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Some Kinds of Interests Under Portuguese Law

I. The “international interest” may include the interest under a security agreement, the title reserved by the conditional seller under a title reservation agreement, the right of the lessor under a leasing agreement. Whether to treat all these interests as “security” or not is left to the applicable domestic law.

We will analyse some kinds of security interests according to Portuguese law:

  • - the most relevant “security agreements”;
  • - the “title reservation agreement”;
  • - the “financial leasing agreement”;
  • - the “title transfer financial collateral arrangement” (“alienagao fiduciaria em garantia”).

II. Among the security agreements ruled in Portuguese law, we must mention the mortgage (“hipoteca”) and the pledge (“penhor”).

In principle, mortgage concerns immovable property and pledge concerns movable property. However, mortgage also relates to some kinds of movable property subject to registration (Articles 686 to 689 CC). That is the case of motor vehicles,[1] aircrafts[2] and ships.[3]

Mortgage does not empower the creditor with the possession of the object and, as a rule, pledge is characterised by the transfer of the possession of the object to the creditor or to a third person (nevertheless there are many examples of pledge without the transfer of the possession of the object to the creditor or to a third person).

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Both mortgage and pledge give the creditor the right to be paid before any common creditor (Articles 686(1) and 666(1) CC). Mortgage must be registered by a public registry office (“Conservatoria do Registo Predial”, in what concerns immovable property). Besides, in Portuguese law, the registration of a mortgage has a constitutive nature: if the mortgage is not registered, it is not effective even between the parties.

III. A title reservation agreement (pactum reservati dominii) usually assumes the nature of a contractual clause, included in a sales contract or in another contract having as purpose the transfer of property over an object.

As an exception to immediate transfer of property by the contract, Article 409 CC states: (1) “in contracts having as purpose the transfer of property, the transferor may reserve the property over the object until the total or partial performance of the obligations of the other party or until the occurrence of another event”; (2) “if the contract concerns immovable property or movable property subject to registration, only the registered clause may have effect against third parties”.

By means of title reservation agreement, the parties agree that the transfer of the property over the object is deferred to a moment subsequent to the conclusion of the contract. In general, the event that determines the transfer of the property is the full payment of the price by the purchaser: this is the typical modality of title reservation agreement. However, under the principle of party autonomy, the parties may establish that the transfer of the property depends upon any other event (for instance, a fixed future date).[4]

Publicity of title reservation agreement is only required in cases of immovable property or movable property subject to registration (Article 409(2) CC); in other cases publicity it not required and title reservation agreement may have effect against third parties.

The function of title reservation agreement does not consist in permitting the transferor to exercise the faculties as if he remains the owner of the object - because the object is delivered to the purchaser in order to empower the purchaser with those faculties (in short, with the use of the object). Differently, the function of this agreement consists in protecting the transferor from the consequences of non-performance of the contract by the purchaser, giving him a guarantee of payment.

Then, whatever may be the characterisation of the juridical position of the transferor and of the purchaser emerging from a title reservation agreement,[5] there is no doubt that such an agreement may be considered as a security agreement in favour of the transferor.[6]

IV. The financial leasing agreement is a financial transaction under which one party (the lessor) grants the other party (the lessee), in return for the payment of rentals, the right to use a movable or immovable object. Such object must be acquired or constructed according to the specification of the lessee, who may purchase it, after the agreed period, for a price determined or determinable by application of the criteria set out therein.[7]

When the financial leasing agreement concerns immovable property or movable property subject to registration, it must be registered.[8]

Financial leasing is a complex transaction, involving several contracts: (i) a sales contract between the seller and the financial institution; (ii) a contract between the lessor and the lessee granting the lessee the use of the object in return for the payment of rentals; (iii) an option to a new sales contract between the lessor and the lessee.

The property right remains with the lessor and it will be transferred to the lessee only when the lessee exercises the option to buy the object, after payment of all the rentals and the agreed sum. Therefore, financial leasing agreement may be considered as a security agreement in favour of the lessor: (i) leasing is a financial transaction that expresses a loan; (ii) the creditor (the lessor) maintains the property right both in front of the debtor (the lessee) and in front of third parties, although the possession of the object remains with the lessee for the time of the financial transaction.[9]

This conclusion about the function of leasing agreement is more obvious in the case of “sale and lease-back”, under which a party transfers the property right over an object (normally, an equipment or an immovable necessary to its activity) to the other party (a financial institution) and at the same time this party grants the first a sum of money and the use of the object, in return for the payment of rentals. It is essential in this kind of leasing agreement that the seller has the right to reacquire the object, in accordance with an option clause which establishes the transfer to the seller of the property right over the object when the agreed sum is totally paid.

Consequently “sale and lease-back” is a financial transaction (similar to a loan) where property right is transferred as a security.[10]

V. The “title transfer financial collateral arrangement” was introduced in Portugal by a statutory law of 2004. It is one of the modalities of financial collateral arrangements admitted by Decreto-Lei 105/2004, 8 May 2004, the legal act that implemented Directive 2002/47/EC of the European Parliament and of the Council of 6 June 2002 on financial collateral arrangements[11] .[12]

Article 2(2) of Decreto-Lei 105/2004 states that the modalities of financial collateral arrangements are, inter alia: (i) the title transfer financial collateral arrangement (alienagao fiduciaria em garantia,[13] pactum fiduciae cum creditore); and (ii) the financial pledge. The distinguishing feature between the two modalities of financial collateral arrangements is the following: the first one (title transfer financial collateral arrangement) has the effect of transferring full ownership of financial collateral to a collateral taker for the purpose of securing or otherwise covering the performance of relevant financial obligations; the second one (financial pledge) has not that effect.

In general, by means of the title transfer financial collateral arrangement, the debtor, or a third party, transfers an object to the creditor, for the purpose of securing or otherwise covering the performance of relevant financial obligations; the creditor is bound to use that object only to obtain the performance of his credit; the object must be given back to the transferor when the obligation is performed.

The material scope of this legal act is narrow, because financial collateral arrangements may only concern cash (i.e., bank account balance), financial instruments and some credits (Article 5).

So, the title transfer financial collateral arrangement referred to in Decreto-Lei 105/2004 does not apply to the equipment covered by the Convention.

However, the opinion of Portuguese authors is not unanimous about this matter and some of them admit the validity of title transfer financial collateral arrangement with a general scope, covering any assets.

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  • [1] Article 4 of Decreto-Lei 54/75, 12.02.1975.
  • [2] Articles 205 and 206 of Regulation on Air Navigation (“Regulamento de Navegagao Aerea”),approved by Decreto 20.062, 25.10.1930.
  • [3] Articles 584 ff of Portuguese Commercial Code. About mortgage over ships, S. Aires, “Hipotecasobre navios”, Estudos em Homenagem ao Prof. Doutor Jose Lebre de Freitas, Vol. II, Coimbra,2013, p. 447 ff.
  • [4] A. Cristas & M.F. Gouveia, “Transmissao da propriedade de coisas moveis e contrato de comprae venda. Estudo comparado dos Direitos Portugues, Espanhol e Ingles”, Transmissao da propriedade e contrato, Coimbra, 2001, p. 15 ff (p. 56 ff).
  • [5] About that problem: G.F. Dias, “Reserva de propriedade”, Comemoragoes dos 35 Anos doCodigo Civil e dos 25 Anos da Reforma de 1977, Vol. III, Coimbra, 2007, p. 417 ff (p. 425 ff); L.Carvalho Fernandes, “Notas breves sobre a clausula de reserva da propriedade”, Estudos emHomenagem ao Professor Doutor Carlos Ferreira de Almeida, Vol. II, Coimbra, 2011, p. 321 ff(p. 334 ff).
  • [6] R.P. Duarte, Curso de direitos reals, 3rd ed., Cascais, 2013, p. 305 ff; L.P. Vasconcelos, Direitodas garantias, Coimbra, 2010, p. 358 ff (p. 359, 363, 377 ff); L.L. Pinheiro, A clausula de reservade propriedade, Coimbra, 1988, p. 109 ff; G.F. Dias, “Reserva de propriedade”, p. 436 ff. In thesame sense, in recent decisions of Portuguese Courts: STJ, 07.07.2010; STJ, 09.10.2008; TRL,28.02.2013; TRP, 29.04.2013; TRC, 19.12.2012; TRG, 21.05.2009; TRE, 07.10.2009.
  • [7] Article 1(1) of Decreto-Lei 149/95, 24.06.1995. See also Article 1 of the UNIDROIT Conventionon International Financial Leasing.
  • [8] Article 3(5) of Decreto-Lei 149/95.
  • [9] R.P. Duarte, “A locagao financeira (Estudo jundico do leasing financeiro)” (1981), Escritossobre leasing e factoring, Estoril, 2001, p. 9 ff (p. 85 ff); Id., “Aspectos contratuais do aluguer, dalocagao financeira e de outros contratos afins a face da lei portuguesa” (1992), Escritos..., p. 161 ff(p. 164 ff); Id., Curso de direitos reais, p. 265. In the same sense, in recent decisions of PortugueseCourts: TRL, 10.04-2008; TRL, 20.01.2011; TRL, 09.06.2011; TRL, 03.11.2011.
  • [10] J.P. Remedio Marques, “Locagao financeira restitutiva (sale and lease back) e a proibigao dospactos comissorios - negocio fiduciario, mutuo e acgao executiva”, BFDUC, 2001, p. 575 ff(p. 604); A.F. Morais Antunes, O contrato de locagao financeira restitutiva. Do dialogo dificilcom a proibigao legal do pacto comissorio, Lisboa, 2008, p. 23, 57. In the same sense, in recentdecisions of Portuguese Courts: STJ, 28.10.1999; TRL, 24.01.2012.
  • [11] OJ L 168, 27.06.2002, p. 43-50.
  • [12] Decreto-Lei 105/2004 was modified by Decreto-Lei 85/2011, 29.06.2011. Its new version takesinto account Directive 2009/44/EC of the European Parliament and of the Council amending,among others, Directive 2002/47/EC (OJ L 146, 10.6.2009, p. 37-43).
  • [13] The Portuguese version includes a word - “fiduciaria”, equivalent to “fiduciary” - without correspondence in the English text of the Directive.
 
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