Security Rights and Law Reform in Continental Europe – Reforms in France and Belgium Security Rights and Insolvency Regulation Conference - London 19 th May 2015 Prof. dr. Eric Dirix, KU Leuven

1. The Need for Reform Reasons for reform: a) Domestic b) International “a diversity of national laws is no longer adequate to meet the needs of the market place, and that long- standing legal traditions, concepts and techniques, however laudable in their objectives, must now be modified so as to be responsive to the needs of commerce and finance, which require above all the minimum degree of formality and the maximum degree of flexibility” (Roy Goode, Unif.L.Rev 2003 (341) 343)

2.Current situation in Europe Civil law jurisdictions: e.g. Belgium, Italy Systems without publicity: e.g. Germany, Austria, The Netherlands Systems with public filing systems: e.g. France since 2006 reform, Spain (Registro de Bienes Muebles), Norway (Mortgage Act 8 February 1980) Recent codifications: e.g. Hungary (2013), Romania (2011) Reforms: e.g. Belgium (2013), Scotland (Scottish Law Commission: Moveable transactions)

3. International Models and Instruments Art. 9 UCC UNCITRAL Legislative guide on secured transactions. UNIDROIT: Cape Town Convention (2001) EBRD Model Law on Secured Transactions DCFR (Draft of a Common Frame of Reference). Book IX: Proprietary security in movable assets. OAS Model Inter-American Law on Secured Transactions (2002) OHADA (Organisation pour l'Harmonisation en Afrique du Droit des Affaires): Revised Uniform Act Organizing Securities (2011)

4.UNCITRAL Guide Enable parties to create security rights in a simple and efficient manner Allow the utilization of a broad range of assets for security purposes; Make it possible to secure all types of obligations Abolish the requirement of withdrawing the possession of the security provider Create an integrated and consistent system Establish clear and predictable priority rules Provide for efficient enforcement rules with as less court intervention as possible

5. Fundamental issues Property as a security device Functional approach Publicity (notice filing or transactional filing, advance filing, access, transparency v. privacy) Party autonomy and contractual freedom Enforcement Protection of unsecured creditors Security rights and insolvency proceedings

6.Present situation in Belgium Typical civil law jurisdiction Pas de gage sans dépossession Complex system of legal preferences Importance of publicity Security transfer of ownership Rules of enforcement

7.Overall conclusion Very complex (e.g. different types of pledges; distinction civil law/commercial law); Incomplete (e.g. no possibility to create a non-possessory pledge); Not very efficient (e.g. existing publicity systems are not organised on a national scale and cannot be consulted in an electronic manner); and sometimes even archaic (e.g. rules of enforcement).

8.Reform in France Bicentenial Civil Code ( ) Committee of experts (prof. Grimaldi) Ordonnance N° of 23 March 2006, JO 24 March 2006 Civil Code, Book IV “Des sûretés” (art CC) Non-possessory pledge (registration) (art CC, Décr. N° of 23 December 2006) Non-possessory pledge on inventory (gage des stocks): registration (art. L C.comm., Décr. N° ) Retention of title: art C.civ. Fiduciary transfer (2009): art C.civ.

9.Reform in Belgium Reform in France (2006) Financial crisis Objectives: enhancing the availability of secured credit of businesses and families in order to support economic growth Act of 11 th July 2013, Official Gazette, 2 August 2013 (2 nd ed.), and German translation in Official Gazette, 14 August 2014 (2 nd ed.) The Act will replace the old provisions regarding pledge in the Civil Code but with a new numeration.

10.Basic principles of the reform Effective, flexible and predictable system of security rights Balanced approach, taking into account both the interests of the creditor, the debtor and third parties (+ consumer protection) Functional approach of security interests (‘pledge’) To restore the position of the Civil Code To contribute to the harmonization of security law in Europe.

11.Scope of the Reform All contractual security rights in movable tangible or intangible property (art. 7). All sorts of claims can be secured (art. 10) All sorts of assets (art. 7) Future assets (art. 8) Real subrogation (art. 9) ‘Business’ and ‘agricultural exploitation’ (art. 7) Intellectual property rights (art. 7)

12.Exceptions Ships Financial collateral (Act 2004, Financial Collateral Directive) Insolvency proceedings Financial leasing and sale and lease back Legal preferences

13.Basic concepts Pledge agreement as a ‘consensual’ agreement (art. 2) Validity between parties/Effectiveness third parties Proof (written document) (art. 4) Consumers: documentary form signed by both parties Effects on third parties: registration, possession (corporal goods), control (claims) Security trust (art. 3)

14.Publicity Registration National Pledge Register (art ) Entries by the secured creditor No advanced filing Consultation of register (Royal Decree)

15.Enforcement Contractual freedom (exception: consumers: art. 46) Extra-judicial enforcement In good faith and economically reasonable (art. 47) a posteriori control by the court (art. 56)

16.Priority conflicts Prior tempore –role (art. 57) Super priority (art. 58)  Unpaid seller  Subcontractors  Legal lien for repairs

17.Other innovations Modernisation of possessory pledge Retention of title (art ) Notion of ‘control’ (receivables) (art. 60) Fiduciary transfer (art. 62) Legal lien (droit de rétention) (art )