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AMERICAN PRIVATE LAW WRIT LARGE? THE UNCITRAL SECURED TRANSACTIONS GUIDE

Published online by Cambridge University Press:  11 August 2011

Gerard McCormack
Affiliation:
Professor of International Business Law, University of Leeds.

Abstract

This article provides a critical evaluation of the main provisions of the UNCITRAL Legislative Guide on Secured Transactions. It examines the Guide in the context of other international and national secured transactions instruments including article 9 of the United States Uniform Commercial Code. The clear objective of the Guide is to facilitate secured financing. It is very facilitating and enabling, and permits the creation of security in all sorts of situations. Security is seen as a good thing, through enhancing the availability of lower-cost credit. The paper suggests that this closeness in approach to article 9 is likely to militate against the prospects of the Guide gaining widespread international acceptance. This is the case for various interlocking reasons including the battering that American legal and financial norms have taken with the global financial crisis.

Type
Article
Copyright
Copyright © 2011 British Institute of International and Comparative Law

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References

1 See the UNCITRAL website—www.uncitral.org and for background see B Foex, L Thevenoz, S Bazinas (eds), Reforming Secured Transactions: The UNCITRAL Legislative Guide as an Inspiration (Geneva, Schulthess, 2007); U Drobnig ‘Study on Security Interests’ (1977) 8 UNCITRAL Yearbook 171 ; UN Doc.A/CN.9/SER.A/1977; S Bazinas, ‘UNCITRAL's Work in the Field of Secured Transactions’ in J Norton and M Andenas (eds), Emerging Financial Markets and Secured Transactions (London, Kluwer, 1998); Buxbaum, H, ‘Unification of the Law Governing Secured Transactions: Progress and Prospects for Reform’ (2003) 8 Uniform Law Review 321CrossRefGoogle Scholar: Garro, A, ‘Harmonization of Personal Property Security Law: National, Regional and Global Initiatives’ (2003) 8 Uniform Law Review 357CrossRefGoogle Scholar; Cohen, N, ‘Internationalising the Law of Secured Credit: Perspectives from the US Experience’ (1999) 20 U Pa J Int'l Econ L 423Google Scholar.

2 For alleged poverty reduction effects see Kozolchyk, B, ‘Secured Lending and Its Poverty Reduction Effect’ (2007) 42 Texas International Law Journal 727Google Scholar and see generally DW Arner, Financial Stability, Economic Growth and the Role of Law (CUP, New York, 2007).

3 ‘Law and Development’ in Law in transition (EBRD, Autumn 2000) 7, 12.

4 ibid 13. See also Waelde, T and Gunderson, J, ‘Legislative Reform in Transition Economies: Western Transplants—A Shortcut to Social Market Economy Status’ (1994) 43 ICLQ 347CrossRefGoogle Scholar; deLisle, J, ‘Lex Americana? United States Legal Assistance, American Legal Models and Legal Change in the Post-Communist World and Beyond’ (1999) 20 University of Pennsylvania Journal of International Economic Law 179Google Scholar.

5 UNCITRAL defines its mission as the ‘modernization and harmonization’ of trade law—see www.uncitral.org/. For discussion of the thesis that so-called modernization is really a euphemism for ‘adaptation of a weaker country's laws in the direction of a powerful sovereign state or international organization which has the cultural authority to define the meaning of ‘modern’' see S Block-Lieb and Halliday, T, ‘Harmonization and Modernization in UNCITRAL's Legislative Guide on Insolvency Law’ (2007) 42 Texas International Law Journal 475481Google Scholar.

6 The World Bank Doing Business reports conclude that the wealth of a particular country is an important indicator of the effectiveness of institutions in that country that guarantee access to credit. The ‘Doing Business’ reports are available at www.doingbusiness.org/. and see generally Florencio Lopez-de-Silanes, ch 1; ‘Turning the key to credit: credit access and credit institutions’ in F Dahan and J Simpson (eds), Secured Transactions Reform and Access to Credit (Edward Elgar Publishing, Cheltenham, 2008).

7 There are also sector-specific studies that purport to demonstrate the value of particular types of collateral, and the economic impact of a stable legal environment for security creation and enforcement. One such study concerns the 2001 Cape Town Convention on International Interests in Mobile Equipment—see generally R Goode, H Kronke, and E McKendrick, Transnational Commercial Law (OUP, Oxford, 2007) 441: ‘the international regime established by the Convention could reduce borrowing costs by several US $billion a year’.

8 See H Fleisig, ‘The economics of collateral and collateral reform’ in Frederique Dahan and John Simpson (eds), Secured Transactions Reform and Access to Credit (Edward Elgar Publishing, Cheltenham, 2008) 81.

9 Draft legislative guide on secured transactions—Report of the Secretary General—Background remarks A/CN.9/WG.VI/WP.2 at p 2 and see also the report by the Asian Development Bank Secured Transactions Law Reform in Asia: Unleashing the Potential of Collateral (Manila, Asian Development Bank, 2000). But for something of an alternative perspective see R Cranston ‘Credit Security and Debt Recovery: Law's Role in Asia and the Pacific’ in J Norton and M Andenas (eds), Emerging Financial Markets and Secured Transactions (Kluwer, London, 1998) 219.

10 See generally R Cotterrell, ‘Comparative Law and Legal Culture’ in R Zimmermann and M Reimann (eds), The Oxford Handbook of Comparative Law (OUP, Oxford, 2006) and see also P Legrand ‘The same and the different’ in P Legrand and R Munday (eds), Comparative Legal Studies: traditions and transitions (CUP, Cambridge, 2003) 245.

11 Professor Zimmermann records that when the German Civil Code, the BGB, was enacted a leading German publication marked the occasion with a large front page heading ‘Ein Volk, Ein Reich, Ein Recht’ which translates as One People, One Empire, One Law—see ‘Civil Code and Civil Law, The Europeanisation’ of Private Law within the European Community and the Re-emergence of a European Legal Science' (1995) 1 Columbia Journal of European Law 65Google Scholar. See more generally Collins, HEuropean Private Law and Cultural Identity of States’ [1995] European Review of Private Law 353Google Scholar.

12 See generally Weatherill, S, ‘Why Object to the Harmonization of Private Law by the EC’ [2004] European Review of Private Law 633Google Scholar.

13 See R Cotterrell, ‘Comparative Law and Legal Culture’ in R Zimmermann and M Reimann (eds), The Oxford Handbook of Comparative Law (OUP, Oxford, 2006).

14 Kahn-Freund, OOn Uses and Misuses of Comparative Law’ (1974) 37 MLR 1CrossRefGoogle Scholar, 12.

15 On legal transplants see, for example, A Watson, Legal Transplants (Edinburgh, Scottish Academic Press, 1994) and for a range of somewhat contrary views see Legrand, P, ‘On the Unbearable Localness of the Law: Academic Fallacies and Unseasonable Observations’ [2002] European Review of Private Law 61CrossRefGoogle Scholar; The Impossibility of Legal Transplants’ (2003) 4 Maastricht Journal 111Google Scholar; Antivonbar’ (2006) 1 JCL 1Google Scholar; Teubner, G, ‘Legal Irritants: Good Faith in British Law or How Unifying Law Ends Up in New Divergences’ (1998) 61 MLR 11CrossRefGoogle Scholar. See also Markesinis, B, ‘Why a Code is Not the Best Way to Advance the Cause of European Unity’ [1997] European Review of Private Law 519Google Scholar.

16 See Berkowitz, D, Pistor, K and Richard, J-F, ‘The Transplant Effect’ (2003) 51 AJCL 164CrossRefGoogle Scholar, where it was stated that ‘newly designed model laws for secured transactions marketed the value of Western law to their counterparts in the East, backing their campaign to transplant their home legal system with financial aid promises and/or the prospect of joining the European Union.’

17 See E Orucu, Critical Comparative Law: Considering Paradoxes for Legal Systems in Transition (Kluwer, Deventer, 1999) 59, 81: ‘What is regarded today as the theory of ‘competing legal systems’, albeit used mainly in the rhetoric of ‘law and economics’ analysis, was the basis of the reception of laws that formed the Turkish legal system in the years 1924–1930. The various Codes were chosen from what were seen to be ‘the best’ in their field for various reasons. No single legal system served as the model.'

18 See generally N de la Pena ‘Challenges in implementing secured transactions reform in Latin America’ in F Dahan and J Simpson (eds), Secured Transactions Reform and Access to Credit (Edward Elgar Publishing, Cheltenham, 2008) 236.

19 For critiques of IMF and World Bank ‘conditionality’ see J Stiglitz, Globalization and its Discontents (Penguin, New York, 2002) and Making Globalization Work (Penguin, New York, 2007).

20 See deLisle, J, ‘Lex Americana? United States Legal Assistance, American Legal Models and Legal Change in the Post-Communist World and Beyond’ (1999) 20 University of Pennsylvania Journal of International Economic Law 179Google Scholar at 269 and see also his comment at p 202 about the US government promoting the indirect export of US models through multilateral organisations that shape international standards.

21 See generally Pistor, K, ‘The Standardization of Law and Its Effect on Developing Economies’ (2002) 50 AJCL 97CrossRefGoogle Scholar.

22 For a discussion of UNCITRAL working methods referring to earlier controversies see ‘UNCITRAL rules of procedure and methods of work: Note by the Secretariat’ A/CN.9/676 (31 March 2009). The controversies covered the role of ‘experts’, the status of non-State actors, primarily American-based organisations, and the dominance of the English language in UNCITRAL's deliberations.

23 See Mattei, U, ‘A Theory of Imperial Law: A Study on US Hegemony and the Latin Resistance’ (2002) 10 Indiana. Journal of Global Legal Studies 383CrossRefGoogle Scholar but for a somewhat different perspective see Mattei, U, ‘Efficiency in Legal Transplants: An Essay in Comparative Law and Economics’ (1994) 14 International Review of Law and Economics 3CrossRefGoogle Scholar. See also J Gardner, Legal Imperialism, American Lawyers and Foreign Aid in Latin America (University of Wisconsin Press, Madison, 1980).

24 M Albert, Capitalism Against Capitalism: How America's Obsession with Individual Achievement and Short-term Profit has Led it to the Brink of Economic Collapse (Whurr, London, 1993); J Braithwaite and P Drahos, Global Business Regulation (CUP, Cambridge, 2000) 591.

25 E Said, Culture and Imperialism (London, Chatto & Windus, 1993).

26 ibid 392.

27 ibid 401.

28 ibid 7.

29 The Model Law can be found on the OAS website—www.oas.org/. See generally Kozolchyk, B and Wilson, J, ‘The Organisation of American States: The New Model Inter-American Law on Secured Transactions’ (2002) 7 Uniform Law Review 69CrossRefGoogle Scholar; Wilson, JSecured Financing in Latin America: Current Law and the Model Inter-American Law on Secured Transactions’ (2000) 33 Uniform Commercial Code Law Journal 43Google Scholar. Valuable preliminary material can be found at (2001) 18 Arizona Journal of International and Comparative Law.

30 See D Fernandez Arroyo and Kleinheisterkamp, J, ‘Inter-American Model Law on Secured Transactions’ (2002) 4 Yearbook of Private International Law 251252Google Scholar.

31 ibid 252.

32 The Commercial Finance Association (CFA) is one of the non-State actors whose role in UNCITRAL's deliberations has caused controversy—see ‘UNCITRAL rules of procedure and methods of work: Note by the Secretariat’ A/CN.9/676 (31 March 2009). See the statement on the CFA website —www.cfa.com: ‘The Commercial Finance Association has been actively involved in the drafting of the legislative guide on secured transactions since the process began in 2002 and continues to play a key role in its development’ (date last visited 28.06.2011).

33 See the following statement by the CFA General Counsel—http://www.un.org/News/Press/docs/2004/eco56.doc.htm ‘This guide is of great interest to my trade association. … CFA members, which include large United States banks but also smaller lenders, often make loans to companies located in other countries supported by collateral. The guide will help countries to modernize their laws, so that lenders who are interested in making loans in other countries will know with certainty and predictability what their rights and obligations are.’

34 See also Spamann, H, ‘Contemporary Legal Transplants—Legal Families and the Diffusion of (Corporate) Law’ [2009] Brigham Young University Law Review 1813Google Scholar; J Armour, S Deakin, P Lele, and Siems, M, ‘How Do Legal Rules Evolve? Evidence from a Cross-Country Comparison of Shareholder, Creditor and Worker Protection’ (2009) 57 AJCL 579Google Scholar.

35 J Braithwaite and P Drahos, Global Business Regulation (CUP, Cambridge, 2000) 591.

36 See on the UNCITRAL website—www.uncitral.org—‘Supplement on Security Rights in Intellectual Property’ the Final Draft of which was pre-released on 15th July 2010.

37 See Recommendation 2(a).

38 Recommendation 19.

39 See Recommendation 2(c).

40 See Recommendation 2 stating that the law should apply to ‘all rights in movable assets created by agreement that secure payment or other performance of an obligation, regardless of the form of the transaction, the type of the movable asset, the status of the grantor or secured creditor or the nature of the secured obligation.’

41 Recommendation 2(b).

42 On which see www.hcch.net

43 Recommendation 4 and 5. There are other exceptions in Recommendation 4.

44 See Mortgages in Transition Economies—the Legal Framework for Mortgages and Mortgage Securities (2007) available at www.ebrd.com/pubs/legal/mit.htm and for discussion see J Simpson and F Dahan ‘Mortgages in transition economies’ in F Dahan and J Simpson (eds), Secured Transactions Reform and Access to Credit (Edward Elgar Publishing, Cheltenham, 2008) 172.

45 Recommendation 17 providing that a security interest may encumber all assets of the debtor.

46 See E-M Kieninger (ed), Security Rights in Movable Property in European Private Law (CUP, Cambridge, 2004) 648. See also Drobnig, U, ‘Present and Future of Real and Personal Security’ [2003] European Review of Private Law 623Google Scholar; C Bourbon-Seclet, ‘Cross-border security interests in moveable property’ [2005] JIBLR 419.

47 See generally on the floating charge R Nolan, ‘Property in a Fund of Assets’ (2004) LQR 120: Farrar, J, ‘World Economic Stagnation Puts the Floating Charge on Trial’ (1980) 1 Co Law 83Google Scholar; E Ferran ‘Floating Charges—the Nature of the Security’ [1988] CLJ 213; Worthington, SFloating Charges—an Alternative Theory’ [1994] CLJ 81CrossRefGoogle Scholar.

48 One of the architects of art 9, Grant Gilmore, has said in ‘Security Law, formalism and Article 9’ (1968) 47 Nebraska LR 659 at 672: ‘Article 9 draftsmen argued from the premise that, under existing security law, a lender could take an enforceable interest in all of a debtor's present and future personal property to the conclusion that the new statute should provide for the accomplishment of this result in the simplest possible fashion.’

49 Professor Grant Gilmore, has argued that if floating charges had been accepted in the US, then some of the pressure for change which brought about art 9 would have been absent—see Security Interests in Personal Property (Little Brown, Boston, 1965) 359–361.

50 (1907) 189 NY 267.

51 Benedict v Ratner (1925) 268 US 353.

52 See generally G Gilmore, Security Interests in Personal Property (Little Brown, Boston, 1965) vol 1, chs 1–8.

53 Art 9 has been described as ‘an anthological collection of the most celebrated security law controversies of the preceding forty years’ in Gilmore, GrantSecurity Law, formalism and Article 9’ (1968) 47 Nebraska LR 671Google Scholar.

54 See Marie-Elodie Ancel, ‘Recent reform in France: the Renaissance of a Civilian Collateral Regime?’ in F Dahan and J Simpson (eds), Secured Transactions Reform and Access to Credit (Edward Elgar Publishing, Cheltenham, 2008) 259.

55 See Recommendation 17 providing that a security right may encumber all assets of a grantor.

56 See what is now s 176A Insolvency Act 1986 and the Insolvency Act 1986 (Prescribed Part) Order 2003 SI 2003/2097 which fixes the proportion of collateral set aside. See generally G McCormack, Secured Credit under English and American Law (CUP, Cambridge, 2004) 46–48 and 108–112.

57 See Insolvency Act 1986 (Prescribed Part) Order 2003 SI 2003/2097.

58 D Milman and D Mond, Security and Corporate Rescue (Hodgsons, Manchester, 1999) 52. The 1982 Department of Trade and Industry Committee on Insolvency Law and Practice (the ‘Cork Committee’) which recommended a carve-out for unsecured creditors specifically rejected the proposition that any such diminution of credit would occur (Cmnd 8558 at para 1535).

59 See Finch, V, ‘Security, Insolvency and Risk: Who Pays the Price?’ (1999) 62 MLR 633CrossRefGoogle Scholar at 652.

60 See L Bebchuk and J Fried, (1996) 105 Yale LJ 857; (1997) 82 Cornell L Rev 1279; Warren, EMaking Policy with Imperfect Information: The Article 9 Full Priority Debates’ (1997) 82 Cornell L Rev 1373 at 1377Google Scholar.

61 See Baird, D and Jackson, T, ‘Corporate Reorganizations and the Treatment of Diverse Ownership Interests: A Comment on Adequate Protection of Secured Creditors in Bankruptcy’ (1984) 51 U Ch L Rev 97, 112114Google Scholar.

62 See Klee, K, ‘Barbarians at the Trough: Riposte in Defense of the Warren Carve-Out Proposal’ (1997) 82 Cornell L Rev 14741475Google Scholar.

63 See Klee ibid 1472: ‘For example, where the debtor is in a risky start-up venture or on the verge of insolvency, the risk to unsecured creditors might be so great that instead of seeking a high interest to compensate for increased risk, they simply will not extend new credit. The resulting liquidity crisis will force the debtor into bankruptcy, where unsecured creditors will recover less than if the debtor had not filed.’

64 See Harris, SL and Mooney, CW, ‘A Property-Based Theory of Security Interests: Taking Debtors- Choices Seriously’ (1994) 80 Va L Rev 2021CrossRefGoogle Scholar; Measuring the Social Costs and Benefits and Identifying the Victims of Subordinating Security Interests in Bankruptcy’ (1997) 82 Cornell L Rev 1349Google Scholar and see also Schwarcz, SL, ‘The Easy Case for the Priority of Secured Claims in Bankruptcy’ (1997) 47 Duke LJ 425CrossRefGoogle Scholar.

65 For a strong riposte to this see E Warren (1997) 82 Cornell L Rev 1373 n 62: ‘Harris and Mooney state: ‘For example, data may confirm that small businesses (and, accordingly, minority-owned businesses) would disproportionately comprise that group [that would face constriction of credit]’ … their support? Anecdotal evidence. This argument can be rephrased to say that banks want full priority to help their minority friends. Some critics may demand more than anecdotes to support this proposition.'

66 See Baird, D, ‘The Importance of Priority’ (1997) 82 Cornell L Rev 1421Google Scholar.

67 Harris, SL and Mooney, CW, ‘Measuring the Social Costs and Benefits and Identifying the Victims of Subordinating Security Interests in Bankruptcy’ (1997) 82 Cornell L Rev 1357Google Scholar.

68 (1997) 82 Cornell L Rev 1349 n 49.

69 Perhaps one can add that playing well in Peoria—the epitome of heartlands America—is often considered to be barometer of acceptability and commercial success for the Hollywood movie industry.

70 Recommendation 15.

71 See Recommendation 11.

72 Recommendation 14.

73 See Recommendation 17.

74 Recommendation 13.

75 Recommendation 30.

77 Recommendation 23.

78 Recommendation 24. Certain common contracts where non-assignment clauses are often found are however, excluded from the ban—see Recommendation 24(c).

79 Recommendation 24(b). Nothing in the recommendation affects any obligation or liability of the assignor for breach of the non-assignment agreement, but the other party to such agreement may not avoid the original contract or the assignment contract on the sole ground of that breach.

80 See Legislative Guide ‘Terminology’.

81 See Recommendations 32–35.

82 See Drobnig, U, ‘Present and Future of Real and Personal Security’ (2003) European Review of Private Law 660Google Scholar.

83 For a somewhat sarcastic panegyric to the American system see White, JReforming Article 9 Priorities in Light of Old Ignorance and New Filing Rules’ (1995) 79 Minnesota Law Review 529Google Scholar at p. 530: ‘The filing system is an integral part of the most sophisticated secured lending system known to mankind. Only by an effective filing system can a secured lender know of other lenders and only by it can later secured lenders and unsecured lenders be encouraged to lend. Without such a system, lenders would grow wary, commerce would be hobbled, and the manifold commercial ends that are met by commercial lenders would be stunted, rendered more costly, or stymied altogether … I can see generations of law students writing this down and repeating this incantation in negotiations, in court, and elsewhere. This view even extends to Americans abroad who approach the English, Dutch and Germans with an air of superiority, asserting the superiority of our filing system and belittling the European efforts to put together a filing system worthy of the name.’ You may delete this quotation if you wish.

84 See Dunham, AInventory and Accounts Receivable Financing’ (1949) 62 Harvard Law Review 588CrossRefGoogle Scholar at 611: ‘One banker though the questions [about sources of debtor information] ‘silly’ because his bank did not make a loan unless the borrower ‘was properly introduced’ and therefore a fraudulent borrower was an impossibility.'

85 For the definition of control see art 9-106. ‘Control’ is recognised as a superior method of perfection over financial collateral than filing. Art 9-328 lays down that a secured party who is perfected by control will have priority over an earlier secured party who has perfected its security interest by filing.

86 Recommendations 48–53.

87 See Recommendations 54 and 57 of the Legislative Guide. For a succinct explanation of the distinction between notice filing and transaction filing see the Scottish Law Commission discussion paper Registration of Rights in Security by Companies (TSO, Edinburgh, October 2002) 8.

88 According to the Scottish Law Commission, the only civil law jurisdictions to have introduced notice filing are Quebec and Louisiana; see Discussion paper Registration of Rights in Security by Companies (Edinburgh, October 2002) 1.28 and see further Harrell, T, ‘A Guide to the Provisions of Article 9 of Louisiana's Commercial Code’ (1990) Loyola Law Review 711Google Scholar; M Bridge, Macdonald, R, Simmonds, R and Walsh, C, ‘Formalism, Functionalism and Understanding the Law of Secured Transactions’ (1999) 44 McGill LJ 567Google Scholar.

89 Recommendations 67 and 68.

90 The EBRD has been sceptical about the merits of allowing advance registration or pre-registration stating that ‘the advantages of allowing a potential creditor to take priority during the negotiations are debatable’—see Publicity of Security Rights: EBRD Guiding Principles for the Development of a Charges Registry (December 2004) at p 14 available on the EBRD web site www.ebrd.com/st.

91 In the UK the Department for Business, Innovation and Skills (BIS) has recently suggested for enactment a modified version of this idea ‘Government Response Consultation on Registration of Charges created by Companies and Limited Liability Partnerships’ (London, December 2010).

92 Art 9-109 states the scope of application of art 9 and art 1-201(37) defining ‘security interest’ as meaning an interest in personal property or fixtures that secures either payment or else the performance of an obligation.

93 See Ziegel, J, ‘The travails of English chattel security law reform—a transatlantic view’ [2006] LMCLQ 116Google Scholar ‘a conditional sale agreement is only a short form of chattel mortgage and that in each case the seller or mortgagee merely retains or obtains title as security for performance of the buyer's obligation.’

94 Recommendation 2(d): which states that the law should apply to ‘all property rights created contractually to secure the payment or other performance of an obligation, including transfers of title to tangible assets for security purposes or assignments of receivables for security purposes, the various forms of retention-of-title sales and financial leases’.

95 See Part IX of the Legislative Guide ‘Acquisition Financing’ with Option A Unitary Approach and Option B Non Unitary Approach.

96 See generally See E-M Kieninger (ed), Security Rights in Movable Property in European Private Law (CUP, Cambridge, 2004).

97 See Recommendations 180(a)(ii) and 192(a)(ii).

98 See art 9 of the EBRD Model Law which can be consulted on the ‘secured transactions’ section of the EBRD website—www.ebrd.com/.

99 See the comment by I Davies ‘The reform of English personal property security law’ [2004] LS 295 at 321: ‘The difficulty with the functionalism as applied in Article 9-type regimes is that it can be both over-inclusive and also under-inclusive at the same time. A more appropriate approach in any reform of English personal property security law is to operate within the existing legal landscape rather than to seek to transform it.’

100 Professor Ronald Cuming ‘The Internationalisation of Secured Financing Law’ in Ross Cranston (ed), Making Commercial Law: Essays in Honour of Roy Goode (OUP, Oxford, 1997) 522–523.

101 See MacDonald, R, ‘Article 9 Norm Entrepreneurship’ (2006) 43 Canadian Business Law Journal 240Google Scholar at 291 who also states that ‘we need to locate our evaluations of commercial law reform within a better understanding of how local entrepreneurial networks and credit institutions function on the ground.’

102 See generally recommendation 192 of the Legislative Guide.

103 Recommendation 192 of the Guide. Both would also constitute an exception to the general first-to-file-has-priority principle underlying the Guide.

104 Art 9-324 deals with the priority of purchase-money security interests and see generally on this area Shupack, P, ‘Defining Purchase Money Collateral’ (1992) 29 Idaho Law Review 767Google Scholar; Meyer, K, ‘A Primer on Purchase Money Security Interests Under Revised Article 9’ (2001) 50 Kan LR 143Google Scholar. For an argument against the PMSI super-priority rules see Schwartz, A, ‘A Theory of Loan Priorities’ (1989) 18 J Legal Stud 250254CrossRefGoogle Scholar.

105 Under art 9-324(g) the holder of a purchase money security interest that secures the unpaid purchase price of collateral will prevail over the holder of a conflicting purchase money security interest that enables the collateral to be acquired. This means that a retention of title seller has priority over a lender that makes an enabling loan. For a similar rule under the Secured Transactions Guide see recommendation 182.

106 Recommendations 180 and 192.

107 See the statement of purposes in Part IX of the Guide.

108 See the ‘Terminology’ section of the Guide.

109 Recommendations 178 and 187 of the Guide.

110 For a law and economics perspective on this view see Kanda, H and Levmore, S, ‘Explaining Creditor Priorities’ (1994) 80 Va LR 21382141Google Scholar.

111 See Schwartz, A, ‘The Continuing Puzzle of Secured Debt’ (1984) 37 Vand LR 1051Google Scholar.

112 See the comments in WJ Gough, Company Charges (2nd edn, Butterworths, London, 1996) 436.

113 See also MacDonald, R, ‘Article 9 Norm Entrepreneurship’ (2006) 43 Canadian Business Law Journal 283Google Scholar: ‘Collapsing the distinction between owing and owning, between true security and title deployed to secure the performance of an obligation, does not relieve a legislature of the need to determine whether, in a competition between secured creditors, a distinction should be drawn between a creditor who was once an owner (a vendor) and a creditor who is merely a financier (a lender). Indeed, the priority afforded to the vendor's hypothec (or a ‘purchase money security interest’) merely replicates the logic of an instalment sale or a sale under a resolutory condition in regimes that continue to distinguish between security and title devices.'

114 See Kanda, H and Levmore, S, ‘Explaining Creditor Priorities’ (1994) 80 Virginia Law Review 2139CrossRefGoogle Scholar and see generally M Bridge, MacDonald, R, Simmonds, R and Walsh, C, ‘Formalism, Functionalism and Understanding the Law of Secured Transactions’ (1999) 44 McGill LJ at fns 99108Google Scholar.

115 See Recommendations 180 and 192 ‘Alternative B’.

116 See Pfeiffer GmbH & Co v Arbuthnot Factors Ltd [1988] 1 WLR 150; Compaq Computer Ltd v Abercorn Group Ltd [1991] BCC 484. See more generally Monti, G, Nejman, G and Reuter, W, ‘The Future of Reservation of Title Clauses in the European Community’ (1997) 47 ICLQ 866CrossRefGoogle Scholar; J-H Dalhuisen, ‘The Conditional Sale is Alive and Well’ in J Norton and M Andenas (eds), Emerging Financial Markets and Secured Transactions (London, Kluwer, 1998); and also Kieninger, ESecurities in Movable Property within the Common Market’ (1996) 4 European Review of Private Law 41Google Scholar.

117 Recommendation 178.

118 Recommendation 186.

119 Recommendation 202.

120 See Recommendation 200.

121 See Recommendation 200(b).

122 See MacDonald, R, ‘Article 9 Norm Entrepreneurship’ (2006) 43 Canadian Business Law Journal 291Google Scholar.

123 See generally F Dahan and J Simpson, ‘The European Bank for Reconstruction and Development's Secured Transactions Project: a model law and ten core principles for a modern secured transactions law in countries of Central and Eastern Europe (and elsewhere!)’ in E-M Kieninger (ed), Security Rights in Movable Property in European Private Law (CUP, Cambridge, 2004) 98. See also Mistelis, LThe EBRD Model Law on Secured Transactions and Its Impact on Collateral Law Reform in Central and Eastern Europe and the Former Soviet Union’ (1998) 5 Parker School Journal of East European Law 455Google Scholar.

124 See Schauer, F, ‘The Politics and Incentives of Legal Transplantation’ (2000) Centre for International Development at Harvard Working Paper No 44 at p 24Google Scholar. www.cid.harvard.edu/cidwp/044.htm.

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