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Secured Transactions Law Reforms

Dr Giuliano Castellano


Dr Giuliano G. Castellano has secured £10,000 from the ESRC Impact Acceleration Account to explore with a two-year project the strategies for reforming secured transactions law – in different legal contexts – as a way to foster access to credit and increase market liquidity.

Secured transactions are key components of market economies and international finance. Through non-possessory security interests business may gain access to credit by collateralising tangible or intangible assets that are integral to the operation of their respective businesses, while retaining control and continuing to profit from those same assets. From a broader perspective, non-possessory security interests are a form of liquidity provided through the financial system, without excessive reliance on the real-estate market.

Pursuing these benefits, national and international policymakers have embarked on various legal reform projects that aim to establish coherent and internationally harmonised sets of rules for secured credit. Of particular relevance are the works of the European Bank for Reconstruction and Development (EBRD) and the United Nations Commission on International Trade Law (UNCITRAL) that are driving legal reforms in different legal systems. Nonetheless, the implementation of international legal standards into national legal contexts – and in general the reform of this ambit of the law – has proven to be problematic. First, a problem of ‘legal transplant’ may emerge: norms generated outside a given legal systems are often rejected or misinterpreted by receiving countries. This in turn renders reforms ineffective and international harmonisation a chimera. Second, there is a critical, yet not fully explored, connection with banking regulation, in particular with liquidity requirements. While international financing laws are trying to foster secured credit, banking (prudential) regulation may limit the use of secured credit. Hence reforms aimed at reforming secured transactions ultimately clash with regulatory requirements.

Moving from the findings of a recent research, the project aims at devising specific reform strategies to address these issues in order to guide law reforms in different legal contexts. The research output is hence translated into policy language with particular reference to the implementation of UNCITRAL’s works.