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  • Print publication year: 2017
  • Online publication date: September 2018

Introduction

from Part I - Comparative Analysis

Summary

This project is funded by the European Commission under the Civil Justice Action programme – grant JUST/2013/JCIV/AG/4631.

The intention is critically to analyse and evaluate the provisions governing rights in rem (security rights) and transactional avoidance in Regulation 1346/2000 and address whether there is scope for reform of the law. Security rights are essentially rights over property intended to secure payment of a debt or obligation. They are of fundamental importance to the granting of credit and are generally considered to increase the availability and lower the costs of credit with concomitant benefits for both debtors and the overall economy. However, there are divergent views on the extent to which it should be possible to create security rights over assets. Moreover, avoidance laws in many countries strike at advantage gaining by creditors in the period immediately before formal insolvency proceedings are instituted. This is seen as potentially unfair in that one creditor gets paid ahead of another, and because of transaction cost issues, or their own involuntary status, some creditors may not be in a position to bargain for security.

There is extensive academic and theoretical literature analysing security rights under the main European legal traditions as well as the advantages and disadvantages of recognising security rights from economic and distributional justice perspectives. There is a lack, however, of developed analyses that synthesise the legal protection of security rights under the different legal traditions as well as framing this analysis in the context of Articles 5 and 13 of Regulation 1346/2000. In particular, a Report on Harmonisation of Insolvency Law at EU Level presented by INSOL to the Directorate General for Internal Policies in 2010 in part acknowledges the gap.

The project aims to fill that gap and considers the need for further European harmonisation. The project:

  • • assesses the extent of the protection given to security rights under the main EU legal traditions;
  • • evaluates the policy reasons behind protection;
  • • examines whether, and to what extent, this protection also applies in the context of insolvency proceedings affecting the debtor;
  • • considers the strength of the case for divergence from general legal norms in insolvency;
  • • assesses the rationales for the invalidation of security rights in the interests of the general body of creditors; and