6 - Security Interests and Proprietary Priorities in Insolvency

Summary

Chapter 6 highlights the changing role of financial institutions and other providers of credit in a globalizing economy, and the challenges that these developments pose for the ranking of creditors and distribution of assets upon a cross-border insolvency in view of the local basis of property law. The chapter examines the different types of assets that serve as collaterals, analyzes the disparities among national legal systems about the status of quasi-security interests, such as reservation of title or transfer of ownership for security purposes, and underscores the normative considerations that drive national systems to establish a particular ordering of creditors upon insolvency. The chapter then identifies the various globalization strategies employed to govern cross-border settings, which involve security interests and proprietary priorities in insolvency, from soft law and conflict of laws instruments promoted by bodies such as UNCITRAL, Organization of American States (OAS), or the European Union, and up to more ambitious strategies, such as the one embedded in the creation of a single registry for international security interests in aircrafts under the UNIDROIT Cape Town Convention.