Transplanting the Law of Secured Transactions

For many years I regularly taught Secured Transactions, a course devoted to Article 9 of America's Uniform Commercial Code. And it looks like this Fall I'll be drilling down again on attachment, perfection, priority, and rights on default.

There's little question that Article 9, adopted in all fifty of the United States, has been an incredible success. Success in what, you ask? Success in permitting creditors to lend and borrowers to borrow on the security of virtually all forms of personal property. Secured lending reduces lender risk and, hence, the argument goes, borrower cost. Of course, reducing lender risk does not reduce risk as such, it simply shifts the risk of borrower nonpayment from the secured lender to the borrower's unsecured creditors.

(The efficient market hypothesis claims this doesn't matter because unsecured creditors can adjust their prices to take account of the greater share of risk they bear. I discussed the implausibility of this claim with respect to certain unsecured creditors--wage earners-- a number of years ago in The Missing Piece of the Puzzle: Perspectives on the Wage Priority in Bankruptcy (download here or here).)

When it comes to discussing the transplantation of America's efficient system of secured transactions to other nations, Professor Charles Mooney utilizes the work of scholar of comparative law, Alan Watson. In Lost in Transplantation: Modern Principles of Secured Transactions Law as Legal Transplants (download here) Mooney first identifies UCC Article 9 and the UNCITRAL Model Law on Secured Transaction as exemplars of "Modern Principles",and then considers how, when, and under what circumstances they have been transplanted. Cribbing from his abstract:

[Considering] the role of legal elites and legal culture, governmental and regulatory influences, opposition of entrenched interests, the role of insolvency law and proceedings, registration in public registries, descriptions of collateral in the context of registration and creation of security interests, and the market for business credit. In particular, it addresses various impediments to the adoption .... Finally, the chapter explains that the Modern Principles offer potential benefits beyond the more obvious goals of expanding access to credit and lowering the cost of credit. They harbor potential for coherence, certainty, and ease of application and use — considerations that generally have been overlooked or underappreciated.

Mooney does not take up the question of whether adoption of the Modern Principles raises systemic distributive concerns. Nonetheless, Lost in Transplantation does a fine job of looking at the work of expanding the neo-liberal economic order through the lens of comparative law.