Remedies of Chargee
I. According to Article 8(1) of the Convention, in the event of default, the chargee may, to the extent that the chargor has at any time so agreed, exercise any one or more of the following remedies:
- (a) “take possession or control of any object charged to it;
- (b) sell or grant a lease of any such object;
- (c) collect or receive any income or profits arising from the management or use of any such object.”
The chargee may alternatively apply for a court order authorising or directing any of the acts referred to in preceding paragraph (Article 8(2)).
II. Article 8(3) and (4) state the conditions for the exercise of the remedies set out in Article 8(1)(a), (b) and (c):
- - any remedy shall be exercised “in a commercially reasonable manner”, i.e., in conformity with a provision of the security agreement except where such a provision is manifestly unreasonable (Article 8(3));
- - a chargee proposing to sell or grant a lease of an object under paragraph 1 shall give reasonable prior notice in writing of the proposed sale or lease to the “interested persons” (Article 8(4), with reference to Article 1(m), in what concerns “interested persons”).
Article 8(5) and (6) establish the effects of the collecting or receiving, by the chargee, of any sum, as a result of the exercise of any remedy set out in Article 8(1) or (2):
- - such sums shall be applied towards discharge of the amount of the secured obligations (Article 8(5));
- - where such sums exceed the amount secured by the security interest and any reasonable costs incurred in the exercise of any such remedy, then unless otherwise ordered by the court the chargee shall distribute the surplus among holders of subsequently ranking interests which have been registered or of which the chargee has been given notice, in order of priority, and pay any remaining balance to the chargor (Article 8(6)).
In principle, any remedy provided by Chapter III of the Convention shall be exercised in conformity with the procedure prescribed by the law of the place where the remedy is to be exercised (Article 14).
III. Article 54 admits the following declarations regarding remedies:
(1) “A Contracting State may [...] declare that while the charged object is situated within, or controlled from its territory the chargee shall not grant a lease of the object in that territory.
(2) A Contracting State shall [...] declare whether or not any remedy available to the creditor under any provision of this Convention which is not there expressed to require application to the court may be exercised only with leave of the court”.