I. THE SIGNIFICANCE OF SECURITY
Security in personal property has become enormously important both within a country and in relation to cross-border transactions. Without an adequate legal regime for personal property security rights, it is almost impossible for a national economy to develop. Indeed, the World Bank considers the role of security so central in promoting economic growth that before making a loan to a developing country it will normally seek to establish to what extent a sound legal system for the creation and protection of security interests is or will be in place. At the international level, a number of factors have contributed to the increased dependence on security rights in cross-border transactions and the need to ensure that a security interest taken in one country will be recognized in others and will be enforceable both before and upon the debtor's insolvency. They include the following:
(a) A sharp move toward the privatization of firms previously in the public sector, with the consequent conversion of sovereign risk to enterprise risk and the replacement of unsecured with secured lending;
(b) The huge growth in the size and financing of big-ticket items, such as aircraft, oil tankers, and satellites;
(c) The expansion of multinational syndications to finance loans and projects too large to be handled by the banks of any one country;
(d) The development of multinational enterprises with assets distributed around the globe, so that the collateral given for loans is no longer located in a single country;
(e) The securitization of secured transactions, with the need to ensure a good market rating and acceptability; and
The internationalization ("globalization") of securities markets, coupled with the immobilization of tangible securities in depository institutions, leading to the substitution of rights in accounts for rights in underlying securities dispersed among financial centers around the world-in short, a move from security in things to security in bundles of rights.
II. KEY LEGAL PROBLEMS
The growth and internationalization of security interests have led to increased concerns as to whether a security interest created in one country will be recognized and enforceable in another country in broadly the same way as in the place of birth, and whether such an interest will be valid and enforceable against a liquidator or trustee in a foreign winding-up or bankruptcy. A number of factors contribute to these concerns.
First, there are wide differences in philosophy and legal culture concerning the extent to which security should be recognized at all and the conditions necessary for the validity of a security interest. Common law jurisdictions, which are generally sympathetic to the concepts of party autonomy and self-help, have a liberal attitude towards security. This attitude allows security interests to be taken with a minimum of formality over both present and future assets to secure existing and future indebtedness. In addition, they allow universal security rather than require specific security. By contrast, civil law jurisdictions have been more cautious in their approach to nonpossessory security and have been anxious about the "false wealth" which such practices are perceived as permitting. So in these jurisdictions one finds, in varying degrees, requirements of specificity or individualization of collateral, the need for a new post-acquisition act of transfer to give in rem effects to security in after-acquired property, requirements of notice to the debtor as a condition of the validity (not merely priority) of an assignment of debts, and restrictions on self-help remedies such as possession and sale of the collateral.
Second, there are acute differences in the legal characterization of security rights. In most jurisdictions outside North America (whether civil law or common law), a sharp distinction is drawn between retention of title under sale and lease contracts on the one hand and security stricto sensu on the other. …