Secured Transactions Law Reform: Secured Transactions Law Reform: The EBRD PerspectiveThe EBRD Perspective

Moscow, Moscow,

September 2009September 2009

Two years later

September 2007: Roundtable organised by the Duma’s Committee on Credit Organisations and Financial Markets on the very same theme

September 2009: Economic climate very different; some reforms have been adopted

What is today’s perspective?

Objective of the presentation

Why is EBRD concerned with pledge (secured transactions) legal reform?

An investment bank …

…with a development mission

Direct (or indirect) experience in lending and structuring secured transactions

Political status to relay concerns / views to government

EBRD secured transactions reform work cycle

AssessingMeasuring economic

benefits

Expressionof law-based

solutions

Accompanying reform -

Country projects

Basic tenets of secured transactionsBasic tenets of secured transactions

1. Why a pledge/mortgage law?

Economic purpose : reduce credit risk

Legal framework to be facilitative / conducive …

…Within the context (sociological and cultural) in which it operates

2. Will the reform work? Has the reform been successful?

Aim for a legally efficient framework

Legal efficiency criteria to guide / Legal efficiency criteria to guide / assess reformassess reform

Basic legal function

Maximising economic benefit

Simplicity

Speed

Cost

Certainty

Fit-to-context

“The extent to which a law and the way it is used provide the benefits that it was intended to achieve”

Main reported problems of Russian pledge law (1)

Too prescriptive law – curtailing contractual specifics

Too formalistic approach (law and interpretation by courts)

Inefficient enforcement in case of debtor’s default (procedure and realisation)

Lack of publicity on existing pledges

Pledge over bank account and pledge over account receivables practically impossible

Main reported problems of Russian pledge law (2)

No concept of security trustee

Limited types of collateral

Conflicting priority regime, leading to uncertainty

Denounced as too debtor-friendly

Problems of implementation – e.g. pledge over objects under construction

Thank you – for more information

www.ebrd.com/st

DahanF@ebrd.com