, since December 2004),Professor Eoin O’Dell (Dublin, until June 2006),Professor Edgar du Perron (Amsterdam), Professor Denis Philippe (Leuven, since June2004), Professor Jerzy Rajski (Warsaw), Professor Christina Ramberg (Gothenburg),Professor Philippe Rémy (Poitiers, until June 2005), Judge Professor EncarnaRoca y Trias (Madrid/Barcelona), Professor Peter Schlechtriem† (Freiburg i. Br.),Professor Martin Schmidt-Kessel (Osnabrück, since December 2004),Professor Jorge Sinde Monteiro (Coimbra, until December 2004),Professor Lena Sisula-Tulokas (Helsinki), Professor Sophie Stijns (Leuven),Professor Matthias Storme (Leuven), Dr. Stephen Swann (Osnabrück),Professor Christian Takoff (Sofia, since June 2007), Professor Luboš Tichý(Prague, since June 2005), Professor Verica Trstenjak (Maribor, until December 2006),Professor Vibe Ulfbeck (Copenhagen, since June 2006), Professor Paul Varul(Tartu, since June 2003), Professor Lajos Vékás (Budapest),Professor Anna Veneziano (Teramo).

Further Members of the Study Group’s Advisory CouncilsProfessor John W. Blackie (Strathclyde, Tort and Trust Law), Professor Michael Bridge(London, Property Law and Security), Professor Angel Carrasco (Toledo, Security),Professor Pierre Crocq (Paris, Security), Professor Helmut Grothe (Berlin, Lease of Goods),Professor Jan Kleineman (Stockholm, Tort Law, until June 2003),Professor Irene Kull (Tartu, Lease of Goods; Gratuitous Contracts; Trust Law),Professor Marco Loos (Amsterdam, Service Contracts; Mandate),Professor Graham Moffat (Warwick, Trust Law, since May 2006),Professor Guillermo Palao Moreno (Valencia, Tort Law),Professor Maria A.L. Puelinckx-van Coene (Antwerp, Gratuitous Contracts),Professor Stefano Troiano (Verona, Gratuitous Contracts),Professor Antoni Vaquer Aloy (Lleida, Lease of Goods; Gratuitous Contracts),Professor Alain Verbeke (Leuven and Tilburg, Lease of Goods),Professor Anders Victorin † (Stockholm, Lease of Goods),Professor Sarah Worthington (London, Lease of Goods).


ISSN 1860-0905ISBN (print) 978-3-935808-65-1ISBN (eBook) 978-3-86653-910-5

The Deutsche Nationalbibliothek lists this publication in the Deutsche Nationalbibliogra-fie; detailed bibliographic data are available on the Internet at http://dnb.dnb.de.

© 2015 by sellier european law publishers GmbH, Munich together withStudy Group on a European Civil Code

All rights reserved. No part of this publication may be reproduced, translated, stored in a re-trieval system or transmitted, in any form or by any means, electronic, mechanical, photo-copying, recording or otherwise, without prior permission of the publisher.

Production: Karina Hack, Munich. Typesetting: fidus Publikations-Service GmbH, Nörd-lingen. Printing and binding: Friedrich Pustet, Regensburg. Printed on acid-free, non-ageing paper. Printed in Germany.

Volume 11

To be cited as: PEL / Drobnig, Böger, Proprietary Security in Movable Assets, Introduction, A, 1 PEL / Drobnig, Böger, Proprietary Security in Movable Assets, Chapter 1, Article IX.–1:101, Comments, A PEL / Drobnig, Böger, Proprietary Security in Movable Assets, Chapter 1, Article IX.–1:101, Nat. Notes, I, 1


Foreword

The Study Group on a European Civil Code has taken upon itself the task of drafting com-mon European principles for the most important aspects of the law of obligations and forcertain parts of the law of property in moveables which are especially relevant for the func-tioning of the common market. It was founded in 1999 as a successor body to the Com-mission on European Contract Law, on whose work the Study Group has been building.

Both groups have undertaken to ascertain and formulate European standards of ‘patrimo-nial’ law for the Member States of the European Union. The Commission on EuropeanContract has achieved this for the field of general contract law (Lando and Beale [eds.],Principles of European Contract Law, Parts I and II combined and revised, The Hague,2000; Lando/Clive/Prüm/Zimmermann [eds.], Principles of European Contract Law PartIII, The Hague, 2003). These Principles of European Contract Law (PECL) have beenadopted with adjustments by the Study Group on a European Civil Code to take accountof new developments and input from its research partners. The Study Group has itselfdovetailed its principles with those of the PECL, extending their encapsulation of standardsof patrimonial law in three directions: (i) by developing rules for specific types of contracts;(ii) by developing rules for extra-contractual obligations, i.e. the law of non-contractualliability arising out of damage caused to another (tort/delict), the law of unjustified enrich-ment, and the law of benevolent intervention in another’s affairs (negotiorum gestio); and(iii) by developing rules for fundamental questions in the law on mobile assets – in par-ticular transfer of ownership, security for credit, and trust.

The results of the research conducted by the Study Group on a European Civil Code seek toadvance the process of Europeanisation of private law. We have undertaken this endeavouron our own personal initiative and merely present the results of a pan-European researchproject. It is a study in comparative law in so far as we have always taken care to identify thelegal position in the Member States of the European Union and to set out the results of thisresearch in the introductions and notes. That of course does not mean that we have onlybeen concerned with documenting the pool of shared legal values or that we simply adopt-ed the majority position among the legal systems where common ground was missing.Rather we have consistently striven to draw up “sound and fitting” principles, that is tosay, we have also recurrently developed proposals and concepts for the further develop-ment of private law in Europe.

The working methods of the Commission on European Contract Law and the Study Groupon a European Civil Code were likewise quite similar. The Study Group, however, has hadthe benefit of Working (or Research) Teams – groups of younger legal scholars under thesupervision of a senior member of the Group (a Team Leader) which undertook the basiccomparative legal research, developed the drafts for discussion and assembled the extensivematerial required for the notes. Furthermore, to each Working Team was allocated a con-sultative body – an Advisory Council. These bodies – deliberately kept small in the interests

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of efficiency – were formed from leading experts in the relevant field of law who are re-presentative of the major European legal systems. The proposals drafted by the WorkingTeams and critically scrutinised and improved in a series of meetings by the respectiveAdvisory Council were submitted for discussion on a revolving basis to the actual deci-sion-making body of the Study Group on a European Civil Code, the Co-ordinatingGroup. Until June 2004 the Co-ordinating Group consisted of representatives from allthe jurisdictions belonging to the EU immediately prior to its enlargement in Spring2004 and in addition legal scholars from Estonia, Hungary, Norway, Poland, Sloveniaand Switzerland. Representatives from the Czech Republic, Malta, Latvia, Lithuania andSlovakia joined us after the June meeting 2004 in Warsaw.

Besides its permanent members, other participants in the Co-ordinating Group with vot-ing rights included all the Team Leaders and – when the relevant material was up for dis-cussion – the members of the Advisory Council concerned. The results of the deliberationsduring the week-long sitting of the Co-ordinating Group were incorporated into the text ofthe Articles and the commentaries which returned to the agenda for the next meeting of theCo-ordinating Group (or the next but one depending on the work load of the Group andthe Team affected). Each part of the project was the subject of debate on manifold occa-sions, some stretching over many years. Where a unanimous opinion could not beachieved, majority votes were taken. As far as possible the Articles drafted in English weretranslated into the other languages either by members of the Team or third parties com-missioned for the purpose. The number of languages into which the Articles could betranslated admittedly varies considerably from volume to volume. That is in part a conse-quence of the fact that not all Working Teams were equipped with the same measure offinancial support. We also had to resign ourselves to the absence of a perfectly uniformeditorial style. Our editing guidelines provided a common basis for scholarly publication,but at the margin had to accommodate preferences of individual teams. However, thisshould not cause the reader any problems in comprehension.

Work on this series of Principles of European Law had begun long before the EuropeanCommission published its Communication on European Contract Law (in 2001), its Ac-tion Plan for a more coherent European contract law (in 2003), and its follow-up Com-munication “European Contract Law and the revision of the acquis: the way forward” (in2004). These documents for their part were published before we formed the Network ofExcellence, together with other European research groups and institutions, which havebeen collaborating in the preparation of an Academic Common Frame of Reference withthe support of funds from the European Community’s Sixth Research Framework Pro-gramme. This network first published an outline edition of its research results: as a firststep, in 2008, an interim outline edition (von Bar/Clive/Schulte-Nölke et al. [eds.], Princi-ples, Definitions and Model Rules of European Private Law. Draft Common Frame of Re-ference (DCFR). Interim Outline Edition, Munich 2008); and, with revisions and additions,a final outline edition in 2009 (von Bar/Clive/Schulte-Nölke et al. [eds.], Principles, Defini-tions and Model Rules of European Private Law. Draft Common Frame of Reference(DCFR). Outline Edition, Munich 2009). A final and full edition was published later in2009 (von Bar/Clive, Principles, Definitions and Model Rules of European Private Law.Draft Common Frame of Reference (DCFR). Full Edition, Munich 2009). The texts laid

Foreword

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before the public by the Study Group on a European Civil Code are integrated in theselatter texts. However, the extensive comparative law introductions and the translations ofthe articles of the Book or Part concerned into the other languages of theMember States areonly being published in the PEL Series. Moreover, there are occasionally small discrepan-cies between the model rules published in this series and those of the Draft CommonFrame of Reference because each publication within the PEL Series is conceived and pre-pared as a self-contained treatment of the field while in the consolidated composite DCFRtext certain provisions could be trimmed. Repetitions could be avoided. It was also possibleto respond to criticism which had been made of the model rules in the PEL Series andwhich had convinced us of the need to make changes.

In order to leave no room for misunderstanding, it is important to stress that these Prin-ciples have been prepared by impartial and independent-minded scholars whose sole in-terest has been a devotion to the subject-matter. None of us have been rewarded for takingpart or mandated to do so. None of us would want to give the impression that we claim anypolitical legitimation for promoting harmonisation of the law. Our legitimation is confinedto curiosity and an interest in Europe. In other words, the volumes in this series are to beunderstood exclusively as the results of scholarly legal research within large internationalteams. Like every other scholarly legal work, they restate the current law and introducepossible models for its further development; no less, but also no more. We are not a homo-genous group whose every member is an advocate of the idea of a European Civil Code. Weare, after all, only a Study Group. The question whether a European Civil Code is or is notdesirable is a political one to which each member can only express an individual view.

Osnabrück, September 2014 Christian von Bar

Foreword

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Our sponsors and donors

The project of the Study Group on a European Civil Code represents a research endeavourin legal science of extraordinary magnitude. Without the generous financial support ofmany organisations and individuals its realisation would not have been possible.

Our thanks go first of all to the Deutsche Forschungsgemeinschaft (DFG), which has sup-plied the lion’s share of the financing for the first phase of this project, including the sal-aries of the Working Teams based in Germany and the direct travel costs for the meetingsof the Coordinating Group and the numerous Advisory Councils. The work of the DutchWorking Teams was financed by the Nederlandse Organisatie voor Wetenschappelijk On-derzoek (NWO). Further personnel costs were met by the Flemish Fonds voor Wetenschap-pelijk Onderzoek-Vlaanderen (FWO), the Onassis-Foundation, the Austrian Fonds zur För-derung der wissenschaftlichen Forschung, Norges forskningsråd (the Research Council ofNorway) and the Fundação Calouste Gulbenkian. From the middle of 2005 funds weremade available to us under the mantle of the ‘CoPECL’ Network of Excellence establishedunder the European Union’s Sixth Framework Programme for Research and TechnologicalDevelopment.

The work of the Austrian working team was financed by the Austrian Fonds zur Förderungder wissenschaftlichen Forschung (FWF) and the European Commission’s Sixth FrameworkProgram for Research and technological Development.

In addition we have consistently been able to fall back on funds made available to therespective organisers of the eighteen week long sittings of the Coordinating Group by therelevant university or other sources within the country concerned. It is therefore with thedeepest gratitude that I must also mention the Consiglio nazionale forense (Rome) and theIstituto di diritto privato of the Università di Roma La Sapienza, which co-financed themeeting in Rome (June 2000), which followed our inaugural meeting in Utrecht (Decem-ber 1999). The session in Salzburg (December 2000) was supported by the Austrian Bun-desministerium für Bildung, Wissenschaft und Kultur, the Universität Salzburg and the In-stitut für Rechtspolitik of the Universität Salzburg. The discussions in Stockholm (June2001) were assisted by the Department of Law, Stockholm University, the Supreme CourtJustice Edward Cassel’s Foundation and Stiftelsen Juridisk Fakultetslitteratur (SJF). Themeeting in Oxford (December 2001) had the support of Shearman & Sterling, the HulmeTrust, Berwin Leighton Paisner and the Oxford University Press (OUP). The session in Va-lencia (June 2002) was made possible by the Asociación Nacional de Registradores de laPropiedad, Mercantil y Bienes Muebles, the Universitat de València, theMinisterio Españolde Ciencia y Tecnología, the Facultad de Derecho of the Universitat de València, the Depar-tamento de Derecho Internacional, Departamento de Derecho Civil and the Departamentode Derecho Mercantil “Manuel Broseta Pont” of the Universitat de València, the law firmCuatrecasas, the Generalitat Valenciana, the Corts Valencianes, the Diputación Provincialde Valencia, the Ayuntamiento de Valencia, the Colegio de Abogados de Valencia and Aran-

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zadi Publishing Company. The subsequent meeting in Oporto (December 2002) was sub-stantially assisted by the Universidade Católica Portuguesa – Centro Regional do Porto. Forthe week long session in Helsinki (June 2003) we were able to rely on funds from SuomenKultuurirahasto (Finnish Cultural Foundation), the Niilo Helanderin Säätiö (Niilo Helan-der Foundation), the Suomalainen Lakimeisyhdistys (Finnish Lawyers Association), theMinistry of Justice and the Ministry for Foreign Affairs, the Nordea Bank, Roschier Holm-berg Attorneys Ltd., Hannes Snellman Attorneys Ltd., the Department of Private Law andthe Institute of International Commercial Law (KATTI) of Helsinki University. The sessionin Leuven (December 2003) was supported by Katholieke Universiteit Leuven, FaculteitRechtsgeleerdheid, and the FWO Vlaanderen Fonds voor Wetenschappelijk Onderzoek(Flanders Scientific Research Fund). The meeting of the Group in Warsaw (June 2004)was substantially assisted by the Fundacja Fundusz Wspolpracy (The Cooperation Fund)and the Faculty of Law and Administration of Warsaw University. The meeting in Milan(December 2004) was supported by the Università Bocconi and its Istituto di diritto com-parato, by theMilan Camera di Commercio, by the Associazione Civilisti Italiani and by theComune di Milano. The meeting in Berlin (June 2005) was made possible by Pricewater-houseCoopers Deutschland AG, Frankfurt/Berlin; Sievert AG & Co., Osnabrück, and byVerband deutscher Hypothekenbanken e.V., Berlin. The meeting in Tartu (December2005) was supported by the University of Tartu, its Faculty of Law, its Institute of Lawand its Institute of Private Law, by the Estonian Supreme Court, the Ministry of Justice,the Tartu City Government, Iuridicum Foundation, the Law Offices Concordia, Lepik &Luhaäär, Luiga Mody Hääl Borenius, Ots & Co, Aivar Pilv, Aare Raig, Raidla & Partners,Sorainen, Tark & Co, Teder Glikman & Partners, Paul Varul, Alvin Rödl & Partner andLextal Law Firm. The meeting in Oslo (June 2006) was made possible by the kongeligeJustis- og Politidepartement (The Royal Ministry of Justice), by Sigvald Bergesen d. y., byhustru Nankis Almennyttige stiftelse, Storebrand and the law firmsWiersholm and BA-HR.The meeting in Lucerne (December 2006) was sponsored by Schulthess Publishing Com-pany, by Schweizerischer Nationalfonds and by the Universität Luzern, the meeting in Bu-dapest (June 2007) by Eötvös Loránd Tudományegyetem (Eötvös Loránd University), byMagyar Tudományos Akadémia (the Hungarian Academy of Sciences), by MOL MagyarOlaj- és Gázipari Nyrt (the Hungarian Oil & Gas Company) and by Szalma & PartnereiÜgyvédi Iroda (Szalma & Partners Attorneys at Law), and the meeting in Prague (Decem-ber 2007) by Česká advokátní komora (the Czech Bar Association), White & Case Prague,Squire, Sanders & Dempsey, Prague, Ladislav Krym, Attorney at Law, Prague, Jan Brož,Attorney at Law, Prague and the Representation of the European Commission in Prague.Our final meeting in Athens (June 2008) had the support of the Stavros Niarchos Founda-tion, the National and Kapodistrian University of Athens, the Union of Greek Civil LawJurists and theMunicipality of Athens.We thank all of these organisations and institutionsfor the funds which they made available to us and for the extraordinary warmth of hospi-tality with which our hosts received us.

Osnabrück, September 2014 Christian von Bar

Our sponsors and donors

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Preface to this volume

As has often been said, credit is the lifeblood of commerce. The availability of security,whether as personal security or proprietary security, can greatly facilitate the provisionof credit, be it by strengthening the creditor’s trust in repayment of its advances in generalor by allowing for specific benefits for the debtor in the form of lower interest rates. Anefficient legal framework for security is therefore very much in the interest of every moderncredit-based economy.

These basic principles are now near universally accepted and have, as a matter of course,also been acknowledged in the work of the Study Group on a European Civil Code. TheStudy Group has prepared both rules on personal security and on proprietary security andboth sets of rules have also been included in the Draft Common Frame of Reference asprepared for the European Commission (Book IV.G is entitled “Personal Security”; BookIX covers the topic of the present volume “Proprietary Security in Movable Assets”).

While the Study Group’s work on personal security has already been published in 2007(Study Group on a European Civil Code, Principles of European Law on Personal Security:UlrichDrobnig, ed., Munich 2007), the authors can now complete the tasks assumed by theStudy Group in this field of law by presenting also the collection of rules, comments andnational notes on the topic of proprietary security. As will be shown throughout this vo-lume, the field of law of proprietary security is characterized by strong divergences betweendifferent legal traditions: It is a primary mission of this book both to attempt to createbridges between these traditions and to further a common understanding of general policyissues in this field of law as well as to promote modernization and the gradual acceptance ofmodern solutions that are best suited to fulfil the needs of current market practices.

Work on the topic covered by this volume started in 2006, after the volume on “PersonalSecurity” had been finalised. The members of the Study Group on a European Civil Code’sHamburg Working Group on Personal and Proprietary Security under the direction of thesenior author, Professor Ulrich Drobnig, were: Christopher Bisping, LL.M. (2000–2003),Luca Bizarri (2004), Dr. Ole Böger, LL.M. (2003–2008), Cristiana Cicoria (2003–2004),Dr. Francesca Fiorentini (2004–2008), Alessio Greco (2004), Judith Hauck, LL.M. (2001–2009), Menelaos Karpathakis (1999–2003), Caroline Lebon (2000–2002), Birte Lorenzen(1999–2000), Dr.Alumudena de la MataMuñoz (1999–2003), Teresa Pereira (2003), FrankSeidel (2000–2002), Dr.Malene Stein Poulsen, LL.M. (2000–2009), Yves Thiery (2002). TheWorking Group had the benefit of discussions with and advice from an Advisory Groupconsisting of ProfessorHugh Beale (Warwick), ProfessorMichael G. Bridge (London), Pro-fessor Angel Carrasco Perera (Toledo), Professor Pierre Crocq (Paris), Justitierådet Profes-sor Torgny Håstad (Stockholm), ProfessorMatthias Storme (Leuven), Professor Luboš Ti-chý (Prague), Professor Anna Veneziano (Rome) and Professor Fryderyk Zoll (Cracow).

The authors are obliged to several persons who have given information, especially uponlegal issues in countries with difficult languages: Dr. Gregor Dugar (University of Ljublja-na); Mrs. Gergana Kozarova (Sofia/Hamburg); Dr. Norbert Csizmazia (Budapest/Cam-

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bridge); Professor Luboš Tichý (Charles University Prague); and Professor Pestana de Vas-concelos (University of Porto). Further support has been provided by the staff of the MaxPlanck Institute for Comparative and International Private Law in Hamburg, especially byMs. Karen Kück, who has provided crucial assistance especially in the preparation of theAnnexes. All errors, obviously, remain the two authors’ own, especially with regard to thepreparation of the National Notes: The Notes to Chapters 1, 2, 5 and 6 as well as Chapter 3Sections 1 and 2 have been prepared by ProfessorDrobnig, the Notes to Chapter 3 Section 3and to Chapter 4 have been prepared by Dr. Böger.

In late 2009, the black-letter text of the Principles and the Comments on proprietary se-curity had been completed and Principles and Comments were subsequently published inthe Full edition of the Draft Common Frame of Reference (Von Bar and Clive, Vol. VI, pp.5389–5667). The elaboration of the extensive body of National Notes took much time sincethe former collaborators of the Hamburg Working Group were no longer available for thiswork. The collection of the national references and the systematic presentation of the Na-tional Notes fell essentially to the two editors of this volume and had to be completed inaddition to other pressing commitments. The delay in the publication of this volume, how-ever, presented the opportunity to take into account, amongst others, several recent codi-fications of civil law in the Central and Eastern European countries (Czech Republic 2012;Hungary 2013; Romania 2009/11) as well as important developments specifically with re-gard to the law of proprietary security in movables in other jurisdictions (see, for instance,the thorough revision of the relevant French law, especially the introduction of a new Book4 of the French Civil Code devoted to security rights, the United Kingdom Companies Act2006 (Amendment of Part 25) Regulations 2013, and, most recently, the introduction of anew regime for proprietary security in movables in Belgian law in Civil Code, Book III, newtitle XVII, as revised by Law of 11 July 2013).

While National Notes have been prepared for Chapters 1 to 6, it was decided against theinclusion of Notes to Chapter 7 which deals with enforcement: Under national law, theissues covered by this Chapter are mainly dealt with under the procedural law of the Mem-ber States, whose legal systems usually are primarily focused on judicial enforcement. TheDraft Common Frame of Reference as a whole, however, concentrates on issues of sub-stantive law.

Finally, in the process of the preparation of this volume, a few minor glitches in the blackletter text of Book IX as published in the Full edition of the Draft Common Frame ofReference were noticed by the editors: These are indicated by footnotes to the text of BookIX in this volume, suggesting an alternative wording preferred by the editors.

Hamburg and Berlin, October 2014 Ulrich DrobnigOle Böger

Preface to this volume

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Short table of contents

Text of Articles 1

Principles of European Law onProprietary Security in Movable Assets

Introduction 205

Chapter 1: General Rules

Section 1: ScopeArticle IX. – 1:101: General rule 221Article IX. – 1:102: Security right in movable asset 229Article IX. – 1:103: Retention of ownership devices: scope 241Article IX. – 1:104: Retention of ownership devices: applicable rules 260Article IX. – 1:105: Exclusions 263

Section 2: DefinitionsArticle IX. – 1:201: Definitions 267

Chapter 2: Creation and Coverage

Section 1: Creation of security rights

Subsection 1: General provisionsArticle IX. – 2:101: Methods of creation of security rights 275Article IX. – 2:102: Requirements for creation of security rights in general 278Article IX. – 2:103: Possessory and non-possessory security rights 280Article IX. – 2:104: Specific issues of transferability, existence and specification 282

Subsection 2: Granting of security rightArticle IX. – 2:105: Requirements for granting of security right 288Article IX. – 2:106: Time when security right is created by granting 293Article IX. – 2:107: Granting of security right by consumer 294Article IX. – 2:108: Good faith acquisition of security right 301Article IX. – 2:109: Good faith acquisition of security right in encumbered

corporeal asset 310

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Article IX. – 2:110: Delayed creation 317Article IX. – 2:111: Security right in cash, negotiable instruments and documents 318Article IX. – 2:112: General matters of property law 320

Subsection 3: Retention of security rightArticle IX. – 2:113: Requirements for retention of security right 321

Subsection 4: Right of retention of possessionArticle IX. – 2:114: Right of retention of possession 325

Section 2: Creation of retention of ownership devicesArticle IX. – 2:201: Retention of ownership devices 332

Section 3: Creation of security rights in specific types of assetsArticle IX. – 2:301: Encumbrance of right to payment of money 342Article IX. – 2:302: Security rights in shares of a company 350Article IX. – 2:303: Security rights in bonds 359Article IX. – 2:304: Negotiable documents of title and negotiable instruments 360Article IX. – 2:305: Security right in an accessory 363Article IX. – 2:306: Proceeds of the originally encumbered assets 365Article IX. – 2:307: Use of encumbered goods for production or combination 371Article IX. – 2:308: Use of goods subject to a retention of ownership device

for production or combination 380Article IX. – 2:309: Commingling of assets subject to proprietary security 386

Section 4: Coverage of securityArticle IX. – 2:401: Secured rights 390

Chapter 3: Effectiveness as Against Third Persons

Section 1: General rulesArticle IX. – 3:101: Effectiveness as against third persons 397Article IX. – 3:102: Methods of achieving effectiveness 402Article IX. – 3:103: Security right made effective by several methods 404Article IX. – 3:104: Change of method 405Article IX. – 3:105: Security right in an accessory to an immovable 406Article IX. – 3:106: Security right in commingled assets 408Article IX. – 3:107: Registration of acquisition finance devices 409Article IX. – 3:108: Importation of encumbered asset 412

Section 2: Possession or control by creditorArticle IX. – 3:201: Possession 415Article IX. – 3:202: Negotiable documents of title and negotiable instruments 418Article IX. – 3:203: Certificated shares and bonds 422Article IX. – 3:204: Control over financial assets 423


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Section 3: Registration

Subsection 1: Operation of the register of proprietary securityArticle IX. – 3:301: European register of proprietary security; other systems

of registration or notation 432Article IX. – 3:302: Structure and operation of the register 464Article IX. – 3:303: Retention of ownership devices and security rights 466Article IX. – 3:304: Authentication as requirement for declarations to the register 474

Subsection 2: Entries in the registerArticle IX. – 3:305: Entries to be made by secured creditor and advance filing 476Article IX. – 3:306: Minimum content of the entry in the register 479Article IX. – 3:307: Additional content of the entry 486Article IX. – 3:308: Information appearing on the register 489Article IX. – 3:309: Required consent of the security provider 489Article IX. – 3:310: Identity of security provider, description of encumbered

assets and effectiveness of registration 495Article IX. – 3:311: Amendments of entries 498Article IX. – 3:312: Transitional provision in relation to entries in other systems

of registration or notation under national law 501Article IX. – 3:313: Automated certification of entry to creditor and security

provider 502Article IX. – 3:314: Third person acting as agent of the creditor 503

Subsection 3: Protection of the security providerArticle IX. – 3:315: Security provider’s right to deletion or amendment of entry 505Article IX. – 3:316: Review of contested entries by registration office 507

Subsection 4: Accessing and searching the registerArticle IX. – 3:317: Access to the register for searching purposes 509Article IX. – 3:318: Searching the register 510

Subsection 5: Registered creditors’ duty to answerrequests for informationArticle IX. – 3:319: Duty to give information 512Article IX. – 3:320: Content of the information 518Article IX. – 3:321: Consequences of correct information given by

secured creditor 521Article IX. – 3:322: Consequences of incorrect information given by

secured creditor 524Article IX. – 3:323: Consequences of failure to give information 526Article IX. – 3:324: Form of requests and information 527


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Subsection 6: Duration, renewal and deletion of entriesArticle IX. – 3:325: Duration 528Article IX. – 3:326: Renewal 529Article IX. – 3:327: Deletion 530

Subsection 7: Transfer of the security right or of the encumbered assetArticle IX. – 3:328: Transfer of the security right: general rules 531Article IX. – 3:329: Transfer of the security right: declaration indicating the

transfer 533Article IX. – 3:330: Transfer of the encumbered asset: general rules 535Article IX. – 3:331: Transfer of the encumbered asset: declaration of transfer 542

Subsection 8: CostsArticle IX. – 3:332: Distribution of costs 545

Subsection 9: Security rights created before establishment of registerArticle IX. – 3:333: Security rights created before establishment of register 546

Chapter 4: Priority

Article IX. – 4:101: Priority: general rules 549Article IX. – 4:102: Superpriority 567Article IX. – 4:103: Continuation of priority 584Article IX. – 4:104: Fruits and proceeds: general rules 602Article IX. – 4:105: Fruits and proceeds: exceptions 605Article IX. – 4:106: Importation of encumbered asset 608Article IX. – 4:107: Priority of execution creditor 609Article IX. – 4:108: Change of ranking 611

Chapter 5: Predefault Rules

Section 1: General principlesArticle IX. – 5:101: General principles 615

Section 2: Encumbered assetsArticle IX. – 5:201: Care and insurance of the encumbered assets 623

Subsection 1: Security provider’s rights and obligationsArticle IX. – 5:202: Rights in general 633Article IX. – 5:203: Use of encumbered industrial material 635Article IX. – 5:204: Dispositions of encumbered assets by traders and

manufacturers 638Article IX. – 5:205: Unauthorised use or disposition 644


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Subsection 2: Secured creditor’s rights and obligationsArticle IX. – 5:206: Limited right of use 648Article IX. – 5:207: Banks entitled to dispose of financial assets 652Article IX. – 5:208: Appropriation of civil fruits 655

Section 3: Change of partiesArticle IX. – 5:301: Transfer of the secured right 659Article IX. – 5:302: Partial transfer of the secured right 663Article IX. – 5:303: Transfer of encumbered asset 666

Section 4: Secured creditor’s obligation to give informationabout secured right 673Article IX. – 5:401: Secured creditor’s obligation to give information about

secured right 673

Chapter 6: Termination

Article IX. – 6:101: Instances of termination of proprietary security 677Article IX. – 6:102: Loss of proprietary security due to good faith acquisition

of ownership 687Article IX. – 6:103: Prescription of the secured right 693Article IX. – 6:104: Consequences of termination 696Article IX. – 6:105: Secured creditor liable to account for proceeds 701Article IX. – 6:106: Recourse of third party security provider 702

Chapter 7: Default and Enforcement

Section 1: General rulesArticle IX. – 7:101: Secured creditor’s rights after default 711Article IX. – 7:102: Mandatory rules 715Article IX. – 7:103: Extra-judicial and judicial enforcement 716Article IX. – 7:104: Right to seek court assistance and damages 718Article IX. – 7:105: Predefault agreement on appropriation of encumbered assets 719Article IX. – 7:106: Security provider’s right of redemption 722Article IX. – 7:107: Enforcement notice to consumer 724Article IX. – 7:108: Solidary liability of several security providers 727Article IX. – 7:109: Rights of recourse of third party security provider 728


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Section 2: Enforcement of security rights

Subsection 1: Extra-judicial enforcement: rules preparatoryto realisationArticle IX. – 7:201: Creditor’s right to possession of corporeal asset 729Article IX. – 7:202: Creditor’s right to immobilise and to preserve

encumbered asset 731Article IX. – 7:203: Intervention of court or other authority 732Article IX. – 7:204: Encumbrance of a right to payment 733Article IX. – 7:205: Negotiable instrument 735Article IX. – 7:206: Negotiable document of title 735

Subsection 2: Extra-judicial enforcement: realisation ofencumbered assetArticle IX. – 7:207: General rule on realisation 736Article IX. – 7:208: Notice of extra-judicial disposition 740Article IX. – 7:209: Addressees of the notice 742Article IX. – 7:210: Time and contents of notice 743Article IX. – 7:211: Sale by public or private auction or by private sale 744Article IX. – 7:212: Commercially reasonable price 747Article IX. – 7:213: Buyer’s rights in the assets after realisation by sale 750Article IX. – 7:214: Realisation of security in right to payment or in negotiable

instrument 754Article IX. – 7:215: Distribution of proceeds 756Article IX. – 7:216: Appropriation of encumbered asset by secured creditor 758

Subsection 3: Judicial enforcementArticle IX. – 7:217: Applicable rules 760

Section 3: Rules for retention of ownership devicesArticle IX. – 7:301: Consequences of default under retention of

ownership devices 762Article IX. – 7:302: Possession, immobilisation and preservation 766

Annexes 767


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Table of contents

Foreword vii

Our sponsors and donors x

Preface to this volume xii

Text of Articles

EnglishProprietary Security in Movable Assets 3

FrenchSûretés réelles portant sur des meubles 40

GermanDingliche Sicherheiten am beweglichen Vermögen 80

ItalianGaranzie reali su beni mobili 123

SpanishDerechos reales de garantía sobre activos mobiliarios 162

Principles of European Law onProprietary Security in Movable Assets

Introduction 205

A. Functions and Basic Kinds of Security 205B. Important Developments on the Level of Regional, Inter- and

Supranational Instruments 206C. Book IX DCFR – Major Characteristics 211D. Conformity with World-Wide Developments 216E. Book IX – Relationship to other Books of the DCFR 218

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Chapter 1: General RulesSection 1: ScopeArticle IX. – 1:101: General rule

CommentsA. Security rights and retention of ownership devices 221B. Contractual security (paragraph (1)) 221C. Non-contractual security rights (paragraph (2)) 222

National NotesI. General Remark 223II. Trust 223III. Security Rights Created by Unilateral Juridical Acts 228IV. Security Rights Implied by Patrimonial Law 228

Article IX. – 1:102: Security right in movable asset

CommentsA. General remark 229B. Security right and retention of ownership devices 230C. Definition of security right (paragraph (1)) 230D. Paragraphs (2) and (3) 231E. Paragraph (2) 231F. Paragraph (3) 233

National NotesI. Main Divisions 233II. Possessory Security 234III. Non-possessory Security in Tangibles 235IV. Security Transfer of Ownership of Corporeal Assets (paragraph (4)(a)) 238V. Alternative: the Chattel Mortgage 239VI. Pledge of Monetary Claims 239VII. Security Assignment of Monetary Claims (paragraph (4)(b)) 240VIII.Sale and Lease-Back (paragraph (4)(c)) 240

Article IX. – 1:103: Retention of ownership devices: scope 241

CommentsA. Introductory remarks 242B. Retention of ownership devices and security rights 243C. Details 244

Chapter 1: General Rules Table of contents

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National NotesI. Retention of Ownership (paragraph (2)(a)) 246II. Hire-Purchase (paragraph (2)(b)) 249III. Financial Leasing (paragraph (2)(c)) 250IV. Credit Consignment (paragraph (2)(d)) 260

Article IX. – 1:104: Retention of ownership devices: applicable rules 260

CommentsA. Retention of ownership devices and rules on security rights 261B. Specific remarks 262

National Notes 262

Article IX. – 1:105: Exclusions

Comments 263

National NotesI. Security for Micro-Credits – Preliminary Remarks 264II. European Law 264III. National Legal Systems 264

Section 2: DefinitionsArticle IX. – 1:201: Definitions 267

Comments 268

National NotesI. General Remark 272II. Security Contract (paragraph (4)) 272III. Third-Party Security Holder (paragraph (12)) 273IV. Third-Party Security Provider (paragraph (13)) 273

Table of contents Chapter 1: General Rules

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Chapter 2: Creation and CoverageSection 1: Creation of security rightsSubsection 1: General provisions

Article IX. – 2:101: Methods of creation of security rights

CommentsA. Creation and third party effectiveness 275B. Proper role and effects of creation 276C. Survey of contents of Chapter 2 277D. General and specific provisions on creation of security rights 277E. Methods of creation of security rights 277F. Transfers of ownership for security purposes 278G. Retention of ownership devices 278

National Notes 278

Article IX. – 2:102: Requirements for creation of securityrights in general 278

CommentsA. General 279B. Existence of asset 279C. Transferability of asset 279D. Existence of secured right 280E. Additional requirements of the different methods of creation 280

National Notes 280

Article IX. – 2:103: Possessory and non-possessory security rights 280

Comments 281

National NotesI. General Remark 281II. Lithuanian CC Art. 4.198 (1) 282

Article IX. – 2:104: Specific issues of transferability, existenceand specification

CommentsA. Transferability of asset to be encumbered 282B. Existence of asset to be encumbered 283

Chapter 2: Creation and Coverage Table of contents

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C. Specification of asset to be encumbered 284D. Existence of secured right 284

National NotesI. General Remark 285II. Transferability of Assets to be Encumbered (paragraphs (1)–(3)) 285III. Present Conditional Right (paragraph (4)) 287

Subsection 2: Granting of security rightArticle IX. – 2:105: Requirements for granting of security right

CommentsA. General 288B. Specification of asset to be encumbered – sub-paragraph (a) 288C. Security provider’s right or authority to grant security right –

sub-paragraph (b) 289D. Secured creditor’s entitlement to security right – sub-paragraph (c) 291E. Agreement on granting of security right – sub-paragraph (d) 291

National NotesI. Contract for Proprietary Security 292II. The Security Provider’s Right to Grant a Security – Especially by a Company 293III. Entitlement and Agreement 293

Article IX. – 2:106: Time when security right is created by granting

Comments 293

National Notes 294

Article IX. – 2:107: Granting of security right by consumer 294

CommentsA. General remarks 295B. Reasons for action 295C. Three aspects requiring protective action 295D. Other rules on consumer protection 296

National NotesI. Summary of the Directive 296II. Major Rules of the Directive 297III. National Legal Systems 299

Table of contents Chapter 2: Creation and Coverage

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Article IX. – 2:108: Good faith acquisition of security right 301

CommentsA. General 302B. Survey of provisions on good faith acquisition in proprietary security law 303C. Good faith acquisition of a security right under the present Article 304D. Position of the owner after good faith acquisition by secured creditor 309

National Notes 310

Article IX. – 2:109: Good faith acquisition of security right inencumbered corporeal asset 310

CommentsA. General 311B. Good faith acquisition of a security right according to the present Article

paragraph (1) 311C. Good faith acquisition of a security right according to IX. – 2:109

paragraph (3) 316D. Effects of good faith acquisition of a security right in disregard of earlier

security right 316

National Notes 317

Article IX. – 2:110: Delayed creation

Comments 317

National Notes 317

Article IX. – 2:111: Security right in cash, negotiable instrumentsand documents

Comments 318

National NotesI. Introductory 319II. Security Rights in Cash 319III. Security Rights in Negotiable Instruments 319IV. Security Rights in Negotiable Documents 320


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Article IX. – 2:112: General matters of property law 320

Comments 320

National Notes 321

Subsection 3: Retention of security rightArticle IX. – 2:113: Requirements for retention of security right

CommentsA. General 321B. Requirements for creation of security right by retention 322C. Time when security right is created by retention 324D. Transferee regarded as security provider 324E. Priority of retained security right 324

National Notes 325

Subsection 4: Right of retention of possessionArticle IX. – 2:114: Right of retention of possession

CommentsA. General 325B. Policy 326C. Requirements for creation of security right on the basis of right of

retention of possession 326D. Effectiveness and priority of right of retention of possession 327

National NotesI. General 327II. Legal Character 328III. Individual Countries 328IV. Groups of Countries 331

Section 2: Creation of retention of ownership devicesArticle IX. – 2:201: Retention of ownership devices

CommentsA. General 332B. Requirements for retention of ownership devices 333C. Retention of ownership devices as acquisition finance devices 335


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National NotesI. Creation of Retention of Ownership Devices (paragraph (1)(a) and (b)) 336II. Transfer of Ownership Subject to Suspensive Condition (paragraph (1)(d)) 340III. Transfer of Ownership Subject to Suspensive Condition (paragraph (2)) 341

Section 3: Creation of security rights in specific types of assetsArticle IX. – 2:301: Encumbrance of right to payment of money

CommentsA. General 342B. Scope of application 342C. Application of provisions on assignment 342D. Encumbrance of security provider’s right against secured creditor 343E. Extension of encumbrance to security rights 343

National NotesI. General Remark 344II. Pledge of Monetary Claims 344III. Security Assignment of Monetary Claims 347IV. Encumbrance of Security Provider’s Right Against Secured Creditor

(paragraph (3)) 349V. Extension of encumbrance to security rights (paragraph (4)) 350

Article IX. – 2:302: Security rights in shares of a company 350

CommentsA. Scope of application of possessory security rights 351B. Possessory security rights in shares of a company 351C. Scope of security rights in shares of a company 352

National NotesI. Introductory Remarks 352II. Basic Types of Company Shares and Bonds 353III. Certificated Company Shares and Bonds 354IV. Uncertificated Company Shares and Bonds 354V. Rights Derived From Shares and Bonds 356VI. Security Rights in Shares and Bonds 357VII. Transfer of Shares 358VIII.Regime for Border-Crossing Transactions 359


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Article IX. – 2:303: Security rights in bonds

Comments 359

National NotesI. General Remark 359II. Negotiable Instruments 360

Article IX. – 2:304: Negotiable documents of title andnegotiable instruments

CommentsA. Negotiable documents and negotiable instruments 360B. Scope of security rights in negotiable documents of title 361C. Scope of security rights in negotiable instruments 361D. Possessory security rights in negotiable documents and instruments 361

National NotesI. General Remarks 361II. Negotiable Documents of Title 361

Article IX. – 2:305: Security right in an accessory

CommentsA. “Accessory” 363B. Legal consequences 363

National NotesI. Principle 364II. Relevant Legislation 364

Article IX. – 2:306: Proceeds of the originally encumbered assets

CommentsA. Basic idea 365B. Exceptions 366C. Effectiveness and priority 367

National NotesI. Substitution for Encumbered Asset 367II. Subrogation of Insurer to the Rights of Insured 368III. Civil and Natural Fruits of Possessory Security 371


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Article IX. – 2:307: Use of encumbered goods for productionor combination 371

CommentsA. General 372B. Use of encumbered assets for production of new goods 372C. Combination of encumbered assets with other assets 374D. Effectiveness and priority 374E. Paragraph (3): Delimitation between Books VIII and IX 374F. Paragraph (4): Security rights of former holder of encumbrance in material

extend to security rights of former owner of material 375

National NotesI. Demarcation between Relevant Rules in Books VIII and IX 376II. Security Rights after Production 376III. Security Rights after Combination of Materials 378IV. Security Rights of Former Owner of Material Created by Party Agreement 378V. Security Right Encumbering Claim for Damages of Former Owner of Material 378VI. Relevant Model Rules of Book VIII DCFR 379

Article IX. – 2:308: Use of goods subject to a retention of ownershipdevice for production or combination

CommentsA. General 380B. Modified application of Chapter 5 of Book VIII (paragraph (1)) 381C. Rights of holder of retention of ownership device after production

or combination 383

National NotesI. Material Subject to Retention of Ownership Used for Production

(paragraph (2)) 385II. Material Subject to Retention of Ownership Used for Combination

(paragraph (3)) 386

Article IX. – 2:309: Commingling of assets subject toproprietary security 386

CommentsA. Commingling of goods subject to a security right 387B. Commingling of goods subject to a retention of ownership device 387C. Financial assets 388


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National NotesI. Security Rights in Share of a Separable Mass or Mixture (paragraph (1)) 389II. Retention of Ownership in a Share of a Separable Mass or Mixture

(paragraph (2)) 389III. Right to Separation (paragraph (3)) 390IV. Financial Assets Commingled in a Fund 390

Section 4: Coverage of securityArticle IX. – 2:401: Secured rights

Comments 391

National NotesI. Ancillary Rights of Specific Security (paragraph (1)) 391II. Legal Proceedings and Enforcement Proceedings Against the Security

Provider (paragraph (2)) 393III. Global Security (paragraph (3)) 393

Chapter 3: Effectiveness as Against Third PersonsSection 1: General rulesArticle IX. – 3:101: Effectiveness as against third persons

CommentsA. Chapter 3 in general 397B. Three classes of third persons – paragraph (1) 398C. Exempted cases – paragraph (2) 399D. Good faith acquisition and effectiveness – paragraph (3) 400

National Notes 401

Article IX. – 3:102: Methods of achieving effectiveness

CommentsA. Paragraph (1): registration 402B. Paragraph (2): possession and control 402

National NotesI. Introduction 403II. The Methods for Achieving Effectiveness 403

Table of contents Chapter 3: Effectiveness as Against Third Persons

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Article IX. – 3:103: Security right made effective by several methods

CommentsA. Factual alternatives of applying more than one method to

achieve effectiveness 404B. Legal issues 404

National Notes 405

Article IX. – 3:104: Change of method

Comments 405

National NotesI. Introductory Remarks 406II. Illustrations 406

Article IX. – 3:105: Security right in an accessory to an immovable

Comments 406

National NotesI. Preliminary Remark 407II. Security Right in Accessory to an Immovable 407III. Effectiveness by Registration or Annotation in Land Register 407

Article IX. – 3:106: Security right in commingled assets

CommentsA. General remark 408B. Paragraph (1) 408C. Paragraph (2) 408

National Notes 408

Article IX. – 3:107: Registration of acquisition finance devices

CommentsA. General remark 409B. Starting point 409

Chapter 3: Effectiveness as Against Third Persons Table of contents

xxxii


C. Special aspects: Non-consumer buyers, hire-purchasers, lessors or consignees 410D. Special aspects: consumer buyers, hire-purchasers or lessees 411

National Notes 412

Article IX. – 3:108: Importation of encumbered asset

CommentsA. Issue 412B. Solution 413

National NotesI. Germany 413II. Netherlands 414

Section 2: Possession or control by creditor 415Article IX. – 3:201: Possession

CommentsA. Possession and control 415B. The scheme of the Article 416C. The three fact patterns 416D. Special types of possessory security rights 417

National NotesI. General 417II. Third Party as Security Provider (sub-paragraph (b)) 418

Article IX. – 3:202: Negotiable documents of title andnegotiable instruments

CommentsA. Possession of negotiable documents and negotiable instruments 418B. Exception: Interruption of possession of the covered assets 419

National NotesI. General Remark 419II. Which Documents Qualify? 419III. Negotiable Documents of Title 420IV. Possessory Pledges of Negotiable Documents and Instruments 420V. Exception – Short Term Relinquishment for Specific Purposes 421


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Article IX. – 3:203: Certificated shares and bonds

Comments

National NotesI. Uncertificated Shares and Bonds 422II. European Law 422III. Member States 422

Article IX. – 3:204: Control over financial assets 423

CommentsA. General remark 424B. Scope of application of the concept of control 424C. Methods of control over intermediated financial assets 425D. Methods of control over non-intermediated financial instruments 425E. Requirements of form 426F. Control by different secured creditors 426G. Superpriority 426

National NotesI. European Roots 426II. Transformation of the Directive into the National Laws 427III. Scope of Application of the Concept of Control 429IV. Methods of Control over Intermediated Financial Assets 430V. Methods of Control over Non-Intermediated Financial Assets 431VI. Formal Requirements 432

Section 3: RegistrationSubsection 1: Operation of the register of proprietary securityArticle IX. – 3:301: European register of proprietary security;other systems of registration or notation 432

CommentsA. Publicity by registration as standard in modern proprietary security legislation 433B. Objectives of a system of publicity by registration 433C. General characteristics of the system of registration under these rules 435D. Deviations from other notice filing systems 436E. Establishment of a European register of proprietary security 437F. Other registers or systems of notation 437

National NotesI. General Registers for Proprietary Security in Movables 438II. Registers for Proprietary Security in Movables for Enterprises or Companies 440


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III. Registers for Proprietary Security in Specific Types of Property 442IV. Member States without General Systems of Publicity by Registration 444V. Common Exemptions from Publicity Requirements for Specific Types

of Security 445VI. Priority Between Different Registers (General and Specific Registers) 453VII. Other Types of Registration and Similar Institutions 454VIII.Main Features (1): Registration as Method for Achieving Third Party

Effectiveness 455IX. Main Features (2): Determination of Priority by Order of Registration 457X. Main Features (3): Effects on Good Faith Acquisition 459

Article IX. – 3:302: Structure and operation of the register

Comments 464

National NotesI. Real Folio and Personal Folio System 464II. Electronic and Paper-Based Systems of Registration 465III. Accessibility 466

Article IX. – 3:303: Retention of ownership devices and security rights

Comments 466

National NotesI. Retention of Ownership Devices without Requirement of Registration 467II. Requirement of Written Form for Retention of Ownership Devices 469III. Differentiation Between Simple and Extended Retention of Ownership Devices 470IV. Requirements of Registration and (Financial) Leasing 471V. Systems Requiring Registration for Retention of Ownership Devices 471VI. Specific Time Limits for Registration for Retention of Ownership Devices 473

Article IX. – 3:304: Authentication as requirement fordeclarations to the register

CommentsA. Authentication 474B. Enrolment or use of online identity verification systems of general application 474C. Consent 475D. Identification 475

National Notes 475


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Subsection 2: Entries in the registerArticle IX. – 3:305: Entries to be made by secured creditor andadvance filing

Comments 476

National NotesI. Person Responsible for Registration 477II. Direct Entry System or Registration by Registrar 477III. Advance Registration 478IV. Time Limit for Registration after Creation of Proprietary Security 478

Article IX. – 3:306: Minimum content of the entry in the register

Comments 480

National NotesI. Required Descriptions of Encumbered Assets 481II. Particulars of the Security Agreement 483III. Indication of Category of Encumbered Assets 484IV. Indication of Identity of Security Provider 484V. Indication of Identity of Secured Creditor 485VI. Undertaking by the Registrant 485VII. Security Provider’s Consent 485

Article IX. – 3:307: Additional content of the entry

Comments 486

National NotesI. Indication of a Maximum Amount of the Security 486II. Indication of the Amount of the Secured Obligation 487III. Date of Expiry 487IV. Type of Security 487V. Security Provider’s Authority to Dispose of Collateral 488VI. Other Additional Information 488


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Article IX. – 3:308: Information appearing on the register

Comments 489

National Notes 489

Article IX. – 3:309: Required consent of the security provider

CommentsA. The requirement of consent of the security provider in general 490B. “Formal” declaration of consent and “substantive” consent distinguished 491C. Possible types of declarations of consent 492

National NotesI. Requirement of Consent by Security Provider 492II. Method of Declaration of Consent 493III. Distinction Between Declaration of Consent for Purposes of Registration and

Substantive Consent 494IV. Consequences of Filing without the Security Provider’s Consent 494

Article IX. – 3:310: Identity of security provider, description ofencumbered assets and effectiveness of registration

Comments 495

National NotesI. Identification of Security Provider 496II. Description in Register Must Cover Encumbered Assets 496III. Whether Proceeds Are Automatically Covered 497IV. Security Right Covering All Assets of Security Provider 497V. Interpretation of Entries 498

Article IX. – 3:311: Amendments of entries 498

Comments 498

National NotesI. Competence to Amend Entries 499II. Preservation of Original Text 499III. No Retroactive Effect of Amendments Extending the Rights under

the Original Entry 499IV. Content of Amendments 500


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Article IX. – 3:312: Transitional provision in relation to entries in othersystems of registration or notation under national law

Comments 501

National Notes 502

Article IX. – 3:313: Automated certification of entry to creditorand security provider

Comments 502

National Notes 502

Article IX. – 3:314: Third person acting as agent of the creditor

Comments 503

National Notes 504

Subsection 3: Protection of the security providerArticle IX. – 3:315: Security provider’s right to deletion oramendment of entry

Comments 505

National NotesI. Deletion of Registration by Secured Creditor 505II. Security Provider’s Right to Deletion of Registration in Case of Termination 506III. Deletion of Registration Merely Declaratory as Between the Parties 506

Article IX. – 3:316: Review of contested entries by registration office 507

Comments 507

National Notes 507


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Subsection 4: Accessing and searching the registerArticle IX. – 3:317: Access to the register for searching purposes

Comments 509

National Notes 510

Article IX. – 3:318: Searching the register

CommentsA. Methods of searching the register 510B. Searching possibilities and third persons’ constructive notice 510

National Notes 511

Subsection 5: Registered creditors’ duty to answer requestsfor informationArticle IX. – 3:319: Duty to give information 512

CommentsA. General 512B. Parties involved 513C. Particulars of the duty to give information 514

National NotesI. Duty to Give Information About Scope of Proprietary Security 515II. Information to be Given by Registrar 515III. What Information is Required from Secured Creditor 515IV. Time of Information 516V. General Information Duties of Secured Creditor 516VI. Limitation of Secured Creditor’s Information Duties 517VII. Consequences of Failure to Comply with Information Duty 517

Article IX. – 3:320: Content of the information

CommentsA. Content of the information 519B. Language of the information – paragraph (4) 519C. Exceptions – paragraph (5) 520D. Information concerning the obligation covered by the security 520

National Notes 521


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Article IX. – 3:321: Consequences of correct information givenby secured creditor 521

CommentsA. General survey 521B. Correct information that assets are not encumbered – paragraph (1) 521C. Correct information that assets are encumbered – paragraph (2) 523D. Relative effects of the Article 523

National Notes 523

Article IX. – 3:322: Consequences of incorrect informationgiven by secured creditor 524

CommentsA. Incorrect information that assets are not encumbered – paragraph (1) 524B. Incorrect information that assets are encumbered – paragraph (2) 525

National Notes 525

Article IX. – 3:323: Consequences of failure to give information 526

CommentsA. Paragraph (1): failure to give information 526B. Paragraph (2): delayed answer 527

National Notes 527

Article IX. – 3:324: Form of requests and information

Comments 527

National Notes 527

Subsection 6: Duration, renewal and deletion of entriesArticle IX. – 3:325: Duration

Comments 528

National Notes 528


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Article IX. – 3:326: Renewal

Comments 529

National Notes 530

Article IX. – 3:327: Deletion

Comments 530

National Notes 530

Subsection 7: Transfer of the security right or of theencumbered assetArticle IX. – 3:328: Transfer of the security right: general rules 531

CommentsA. General rules 531B. Other secured creditors 531C. Prospective creditors 532D. Security provider 532E. Secured creditor (transferee) 532

National Notes 533

Article IX. – 3:329: Transfer of the security right: declarationindicating the transfer

Comments 534A. Amendment of the original entry 534B. New entry indicating the transfer 534

National Notes 535

Article IX. – 3:330: Transfer of the encumbered asset: general rules

Comments 535A. Transfer of ownership of encumbered asset does not necessarily affect

effectiveness of security right 536B. Conflicts between original secured creditor and persons acquiring

proprietary rights (including security rights) from transferee 537


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C. Transferee as security provider 540D. Transfer of assets subject to an existing retention of ownership device 540

National Notes 542

Article IX. – 3:331: Transfer of the encumbered asset:declaration of transfer

Comments 543

National Notes 545

Subsection 8: Costs

Article IX. – 3:332: Distribution of costs 545

Comments 545

National Notes 545

Subsection 9: Security rights created before establishment of registerArticle IX. – 3:333: Security rights created before establishmentof register

Comments 547

National Notes 548

Chapter 4: PriorityArticle IX. – 4:101: Priority: general rules

CommentsA. Priority in general 549B. Rules on conflicting proprietary interests outside this Chapter 550C. Priority and limited proprietary rights other than security rights 551D. Retention of ownership devices 551E. Order of priority under this Article 551F. Order of relevant time as general rule 551G. Relevant time for registered security rights 551H. Relevant time for security rights made effective by other means 553I. Relevant time for other limited proprietary rights 554J. Priority between non-effective security rights 554

Chapter 4: Priority Table of contents

xlii


K. Priority for security right acquired by good faith acquisition 554L. Exceptions for specific types of security rights 555M. Priority between effective and ineffective security rights 556

National NotesI. Priority According to Order of Time 556II. Nemo Dat Quod Non Habet as a Principle Governing Priority 560III. Good Faith Acquisition and Priority 561IV. Priority Conflicts Between Outright Assignments and Security over Claims 562V. Ineffective Proprietary Security and Priority 564VI. Priority Between Security Rights and Other Limited Proprietary Rights 564VII. Other Specific Issues Under National Law 564

Article IX. – 4:102: Superpriority

CommentsA. Superpriority in general 567B. Security rights as acquisition finance devices 567C. Retention of ownership devices 569D. Security rights in financial assets made effective by control or possession 571E. Right of retention of possession according to IX. – 2:114 572F. Exceptions – paragraph (4) 573G. Superpriority outside this Book 573

National NotesI. Acquisition Finance Devices as Security Rights with Specific Priority Rules 573II. Acquisition Finance Devices Based upon Retention of Ownership 575III. Other Expressions of the Preferential Status of Acquisition Finance Devices

Based upon the Concept of Retained Ownership 576IV. Specific Issues Concerning the Superpriority of Acquisition Finance Devices 580V. Control and Possession of Financial Assets 581VI. Priority of Rights of Retention of Possession 582VII. Other Instances of Superpriority, Especially Ex Lege Security of the

Unpaid Seller 583

Article IX. – 4:103: Continuation of priority

CommentsA. Continuation of priority and individual determination of priority

distinguished 584B. Continuation of priority as exception 585C. Encumbered asset becomes an accessory 585D. Production, commingling and combination 586

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National NotesI. Priority Where Collateral Becomes an Accessory 587II. Priority of Security in Cases of Production, Commingling or Combination 587III. Priority of Security Rights in Fruits and Proceeds of the Original Collateral 588IV. Preservation of Superpriority in Assets Other than the Original Collateral 590V. Specific Rules on the Acquisition of Ownership in Products of Assets Subject

to Retention of Ownership Devices 598

Article IX. – 4:104: Fruits and proceeds: general rules

CommentsA. General 602B. Fruits and proceeds of the same kind as the original assets 603C. Rights to payment due to defects in, damage to, or loss of the original assets 603D. Fruits and proceeds covered by the original registration 604

National Notes 605

Article IX. – 4:105: Fruits and proceeds: exceptions

CommentsA. General 605B. General rule: no continuation of superpriority for security rights in fruits

and proceeds – paragraph (1) 606C. Exceptions – paragraph (2) 606

National Notes 607

Article IX. – 4:106: Importation of encumbered asset

Comments 608

National Notes 608

Article IX. – 4:107: Priority of execution creditor

Comments 609

National Notes 610

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Article IX. – 4:108: Change of ranking

Comments 611

National Notes 612

Chapter 5: Predefault RulesSection 1: General principlesArticle IX. – 5:101: General principles

CommentsA. Predefault stage 615B. Predefault rules: creation and effectiveness of security right 615C. Retention of ownership devices 616D. Parties’ freedom to determine their relationship concerning the

encumbered asset 616E. No appropriation before or at default 617F. Retention of ownership devices 618

National NotesI. Party Autonomy for Security Rights (paragraph (1)) 618II. Lex Commissoria (Forfeiture Clause) (paragraph (2)) 619III. Retention of Ownership Devices (paragraph (2) sent. 2) 623

Section 2: Encumbered assetsArticle IX. – 5:201: Care and insurance of the encumbered assets

CommentsA. Specific application of the principle of good faith 623B. Preservation and maintenance 624C. Obligation to keep assets identifiable 624D. Right to inspection 625E. Insurance 625F. Sanctions 625G. Exceptions and agreements to the contrary 626

National NotesI. Separation of Assets 626II. Care and Maintenance of Encumbered Asset 627III. Inspection of Encumbered Assets 630IV. Insurance 631V. Protection 632VI. Consequences of Devaluation of Encumbered Assets 632

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Subsection 1: Security provider’s rights and obligationsArticle IX. – 5:202: Rights in general

CommentsA. General 633B. Use in a reasonable manner 634C. Sanctions 634

National NotesI. Right to Use 634II. Possessory Security 635

Article IX. – 5:203: Use of encumbered industrial material

Comments 635

National NotesI. No General Rule in National Legal Systems 636II. Global Securities 636III. Extension of Specific Security into Products 637

Article IX. – 5:204: Dispositions of encumbered assets bytraders and manufacturers

CommentsA. General 638B. Dispositions of inventory or products – paragraph (1) 639C. Prohibition of dispositions of equipment – paragraph (2) 639D. Position of the transferee 640E. Position of the security provider after disposition 640

National NotesI. Introductory Remark 641II. Global Securities: Enterprises 641III. Security Rights in Inventory (paragraph (1)) 642IV. Security Rights in Equipment (paragraph (2)) 643

Article IX. – 5:205: Unauthorised use or disposition

CommentsA. Liability for damages 644B. Obligation to account 645

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C. Position of the transferee 646

National Notes 646

Subsection 2: Secured creditor’s rights and obligationsArticle IX. – 5:206: Limited right of use

CommentsA. General 648B. Limited right of use 649C. Exceptions and sanctions 649

National NotesI. Prohibition of Use, Unless Agreed by Security Provider 650II. Possessory security 650III. Exceptions 651

Article IX. – 5:207: Banks entitled to dispose of financial assets

CommentsA. Banks’ and equivalent financial institutions’ right of use, appropriation

and disposition of encumbered assets – paragraph (1) 652B. Secured creditor’s obligations after satisfaction of the security right 653C. Consequences of commingling of financial assets by secured creditor 653

National NotesI. Preliminary Remarks 653II. European Law 654III. National Laws 654

Article IX. – 5:208: Appropriation of civil fruits 655

CommentsA. Security right extending to civil fruits 656B. Secured creditor’s right to collect and appropriate civil fruits 656

National NotesI. Starting Point 656II. Usufructuary Pledge 657III. Specific Applications 658IV. Pledge of Monetary Claim 659

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Section 3: Change of partiesArticle IX. – 5:301: Transfer of the secured right 659

CommentsA. Security right follows the secured right 660B. Transferor’s obligation of information 660C. Effectiveness of security right after transfer 661D. Priority of security right after transfer 661

National NotesI. The General Rule 662II. Differentiations 662III. Effectiveness of the Security Right after Transfer 663IV. Priority of Security Right after Transfer 663

Article IX. – 5:302: Partial transfer of the secured right

CommentsA. General 664B. Pro rata entitlement to security right 664C. Effectiveness of each secured creditor’s rights 664D. Priority 665

National NotesI. Introductory Remark 665II. Indivisibility of the Security Right 665III. Pro Rata Entitlement to Security Right 665IV. Effectiveness of Each Secured Creditor’s Right 666

Article IX. – 5:303: Transfer of encumbered asset

CommentsA. Existence of security right not affected by transfer of encumbered asset 667B. Transferee assumes position of security provider 667C. Effectiveness of security right after transfer of encumbered asset 668D. Priority of security rights created by transferee before transfer 668E. Retention of ownership devices 668

National NotesI. Security Right and Transfer of the Encumbered Asset (paragraph (1)) 670II. Exceptions (paragraph (2)) 670III. Priority of Security Right (paragraph (3)) 671IV. Retention of Ownership Devices and Transfer of the

Encumbered Asset (paragraph (4)) 672

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Section 4: Secured creditor’s obligation to give informationabout secured rightArticle IX. – 5:401: Secured creditor’s obligation to give informationabout secured right

CommentsA. Security provider’s right to information about secured right 673B. Participation of the debtor 673C. Sanctions 674

National NotesI. European Consumer Legislation 674II. National Notes 674III. Third Party Security Provider 675

Chapter 6: TerminationArticle IX. – 6:101: Instances of termination of proprietary security

CommentsA. General 677B. Meaning of termination 677C. Instances of termination of a security right 678D. Instances of termination of a retention of ownership device 680

National NotesI. General Principles 681II. Agreement of the Parties (paragraph (1)(a)) 681III. Waiver by Secured Creditor (paragraph (1)(b)) 682IV. Loss or Termination of Encumbered Asset (paragraph (1)(c)) 682V. Secured Creditor Acquires Encumbered Asset (paragraph (1)(d)) 683VI. Third Person Acquires Encumbered Asset (paragraph (1)(e)) 683VII. Other Cases (paragraph (1)(f)) 683VIII.Full Satisfaction of Secured Obligation (paragraph (2)) 684IX. Partial Satisfaction of Secured Obligation (paragraph (2)) 685X. Partial Satisfaction of a Partially Secured Obligation 686XI. Termination of Retention of Ownership Devices (paragraph (3)) 686

Article IX. – 6:102: Loss of proprietary security due to good faithacquisition of ownership

CommentsA. General 687B. Registration and good faith acquisition in general 688

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C. Registration and good faith acquisition of ownership in the ordinary courseof business – paragraph (2)(a) 689

D. Registration against person different from transferor – paragraph (2)(b) 690E. Other exceptions to the rule in paragraph (2) 690F. Systems of registration or notation other than the European register of

security rights 690

National NotesI. The Principle: Registration Excludes Good Faith Acquisition 691II. Exception: Good Faith Acquisition of Registered Security Right 691III. Unregistered Encumbrance: Good Faith Acquisition Excluded 692IV. Valid Acquisition of Encumbered Asset Irrespective of Good Faith 692

Article IX. – 6:103: Prescription of the secured right

CommentsA. Effect of prescription in general 693B. Effect of prescription on proprietary security 693

National NotesI. Maintaining Secured Claims for All Kinds of Security 694II. Distinction between Possessory and Non-Possessory Security Rights 695III. Expiration of Security after Secured Claim Becoming Unenforceable 696IV. Substitute Practice 696

Article IX. – 6:104: Consequences of termination 696

CommentsA. Security right automatically extinguished 697B. Possession, control and registration 697C. Assets held by third person 698D. Reversal of notice in case of notification of account debtor 698E. Retention of ownership devices 699

National NotesI. Full Termination 700II. Partial Termination 700

Chapter 6: Termination Table of contents

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Article IX. – 6:105: Secured creditor liable to account for proceeds

Comments 701

National Notes 701

Article IX. – 6:106: Recourse of third party security provider

Comments 702

National NotesI. Introductory 703II. Third Party Security Provider 704III. Categorisation 704IV. Basic Rule 704V. Specific Rules 705VI. Third Party(ies) as Exclusive Security Provider(s) 706VII. Several Third Parties as Security Providers 706VIII.General Cross-Reference 707IX. Third Person’s Recourse 707X. Recourse Among Several Third Party Security Providers 707

Chapter 7: Default and EnforcementSection 1: General rulesArticle IX. – 7:101: Secured creditor’s rights after default

CommentsA. General remarks on Chapter 7 711B. Event of default 712C. Additional conditions agreed by the parties 713D. Exercise of the rights under this Chapter 713E. Creation and effectiveness of security right 713

Article IX. – 7:102: Mandatory rules

Comments 715

Article IX. – 7:103: Extra-judicial and judicial enforcement

CommentsA. General 716B. Extra-judicial enforcement 716

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C. Judicial enforcement 717D. Consumer security providers 717E. Retention of ownership devices 718

Article IX. – 7:104: Right to seek court assistance and damages

CommentsA. Violation of rights by enforcement measures or resistance 718B. Right to call upon a competent court or other authority 719C. Right to damages 719

Article IX. – 7:105: Predefault agreement on appropriationof encumbered assets 719

CommentsA. No predefault agreement on appropriation after default 720B. Exceptions – paragraph (2) 720C. Consumer security providers 721D. Valuation of appropriated asset 721E. Retention of ownership devices 721

Article IX. – 7:106: Security provider’s right of redemption

CommentsA. Security provider’s right of redemption (paragraph (1)) 722B. Limitations of the right to redeem (paragraph (2)) 723

Article IX. – 7:107: Enforcement notice to consumer 724

CommentsA. Brief survey of rules on notices 724B. Enforcement notice to consumer security provider 725C. Retention of ownership devices 726D. Security provider’s remedies 726

Article IX. – 7:108: Solidary liability of several security providers

CommentsA. Solidary proprietary liability 727B. Solidary mixed proprietary and personal liability 728

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Article IX. – 7:109: Rights of recourse of third party security provider

Comments 728

Section 2: Enforcement of security rightsSubsection 1: Extra-judicial enforcement: rules preparatoryto realisationArticle IX. – 7:201: Creditor’s right to possession of corporeal asset

CommentsA. Scope of application of Section 2 729B. Summary of contents of Section 2 729C. Scope of Article and issue at stake 730D. Solutions 730

Article IX. – 7:202: Creditor’s right to immobilise and to preserveencumbered asset

Comments 731

Article IX. – 7:203: Intervention of court or other authority

Comments 732

Article IX. – 7:204: Encumbrance of a right to payment

Comments 733

Article IX. – 7:205: Negotiable instrument

Comments 735

Article IX. – 7:206: Negotiable document of title

Comments 735


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Subsection 2: Extra-judicial enforcement: realisation ofencumbered assetArticle IX. – 7:207: General rule on realisation

CommentsA. General 736B. Realisation of encumbered asset 736C. Enforcement notice against consumer security provider 739D. Appointment of private agent or application to court officer 739E. Realisation in the course of extra-judicial and judicial enforcement 739

Article IX. – 7:208: Notice of extra-judicial disposition

CommentsA. Notice of extra-judicial disposition 740B. Excluded cases 741

Article IX. – 7:209: Addressees of the notice

Comments 742

Article IX. – 7:210: Time and contents of notice

CommentsA. Notice to be given in due time 743B. Content of notice 743C. Language 744

Article IX. – 7:211: Sale by public or private auction or by private sale

CommentsA. General remarks 744B. Sale by public or private auction 745C. Private sale 745D. Details of the realisation by sale 746E. Acquisition by secured creditor 747F. Acquisition by security provider 747


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Article IX. – 7:212: Commercially reasonable price 747

CommentsA. Commercially reasonable price 748B. Specific instances where price regarded as commercially reasonable 748C. Right to demand auction instead of private sale where expected

price insufficient 749D. Remedies 749

Article IX. – 7:213: Buyer’s rights in the assets after realisation by sale

CommentsA. Effects of a realisation by sale in general 750B. Acquisition of ownership free of the secured creditor’s rights 750C. Junior proprietary rights are lost 751D. Senior proprietary rights generally not affected 752E. Participation of secured creditor or security provider as buyer 753F. Violation of procedural provisions irrelevant 754

Article IX. – 7:214: Realisation of security in right to paymentor in negotiable instrument

Comments 754

Article IX. – 7:215: Distribution of proceeds

Comments 756

Article IX. – 7:216: Appropriation of encumbered assetby secured creditor

Comments 758

Subsection 3: Judicial enforcementArticle IX. – 7:217: Applicable rules

CommentsA. Judicial enforcement 760B. Applicable procedural rules 761C. Available remedies 761


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Section 3: Rules for retention of ownership devicesArticle IX. – 7:301: Consequences of default under retention ofownership devices 762

CommentsA. Starting point 763B. Obtaining possession 763C. Compensation for use and diminution of value of assets 764D. Extinction of rights created by buyer, hire-purchaser, lessor or consignee –

paragraph (2) 764E. Resale or releasing 765F. Position of third person transferee of retention of ownership device 765

Article IX. – 7:302: Possession, immobilisation and preservation

Comments 766

Annexes 767

Abbreviations 769

Bibliography 775

Tables of Legislation 795

Table of English, Scottish and Irish Cases 849

Indices 853


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