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Private Enforcement and Pactum Commissorium

Besides the variety of remedies, a controversial issue is whether the creditor may exercise the remedy without resorting to the court. In the United States, UCC Article 9 allows a secured party to take possession of collateral following a default without the judicial process unless it breaches the peace in doing so. Under the Greek law, the mortgagee of a preferred mortgage in aircraft may take possession of the aircraft without any court procedure, on condition that the mortgage is in the form of a notarial deed, which is regarded as one of the enforceable titles in Greece. In Canada, the Code civil of Quebec, as opposed to PPSA of common law provinces, requires the procedure before the court unless the debtor voluntarily delivers the secured object.[1]

In other jurisdictions, the secured creditor can only avail itself of the judicial enforcement (judicial sale). This is so, for example, with the pledgee of a registered pledge in Poland.[2] On a particular issue of whether an agreement to grant the secured object in satisfaction of the claim (pactum commissorium) is valid, jurisdictions are divided. Italy, Portugal and the Netherlands deny the validity of such an agreement.[3] In fact, it is one of the reasons why the Netherlands chose not to accede to the Cape Town Convention with the effect over the European part of the Kingdom. In contrast, France affirms the validity of pacte commissoire after the reform of 2006.[4] A halfway solution is found in Germany, where it is implied by the Aircraft Mortgage Act that the mortgagor and mortgagee of an aircraft may enter into an agreement of this kind after the mortgage becomes enforceable.[5] The academic literature in Spain holds the same view, namely an agreement of vesting an object in satisfaction of the claim (pacto comisorio) is valid if made after the claim becomes due.[6] Finally, under the Code civil of Quebec, taking the creditor’s secured object in satisfaction requires the court’s permission when the debtor has discharged half or more of the secured debt. Thus, the timing of entering into the agreement is not the only element for consideration.[7]

  • [1] See Chaps. 3, 11 and 15. Canada made a declaration under Article 54 (2) of the Base Conventionthat the court order is not required for the exercise of remedies when acceding to the Cape TownConvention. As a result, Quebec’s Code civil providing for a contrary rule had to be amended.
  • [2] See Chap. 18.
  • [3] See Chaps. 7, 16 and 19.
  • [4] See Chap. 13.
  • [5] See Chap. 14.
  • [6] See Chap. 10.
  • [7] See Chap. 3.
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