Academic journal article Law and Contemporary Problems

The Private International Law of Secured Transactions: Rules in Search of Harmonization

Academic journal article Law and Contemporary Problems

The Private International Law of Secured Transactions: Rules in Search of Harmonization

Article excerpt

I

INTRODUCTION

Based on the evidence of almost two decades, it seems likely that the secured transactions revolution that began over a half-century ago with the promulgation and widespread enactment of Article 9 of the Uniform Commercial Code will continue apace in the twenty-first century. For several decades before the turn of the twenty-first century, the revolution did not extend much beyond the United States and the Anglophone provinces of Canada, but that changed significantly in the new millennium. Much of this progress can be attributed to the work of the United Nations Commission on International Trade Law ("UNCITRAL" or the "Commission"), which has been engaged in projects relating to secured transactions since 1995.

The first UNCITRAL project resulted in the United Nations Convention on the Assignment of Receivables in International Trade (the Receivables Convention). The Convention has not yet gone into force, having been signed only by three States (1) and acceded to only by Liberia. (2) It has, however, been submitted to the United States Senate for its Advice and Consent (3) and is before the Senate at this writing. (4)

The negotiations that led to the Receivables Convention were difficult. Many participants sought to create a uniform regime for assignments of receivables, whether outright or for security, (5) that would provide uniform substantive rules for the creation, third-party effectiveness, and priority of such assignments, as well as the effect of assignments of receivables on the account debtors. While the Commission reached consensus on a number of substantive rules regarding the effect of assignments of receivables on the account debtors, consensus proved elusive with respect to substantive rules for third-party effectiveness and priority. The result was a "second best" of sorts, with a uniform set of conflict of laws rules to determine which State's law is to govern those matters. (6)

While the Receivables Convention did not accomplish all that was hoped, and it still has not gone into effect, the ability of UNCITRAL to obtain consensus as to at least some matters related to secured transactions led to a decision by the Commission to further pursue work in the field. In the last decade and a half, UNCITRAL has produced a Legislative Guide on Secured Transactions (7) (with a supplement devoted to security rights in intellectual property (8)), a Guide on the Implementation of a Security Rights Registry, (9) and most recently, a Model Law on Secured Transactions (10) and a guide to its enactment. (11)

The text of the Model Law achieves a remarkable degree of substantive harmonization to create a model legal regime that adopts a very thoughtful version of the modern notice-filing based secured transactions systems that were the focus of Article 9 of the Uniform Commercial Code (U.C.C.) in the United States, the subject of refinement in Canada in the development of its Personal Property Security Acts, and have since been enacted in several nations around the world. This consensus may have been easier to achieve than the elusive consensus in the Receivables Convention, however, because a model law is "soft law"--none of its provisions are mandatory on States, which can pick and choose among its provisions.

Even as soft law, however, the Model Law and domestic enactments of it have not yet swept the world, and even optimists would have difficulty concluding that the legal regimes based on the Model Law will come to dominate secured transactions law in the near future. Most nations have not yet taken the plunge to move to a comprehensive and systematic notice-filing based system, and those that have already adopted such systems, such as the United States, (12) the Anglophone provinces of Canada, (13) Australia, (14) and New Zealand, (15) often with more detail or nuance, may not be eager to abandon their regimes for the somewhat more generic regime envisioned by the Model Law. …

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