Uniform Commercial Code Law Journal - EBRD
Transcript of Uniform Commercial Code Law Journal - EBRD
Mat #40083929
UniformCommercial Code
Law Journal
Vol. 36, No. 3 Winter 2004
CONTENTS
• Investment Securities as Collateral 3
Egon Guttman
• Secured Transactions in Central and Eastern Europe: European
Bank for Reconstruction and Development (EBRD) Assessment 77
Frederique Dahan and John Simpson
• Benefiting from the Article 9 Drafting Experience: Expanded Use of
Captions for Subsections 103
Louis F. Del Duca, Paul M. Shupack, Vincent C. DiLiberato, Jr., Michael Greenwald, Edwin E. Smith, and Steven O. Weise
• Judicial Highlights 111
Louis Del Duca and Patrick Del Duca
• Current Literature 121
Editor-in-Chief:
LOUIS F. DEL DUCA Associate Dean, Ad-
vanced Legal Education and Professor of Law,
The Dickinson School of Law
Managing Editor:
AARON P. MICHEAU, Member of the New
York Bar
Associate Editor:
PATRICK DEL DUCA, Member of the Califor-
nia Bar
Publisher:
CHERYL GIRAULO
EDITORIAL ADVISORY BOARD
Barkley Clark Member of the District of Columbia Bar
Frederick M. Hart Professor of Law, University of New Mexico
School of Law
William D. Hawkland Chancellor Emeritus of Louisiana State Univer-
sity Law Center
Frank R. Kennedy Professor Emeritus of Law, University of Michi-
gan Law School
Daniel R. Murray Member of the Illinois Bar
Thomas M. Quinn Professor of Law, Fordham Law School
Milton W. Schober Member of the Minnesota Bar
Edwin E. Smith Member of the Massachusetts Bar
Steven O. Weise Member of the California Bar
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77
Secured Transactions in Central and Eastern Europe: European Bank for Reconstruction and Development (EBRD) AssessmentFREDERIQUE DAHAN AND JOHN SIMPSON
Frederique Dahan and John Simpson are, respectively, Counsel
and Secured Transactions Project Leader, EBRD. This article re-
flects the opinions of the individual authors and does not necessar-
ily reflect the views of the EBRD’s Office of the General Counsel
or the EBRD generally. Thanks to Michel Nussbaumer, Martin
Raiser, and Alan Rousso for their helpful comments on an earlier
draft. Thanks also to Eliska Kutenicova for her invaluable assis-
tance in data collection and analysis. All mistakes or omissions re-
main the authors’ sole responsibility.
Understanding how legal frameworks work in practice is a pre-
requisite both for policy dialogue on legal reform and for general
credit risk assessment. Too often, preconceived views govern the
behaviour of investors and other creditors as to whether the legal
regime in a given country will support or impede their activities. In
the field of law reform, inadequate attention is often paid to what
has been done in the past and how new proposed legal rules will
(or will not) function in their environment. In both cases, the lack
of proper information can lead to serious misjudgement.
EBRD ASSESSMENT WORK: PRESENTATIONThe European Bank for Reconstruction and Development
(EBRD) has tried for a number of years with modest means to con-
tribute to knowledge enhancement, especially in areas where it is
directly involved. One of these areas is secured transactions.
78 UNIFORM COMMERCIAL CODE LAW JOURNAL [VOL. 36, NO. 3]
An effective legal framework for the granting of credit is an es-
sential prerequisite for the development of a modern market econ-
omy. Lenders, especially foreign investors, need assurance that
they will see their money back, and such assurance is hard to find
in countries where potential borrowers have no credit experience.
A legal system that enables recovery from assets of the borrower
can provide a solution. The availability of credit is likely to be in-
creased and the terms attached to it improved, notably the duration
and the cost, thereby bringing benefits not only to the parties but
also in the broader macroeconomic context.
Through its Secured Transactions Project, the EBRD has assist-
ed in the reform process of secured transactions laws with a com-
bination of policy advice and technical assistance. One of the key
objectives of the Project is to stimulate debate and disseminate
knowledge in order to increase awareness of the advantages that
can be derived from an effective legal regime for security. As an in-
ternational financial institution, the EBRD mission is to promote
and foster transition to a market economy. It does so by operating
as a commercial bank, lending primarily to the private sector in ac-
cordance with sound banking principles. EBRD thus has first-hand
experience of the difficulties that arise from an insufficient legal
regime. In 1994, it published the Model Law for Secured Transac-
tions, which has had a considerable impact in the region. The
Model law was prepared in order to:
• illustrate the principal components of a secured transactions
law and the way in which they can be included in legislation.
• act as a reference point and checklist for the law reformer.
• provide guidance as to expectations of international inves-
tors and lenders.
• harmonise the approach to secured transactions legislation.1
In 1999, the EBRD published a Regional Survey on Secured
Transactions Laws, which has been regularly updated since. The
primary role of the Survey was to provide information on the state
1 The Model law was not intended to be a model which could be adopted with little
modification by different countries in a similar way to the UCC in the United States.
Such a solution was not appropriate for sovereign states with widely diverse legal tradi-
tions.
SECURED TRANSACTIONS IN CENTRAL AND EASTERN EUROPE 79
of collateral laws in the Bank’s 27 countries of operations.2 It was
an assessment by the Bank drawing on its accumulated knowledge
of secured transactions law and practice in the region. The regional
survey aimed to:
• provide basic information about secured transactions to help
credit providers and their advisers assess the potential ad-
vantages of taking security.
• highlight the strengths and weaknesses of the legal frame-
work for collateral in each country.
• give a basis for objective comparison and encourage mutual
assistance in legal reform among transition countries.3
The Regional Survey consists of a series of five tables that give
an immediate picture of the state of laws for security over movable
assets (tangible and intangible) in each of the Bank’s 27 countries
of operations. Prior to this survey, there had never been a thorough
comparative study of secured transactions laws giving a systematic
presentation of the characteristics of the laws in the region.4 The
Survey draws on the EBRD’s role as a lender, benefiting from the
considerable experience of the Bank’s lawyers and bankers in tak-
ing and enforcing security in the region. Advice from local special-
ists was also sought: over 100 experts, including legal practitio-
ners, government officials, bankers, and academics assisted in
evaluating the practical impact of the collateral laws.
The primary aim of the Survey was to provide an accessible and
user-friendly overview of the laws for non-possessory security in
each country in the region.5 Inevitably, the information provided is
of summary nature. One could not structure a deal or obtain de-
tailed legal advice by looking at the Regional Survey. However, the
2 Albania, Armenia, Azerbaijan, Belarus, Bosnia and Herzegovina, Bulgaria, Croatia,
Czech Republic, Estonia, FYR Macedonia, Georgia, Hungary, Kazakhstan, Kyrgyz
Republic, Latvia, Lithuania, Moldova, Poland, Romania, Russian Federation, Serbia and
Montenegro, Slovak Republic, Slovenia, Tajikistan, Turkmenistan, Ukraine, and Uzbeki-
stan.3 See www.ebrd.com/st4 In 1995, William Rich produced a basic but valuable table. See William A. Rich, "A
Survey of Asset-based Lending in Central and Eastern Europe" (1995) Butterworth’sJournal of International Banking and Financial Law (Special Supplement).
5 The Survey also covers possessory security but this is not covered in the context of
this article.
80 UNIFORM COMMERCIAL CODE LAW JOURNAL [VOL. 36, NO. 3]
tables do address the principal issues and give preliminary answers
to basic, practical questions that a practitioner needs to know. The
questions in the Survey have intentionally been framed to address
the issues that are relevant to those taking security and not just the
underlying legal theory. Any person doing a deal involving securi-
ty in any of EBRD’s countries of operations can obtain an initial
impression of the law on security over movable assets currently in
force simply by consulting the Regional Survey from his or her
desk.
In addition, the Regional Survey has been designed to provide a
balanced evaluation of the present provisions for proprietary secu-
rity, assessed against the benchmark of the EBRD Core Principles
for Secured Transactions Laws, which reflect the underlying
themes of the Model Law on Secured Transactions. These princi-
ples underpin what is seen as the necessary conditions for a mod-
ern secured transactions law. It is clear that secured transactions
practice cannot be reformed overnight. The process is inevitably
uncertain and likely to be incremental. Practitioners, especially in-
ternational lawyers, will find many ways of securing a deal in spite
of an inadequate legal framework. They can, for example, use title
transfers, set up fiduciary arrangements, base their transactions on
foreign law, or secure the deal on offshore assets. However, these
ways are all likely to have shortcomings. When looking at im-
provement, the objective should be a long term one. A coherent
and efficient structure should gradually replace those current, in-
herently inefficient devices. Reform plans may therefore often ap-
pear remote and of little immediate help to practitioners, but if the
long term objective is understood, it is essential that reform plans
address their concerns and create a system that responds to their
needs.
The Regional Survey was therefore designed not only to be of
practical use to practitioners but also to draw them and all interest-
ed parties (policy-makers, international and bilateral donors, etc)
into the reform process. Reform will not take place unless the need
is recognised. A country can survive without a coherent legal basis
for secured transactions but the market for credit will be less effi-
cient. By constantly referring to what could have been achieved if
the law was improved rather than accepting the status quo, the
EBRD is hoping to act as a catalyst in starting the process that will
lead to improvement.
SECURED TRANSACTIONS IN CENTRAL AND EASTERN EUROPE 81
THE REGIONAL SURVEY: SCOPE AND OBJECTIVES
The Survey covers consensual charges6 over movable (including
intangible) property. It does not cover immovables, ships, or air-
craft. It deals only with proprietary security that gives the creditor
the right to recover a claim by realising a charged asset. Therefore,
personal security such as a guarantee is excluded. The Survey does
not extend to instruments of quasi-security, such as financial leas-
es, retention of title, fiduciary transfers, or factoring arrangements.
A series of five tables was completed for each country. (The Sur-
vey is currently subject to a significant overhaul and the tables’
structure may change although the general themes will remain.)
The first table gives an overview of the secured transactions laws
by assessing the extent to which certain essential features are
present. Three further tables concentrate on specific aspects of the
charge and expand the answers provided in the first table. They
cover, respectively, the provisions governing the creation of a
charge, the extent to which the legal framework is adapted to the
needs of commercial transactions in modern market economies,
and the effect of the security right upon third parties. The final ta-
ble assesses the extent to which the legal right given by the charge
in the secured property can be realised in practice. A grade is given
on each question for both possessory and non-possessory security.
The grading system reflects a gradual progression from a clear
‘yes’ to a clear ‘no.’7 Last but not least, the electronic publication
of the Survey allows for regular updating of the information,
which is particularly important given the rapidly-developing na-
ture of legal provisions in the region.
For each country, general background information is given, such
as the provisions of the Civil Code applicable to secured transac-
tions, the title and date of the specific Law on Pledge or Charge,
and generally the current state of reform. Thereafter, Table 1 cov-
6 ‘Charge’ is used as a general term. For this article readers should not taint it with
the particular connotations of any specific jurisdiction.7 It is recognised that the answers given will be to some extent subjective and where
the legal or practical position is complex, they will provide only an indication of the situ-
ation. The answers to individual questions are intended to be read in light of explanatory
notes that give a further explanation of the questions in the Survey and the methods used
in completing the tables. Further information is provided in a series of footnotes follow-
ing each table.
82 UNIFORM COMMERCIAL CODE LAW JOURNAL [VOL. 36, NO. 3]
ers the key elements of a charge. The first question anyone think-
ing of taking a security will ask is whether such security will cre-
ate a proprietary right in his favour. The concept of proprietary
right may vary from one jurisdiction to the next but the principal
factors taken into account are the ability of the chargeholder ulti-
mately to enforce his claim by requiring the charged property to be
sold so that the proceeds can be used to satisfy the secured debt,
and the extent to which the rights under the charge are valid
against third parties. Other questions address the possible restric-
tions that the law may put on the main elements to the secured
transactions: parties to the secured transaction, the type of collater-
al, and the debt secured. In practice, these restrictions can prevent
security being useful. For example, if all the assets have to be spe-
cifically identified as collateral in the charging agreement, this lim-
its the possibility to charge future assets or pools of assets. This is
a problem in many countries including Estonia, Lithuania, F.R.Y.
Macedonia, Russia, and Slovenia. Finally, the question of priority
is addressed. In only six of the 27 countries is the priority of secu-
rity clearly established both before and after bankruptcy. General-
ly, if answers to Table 1 are positive, that means that the setting is
good, i.e., security is in theory possible. This does not mean, how-
ever, that it will work in practice.
Table 2 covers the creation of security. The questions are inten-
tionally phrased as simple and practical issues: Is the manner of
creation of a charge clearly defined? Is it simple, quick, cheap? Is
there an effective system for publicising the charge? The practitio-
ner consulting the Survey will, for example, be able to note that in
Georgia, there is no obvious answer as to whether the creation of a
charge is simple or quick. This should reinforce the need for local
advice to be sought from the very outset of the transaction. In Po-
land, the taking of a non-possessory charge looks simple and
cheap, however some delays should be expected, mainly due to the
registration process by courts, which suffer heavy backlogs.
Table 3 addresses the commercial effectiveness of the transac-
tion. This may sound like an overly ambitious title but in fact it
covers various simple issues which may be given scant recognition
in legal theory but can be of critical importance in practice. For ex-
ample, the possibility to describe the charged assets generally, to
charge after-acquired assets, or to secure a fluctuating pool of debt
or debts in a foreign currency is also raised with the same practical
SECURED TRANSACTIONS IN CENTRAL AND EASTERN EUROPE 83
objective in mind. The charging of future property is permitted in
many laws without any clear definition of when the security inter-
est in after-acquired property comes into existence, thereby raising
some doubt as to the priority ranking that the secured creditor will
have on these assets once acquired (for example in Kyrgyz Repub-
lic, Latvia, Moldova, and Tajikistan). In Poland, a charge can cover
a fluctuating pool of assets, but only where the pool constitutes an
economic unit, which is again an important caveat. In Russia, gen-
eral description is only allowed for charge of commodities in cir-
culation and processing, otherwise specific identification of
charged property is required. Russian law does not seem to cover
other types of property which may also be subject to constant
change, such as accounts receivable, which are of particular rele-
vance in practice.
Table 4 deals with the effect of the security right against third
parties, including the chargeholder’s priority, in and out of bank-
ruptcy. In many countries, creditors may believe that their security
will give them first priority, only to discover that this rule does not
extend to bankruptcy, the one time when they most need it. The ta-
ble also covers the position of third parties who acquire the
charged property in the ordinary course of business or in good
faith without notice of the charge. If these issues are not adequate-
ly addressed, the existence of security can cause confusion to the
detriment of all participants in the market. In Latvia, for example,
the score is good on this count. The non-possessory charge gives
priority in and out of bankruptcy, although the charged assets may
be used in insolvency in case of rehabilitation of the debtor. An ac-
quirer in the ordinary course of business would also be protected if
he did not have actual knowledge of the charge. On the contrary, in
Bulgaria, Romania, and Russia, the position is unsatisfactory.
Finally, Table 5 addresses the most uncertain aspect of the trans-
action, enforcement. Ultimately, efficient enforcement is the main
protection given by security; therefore, if enforcement is unsatis-
factory there is little purpose in obtaining security. Enforcement is
also the last area for progress as it can be seen as working only
once the practice has been established and tested several times.
Hiccups are inevitable. The Survey evaluates whether the charge-
holder can protect the charged assets, obtain rapid realisation, and
whether private sales are permitted. The ability to make private
sales is usually indicative of a progressive approach: this is found,
84 UNIFORM COMMERCIAL CODE LAW JOURNAL [VOL. 36, NO. 3]
for instance, in the Lithuanian and Bulgarian laws. Generally, the
speed of realisation and the level of proceeds that can be expected
are the key test.
FROM THE REGIONAL SURVEY TO THE CASE STUDYThe EBRD Regional Survey provides a good overview of
progress in legal reforms and their implementation measured
against best international practice. Yet it may in some aspects be
too general and not give sufficient detail, especially when the par-
ticular aspect of the secured transactions regime is complex and in-
tertwined with other areas of the law. It is also designed to “re-
ward” with better grades the systems which have adopted modern
efficiencies, as opposed to those that have somehow developed
practices which, whilst being complex and costly, may still allow
for practical results. This is no accident, since, as explained above,
the Survey is primarily designed to accompany the Bank’s legal re-
form efforts. The Bank thus has lacked the data necessary to gauge
the benefit that best international practices can bring to those coun-
tries that chose to adopt them. The EBRD therefore decided to add
to the Regional Survey a new type of assessment which seeks to
find out how the law works in action, without regard to the under-
pinning principles used in law reform. EBRD sees these two as-
pects of the legal framework (so called laws in transition and lawsin action) as essential benchmarks both to measure the state of le-
gal transition and point to the strengths and weaknesses of individ-
ual countries.8
The need to concentrate on the “laws in action” becomes obvi-
ous, and the best method for that is through a case study. A case
study has the advantage of concentrating on the facts as opposed to
the rules and to assume a situation as close as possible to the con-
text of normal commercial practice. Using cases to survey legal
systems is a road which many organisations have recently taken,
for instance the World Bank’s Lex Mundi project,9 and also the
Trento project on “The Common Core of European Private Law.”10
Drafting of the case is paramount for the quality of the responses:
8 The full strategy and context are further explained in the EBRD 2003 Transition
Report, where the findings of this study were first published. The governments of the
United Kingdom, Japan and the United States provided support for the EBRD Regional
Survey on Secured Transactions and the New Legal Indicators Survey and their analysis.
This funding is gratefully acknowledged.
SECURED TRANSACTIONS IN CENTRAL AND EASTERN EUROPE 85
if the case is too wide, the results will not be comparable across ju-
risdictions; if it is too narrow, it may not leave the respondent suffi-
cient scope to describe particularities of its legal system, which
may have dramatically affected the results. One must also recogn-
ise that secured transactions is a relatively complex area of the law
and the application of the law greatly varies with the specifics of
the case. Over-simplification of the matter could lead to seriously
misleading results.
In the context of secured transactions, the practical effects of the
law appear most clearly on the question of enforcement of a secu-
rity interest. The key issue for a creditor whose claim is not satis-
fied is how much and how fast he can recover through realisation
of the charged assets, and how simple the whole process will be.
Therefore, the primary evaluation of the responses needs to con-
centrate on these three dimensions of enforcement. It ought also to
take in a number of other factors, which cannot be overlooked.
Since the exercise’s objective is to gauge the effectiveness of the
process, all aspects of the process must be taken in, in one way or
another.
In translating this conceptual backdrop into a practical method-
ology, EBRD worked with two leading law firms in the region,
Allen & Overy and Chadbourne & Parke LLP. Where these firms
did not have an office or an associate, EBRD directly contacted lo-
cal law firms.11 The respondents had to treat the case as if it were a
real-life case involving a client, adding any practical advice they
would normally give to a client in similar circumstances. Consis-
tency of the information was ensured by a thorough review of the
individual replies and follow-up with the local counsel on any
questions that arose.
The case put to respondents was the following:
We are a bank registered in your country. One of our custom-
ers, a local privately-owned limited company in manufactur-
ing, has failed to repay a loan of $100,000. There was no in-
9 The Lex Mundi project, which forms part of a larger World Bank project on “Doing
Business” in various jurisdictions throughout the world. See Simeon Djankov, Rafael La
Porta, Florencio Lopez De Silanes, and Andrei Shleifer, “Courts: The Lex Mundi
Project” (March 2002), at http://rru.worldbank.org/DoingBusiness/Downloads/Contract-
Enforcement/lexpaper.pdf10 See http://www.jus.unitn.it/dsg/common-core/home.html
86 UNIFORM COMMERCIAL CODE LAW JOURNAL [VOL. 36, NO. 3]
validity to the underlying loan agreement: the default is due
to cash flow problems. The debtor thus has no valid defence
to the non-payment of the loan.
Our customer has given us security over $120,000 worth of:
(1) production equipment and machinery used in its factory; and
(2) inventory consisting of finished products.
We now ask you for advice on how we can enforce our rights
over the assets given as security in order to recover our claim.
Respondents were asked to assess the creditor’s ability to ini-
tiate an enforcement procedure and recover from the charged as-
sets (equipment only if inventory could not be used as collateral),
giving an indication of the amount of any likely recovery and the
time it would take for enforcement. The case also requested the re-
spondent to provide additional information on various aspects of
enforcing a security right:
• Status of debtor: the extent to which the procedure would
vary should the debtor be declared insolvent.
11 EBRD is indebted to all the law firms involved which participated on a pro bonobasis. Initially answers were obtained to a set of fifteen questions relating to the facts of
the case. Subsequently, the answers were clarified and elaborated through follow-up
exchanges. In addition, Allen & Overy and Chadbourne & Parke LLP both reviewed and
co-ordinated the work with their own offices and associates to ensure the quality and
timeliness of the responses. The NLIS participating firms were: Allen & Overy (Albania,
Croatia, Czech Republic, Hungary, Poland, Russia, Slovak Republic); Grant Thornton
Amyot LLC (Armenia); BM Law Firm in cooperation with Chadbourne & Parke LLP
(Azerbaijan); Borovtsov & Salei in cooperation with Chadbourne & Parke LLP
(Belarus); Advokat Maric Branko (Bosnia and Herzegovina); Spasov & Bratanov in
cooperation with Allen & Overy (Bulgaria); Luiga & Mugu (Estonia); Mgaloblishvili,
Kipiani, Dzidziguri (MKD) Law Firm (Georgia); Zanger Law Firm in cooperation with
Chadbourne & Parke LLP (Kazakhstan); Dignitas Law Firm in cooperation with Chad-
bourne & Parke (Kyrgyz Republic); Sorainen Law Offices (Latvia); Lideika, Petrauskas,
Valiunas & Partners (Lithuania); Law Office Polenak (F.Y.R. Macedonia); - Turcan &
Turcan (Moldova); Nestor Nestor Diculescu Kingston Petersen in cooperation with Allen
& Overy (Romania); Chadbourne & Parke LLP (Russia, Uzbekistan)); Karanovic &
Nikolic (Serbia); Colja, Rojs & partnerji (Slovenia); Medet Company Ltd (Turkmeni-
stan); Grischenko & Partners in cooperation with Chadbourne & Parke LLP (Ukraine). It
was not possible to secure the support of a law firm in Tajikistan, so the survey does not
provide any data for that country.
SECURED TRANSACTIONS IN CENTRAL AND EASTERN EUROPE 87
• Extent of charged assets: what will be included in the collat-
eral and what will not (replacement assets, added assets, re-
lated rights, proceeds).
• How different would the process be if the charged assets
were immovable (for instance an office building or a facto-
ry) or receivables (e.g. the claims on customers for payment
for goods sold).
• Extent of secured debt: whether interest, costs, damages,
and any penalty will be included as part of the debt secured
by the charge.
• External threat: competing claims to charged assets or pro-
ceeds (priority creditors, e.g., tax claims or employees, judg-
ment creditors, other charges or liens, etc.).
• Recovery procedure: simplicity, costs, speed, creditor ability
to influence the process, scope for debtor obstruction.
Some additional general questions also highlighted the existing
institutional context (courts, bailiffs, notaries, auctioneers, accoun-
tants, experts) and their integrity, and the existing practice of en-
forcement in the country (in general and also in terms of the num-
ber of cases the respective law firms had handled in the past).12
ENFORCING THE CHARGE: AMOUNT, TIME, AND SIMPLICITY
As explained above, to allow cross-country comparisons, results
are first presented on the basis of summary indicators relating to
the amount a debtor could be expected to recover from the general
case as described, the time needed to realise recovery, and the sim-plicity of the legal process to be followed. These comparisons are
12 The assessments of the respondents have been taken into consideration at their face
value. In most countries the lawyers consulted gave quick and clear answers to the case
questions, based on their own practice of enforcement. When respondents could not pro-
vide any basis for a realistic estimate, the lowest score (1) was given on the basis that
such uncertainty is bound to reflect negatively on the creditor’s expectations. The results
should be interpreted with some caution. They reflect the views of a small number of
lawyers. The EBRD welcomes comments on the sector assessments or the case study, in
order to improve the data that is being evaluated and reported.
It is only possible here to present a summary of the results which will be published in
more detail on the EBRD website (see www.ebrd.com/law) together with the full text of
the case and the methodology used for analysing responses.
88 UNIFORM COMMERCIAL CODE LAW JOURNAL [VOL. 36, NO. 3]
then refined and qualified by looking at how results might be af-
fected if the circumstances of the case changed (scope) and how
the process of enforcement is affected by taking into account other
interested parties, as well as the quality and integrity of the courts.
This is the only way the survey can give a fair and realistic picture
of the situation on the ground.
Chart 1 shows the initial assessment of how much a secured
creditor can expect to recover (amount), how quickly (time) and
how simply (simplicity). Each of these criteria is assessed on the
basis of 0 (worst) to 10 (best). The taller the bar, the more efficient
and creditor-friendly the system is.
The amount indicator reflects the likely return on the realisation
of the assets minus the enforcement costs (since the costs will be
recovered out of the sale price and will therefore diminish what the
secured creditor will recover from the collateral). The amount has
been adjusted on a scale of 0-10 where 10 equals the maximum
possible return ($120,000 — the assets’ market value). The time
indicator reflects the estimated length of the process necessary for
successful enforcement, from the commencement of the enforce-
ment procedure to the collection of the proceeds of sale. The time
has been adjusted on a scale of 0-10 where 0 equals the longest
possible time (24 months) and 10 the shortest (one month). The
simplicity indicator summarises a range of factors, including the
number of procedural steps to be taken, the number of places to
visit or persons to contact, the availability of information, clarity
of the law and regulations, uniformity of practice, the adoption of
necessary implementing regulations, and the ease of ascertaining
the existence of competing claims. To simplify the scoring, coun-
tries were given a 10 where the enforcement process was consid-
ered clear overall and with only a minor level of complexity; 5
where there was a significant likelihood of complexity or uncer-
tainty which might prejudice the enforcement process; and 1
where there was a major level of complexity or uncertainty which
could deter creditors from commencing enforcement.
The results give a surprisingly positive overall picture of en-
forcement in EBRD countries of operations. The results indicate
that it is possible to recover at least 80% of the market value of
the assets taken as security in 6 months or less in nine countries
(Croatia, Czech Republic, Estonia, Hungary, Kazakhstan, Latvia,
Lithuania, F.Y.R. Macedonia, and Slovak Republic). A recovery
SECURED TRANSACTIONS IN CENTRAL AND EASTERN EUROPE 89
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051015202530 Hunga
ryLatv
ia
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atia Sl
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nfo
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ent
of c
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by
Cou
ntr
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ime,
am
oun
t an
d s
imp
lici
ty s
core
s
90 UNIFORM COMMERCIAL CODE LAW JOURNAL [VOL. 36, NO. 3]
of at least 60% of the market value of the assets taken as security
can be expected in nine months or less in 16 countries (the above
plus Albania, Bulgaria, Belarus, Moldova, Romania, Serbia, and
Slovenia).
Interestingly, the amount recovered and time factors are not pos-
itively correlated in cases where the procedure is more complex,
but they are positively correlated where the procedures are simple.
In other words, countries that score high on amount and time gen-
erally provide for a simple process. In only one of the 16 top coun-
tries for amount and time (Moldova) was the process judged very
complex or uncertain. By contrast, in countries with significant
complexity ratings, like Bulgaria, a quick procedure (8.3 on a scale
of 10) is paired with a mediocre return (5.3). The dichotomy is
even more marked for Slovenia, where the return is assessed at 9.7
but the time involved is down to 2.5. The Kyrgyz Republic,
Ukraine, and to some extent Russia also record reasonably high
scores for the amount recovered but low scores on the time in-
volved and the simplicity of the process.
The results are summarised in Chart 2 which presents an un-
weighted average of the three dimensions of time, amount and
simplicity, sorted by region.
Chart 2 presents a familiar picture of better performance in Cen-
tral and Eastern Europe and the Baltic states (CEB) than in the re-
mainder of the region. Six out of eight countries of CEB scored 8
or more (out of 10) on the overall results. A note of caution, how-
ever, is that in some of these countries (Hungary and Slovak Re-
public), security enforcement rules have recently been changed
and the evaluation may to some extent reflect expectations of posi-
tive changes rather than accumulated experience. Poland is the
most noticeable exception of the CEB group: the system there does
not provide a good recovery amount for the secured creditor en-
forcing his security over movable property (4.4 on a scale of 10)
and the time required is worryingly long (1.6 on a scale of 10). The
reason for this seems to be the over-burdening of the courts which
are, in practice, the only available method for pursuing enforce-
ment. Although the 1998 Law on Registered Pledge and Pledge
Registry provided for a possible out-of-court procedure, the neces-
sary implementing regulations were never adopted. In their ab-
sence, the creditor has no practical choice but to petition the
courts. The sale will then take place at public auction and the re-
SECURED TRANSACTIONS IN CENTRAL AND EASTERN EUROPE 91
Not
es:
No
data
for
Taj
ikis
tan.
Rat
ings
ran
ge f
rom
0 (
wor
st)
to 1
0 (b
est)
.
Sou
rce:
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RD
New
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al I
ndic
ator
Sur
vey
2003
Sou
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Kyrgy
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uani
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Czech
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Slov
ak R
epub
lic Latvia Hun
gary
Ch
art
2: E
nfo
rcem
ent
of C
har
ged
Ass
ets
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rage
sco
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ved
by
each
Cou
ntr
y on
am
oun
t, t
ime
and
sim
pli
city
sco
res
92 UNIFORM COMMERCIAL CODE LAW JOURNAL [VOL. 36, NO. 3]
turn is likely to be well below market price. Slovenia also presents
a low scoring on time, which is reflected in the overall scoring; in
addition, the enforcement regime is recent too, so here again, only
further experience will confirm the efficiency or otherwise of the
system.
Interestingly, close examination of the country reports reveals
that there is not a single mode of enforcement common to all these
countries that could serve as a model for less successful jurisdic-
tions. In Hungary, Latvia, Lithuania, and Slovakia, where the cred-
itor and debtor have so agreed, the law gives the creditor or his
agent the right upon debtor default to take the collateral into his
possession. Thereafter, he can organise for a sale of the collateral,
normally a direct private sale or by selected bidding, subject to the
legal duty to realise as good a sale as possible in the then-current
market circumstances. In the Czech Republic, such an option is not
available: the sale would typically be led by a private executor ap-
pointed by the creditor without further influence of the creditor,
and the appointment itself could be contested by other creditors. In
Estonia, although creditor-led enforcement is possible, it is not
recommended, due to the complexity of statutory provisions and
the lack of reliable practice.
In Southeastern Europe, six out of seven states fare relatively
well with scores between 6 and 8 (average of 6.88 out of 10). The
clear exception to this is Bosnia and Herzegovina, where a credi-
tor’s prospects for enforcing a security right are problematic. The
only way to contract a non-possessory charge over movable prop-
erty is to use the Law on Enforcement, by which a court-ordered
seizure of the assets constitutes a charge, pending its enforcement
upon the debtor’s default. The procedure is ill-designed for com-
mercial transactions. Furthermore, public auctions, which are the
only method to realise the collateral, are often unsuccessful, leav-
ing the creditor unable either to collect any proceeds or to take title
of the assets. A new Law on Enforcement and a complete overhaul
of the secured transactions legal framework currently in prepara-
tion should improve the system.
In the countries of the Commonwealth of Independent States
(CIS),13 the results are mixed, with an average score of 4.84 out of
10. At one extreme is Kazakhstan, which has a well-implemented
13 The CIS covers effectively all countries of the former Soviet Union except the
Baltic States.
SECURED TRANSACTIONS IN CENTRAL AND EASTERN EUROPE 93
system for secured transactions over movable property. The credi-
tor’s position on enforcement of a charge is made stronger by reg-
istration since the debtor then has fewer grounds for challenging
the validity of the charge. Upon default, the creditors can choose
the extrajudicial procedure of enforcement, by which their autho-
rised representative conducts a public auction. This procedure is
generally slightly faster than court-led enforcement but even court-
led enforcement is not reported to be unduly long. Ukraine, the
Kyrgyz Republic, and Russia, by contrast, are all characterised by
a time-consuming process, which makes enforcement more diffi-
cult for the secured creditor. In Moldova, the return that a creditor
can expect on enforcement and the time involved are quite reason-
able. However, the whole process lacks simplicity and certainty.
For instance, the newly created registration system for charges
lacks a centralised pledge numbering system — public notaries,
who have been appointed to operate the registry, use their own
numbering system when making entries into the registry, which
means that several entries could have the same number, leading to
confusion. At the bottom of the scale are Armenia, Uzbekistan, and
Turkmenistan, where the position of the secured creditor is unclear
in terms of time and/or amount. The uncertainty is also shown for
Armenia and Uzbekistan in the complexity of the process.
SCOPE AND PROCESS OF ENFORCEMENTAs noted above, results based only on the predicted return, tim-
ing, and simplicity in a single situation cannot alone tell the whole
story. The efficiency of the enforcement process may be influenced
by many other factors, or “qualifiers,” that add nuance to the ‘raw’
results on amount, time, and simplicity. Twelve qualifiers were
taken into account here. Six of these qualifiers account for difficul-
ties that can be encountered in the process of enforcement, espe-
cially by involved parties or institutions being able to affect this
process (see table below). While some of these process-related fac-
tors may be reflected in the raw scoring (e.g., a high likelihood of
debtor obstruction would have influenced the assessment of the
time of the enforcement process), it is useful to assess them sepa-
rately to gain a better understanding of the practical situation in a
given country.
The remaining six qualifiers relate to the scope of enforcement
(see table below). Such factors include insolvency procedures and
ranking of creditors under insolvency. The relevance of insolvency
94 UNIFORM COMMERCIAL CODE LAW JOURNAL [VOL. 36, NO. 3]
is self-evident. A creditor’s assessment of his security will change
if, on examination, it appears that the relatively good enforcement
that might be expected would be radically curtailed should the
debtor be declared insolvent. Limitations on the kinds of assets
that can be pledged and variations in the legal procedures relating
to different classes of assets similarly provide necessary qualifica-
tions to the raw results.
Chart 3 below presents the results in the form of a table. These
factors were rated on a scale of 1 to 3; 1 indicating no significant
problems or limitations, 2 relatively minor problems or limitations,
and 3 major problems or limitations.
The first observation is that the situation is mixed on all factors,
whatever their nature. No single problem has been satisfactorily
addressed across the region, certainly not in the process-related
factors where the number of 1, 2, and 3 scores is relatively similar.
Security over inventory and receivables seems to be slightly less
problematic, but this is only relative.
More interestingly, the table brings about a number of findings
that supplement the raw results. For some countries, there is a rela-
tively close correlation between the raw scores on amount, time,
and simplicity and the scores on scope and process. Lithuania and
Latvia, for instance, which both received high scores on time,
amount, and simplicity, reveal no particular underlying problems
that could contradict or qualify the raw results. Notably, enlarge-
ment of the scope of the case would not have had any significant
effect on the overall positive assessment. In a similar vein, Azer-
baijan and Georgia received a 2 or 3 scoring on almost all scope
and process factors, which matches their low ratings on the raw
scores above. Major efforts would be needed to achieve real im-
provement in these countries.
However, the importance of examining the scope of the law
comes out clearly for countries like Hungary, the Czech Repub-
lic, and the Slovak Republic, where severe limitations exist on
recovering charged assets from a debtor in insolvency. In both
the Czech Republic and the Slovak Republic, the chargeholder
only retains priority for 70 percent of the secured debt — for the
remaining amount, he ranks as an unsecured creditor. In Hunga-
ry, for charges which were taken more than one year before the
start of the procedure, 50 percent of the claim will rank ahead of
all creditors, while the remaining 50 percent will rank behind the
SECURED TRANSACTIONS IN CENTRAL AND EASTERN EUROPE 95
cost of the liquidation (including, but not limited to, the out-
standing salaries, tax and social security payments, associated
costs, and fees of the liquidation).
Moreover, in the Czech Republic, taking security over invento-
Process Factors Scope Factors Debtor obstruction: possibility for the debtor to prevent, slow down or otherwise obstruct the enforcement proceedings to the detriment of the chargeholder. Legitimate exercise of right of defence or appeal is not included.
Insolvency procedure: the impact of the debtor’s insolvency on the enforcement process.
Preferential creditors: impact of claims of other creditors (other than prior-ranking secured claims) on the satisfaction of the secured creditor’s claim.
Insolvency ranking: the priority of the secured creditor’s claim upon insolvency of the debtor.
Creditor control: ability of the creditor to control or influence the conduct of the enforcement procedure.
Receivables: an assessment of the simplicity and certainty of the enforcement process for a charge over receivables.
Institutions: reliability of the courts and other institutions necessary to support the enforcement process.
Immovables: an assessment of the simplicity and certainty of the enforcement process for a charge over immovables.
Practical experience: the general level of practical experience with the enforcement process in the country in question.
Inventory: an assessment of the simplicity and certainty of the enforcement process for a charge over inventory.
Corruption: the impact of corruption within the court system on the enforcement process. *
Scope of collateral: the possibility to enforce against replacement and subsequently acquired assets included in the general description of the collateral.
* Although the assessment was based on the replies from the respondents, reference was also made to the Joint EBRD-World Bank Survey on Business Environment and Enterprise Performance (BEEPS) and, where applicable, the Transparency International Corruption Perceptions Index. For Turkmenistan, which was not covered by these surveys, no assessment was given for corruption or institutions.
96 UNIFORM COMMERCIAL CODE LAW JOURNAL [VOL. 36, NO. 3]
ry is not possible, nor does the law allow for a flexible descrip-
tion of the collateral by which parties could agree to add or re-
place the assets. Such restrictions, in effect, preclude the use of
many modern financing techniques that involve granting security
over groups or pools of assets. In Estonia, the law on secured
Deb
tor o
bstr
uctio
n
Pref
eren
tial c
redi
tors
Cre
dito
r con
trol
Prac
tical
exp
erie
nce
Cor
rupt
ion
Inst
itutio
ns
Scop
e of
col
late
ral
Inso
lven
cy p
roce
dure
Inso
lven
cy ra
nkin
g
Inve
ntor
y
Imm
ovab
les
Rec
eiva
bles
Albania 1 2 1 3 3 3 2 1 2 1 3 1
Armenia 3 3 2 2 3 2 1 2 3 2 2 2
Azerbaijan 2 3 3 3 3 3 2 1 3 2 3 3
Belarus 2 3 2 1 2 2 2 2 3 1 3 2
Bosnia and Herzegovina 3 3 3 1 2 3 3 2 2 3 3 3
Bulgaria 3 2 2 1 3 2 2 1 1 2 2 1
Croatia 2 1 1 2 1 2 3 2 1 3 2 2
Czech Republic 1 1 3 2 1 1 3 3 3 3 2 1
Estonia 2 1 2 2 1 1 2 2 3 2 2 2
FYR Macedonia 1 2 2 3 3 2 1 1 1 1 1 1
Georgia 2 3 2 3 3 3 3 1 3 3 3 3
Hungary 1 2 1 2 1 1 1 3 3 1 1 1
Kazakhstan 3 1 2 2 3 3 2 2 2 1 1 2
Kyrgyz Republic 3 1 2 3 3 2 1 1 1 1 2 2
Latvia 1 1 1 1 2 2 1 2 1 1 2 2
Lithuania 1 1 1 1 1 1 2 2 1 1 1 1
Moldova 1 2 1 3 3 3 1 2 2 1 1 2
Poland 3 2 3 2 1 3 1 1 1 1 2 1
Romania 1 2 2 2 2 2 1 1 3 1 2 1
Russia 3 2 2 2 1 1 3 2 2 2 2 2
Serbia 3 1 3 1 2 3 3 2 1 3 3 1
Slovak Republic 2 1 1 3 1 2 1 3 3 1 1 1
Slovenia 3 3 1 2 1 3 3 2 3 2 3 2
Turkmenistan 2 3 3 2 * * 1 2 3 2 2 3
Ukraine 3 1 3 1 3 2 2 3 1 1 2 2
Uzbekistan 3 3 2 3 3 3 1 2 3 1 3 1
Scoring ranges on a scale of 3 (problematic area) to 1 (not problematic).
Chart 3: Process and Scope of Enforcement
Process Scope
Notes: No data for Tajikistan. * No assessment
SECURED TRANSACTIONS IN CENTRAL AND EASTERN EUROPE 97
transactions also has restricted application: it is only possible to
take a non-possessory security over certain types of assets or
over the whole of an enterprise.
These qualifications echo some of the limitations of the law it-
self (see below). What this indicates is that, for these advanced re-
form countries, the principal issue seems to relate to extending the
scope of secured transactions law to cover a broader class of assets
and deal with the case of insolvency. The case study does not sug-
gest any major problems with implementing and using the law in
practice in these countries.
A closer look at the process of attempting to realise a charged
asset reveals further interesting qualifications. In Bulgaria, F.R.Y.
Macedonia, and Kazakhstan, for example, the weakness of the
courts, and in particular the problem of corruption in the courts,
is regarded as a serious limitation. In the Kyrgyz Republic and
Moldova, similarly, good and comprehensive laws on secured
transactions are being undermined by a deficient institutional
framework. In Poland, where raw results show that enforcement
is slow and gives a poor return, the table demonstrates that the
scope factors are actually excellent (5 out of 6 received a 1
score). If Poland were to improve its institutional framework for
the enforcement of pledges, this should have a major positive im-
pact on secured lending.
Finally, for a few countries, the findings derived from the quali-
fiers appear rather inconsistent with the overall picture brought by
the raw results. The picture for Romania, for example, is puzzling:
the raw scoring does not show a particularly good expectation for
secured creditors, yet the scores in the table do not pinpoint any
particular process-related factors; it would seem to be more a ques-
tion of a broad range of issues where some problems still persist.
The same is true for Russia, where only one process-related factor
is found to be very problematic (debtor obstruction) but where
scope factors are also less encouraging.
THE REGIONAL SURVEY AND COMPARISON BETWEEN RESULTS
It was noted earlier that what triggered this study on enforce-
ment was the EBRD endeavour to assess its countries of opera-
tions’ laws in action, as opposed to their reform efforts. How do
98 UNIFORM COMMERCIAL CODE LAW JOURNAL [VOL. 36, NO. 3]
these results reconcile with or contradict the assessment provided
by the EBRD Regional Survey, which is designed to assess
progress against benchmarks?
The 2003 edition of the Regional Survey shows that countries
can roughly be divided into five groups.
ADVANCED REFORM COUNTRIESAn advanced reform country is one where there has been major
reform of the law on the books and also of the institutional frame-
work to enable the efficient use of collateral for securing credit.
For example, Hungary and Lithuania introduced major reforms in
1997. However, secured creditors in Hungary still suffer from a
weak position in insolvency, while in Lithuania formalistic re-
quirements for defining the collateral restrict the scope for some fi-
nancing techniques. The Slovak Republic carried out the most far-
reaching reform in the region to date, which became effective on 1
January 2003. Initial indications are that this is being implemented
successfully although, as in Hungary, the position on insolvency is
less satisfactory. Nonetheless, all three countries have a modern
and efficient regime for secured transactions.
MAJOR REFORM COUNTRIESMajor reform countries are those that have carried out a major
overhaul of their laws but have shortcomings or significant limita-
tions either in the laws themselves or in their implementation. In
Advanced Reform Countries
Major Reform Countries
Minor Reform Countries
Deficient Reform Countries
Unreformed Countries
Hungary Lithuania Slovak Republic
Albania Bulgaria Czech Republic Kazakhstan Kyrgyz Republic Latvia Moldova Poland Romania Ukraine
Armenia Belarus Croatia Estonia FYR Macedonia Russia Slovenia
Azerbaijan Georgia Tajikistan Turkmenistan Uzbekistan
Bosnia and Herzegovina Serbia
Source: EBRD Regional Survey of Secured Transactions, 2003
SECURED TRANSACTIONS IN CENTRAL AND EASTERN EUROPE 99
the Czech Republic, for instance, the legal framework limits the
type of collateral available. In Poland, the time required for regis-
tration and the complexity of the process discourages the use of se-
curity. In the Kyrgyz Republic and Moldova, the establishment of
a reliable registry still remains a problem. A notification or regis-
tration system is a necessary part of any effective regime for secu-
rity over movables, serving to publicise the security and to alert
others that the creditor has a prior right in the collateral.
MINOR REFORM COUNTRIESThese countries have carried out some reform but remain far
from having an adequate legal framework for secured transactions.
Russia, for example, made a promising start with a new law as ear-
ly as 1992, which provided a model for other CIS countries. How-
ever, the failure to implement the law as it was intended means that
taking security in Russia is still problematic. The lack of any form
of registration or notification system has been one of the main rea-
sons for the ineffectiveness of the 1992 Pledge Law. Estonia only
allows security over certain types of assets and over the whole of
an enterprise. F.Y.R. Macedonia has been making considerable ef-
forts to reform its law, but the rules for creation of security remain
incompatible with the requirements of a modern market for se-
cured credit. Slovenia only allowed the taking of security in a very
limited way, although it has recently introduced new provisions on
collateral.14 Croatia offers only a rudimentary system of non-pos-
sessory charges over movable property.
DEFICIENT REFORM COUNTRIESFive countries fall in this group, all from the Caucasus or Cen-
tral Asia. In all of them, the legal framework for secured transac-
tions is seriously lacking, according to responses to the Survey.
Azerbaijan made a serious attempt at reform in 1998, but the status
of that reform became confused with the introduction in 2001 of
the new Civil Code. This is a problem found in a number of coun-
tries, including Tajikistan, where Civil Codes that contain general
provisions on security rights on property are not always well coor-
dinated with specific secured transactions law.
14 This has not yet been covered in the 2003 survey. It may be that this new law will
move Slovenia to the major reform countries group.
100 UNIFORM COMMERCIAL CODE LAW JOURNAL [VOL. 36, NO. 3]
UNREFORMED COUNTRIESOnly two countries out of 27 fall into the unreformed group.
Both of them are currently undertaking reform. Serbia passed a
new law in May 2003 which, if properly implemented when it en-
ters into force, could propel it into a new status as one of the most
advanced countries in the region. Bosnia and Herzegovina is a spe-
cial case. In 2000 and 2002, each of the entities of the State (the
Federation of Bosnia and Herzegovina and the Republica Srpska)
adopted a separate Law on Registered Pledges on Movables and
Shares, but it is not clear whether these laws have entered into
force.15
In broad terms, the results of the Regional Survey and of the
case study coincide. The advanced reform countries and major re-
form countries generally score among the top countries in the case
study results. This suggests that most countries with a sound legal
framework for secured transactions have efficient enforcement
mechanisms in place that effectively provide the necessary level of
confidence to secured creditors. There are exceptions, however,
and a full understanding of causes of this divergence undoubtedly
will require further research. Nevertheless, a few observations can
be made at this stage.
The case study has highlighted some practical features that the
survey had only partly revealed. In some countries where the se-
cured transactions law has been reformed (thus achieving a rela-
tively good evaluation in the Regional Survey), enforcement re-
mains a serious problem. This is true of Albania, Kyrgyz Republic,
Moldova, Poland, and Romania, which were all major reform
countries according to the Regional Survey categories. Evidence in
the Regional Survey of institutional weaknesses comes through
more clearly in the case study, where greater focus was put on in-
stitutional efficiency (for example, the ability of the court system
to support the enforcement process).
Albania is a case in point: the secured transactions regime was
comprehensively reformed in 1999 with the adoption of the Law
on Securing Charges, which entered into force in 2001. The law
provides for an enforcement system by which the charged assets
can be sold directly by the secured creditor (after the sequestration
15 There is an on-going reform project in Bosnia led by USAID to reform and imple-
ment these laws.
SECURED TRANSACTIONS IN CENTRAL AND EASTERN EUROPE 101
of the collateral by the bailiffs office and its restitution to the cred-
itor). The secured creditor needs to present to a court an immedi-
ately enforceable instrument (which is the securing charge agree-
ment duly registered with the Registry of Securing Charges), on
the basis of which the court will issue an enforcement order. Upon
presentation of the enforcement order, the bailiff office can act im-
mediately, without prior notice to the debtor, and proceed with the
sequestration of the collateral. The collateral is then handed to the
creditor for sale. Problems associated to this procedure are the
costs (bailiffs will charge a fee of 7 percent of the secured claim)
and the time: despite a seemingly simple procedure, enforcement
will usually take between six and twelve months, seemingly due to
the inability of the courts to handle case swiftly.
The combination of the Survey and the case study evidence sug-
gests that the benefits of legal reform can be reaped fully only if
the institutional changes required to enable effective enforcement
are undertaken. Too often, legal reform is not followed through
with adequate structural improvements.
Conversely, in other countries where there are limitations and/or
inadequacies in the secured transactions law, there nonetheless ex-
ists a basis for effective enforcement. This is true of the Czech Re-
public, Croatia, and Estonia, and, at the extreme, Serbia (Croatia
and Estonia were assessed as minor reform countries according to
the Regional Survey results, and Serbia is still in need of reform).
In the Czech Republic, enforcement of a charge can be done
through a licensed executor who sells the charged assets in a pub-
lic auction pursuant to a detailed procedure contained in the Civil
Procedure Code. The system seems to be efficient, and practitio-
ners seem to be relatively comfortable with it. Similarly, in Croat-
ia, enforcement can be conducted by public notaries; the process
has been taken out of the courts and this seems to give a relatively
good return in a fairly quick period of time. Although the legal re-
gime for secured transactions in these countries remains imperfect,
the market has nonetheless found a relatively successful way of re-
alising value out of charged assets. Practical adaptation to a defi-
cient legal framework has its limits, however, it is unlikely that
such systems would prove to be sufficiently flexible for many
modern financing techniques. This represents a lost opportunity
for creditors and borrowers. There is a potential for greater use of
secured credit if the rules are widened, such as to facilitate taking
102 UNIFORM COMMERCIAL CODE LAW JOURNAL [VOL. 36, NO. 3]
security in a commercially efficient manner over a broader range
of assets including inventory.
The assessment exercises of secured transactions carried out by
EBRD present a wealth of information. This is intended to provide
a useful tool for continuing reform efforts of individual countries
and of external assistance providers. Although it cannot be proved
by hard statistics, it is believed that the regular publication of in-
formation on the state of collateral laws in the Bank’s 27 countries
of operations, together with assessment of the result that those
laws actually lead to in practice, is itself a significant conducive el-
ement towards continuing improvement.