Party Autonomy in International Property Law - Peace Palace Library

1. Choice of Law in International Property Law
Publicity of security rights through transfer of possession should serve, to
be sure above all those people who may extend additional credit to the
debtor and security provider, in other words, the further and subsequent
creditors, who would otherwise gain a false impression of the debtor’s
financial standing. It has already been shown that this creditor interest,
insofar as it relates to particular pieces of property, has only a weak
foundation in law and in fact in the time before insolvency and enforcement.
77 Compared to the interest of the parties to the credit agreement
in choosing the applicable law, it loses further weight due to the fact that
Austria focuses its requirement for publicity of the security right not on
the international credit market or on the protection of creditors of Austrian
debtors or even on the protection of Austrian creditors of Austrian
debtors, but rather exclusively on the question whether a piece of property
intended to secure a loan is located in Austria. Money lending, however,
which is to be secured by movable assets, is to a large extent internationally
volatile because the market for lenders and borrowers is wide open
internationally. An interest, even a public (?) interest, to have publicity
of credit security rights in tangible movables for the benefit of ‘the
creditors’ when, and only when, the security collateral is in Austria seems
scarcely purposeful in this market, rather like an at random policy. In the
neighbouring field of the assignment of claims for security, the Supreme
Court has expressly denied a public interest on the part of Austria in the
international enforcement of the Austrian publicity rule. 78 Such an interest
should therefore only have a limited bearing when weighing it against
the contrary interest of parties to the credit agreement, which they have
expressed in a choice of law clause for the security right.
The Austrian Supreme Court ruled in 1983, on the other hand, that the
Austrian publicity requirement should even apply to a tangible asset subject
to a non-possessory security right validly created under a foreign law
while the asset was located in that jurisdiction; if the asset were later to
arrive in Austria, the foreign non-possessory security right would not be
recognised there. 79 If this precedent were followed nowadays, Austrian law
would find itself in the sights of the European Union (to which – then the
European Community – Austria did not belong at the time). Not recog-
77
See footnote 49 et seq.
78
OGH (Supreme Court) in JBl 1992, 189 = IPRax 1992, 47.
79
OGH in SZ 56 / 188 = IPRax 1985, 165. The decision has been welcomed in
the literature, see Verschraegen in Rummel, ABGB II 3d ed., § 31 IPRG nr. 28,
29; detailed criticism: Schwind, IPR nr. 393.
Axel Flessner
37
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