Lesson 33: Conflict of Laws in Secured Transactions

In cross-border secured transactions, determining which jurisdiction's laws apply can be as tricky as trying to explain a meme to your grandparents. This is particularly important because different jurisdictions may have varying rules that affect the validity, priority, and enforcement of security interests. Think of it as trying to play Monopoly with rules from different editions—chaos!

Jurisdictional Principles

Several principles guide the determination of applicable laws in cross-border secured transactions:

  • Lex Situs: The law of the place where the collateral is located.
  • Lex Contractus: The law that governs the contract between the parties.
  • Lex Domicilii: The law of the domicile of the debtor or creditor.

Application of Lex Situs

The lex situs (law of the location) principle generally applies to tangible collateral. For instance, if the collateral is located in France, French law will govern the security interest.


    

        
The lex situs principle applies to tangible collateral.

        
Example: If the collateral is located in France, French law governs the security interest.

Lex Contractus and Cross-Border Contracts

The lex contractus (law governing the contract) principle is used to determine the applicable law for contractual obligations. This is particularly relevant when the parties involved are from different jurisdictions.

Note: Parties can agree on the governing law for their contract, but this choice must not violate public policy of the jurisdiction where enforcement is sought. 

    

        Note: Parties can agree on the governing law for their contract, but this choice must not violate public policy of the jurisdiction where enforcement is sought.

Diagram: Conflict of Laws in Secured Transactions

graph LR A["Secured Transaction"] --> B["Location of Collateral"] A --> C["Law Governing Contract"] A --> D["Domicile of Parties"] B --> E["Lex Situs"] C --> F["Lex Contractus"] D --> G["Lex Domicilii"]

International Treaties and Conventions

International treaties and conventions play a significant role in harmonizing secured transactions laws across borders. For example, the Cape Town Convention on International Interests in Mobile Equipment provides a uniform framework for the creation, priority, and enforcement of security interests in certain types of mobile equipment.

Connecting with Other Lessons

To understand more about the foundational aspects of secured transactions, you may refer to Lesson 1: Definition and Overview of Secured Transactions and Lesson 6: International Secured Transactions Law.

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