учебный год 2023 / Drobnig, Principles of European Law of Personal Security

Chapter 1: Common Rules

58.According to the ENGLISH Unfair Terms in Consumer Contracts Regulations 1999, a consumer is a natural person only (reg. 3 para 1). The ConsCredA is designed for the protection of “individuals”. In sec. 189 an individual is defined as including “a partnership or other unincorporated body of persons not consisting entirely of bodies corporate” (in the form amended by sec. 1 of the Consumer Credit Act 2006 (not in force yet) sec. 189 defines “individual” as including “(a) a partnership consisting of two or three persons not all of whom are bodies corporate; and (b) an unincorporated body of persons which does not consist entirely of bodies corporate and is not a partnership”).

59.In the BELGIAN ConsCredA a consumer is a natural person (art. 1 para 1). In the Commercial Practices Act, a consumer is defined as a “natural or legal person” (art. 1 para 7). The LUXEMBOURGIAN ConsCredA art. 2 lit. a) defines the consumer as a

natural person only; the LUXEMBOURGIAN ConsProtA with rules on unfair contract terms, on the other hand, does not define the term at all. The PORTUGUESE ConsCredA art. 2 para 1 lit. b) defines the consumer as a “singular person”, while the ConsProtA (DL 24/96 of 31 July 1996) uses the expression “that one”, which is said to include legal entities (Duarte 661).

b.Functional Scope

i.Acting outside Trade or Business

60.In accordance with EUROPEAN Directives, in most legal systems consumer protection

is dependent on the purpose of a person’s dealing. The BELGIAN ConsCredA art. 1 para 1 defines a consumer as “every natural person who [...] is acting for purposes which can be supposed to be outside his business, profession or trade” (similar LUXEMBOURGIAN ConsCredA 1993 art. 2 lit. a)). In the BELGIAN Commercial Practices Act, a consumer is defined as “every natural or legal person who exclusively for non-profes- sional purposes acquires or uses marketed products or services” (art. 1 para 7). Equally, the LUXEMBOURGIAN ConsProtA art. 1 opposes “the professional supplier of durable or non-durable consumer goods or services” to the “consumer acting for private purposes.” In FRENCH law the consumer is understood as a non-professional, a person without professional purpose (ConsC art. L 132-1). Since 1995 (Cass.civ. 24 Jan. 1995, D. 1995, 327) consumer protection is according to the Supreme Court generally excluded if a “direct relationship with the exercise of professional activities” exists. This criterion had already been introduced by the Law of 23 June 1989 on doorstep transactions (cf. ConsC art. L 121-22). The FRENCH Supreme Court continues to apply the criterion of the “direct relationship” (Cass.civ. 5 March 2002, JCP G 2002, II no. 10123), although it is very controversial among the lower courts. There is no direct relationship according to certain courts if the contract is concluded outside of the ordinary professional sphere of the person who deserves protection or, according to other courts, if the contract is set up outside of the interest of the enterprise (cf. further Paisant, JCP G 2003, I no. 121, p. 549 ss.). Under the ENGLISH Unfair Terms in Consumer Contracts Regulations 1999 the consumer has to be “acting for purposes which are outside his trade, business or profession” (reg. 3 para 1). Under the ITALIAN ConsC art. 3 para 1 lit. a) the consumer has to act “outside its business or professional activity, if any”. This definition is interpreted strictly by the Supreme Court (Cass. 25 July 2001 no. 10127, Giust.civ. 2002 I 685; Cass. 14 April 2000 no. 4843, Corr.giur. 2001, 524), whereas sometimes courts of

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first instance and legal writers regard also as consumers persons that act in matters belonging to their professional or business activity, as long as these matters are outside the ordinary scope of that persons’ professional or business activity (CFI Roma 20 Oct. 1999, Giust.civ. 2000 I 2117; Monteleone 28).

Similarly, according to the PORTUGUESE ConsCredA the consumer has to act for purposes outside his commercial or professional activity. Under the ConsProtA the goods supplied, the services provided or the rights transferred by a person with a professional economic activity to the consumer must be allocated to a non-professional use. According to the SWEDISH Law on Terms of Contracts in Consumer Relationships § 2 para 1 and the DANISH Law on Certain Consumer Contracts § 3 and ContrA § 38a para 2 a consumer is defined as “a natural person, who is mainly acting for a purpose which is outside business activities” (SWEDEN: Ramberg 258 s.) or “who mainly is acting outside its profession” (DENMARK: Gomard 29 ss.; Andersen, Madsen and Nørgaard 96). Less specific is the AUSTRIAN definition of “non-entrepreneurial activity” (ConsProtA § 1 para 1 no. 2).

61.GREEK and SPANISH law deviate from Council Directive 85/577 Art. 2: in their view protection does not depend on the participation of the consumer in the market “for purposes outside his trade or profession”, but on the final receiving of the goods or the services, i.e. as long as the consumer is at the end of the economic chain and has no intention to prolong the economic circulation of the goods or services (GREECE: Sko- rini-Paparrigopoulou 80, 82; SPAIN: Law no. 26/1984 (ConsProtA) art. 1 para 3). However, at another place the SPANISH legislator expressly considers the concept of consumer as covering “– according to the EU-Directive – every person acting for purposes which are outside his professional activity, even if he shall not be the final receiver of the goods or services which are the object of the contract.” (Introduction VIII para 2, to the SPANISH Law no. 7/1998 on General Contractual Terms (amending the ConsProtA) regarding abusive clauses as required by the EU-Directive 93/13). Under the ENGLISH ConsCredA, protection of the consumer is not dependent upon that person acting outside its trade or business (note that it is the person of the debtor that is relevant for the applicability of the consumer protection provisions under this act in relation to securities provided for agreements regulated under this act, cf. infra no. 65): according to the present sec. 8 para. 2, it is decisive only that the amount of the credit does not exceed GBP 25,000. This rule is due to cease to have effect according to sec. 2 para 1 lit. b) of the Consumer Credit Act 2006; once this provision comes into force, all credit agreements with individuals would fall under the ConsCredA regardless of the amount of the credit, subject to certain exemptions. One exemption are credits with an amount exceeding GBP 25,000 entered into by the debtor wholly or predominantly for the purposes of a business carried on, or intended to be carried on, by him (sec. 16B of the ConsCredA, as introduced by sec. 4 of the Consumer Credit Act 2006 (not in force yet)).

ii.Acting outside Independent Professional Activity

62.GERMAN CC § 13 fixes a broader functional scope of the term consumer by excluding not all legal acts in the context of a professional activity but only those pertaining to independent professional activity. Therefore an employee who buys working equipment is regarded as a consumer according to GERMAN consumer law (Palandt/Heinrichs § 13

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no. 3; Ulmer/Brandner/Hensen/Ulmer § 24a no. 23). Problems of differentiation arise if an entrepreneur acts since it can assume the dependent personal security for private or for professional activity. In the absence of any indication in the contract of personal security the differentiation is made according to the entrepreneur’s intended purpose as it appears to the other party (Ulmer/Brandner/Hensen/Ulmer § 24a no. 24). Even small merchants, farmers, artisans and persons exercising a liberal profession are regarded as entrepreneurs and consequently not as consumers if they act in connection with their profession. This is even true if an employed person concludes a contract for the purpose of establishing a professional activity (BGH 24 Feb. 2005, BGHZ 162, 253, NJW 2005, 1275; this is, however, controversial and there is a contrary provision in CC § 507 for the assumption of a credit for purposes of setting up a profession or business).

C.Whether Security Provider or Debtor has to be a Consumer

a.Consumer Security Provider

63.The DUTCH Civil Code focusses on the person of the security provider (CC art. 7:857). In GREECE it is asserted that the security provider enjoys consumer protection even if the secured credit is not granted to a consumer, since the dependent character of the personal security does not preclude the need for protection of the security provider, when he is inexperienced and an amateur (Georgiades § 3 no. 100). GERMAN case law on consumer protection in personal security transactions also focuses exclusively on the person of the security provider (Staudinger/Weick § 13 no. 49; Bu¨low, Kreditsicherheiten nos. 866-890; Lwowski nos. 412-420). On the basis of the above mentioned decision of the European Court of Justice (cf. supra Comment B, e, no. 18 fn. 4, Dietzinger v. Bayerische Hypothekenund Wechselbank AG, ECJ 17 March 1998) the GERMAN Federal Supreme Court previously required for the rules on doorstep transactions that both debtor and security provider must be consumers and that the contract creating the secured obligation and the contract of dependent personal security must fall under the rules on doorstep transactions (BGH 14 May 1998, BGHZ 139, 21 at 24 ss.; Palandt/ Heinrichs § 312 no. 8, but critical; Erman/Saenger § 312 no. 29 with further references and Reinicke and Tiedtke, B4rgschaftsrecht nos. 463 ss.). Recently, however, the division which now is exclusively competent for security has held that the personal qualification of the debtor is irrelevant (BGH 10 Jan. 2006, BGHZ 165, 363, 367 s.). The GERMAN provisions on general terms and conditions, though, protect everyone – not only consumers – from unfair or surprising general terms and conditions. However, according to CC § 310 para 3 that transposes the EU-Directive on abusive contract clauses, consumers enjoy special protection vis- -vis entrepreneurs.

64.Formerly, in FRANCE the person of the debtor was the decisive criterion for consumer protection of the provider of a dependent security (ConsC arts. L 311-3 ss., 312-3 ss.). It was not until the Law Dutreuil no. 2003-721 of 1 Aug. 2003 that protective consumer legislation turned on the person of the provider of dependent security, even if the debtor was a professional (ConsC arts. L 341-1 to L 341-6). According to the proposals of the Grimaldi Commission special protection should be granted equally to all natural persons who assume a dependent security irrespective of the person of the debtor. The only exception would obtain for the application of the principle of proportionality between the amount of the security and the assets and income of the security provider who must

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not act for a professional purpose (a` titre non-professionnel). According to the proposed CC art. 2305 the engagement of the provider of dependent security must not be manifestly disproportionate to its financial capacity and its income, unless at the time of the requested performance it is able to perform the obligation. However, as a result of the transfer of the protective rules from the Consumer Code to the Civil Code, the natural person who assumes a dependent security for a professional purpose should not be considered as a consumer but as a person requiring special protection.

b.Consumer Debtor of the Secured Obligation

65.A few member states regard as decisive not the person of the security provider but that of the debtor of the secured obligation. In ENGLAND personal securities are only subject to specific consumer credit legislation if the secured debt is a regulated agreement according to ENGLISH ConsCredA 1974 sec. 8 and 15. The decisive criterion is whether the debtor is an individual protected under the provisions of that Act. To consumers securing obligations which are not regulated agreements (in the meaning of these Acts), the more general consumer legislation applies (ENGLAND: UnfContTA 1977, Unfair Terms in Consumer Contracts Regulations 1999). In ENGLISH law it is nowhere discussed whether for the purposes of the ConsCredA, in addition, the security provider also has to fall within the definition of consumer. However, it seems that, since the wording of ConsCredA sec. 189 simply defines the security provider as “the person by whom any security is provided”, the security provider does not necessarily have to be a consumer itself for the Act to apply. The situation appears to be similar for the purposes of the application of the IRISH ConsCredA sec. 30 para 1 lit. b. A similar situation can also be found in BELGIAN law, where ConsCredA arts. 34-37 only apply to personal securities granted in order to secure debts arising from a consumer-credit- agreement – without distinguishing between consumer and other security providers. If the debtor is not a consumer, the credit agreement falls beyond the scope of the ConsCredA. Other consumer protective legislation, such as the Commercial Practices Act may apply.

c.Alternative between Solutions a. and b.

66.In ITALY the scope of the legislative provisions on consumer protection together with the criteria developed by case law in the last years seem to lead to the following practical results: Consumer protection legislation will be applicable to personal securities (a) when the security provider acts as consumer; or (b) when the security provider acts as professional, but the principal debtor is a consumer. This last alternative has been developed by the courts (Cass. 11 Jan. 2001 no. 314, Foro it. 2001 I 1589; Cass. 13 May 2005 no. 10107, Foro it.Mass. 2005, 1203): the accessority of the security to the relationship between debtor and creditor makes it possible to apply the rules of consumer protection of the latter relationship to the former (Palmieri 1598; Falcone 91; Ruggeri 685 s.). Therefore, consumer protection legislation will be not applicable when the security provider acts as a professional in order to secure an obligation of another professional, as in the situation of security provided by the manager of the company in favour of the latter (Falcone 92). In the model contract of personal security provided by the Association of Italian Banks (version 11 Nov. 2003), however, it is suggested to

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restrict the scope of consumer protection to situations where both the security provider and the debtor of the secured obligations act as consumers. This model contract has no binding character though (Falcone 91).

X.Proprietary Security – Lit. (h)

A.Definition

67.The distinction between proprietary and personal security rights is recognized in all European countries. However, a definition of proprietary security is not given in the civil codes, but rather is traditionally left to scholarly writings.

68.In BELGIUM, FRANCE, ITALY, LUXEMBOURG and PORTUGAL the notion of proprietary security right (suˆrete´ re´elle or suˆrete´, garanzia reale) is sometimes used by the legislators (cf. FRENCH, BELGIAN and LUXEMBOURGIAN CC art. 1188 «... le be´ne´- fice du terme lorsque par son fait il a diminue´ les suˆrete´s qu’il avait donne´es par le contrat a` son cre´ancier»; ITALIAN CC arts. 156 para 4, 506 para 2, 1179, 1828 para 1, 1844 para 1, 2795 paras 2 and 3; PORTUGUESE CC arts. 624, 639, 674 para 3).

B.Proprietary Rights Granted by Third Persons

69.In most member states proprietary securities granted by a third party who is not the debtor of the secured obligation are classified as proprietary security rights, although overlappings with the position of the provider of dependent personal security sometimes come to the surface: Rules on dependent personal security are sometimes applicable – by virtue of express legal provision or by analogy – not only to the relationship between the third-party provider of proprietary security and the debtor, but also to the relationship between the third-party provider of proprietary security and the creditor (FINLAND: LDepGuar § 41; RP 189/1998 rd 78 ss.; ITALY: CC arts. 2868-2871 on the effects of land mortgages of a third-party security provider are applicable by analogy to third-party security providers of pledges, Gorla and Zanelli 457 ss., 460; PORTUGAL: Antunes Varela II 520 fn. 2; SPAIN: Carrasco Perera a.o. 478 ss.; for a qualification of the third-party provider of proprietary security as a subject assuming personal liability for the secured debt as an «obligado sui generis», whose liability is limited to the specific encumbered asset cf. TS 23 March 2000, RAJ 2000, 2025).

70.In FRANCE, although the term «cautionnement re´el» seems to refer to a personal security, a third-party proprietary security is considered as a proprietary right as far as the external relationship between the creditor and the security provider is concerned (cf. recently Cass.com. 7 March 2006, Bull.civ. 2006 IV no. 59 p. 59 confirming Cass.ch.- mixte 2 Dec. 2005, Bull.civ. 2005 ch.mixte no. 7 p. 17, JCP G 2005 II no. 10183; Grimaldi Commission’s proposed art. 2295 «Le cautionnement re´el est une suˆrete´ re´elle constitue´e pour garantir la dette d’autrui»; Simler no. 20). However, it is possible that the provider of a proprietary security in addition also assumes a personal security (Cass.com. 21 March 2006, Bull.civ. 2006 IV no. 72 p. 71).

(Bo¨ger/Dr. Fiorentini)

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Article 1:102: Scope

Article 1:102: Scope

(1)This Part applies to any type of contractual personal security, in particular:

(a)to suretyship guarantees (dependent personal security), including binding comfort letters (Article 1:101 lit. (a));

(b)to indemnities /independent guarantees (independent personal security), including stand-by letters of credit (Article 1:101 lit. (b)); and

(c)to co-debtorship for security purposes (Article 1:101 lit. (e)).

(2)This Part does not apply to insurance contracts. In the case of a guarantee insurance, this Part applies only if and in so far as the insurer has issued a document containing a personal security in favour of the creditor.

(3)This Part does not affect the rules on the aval and the security endorsement of negotiable instruments, but does apply to security for obligations resulting from such an aval or security endorsement.

Comments

A. Types of Personal Security		C. Personal Security and
Covered . . . . . . . . . . . . . . . . . . . . . . . . . .	nos. 1-16	Negotiable Instruments . . . . . . . . .	nos. 20, 21
B. Personal Security and		D. Aspects of Public Law . . . . . . . . . .	nos. 22-25
Insurance . . . . . . . . . . . . . . . . . . . . . . . .	nos. 17-19

A.Types of Personal Security Covered

1.Personal security. Paragraph (1) opens with a general formula indicating that this Part covers “any type of personal security”. Personal security must be contrasted with proprietary security: in the latter case, the security provider’s liability towards the creditor is limited to the encumbered asset. By contrast, in any type of personal security the security provider is liable towards the creditor with all its assets – up to the agreed maximum amount, if any.

2.Types of personal security. The aforementioned general formula is supplemented by an enumeration of three major types of personal security in litt. (a) to (c). However, this enumeration is open-ended, as the words “in particular” indicate. This is necessary in order to make sure that special instruments that may be evolved in future, will be covered if they meet the general criterion laid down in the opening general clause.

3.Suretyship guarantee (dependent personal security). Letter (a) starts out by naming the classical instrument of dependent personal security, i.e. “suretyship guarantees”. While the basic institution alluded to is well known in all member states, terminology is not uniform; reference is made here to the Introduction no. 9 and Comments on Article 1:101 nos. 3 and 8. The essence of a dependent personal security is that, as a rule, its validity, its extent and its contents depend upon the validity, extent and contents

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of the secured obligation (cf. Article 1:101 (a)). The details are covered in Chapter 2. A modern phenomenon of a dependent personal security expressly mentioned in lit. (a) is the binding comfort letter (infra nos. 4-7).

4.“Binding” comfort letters. Comfort letters are a recent phenomenon primarily of commercial practice fulfilling a security function outside the traditional scheme of instruments of personal security. Security providers as well as creditors have differing reasons (such as accounting, taxes, fees etc.) to avoid using one of the traditional means of personal security which would achieve the same purpose. One may distinguish a commercial and a non-commercial type. Comfort letters of the commercial type are used in many countries in the framework of corporate financing. As a result of individual negotiation, they are couched in very different terms. So-called comfort letters of a noncommercial type and of a different design are also issued in some countries by individuals in connection with the (temporary) admission of aliens. In these letters the issuer, a citizen and inhabitant, promises, on a form supplied by the public authority, to reimburse public authorities for any financial assistance from public resources that may have to be rendered to the alien during its stay in the country.

5.A preliminary general issue is whether comfort letters are binding. This issue is outside the present Rules and must be solved according to the general rules of interpretation laid down in PECL Chapter 5. The present Rules only apply after it has been determined that a comfort letter is binding. Because of the importance of the preliminary issue, in the present context the express qualification as “binding” is called for.

6.Most binding comfort letters, especially those of a commercial type, differ from the usual forms of personal security. The provider undertakes to make payments to the creditor’s debtor (usually a subsidiary of the security provider or “its” company) in order to enable it to perform its obligations to the creditor. Practice converts any breach of this promise, especially in the debtor company’s insolvency, to a claim for damages by the creditor against the sender of the binding comfort letter.

By contrast, in the non-commercial type of comfort letter the sender promises reimbursement of the public expenses (supra no. 4) to the creditor, on the same pattern as in a traditional personal security.

7.The sender of a binding comfort letter will not usually be willing to make payment for the creditor’s claims against the debtor, unless the latter is insolvent. Also, the sender will not be willing to pay more or under less favourable conditions than those of the debtor’s obligations. These two criteria imply that the rules of Chapters 1 and those of Chapter 2 on dependent personal security apply to binding comfort letters.

8.Independent personal security. Letter (b) deals with independent personal security, the modern branch of the field. Here again we are confronted with some problems of terminology (cf. Introduction no. 9 and Comments on Article 1:101 no. 3).

9.The essential difference from a dependent personal security is that the validity, extent and terms of an independent personal security do not depend upon any secured obligation (cf. Article 1:101 (b)). Rather, the independent security legally stands on its

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own feet. Economically, though, typically it secures another person’s obligation, lest it would not be a security. The relatively few specific aspects of independent personal security are covered, apart from the general rules in Chapter 1, by Chapter 3. One particular form of independent personal security is the stand-by letter of credit, cf. infra nos. 10-12.

10.Stand-by letters of credit. In a “pure” letter of credit a bank promises payment of a sum of money to a creditor if the latter so demands; possibly, the creditor has to present certain documents on which its demand is based. Such letters of credit serve as a primary means of payment for goods sold by the creditor or for another performance made by it, such as work or services.

11.By contrast, stand-by letters of credit serve a security function like an independent personal security (supra nos. 8-9). They are issued as a security which may be utilized by the creditor if the condition(s) fixed for its utilization are fulfilled. Even a “pure” letter of credit may in reality have been issued for a security purpose; that would bring it under the present Part.

12.Stand-by letters of credit are subject to Chapters 1 and 3 of this Part.

13.Co-debtorship for security purposes. Recent protective legislation and court practice in some countries, especially that dealing with consumer security providers, extends to debtors who assume an obligation jointly and severally with the “principal debtor”, provided this assumption of debt is undertaken for security only. Such a collateral debtor deserves indeed the same protection as a security provider. The term “co-debtorship” covers both an initial co-debtorship and a subsequent assumption of a solidary debt after the “principal” debtor had already incurred its obligation. Co-debtorship for purposes of security is governed by Article 1:106. See also Comments on Article 1:101 (e) and on Article 1:106.

14.Nature of the secured obligation. One aspect of the secured obligation is already covered by Article 1:101 (a): the secured obligation may be present or future. The latter rule implies that it may also be conditional; if subject to a suspensive condition, it will arise as soon as the condition materialises. If the secured obligation is subject to a resolutive condition, it is a present obligation (cf. PECL Articles 16:101 and 16:103).

15.Another aspect of the secured obligation is not expressly spelt out but can be derived from the general term of secured “obligation” which is not qualified. This means that the obligation secured need not only be one for the payment of money, although in practice this will most often be the case. Other examples are a seller’s obligations under a sales contract or a building contractor’s obligations under a construction contract, etc. Even the performance of a legal act, such as a principal’s confirmation of a legal transaction concluded by his representative in the principal’s name but without or beyond the authority granted to the representative, may be covered – one of the main applications of the FRENCH, BELGIAN and LUXEMBOURGIAN institution of porte-fort.

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16. Counter security. The security provider may wish to obtain security for its own claim for reimbursement against the debtor. It may therefore require and obtain a personal security from another security provider. Such a counter (or back-to-back) personal security is subject to all the rules of this Part without necessity of special rules or express mention. After having performed to the original creditor, the first security provider is by virtue of Article 2:113 (1) in the position of the creditor who may, unless duly reimbursed by the debtor, demand performance, according to the terms of the counter security, from the second security provider.

B.Personal Security and Insurance

17.In para (2), the first sentence expressly excludes insurance contracts from the scope of application of the present Rules. In a very broad functional sense third party liability insurance may be regarded as a kind of personal security. However, the general structure of insurance contracts of which those contracts form but a part and the special European rules that are envisaged to govern them exclude even this branch of insurance from the scope of application of this Part.

18.The same general considerations apply to credit insurance, i.e. an insurance taken out by the creditor against loss due to his debtors’ insolvency. Although functionally very close to a personal security, credit insurance is everywhere regarded as a pure insurance contract and therefore subject to the relevant rules of this branch of the law.

19.Functionally even closer to personal security is guarantee insurance since it is taken out by the debtor, usually on the demand of the creditor and in his favour. Practice and legislation seem to vary considerably from country to country, and this is reflected in differing doctrinal qualifications. These, however, also are highly controversial within some countries, such as GERMANY and SPAIN. In FRANCE, the BENELUX countries, AUSTRIA and apparently also in ENGLAND, guarantee insurance seems to be regarded as a pure insurance contract, insuring the creditor against the debtor’s insolvency. In other countries, especially in GERMANY, ITALY and SPAIN, perhaps also in the SCANDINAVIAN countries, the insurer issues on the basis of the insurance contract a (dependent or independent) personal security to the creditor; thus an insurance contract and a personal security are combined. Paragraph (2) sent. 2 restricts the application of this Part to this personal security, to the exclusion of the underlying insurance contract.

C.Personal Security and Negotiable Instruments

20. Paragraph (3) makes clear that the rules applicable to the aval of negotiable instruments, especially those governed by the Geneva Uniform Laws on Bills of Exchange (arts. 30-32) and of Cheques (arts. 25-27) of 1930 and 1931, respectively, have precedence over the rules of this Part. The same applies to corresponding national laws which are not governed by the aforementioned Geneva Conventions. This is especially true for

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the form of the aval and the avalist’s liability. The same precedence is enjoyed by the ENGLISH and IRISH rules on the security endorsement (sec. 56 Bills of Exchange Act) which differ to some degree from those of the Geneva Uniform Laws.

21. However, apart from the aforementioned special rules and the general provisions on negotiable instruments into which those special rules are embedded, para (3) implies that the aval and the security endorsement are two types of personal security; therefore, subsidiarily the rules of this Part apply, as the last half-sentence spells out.

D.Aspects of Public Law

22.In practice, personal security, especially in the form of dependent and independent personal securities, plays an important role in economic law. In this respect, various aspects of public law may become relevant.

23.First, public law rules may establish an obligation, or offer the possibility, to provide personal security, and they may also require specific features for such security. Such public duties and requirements do not, however, affect the legal nature of the personal security that has to be provided. Therefore, the rules of this Part are applicable.

24.Secondly, personal security may be demanded and/or provided in order to secure public obligations, such as taxes or customs duties.

An example of great practical importance is the international transport of goods under cover of carnets TIR, as regulated by the so-called TIR Convention of 14 November 1975. In essence it provides that border-crossing road transports of goods are exempted from controls and the payment of customs duties if they are made under cover of a carnet TIR. Such carnets are only issued if an approved “guaranteeing association” has provided a carnet TIR. The guaranteeing association is liable, “jointly and severally with the persons” who owe payment of the customs duties (art. 8 para (1)); this liability is subsidiary to that of the debtors (art. 8 para (7)). See also supra Article 1:101 Comment nos. 12, 14 and 18.

Again, the rules of this Part are fully applicable. The fact that the secured obligation is governed by public law does not exclude the application of this Part. This is even true for a dependent personal security where the security provider may invoke the debtor’s defences, scil. possibly even defences rooted in public law.

25. Thirdly, the strongest aspect of public law may become visible if the state or another public authority provides a personal security, especially a dependent security. Depending upon the legal and factual circumstances, such a security may be regarded as one of private law and therefore be subject to these Rules. But even if it is regarded as one of public law, these Rules may be relevant. If and insofar as there are no specific rules on personal security of public law, the rules of this Part may be applicable directly or at least by analogy.

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