Effectiveness as Against Third Parties and Role of Publicly Accessible Registries
Cape Town Convention The Cape Town Convention provides for the setting up of an asset-based international registry, wholly electronic, for each type of collateral regulated in a Protocol, with the purpose of determining the priority of the creditor as against competing secured creditors and subsequent buyers, as well as against the debtor’s insolvency administrator. Filing in the registry is therefore not necessary to create a valid international interest inter-partes nor to grant the creditor the right to enforce its security upon debtor’s default. There is furthermore no need to register the agreement as such, but only a simplified document containing a limited number of required elements which will allow a subsequent interested party to search whether there are existing or prospective encumbrances on the equipment (“notice filing”). The Convention system allows for registration of a prospective interest, i.e. an interest which is still under negotiation between the parties, as long as the collateral is identified.
As to the priority of the registered creditor, the Cape Town Convention adopts a strict first-to-file rule, with no exceptions for acquisition finance devices such as retention of title or lease, nor for subsequent buyers. This is justified both by the specialized character of the industry sectors involved and by the nature of the collateral, that is high value equipment as opposed to inventory or receivables.
Italian Law In Italian law there is as yet, no single comprehensive filing system for security devices. Thus, a “first-to-file” rule for priority among all subsequent creditors cannot exist, not even when a filing system is in place for a specific type of device. Registration, however, has always been the traditional means to give “publicity” to charges in lieu of dispossession. There are different registries for various purposes (collateral-specific, such as the ones for aircraft and ship mortgages, or transaction-specific, such as the ones for retention of title). They differ widely as to their location, the necessary formalities for filing and the effectiveness of the filed interest vis-a-vis third parties. Some of them (such as the ones for aircrafts, ships and motor-vehicles) are not exclusively dedicated to security rights but serve as title registries as well. One common feature is that they are all “transaction filing” as opposed to ‘notice filing’, and the operative document establishing the transaction must be presented and evaluated by the registrar. The extent of computerization of the registries is also varied, but there is, for the moment, no completely electronic registry with remote access facilities similar to the one set up for the international interest under the Cape Town Convention.
As mentioned above, the role played by the registry is diversified.
For an aircraft chattel mortgage, title and other property rights on aircrafts are filed in a national registry. Registration of an aircraft mortgage is possible only if the transaction is contained in a notarized document and is a necessary prerequisite for their valid creation, and not only for priority purposes. This is, in my view, an obsolete approach to registration of security rights on movables and should not be favored.
An interesting feature to be considered is the fact that the Maritime Code introduced an exception to the rule according to which a mortgage on a future asset is validly registered only when the asset comes into existence (contained in Art. 2823 Civil Code) It is possible to create a mortgage on an aircraft which is still under construction or the construction of which is planned (Art. 1028 Maritime Code). It must be underlined, however, that the registry for aircrafts under construction is not the same as the general one.
As to the opposability of the creditor’s rights to third parties, a registered chattel mortgage prevails over later-in-time registered rights and subsequent buyers and enjoys a high priority ranking vis-a-vis other competing interests (with the exception of a number of specific non-consensual liens, see below, para. 4.4).
For an Art. 46 Bank Charge, registration is needed to achieve effectiveness against third parties (including competing creditors) at the Tribunale (first or low instance court) of both the place where the grantor is located and the place where the bank has its seat (when different). Thus, registration is not a condition of the validity of the charge, though Art. 46 still requires a relatively high level of formality even as between grantor and bank. As between Art. 46 creditors, a simple first-to-file rule would be applied. All other competing limited rights on the assets prevail over the Bank Charge if created with an ‘ascertained date’ (data certa), that antedates registration of the charge. In practice, it would be difficult for a lender to determine whether a prior in time interest prevails over its security since the ascertainment of the date is not done through a public filing but through notarization or authentication by a public official, and is mainly a way to prevent fraud.
In the case of a retention of title in a sales contract, differently than in most other (especially European) jurisdictions, retention of title in certain items, i.e. ‘machinery’ whose value exceeds what has now become a negligible sum is also subject to registration, in the registry kept at the Tribunale of the place where the asset is located at the time of the stipulation. It is important to note, however, that the seller’s rights are protected only as against sub-buyers (superseding the general bona fide acquisition provision in Art. 1153 Civil Code), and only if the asset remains within the jurisdiction of the same Tribunale. In relation to competing creditors (in particular judgment creditors) the retention of title does not have to be filed, but has to be previously agreed upon between the parties in writing, confirmed in the sale invoices, with ascertained date prior to the date of attachment and duly registered in the buyer’s accounts.
Interestingly, the registry for the retention of title is the same which should be used also for Art. 46 bank charges. This did not result, however, in any coordination of the priority rules, not even as between the two registrable interests, and was apparently done solely to avoid the setting up of another registry. The question is to be considered of little practical import due to the scant attention that Art. 46 Bank Charge has received until now in financing practice.
-  The term ‘notice’ filing as opposed to ‘transaction’ or ‘transactional’ filing, originally specificto the US UCC Article 9 model, is now widely used in scholarship and international instrumentson secured transactions and was even adopted by Book IX of the Draft Common Frame ofReference.
-  Goode, R, Official Commentary (above fn. 25), 44.
-  Goode, R, Official Commentary, (above fn. 25) 67.
-  This requirement was later simplified by allowing also a mere ‘registration’ of a written document by other competent authorities, cf. Law No. 248/2006.
-  The charge must be create by a written document ‘exactly describing’ (1) the collateral; (2)names of lender and debtor or third party provider of security; (3) amount of the loan and its terms;(4) sum secured.
-  Veneziano, A, Italy (above fn. 14), 172.
-  With the exception of assets that are registered in public registries.
-  Art. 1524 (2) Civil Code: € 15,49 - the amount has never been adjusted to the decrease in valueof the nominal sum in Italian old lire. Furthermore, in the case of equipment exceeding the valueof € 258,23 an additional requirement of a marking - a plate containing the seller’s name and itsproperty right in the machine as well as particulars concerning the machine - is provided for byspecial legislation, but again only to protect the title-retaining seller from sub-buyers.
-  This is the resulting regulation after the implementation of the 35/2000/EC Late PaymentDirective (Legislative Decree No. 231/2002, Art. 11 (3)) and the decision of the European Courtof Justice 26 Oct 2006, Commission v. Italy, C-302/05, according to which Italy did not fail toimplement the Directive by providing for additional acts of the part of the seller in order for thetitle retention to be opposable to the buyer’s creditors).
-  For this comment and a review of what could be the abstractly possible solutions as to the relativepriorities see Veneziano, A, Italy (above, fn. 14), 173.