On 1 July 2016 the UN Commission for International Trade Law adopted the UNCITRAL Model Law on Secured Transactions. This is the culmination of a long term project of Working Group VI of the Commission, which first produced a legislative guide, and has since been working on a Model Law to assist States to implement the recommendations of that guide. Working Group VI will continue to work on a Guide to Enactment of the Model Law.
The purpose of project has been to help states, particularly those with developing and transitional economies, reform and modernise their secured transactions law so as to increase access to, and reduced the cost of, credit and thus to stimulate international trade. The legislative guide has already been used by a number of states in the modernisation of their law, and the Model Law should help many others. The text of the Model Law is designed to work in jurisdictions of all legal traditions, which has been possible because of the involvement of delegations from all legal traditions in its development. The adopted text will be translated into a number of key languages, and is designed to work in all those languages, although it will, of course, have to be further translated into the language(s) of an enacting state.
The Model Law applies to all types of assets except
- intermediated securities, which are dealt with by a UNIDROIT Convention;
- IP rights, which are governed by the particular law of the state; and
- some other payment rights which are the subject of other Conventions.
The Model Law enables security to be taken over present and future assets, which can be described generically, and there is a single concept of a security right, which applies regardless of the label put on the transaction by the parties. Third party effectiveness) of security rights can be by possession or registration, or, in the case of certain types of assets, by control.
The basic priority rule in the Model Law is first to register or achieve third party effectiveness, but there are special rules for purchase money security interests (called acquisition security rights). Registration is by registration of a notice, which can be in advance of the creation of the security interest: the Model Law includes detailed provisions about registration. A wide range of enforcement mechanisms are provided for, and there are also provisions covering the conflict of laws.
More information about the Model Law is available here.
Professor Louise Gullifer is the UK delegate to the Commission on International Trade Law.