chapter  8
36 Pages

Choice-of-law issues

Choice-of-laws rules have a signifi cant role in the facilitation of credit. In the international context, choice-of-laws serve as a means to determine the applicable substantive law on creation, third-party effectiveness and priority of a security interest. In cross-border secured transactions, international fi nanciers are often concerned about the recognition of creation, third-party effectiveness and priority of security interests, hence efforts to create a comprehensive international secured transactions regime to overcome complexities. In this context, achieving predictability and certainty through choice-of-laws may reduce the cost of credit. It seems a remarkably feasible approach to combine substantive and choice-oflaws rules within the framework of a single international instrument. Simply harmonising choice-of-laws rules cannot provide a satisfactory approach. Equally, since substantive secured transactions laws vary among States, creating a purely substantive law instrument may not always be possible.1 Even though there may be similarities in the way jurisdictions regulate creation and perfection, this is not suffi cient to establish certainty in international secured transactions because a harmonised application is necessary. This may be achieved through international instruments that address these problems and offer solutions through either substantive or choice-of-laws rules. Some instruments address these issues through a mixture of rules.2