Home Law Implementing the Cape Town Convention and the Domestic Laws on Secured Transactions
The mortgage system for means of transport has little to do with the idea of functionalism as generally understood in the context of systems of security rights. A mortgage can be used for just one purpose, to create a security right of just one type, that is, a charge over a means of transport with respect to which a mortgage is registered. Besides, legislation provides exhaustive lists of mortgageable means of transport. A seller’s right based on a retention of title clause or a lessor’s right under a leasing agreement cannot be registered, and need not be registered for effectiveness against third parties.
As a general proposition, though, Finnish law on security rights subscribes to functionalist thinking. This can be seen in the underlying aim, namely, to afford similar treatment to arrangements that pursue similar economic purposes. Two examples may serve as an illustration: First, the same third-party effects as by using a retention of title clause can be achieved by a clause on the right to recover the object of sale if the buyer fails to pay the purchase price. This is so because the clauses have a similar economic purpose. Thus, the seller’s protection against, say, the buyer’s other creditors does not depend on resorting to concepts like “title” or “ownership”. Second, a (non-possessory) security transfer of ownership is not effective against the transferee’s creditors because such a transfer has a similar economic purpose to a possessory pledge. Effectiveness would thus enable circumvention of the possession requirement concerning pledge, and the policy according to which this requirement is needed for publicity purposes.
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