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

Chapter 1: Common Rules

para 1 sent. 2, 31 para 1 – however, subject to the exception in § 31 para 2 (supra sub a); FRANCE: Cass.civ. 3 Oct. 1995, JCP N 1996, II no. 1631; Simler no. 640; ITALY: Fragali, Della fideiussione 446; NETHERLANDS: CFI Haarlem 24 Feb. 1942, N.J. 1942 no. 849 at p. 1270; Korthals Altes 340-341; Asser/Hartkamp no. 116; PORTUGAL: CC art. 650 para 2; STJ 15 Feb. 2001, 3764/00 www.dgsi.pt). Even more in FRANCE the provider of personal dependent security is entitled to exercise internally its right to recourse before any payment if the creditor has brought an action against it. The reason is that the claim of this provider of personal security against other providers of security is considered to exist since the date of the assumption of the dependent security so that its claim for contribution against a co-provider of security is not affected if the co-provider has become insolvent after assumption of the security (cf. Cass.com. 16 June 2004, Bull.civ. 2004 IV no. 123 p. 126). But a provider of dependent security can demand performance from other providers of security only after having paid (Cass.civ. 15 June 2004, D. 2004, 1972).

8.GERMAN courts are somewhat more favourable to the paying provider of security: As long as it is uncertain to what extent the creditor will demand performance from the providers of security, each provider of personal security is after every partial payment to the creditor generally entitled to demand proportionate recourse from the other security provider(s). It is irrelevant whether the security provider paid more than its internal share as that would have to be calculated on the hypothesis that the creditor demands performance of the full security or less than such share (cf. BGH 21 Feb. 1957, BGHZ 23, 361, 364; BGH 19 Dec. 1985, NJW 1986, 1097, 1097; BGH 15 May 1986, NJW 1986, 3131, 3132). But in the latter case recourse is suspended until the internal share of each security provider is certain if the paying security provider becomes insolvent after payment (BGH 17 March 1982, BGHZ 83, 206, 210). Finally, if the principal debtor is insolvent the paying security provider is entitled to recourse only if it paid more than its internal share (CA Kçln 26 Aug. 1994, GmbHR 1995, 51).

9.In GREECE, according to the predominant opinion in literature, in case of part payment the claim of the provider of personal security (security provider or co-debtor for security purpose) for partial recourse competes with the creditor’s claim for payment still due: hence, according to CCP art. 977 para 3, 1007 para 1 the creditor and the provider of personal security are to be satisfied pro rata (Georgiades § 3 no. 164; Kaukas 858 § 3, 465466; ErmAK/Zepos art. 858 no. 11; Georgiades-Stathopoulos AK/Vrellis art. 858 no. 13). However, according to a minority opinion, the claim of the creditor has priority: the predominant opinion would only be justified, if the claims of the creditor and of the provider of personal security vis- -vis the debtor had the same rank; but this is not so, since the co-debtor remains liable until the whole performance has been furnished (cf. CC art. 482 sent. 2; Tampakis 425; on the grounds of good faith Zepos A 316), whereas the security provider may still be called upon by the creditor for the payment of the remaining part (Tampakis 426; on the grounds of good faith Theodoropoulos 217).

10.For a “second-degree” recourse if one (or more) security provider(s) are unable to contribute, cf. notes on PECL Art. 10:106 para 3.

B.Extension to All Securities

11.In most countries the principle of full recourse is applied to all third party providers of security as enumerated in the national notes to Art. 1:102 nos. 2-13. All persons granting

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security of any kind have a right of recourse against each other. However, the legal basis for this solution differs: in DENMARK, Promissory Note Act § 61 juncto § 2 para 2 concerning several providers of personal security as solidary debtors (cf. Bryde Andersen 35 ss. and 251 s.; Pedersen, Kaution 97 s.) is extended to the relationship between all providers of security according to the principle of the Insurance Agreement Act § 42 (cf. Pedersen, Kaution 97).

12.In ENGLAND a person granting proprietary security for another person’s debt is regarded as a surety just as a provider of personal security and is thus entitled to the same remedies for its indemnity (Rowlatt 6). The principles of equity mentioned supra no. 4 are therefore applicable. The same is true in BELGIUM, FRANCE and LUXEMBOURG since CC art. 2033 (since 2006: FRENCH CC art. 2310) applies mutatis mutandis to providers of proprietary security (BELGIUM: Du Laing no. 7; Van Quickenborne no. 527; FRANCE: Cass.civ. 25 Oct. 1977, Bull.civ. 1977 I no. 388 p. 306; CA Paris 13 Jan. 1995, D. 1995, 573). And DUTCH CC art. 7:869 juncto art. 6:152 and 6:151 para 2 cover providers both of personal and also of proprietary security (“other sureties and persons who as non-debtors were liable for the obligation”, cf. also Blomkwist no. 39).

13.In view of the lack of specific legal provisions in GERMANY and GREECE, legal practice had to find solutions on the basis of general principles of law. There was special need for adequate solutions in these countries since the strict application of existing legal provisions would result in an internal liability for “everything” by the first performing security provider and in no liability of any other security provider, which has been considered as arbitrary and unjust (GERMANY: BGH 29 June 1989, BGHZ 108, 179, 183, 186; GREECE: Karasis 179-180; ITALY: Petti 192). Therefore GERMAN courts apply with the approval of most legal writers the general rules on recourse among solidary debtors on the legal basis of bona fides (CC § 242) in all cases of plurality of providers of security, provided that the securities can be regarded as having equal rank (BGH 29 June 1989, BGHZ 108, 179, 183, 186; BGH 24 Sept. 1992, NJW 1992, 3228; Schlechtriem 1026-1047; Bu¨low, Ausgleich 62-63; Graf Lambsdorff and Skora no. 313; Schmitz [a Justice of the Federal Supreme Court]; contrary view: Reinicke and Tiedtke, Kreditsicherung nos. 11111122; Staudinger/Horn § 774 no. 68 who are still of the opinion that providers of dependent personal security are to be privileged). The same solution is sustained by AUSTRIAN courts and writers (OGH 20 June 1984, SZ 57 no. 114 at p. 565-566; OGH 9 Dec. 1987, SZ 60 no. 266 at p. 701; Rummel/Gammerith § 1359 no. 7) as well as by the prevailing opinion in GREEK legal literature (cf. with different dogmatic reasons Georgiades § 3 nos. 175 ss., 178; Karakatsanis 127-129; Karasis 187; Spyridakis § 80; Theodoropoulos 260 ss.; with a different – procedural – approach Kaukas arts. 847-848, § 9 sub c, § 10; but contra Filios II/1 § 128, 90-93; Georgiades-Stathopoulos AK/Vrellis art. 858 no. 12: providers of personal security must be treated more favourably than mortgagees).

14.Although in SPAIN the strict application of the legal provisions seems to result in the same difficulties and unfairness as in GERMANY and this has been demonstrated by scholars, SPANISH courts until now have not found a satisfactory solution. In literature, however, both solutions have been proposed: the proportional liability of providers of security as well as the privilege of providers of personal security (cf. Guilarte Zapatero, Comentarios 219).

15.Under SCOTS law the question of recourse between providers of securities of a different kind is rarely discussed. Thow’s Trustee v. Young 1910 SC 588, 596 (CA) can probably be understood as indicating that it is in principle possible for a personal security provider to

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claim relief from proprietary providers of security (in this case, however, relief was denied because the proprietary security was held not to be granted as security for the same debt).

16.In SWEDEN, Walin, Borgen 317 ss., seems to prefer that a third party who has furnished proprietary security normally is fully liable with the encumbered assets towards providers of personal securities, although he finally also expresses the contrary opinion.

C.Internal Recourse Restricted to Some Providers of Security

17.In some countries the provisions on recourse between providers of dependent personal security are applied only to some minor extent to other securities.

18.Under PORTUGUESE law, the general rule being the non-solidarity of several obligations (CC art. 513), there is no internal recourse, unless the parties agreed otherwise. By contrast, in commercial obligations there is a general rule of solidarity according to Ccom art. 100.

19.Under FINNISH law the provider of dependent personal security has a right to recourse against a provider of proprietary security only insofar as this has been agreed between the security providers (LDepGuar § 30 para 3; RP 189/1998 rd 69). According to LDepGuar § 41 third persons’ proprietary securities are governed by § 30. This means that after payment the provider of proprietary security has, as a rule, a claim for recourse against proprietary security granted by the principal debtor (§ 30 para 1, but see para 2, cf. supra no. 3). But it has not, unless otherwise agreed, a right of recourse against another third party provider of proprietary security (§ 30 para 3, cf. supra this no.). Since § 41 does not declare § 31 to be applicable, there is also no recourse against providers of dependent personal security.

III. The Measure of Internal Recourse

20.Where internal recourse between providers of security is recognised, the question arises how the amount of this recourse shall be calculated.

A.Party Agreement

21.As mentioned before (supra no. 2), the principle of freedom of contract also applies in this part of the law. Due to this principle providers of security are free to agree upon the internal sharing of their liability (DENMARK: Pedersen, Kaution 96 s.; ENGLAND: Andrews and Millett no. 12-002; FINNISH LDepGuar § 31; RP 189/1998 rd 69 s.; FRANCE: CA Lyon 13 Oct. 1981, JCP N 1983, II no. 112; CA Riom 2 Oct. 1996 (two decisions), JCP G 1997, I no. 1033 (9); GERMAN CC § 426 para 1, Schlechtriem 1039 and Bu¨low, Ausgleich 59, 64; GREEK CC art. 487 para 1 and Georgiades § 3 no. 178; Karakatsanis 137; Karasis 187; Spyridakis § 80 no. 2; ITALY: Fragali, Della fideiussione 437;

PORTUGAL CC art. 516; SCOTLAND: Gloag and Irvine 822; SPANISH CC art. 1138;

SWEDEN: Walin, Borgen 119 s.). But an agreement between the creditor and one or all providers of security that excludes the internal recourse between the providers of security is not valid (GERMAN BGH 14 July 1983, BGHZ 88, 185, 189 for dependent personal securities assumed by standard form contracts).

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B.Internal Liability in the Absence of Party Agreement

a.Internal Liability ‘‘per capita’’

22.According to ITALIAN and SPANISH law, several providers of security are, in the absence of an agreement to the contrary, internally liable per capita (ITALIAN CC art. 1954 juncto art. 1299 and Giusti 243; SPAIN: CC art. 1844 juncto art. 1145 para 2 and 3, 1138; TS 2 Dec. 1988, RAJ 1988 no. 9287). Similarly in SCOTLAND there is a presumption for per capita liability if the parties have not agreed on a different share to be borne by the providers of security (Stair/Clark no. 940).

b.Proportional Internal Liability – cf. Para (2)

23.AUSTRIAN CC § 896, FINNISH LDepGuar § 31 para 1, GERMAN CC § 426, GREEK CC art. 487, ITALIAN CC art. 1298, PORTUGUESE CC art. 516, SPANISH CC art. 1138 and SWEDISH Ccom chap. 10 § 11 provide that co-debtors are liable in equal shares unless there is a “special relationship” between them (AUSTRIAN CC § 896) or it is “otherwise provided” (GERMAN CC § 426) (the situation is similar in DENMARK: Pedersen, Kaution 101 s.). The latter is mostly the case since AUSTRIAN and GERMAN courts nowadays consider that the maximum risk assumed by the providers of security is in general the basis for internal recourse (AUSTRIA: OGH 9 Dec. 1987, SZ 60 no. 266 p. 702-703 (at the time of the payor’s payment); formerly different OGH 20 June 1984, SZ 57 no. 114 at p. 566; GERMANY: BGH 11 Dec. 1997, BGHZ 137, 292 approving CA Hamm 29 Oct. 1996, WM 1997, 710 for dependent personal securities). According to GERMAN case law the maximum risk of an unlimited dependent personal security is defined by the final balance of the secured credit (BGH 11 Dec. 1997, BGHZ 137, 292,

296 s.). Most writers agree with this (AUSTRIA: Rummel/Gamerith § 896 no. 12, but differently in II § 1359 no. 7 a; indirectly also Schwimann/Mader and Faber § 1359 nos. 3-4); but some are opposed (GERMANY: Schlechtriem 1026-1047 – except if one of several security providers has a special interest in the secured credit 1026-1030, 1047; Staudinger/Horn § 774 nos. 55 ss., but rejected by BGH 11 Dec. 1997, BGHZ 137, 292).

24.DUTCH CC art. 7:869 refers to art. 6:152 as the applicable rule on the measure of the internal recourse. The part which has remained unpaid by the debtor is apportioned among the subrogated party and other providers of security or liable “non-debtors” (i.e. providers of proprietary security) who are liable in proportion to the amounts for which each party was liable towards the creditor at the time of the payment (CC art. 6:152 para 1), the maximum being the extent of their respective obligation towards the creditor (para 2); cf. also para 3 (Blomkwist no. 39).

25.The solution is similar under BELGIAN, ENGLISH, FRENCH and LUXEMBOURGIAN law. If providers of personal security are not liable for equal amounts, they share the burden of the secured debt according to the proportion of their maximum liability (BELGIUM: Du Laing nos. 18-20; Van Quickenborne nos. 533-539; ENGLAND: Ellesmere Brewery v. Cooper [1896] 1 QB 75 (CFI); FRANCE: Cass.civ. 2 Feb. 1982, JCP 1982 II no. 19825; Simler nos. 646 ss.; LUXEMBOURG: CFI Luxembourg 8 Oct. 1982, Pas luxemb XXVI (1984-1986) 59); the latter is according to FRENCH writers in cases of unlimited dependent personal securities determined by the final balance of the secured obligation (cf. Simler no. 649).

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c.Legal Systems with Uncertain Solution

26.GREEK courts did not yet deal with this issue and the literature is divided: Whereas some writers are of the opinion that providers of security shall be internally liable in equal shares (Karasis 187; Spyridakis § 80 no. 2), others argue that only if the value of proprietary security exceeds the value of the secured obligation, the providers of security shall be internally liable in equal shares, but if the value of proprietary security is less than the value of the secured claim, the liability shall be proportional (Karakatsanis 134136; Theodoropoulos 263).

IV. Type of Liability

27.It is commonly thought that a provider of security who has a right of recourse against its several fellow providers of security cannot seek satisfaction from only one of them, with the consequence that the second would have to proceed afterwards against the third and so on. Rather, the first is obliged to divide its recourse between the remaining providers of security pro virili parte (DENMARK: Pedersen, Kaution 101 s.; FRANCE: if fellow providers of security are liable for equal amounts CA Poitiers 11 June 1981, D. 1982, 79; for GERMANY in general Palandt/Gru¨nberg § 426 no. 6: no solidary liability in the internal relationship of co-debtors).

(Seidel/Hauck)

Article 1:109: Several Security Providers: Recourse Against Debtor

(1)Any security provider who has satisfied a claim for recourse of another security provider is subrogated to this extent to the other security provider’s rights against the debtor as acquired under Article 2:113 paragraphs (1) and (3), including proprietary security rights granted by the debtor. Article 2:110 applies with appropriate adaptations.

(2)Where a security provider has recourse against the debtor by virtue of its rights acquired under Article 2:113 paragraphs (1) and (3) or under the preceding paragraph, including proprietary security rights granted by the debtor, every security provider is entitled to its proportionate share, as defined in Article 1:108 paragraph (2) and PECL Article 10:106, of the benefits recovered from the debtor. Article 2:110 applies with appropriate adaptations.

(3)Unless expressly stated to the contrary, the preceding rules do not apply to proprietary security provided by the debtor.

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Comments*

A. Rights of Security Provider after	C. Exception . . . . . . . . . . . . . . . . . . . . . . . .	nos. 17, 18
Exposure to Internal Recourse	nos. 1-11

B.Other Security Providers’ Entitlement to Benefits

Recovered from the Debtor . . . . nos. 12-16

A.Rights of Security Provider after Exposure to Internal Recourse

1. General. If one (or several) security provider(s) had been exposed to internal recourse according to Article 1:108 (1) and (2) the next issue is to which rights it (or they) is (or are) entitled against the debtor. This issue is addressed by Article 1:109 (1). It has to be emphasised that this secondary recourse against the debtor is a matter that does not feature prominently in the legal systems of the member states. The reasons are obvious: more often than not the security provider’s chances of recovery from the debtor are low because of the latter’s insolvency – precisely because it is especially in such situations that the creditor will demand payment from the security provider instead of the debtor. The situation is different in the area of, amongst others, personal securities on first demand. Also here, the effect of these Rules is that several providers of security are solidarily liable (cf. Article 1:107 (1)). However, the creditor typically demands payment from a security provider under such a security not only if the debtor defaults but because this is an easier way of achieving payment. Since in this situation the security provider is held liable by the creditor even though the debtor is solvent, the security provider’s rights of recourse against the debtor become more important. Thus, not only the rights of internal recourse between several security providers (cf. Article 1:108) but also the rights of secondary recourse against the debtor in the situation of a plurality of security providers need to be dealt with.

a.Rights against the Debtor

2.General. Paragraph (1) deals with the question to which rights one or more of several security providers is or are entitled against the debtor who had been exposed to recourse by another security provider according to Article 1:108 (1) and (2).

3.Secondary recourse against the debtor. Whenever a security provider performs to the creditor, the former acquires both rights against the debtor according to Article 2:113 (1) sent. 1 and 2 juncto para (3) as well as rights against other security providers according to Article 2:113 (1) sent. 2 juncto para (3) and Article 1:108 (1). While in principle the

security provider can claim reimbursement in full from the debtor, chances of success will typically be higher for proceeding against the other security providers. These are liable to the security provider, who has satisfied the creditor, however, only within the limits of their respective proportionate shares as defined in Article 1:108 (2). Therefore, any se-

*The Comments on Article 1:109 are by Ole Bçger, LL.M.

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curity provider that has been held internally liable by the security provider who has paid to the creditor may not in turn take recourse against the other security providers on the basis of Article 1:108 (1) and (2), since a right to internal recourse is available only where a solidary debtor has paid more than its proportionate share. The security provider may in this situation only try to be reimbursed by the debtor, either directly (cf. the following paragraphs) or indirectly (on the basis of Article 1:109 (2), cf. infra nos. 12 ss.).

4.Subrogation according to Article 1:109 (1) sent. 1. A security provider, who has been held liable by that security provider who had satisfied the creditor, steps into the shoes of that security provider according to the first sentence of para (1); it is subrogated to the rights against the debtor to which that security provider itself had been subrogated on its payment to the creditor (cf. Article 2:113 (1) second sentence). It is also subrogated to those rights against the debtor which the other security provider had acquired under Article 2:113 (1) sent. 1.

5.This subrogation does not follow from any other provision, at least not to the extent provided for here: no rights are conferred to the security provider in question by PECL Article 10:106, since this provision applies only if a solidary debtor has performed more than its share.

6.Extent of the subrogation. The extent, to which a security provider, who is held liable by the security provider who has satisfied the creditor, is subrogated into the latter’s rights against the debtor depends upon the extent to which the latter security provider has taken recourse against the former security provider. Since this right to recourse is limited to the other security provider’s proportionate share as defined in Article 1:108 (2), this security provider will normally acquire no more than its proportionate share of the rights against the debtor. The security provider who has satisfied the creditor is then entitled to the remaining part. Should the security provider be held liable for less than its proportionate share as defined in Article 1:108 (2), it is subrogated only proportionally to the rights acquired by the other security provider according to Article 2:113 (1) and (3).

7.It is important to stress that Article 1:109 (1) sent. 1 may not only give a security provider a personal claim for reimbursement against the debtor but may also confer an entitlement to proprietary security rights (not, however, to proprietary security rights provided by third persons) insofar as such rights have passed to the security provider who has satisfied the creditor (Article 2:113 (1) and (3)). It is self-evident, however, that Article 1:109 (1) sent. 1 can not confer any entitlement to rights against the debtor or proprietary security rights which the security provider who sought recourse has not acquired by reason of its own performance under the security, but e.g. as a countersecurity granted by the debtor. The subrogation is limited to rights acquired by the security provider, who seeks recourse from the other security providers, under Article 2:113 (1) and (3).

8.Subrogation to proprietary security rights. It is expressly spelt out in Article 1:109 (1) that there is no subrogation to proprietary security rights provided by third persons. Third party proprietary security aside, however, the reference in Article 1:109 (1) to proprietary security rights granted by the debtor is to be understood in a wide sense. It is meant to

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cover not only proprietary security rights that a creditor obtains from the debtor (whether by transfer or by creation of a new proprietary security interest), but also proprietary security rights retained by the creditor on the basis of an agreement with the debtor, such as a retention of ownership. While it is envisaged that the future European Rules on Proprietary Security will cover both types of proprietary security rights (although they might to some extent be subjected to different rules), these provisions are not finally drafted yet. Therefore, it is thought to be preferable at this stage to have a rather broad reference to proprietary security rights irrespective of the method of creation instead of an explicit reference to both distinct types of proprietary security.

b.Liability of Other Security Providers

9.General. A security provider who – after having paid the creditor – seeks recourse from the other security providers, may become liable for damages towards the other security providers. This may occur if its conduct makes it impossible for the other security providers to be subrogated to their rights against the debtor, including any proprietary security rights granted by the debtor (cf. supra no. 8), or to be fully reimbursed by the debtor (cf. Article 2:110). After the creditor is satisfied only the security provider who has paid the latter is entitled to the latter’s rights against the debtor. The other security providers, however, will be subrogated into these rights once they were held internally liable by the security provider who satisfied the creditor, and then these rights against the debtor will be available as means to secure reimbursement from the debtor for these other security providers. Thus the latter have to be protected against any loss or depreciation in value of these rights due to the fault of the security provider who has satisfied the creditor.

10.Liability according to Article 1:109 (1) sent. 2. This aim is sought to be achieved by Article 1:109 (1) sent. 2. This provision will apply, e.g., where a security provider releases the debtor or where it fails to realise proprietary securities in due time, which are subsequently lost or depreciated. A security provider who does not timely commence proceedings against the debtor who then becomes insolvent might also in appropriate circumstances be liable towards the other security providers for any losses caused by this delay.

11.Security providers who may be entitled to damages. Only those security providers can claim damages under this provision, though, that had been held internally liable by another security provider. Security providers who have neither satisfied the creditor nor have been held liable by another security provider do not suffer any damage by the loss of these rights against the debtor.

B.Other Security Providers’ Entitlement to Benefits Recovered from the Debtor

12. General idea. The basic principle underlying the provisions about a plurality of security providers is that all security providers securing the same obligation shall share the risk which they assumed in proportion to their individual proportionate shares as defined in Article 1:108 (2) and PECL Article 10:106.

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a.Obligation to Share Benefits

13.General. One consequence flowing from this principle is that a security provider who has satisfied the creditor under the security is entitled to take recourse against the other security providers up to the extent of their individual proportionate shares according to Article 1:108. On the other hand, where a security provider is able to reduce its burden by taking recourse against the debtor after having paid the creditor or any other security provider by whom it has been held internally liable, this security provider has to share any benefits obtained with the other security providers. Without such participation, individual security providers could effectively reduce their total liability by taking recourse against the debtor to the disadvantage of other security providers who might not be able to get any reimbursement from the debtor, e.g. due to an intervening insolvency of the latter.

14.Security provider’s entitlement to share of benefits recovered. Paragraph (2) achieves this objective by obliging any security provider who has taken recourse against the debtor to share any benefits so obtained with the other security providers in proportion to their individual proportionate shares as defined in Article 1:108 (2) and PECL Article 10:106. Again, no security provider is bound to let the other security providers participate in any benefits acquired e.g. under proprietary security rights granted by the debtor as a countersecurity to this security provider only. The liability under para (2) sent. 1 arises only where a security provider has recourse against the debtor under the rights conferred by Article 2:113 (1) and (3) or under Article 1:109 (1) or equivalent claims arising from the underlying relationship between security provider and debtor (e.g. a mandate). This liability arises in the case of a recourse by virtue of rights which in appropriate circumstances would have been available to the other security providers as well, if they had paid the creditor or had been held internally liable by another security provider, respectively. It should be emphasised that the reference to proprietary security rights granted by the debtor is to be understood in the same broad sense as in para (1), cf. supra no. 8.

b.Liability for Damages

15.Article 1:109 (2) sent. 2. Sentence 2 of para (2) refers to Article 2:110, thereby creating a liability between co-providers of security where due to the fault of one security provider the other security providers cannot share the full benefits which the former security provider acquired or could have acquired by taking recourse against the debtor under its rights conferred by Article 2:113 (1) and (3) or under Article 1:109 (1). In contrast to Article 1:109 (1) sent. 2, this liability for damages does not protect security providers against loss resulting from not being subrogated into another security provider’s rights against the debtor or from not obtaining full satisfaction from the debtor under such rights. Rather, the security provider is protected against losses resulting from rights of participation against another security provider according to para (2) sent. 1 not coming into existence or being limited to a smaller amount than possible if the other security provider would have duly exercised its rights against the debtor.

16.Situations covered. The liability provided for in para (2) sent. 2 juncto Article 2:110 will typically arise in two different sets of circumstances: in the first situation, a security

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provider might fail to exercise its rights against the debtor in time, which then becomes insolvent, or fail to take advantage of proprietary security rights, which subsequently are depreciated. Such conduct would be detrimental to the other security providers as well since in such situations their right to share in any benefits obtained from the debtor could be diminished or become worthless. The reference to Article 2:110 is broad enough, however, to cover also situations, in which a security provider wilfully refrains from exercising any rights against the debtor. A security provider may have personal reasons not to demand reimbursement from the debtor although it is entitled to do so; however, that security provider must be liable for any losses caused to the other security providers by not exercising rights to the benefits of which the other security providers would have been entitled in part.

C.Exception

17.Proprietary security rights provided by debtor excepted. Paragraph (3) contains an exception referring to proprietary security rights provided by the debtor (also in this context, the remarks in no. 8 supra apply). In any case, it is the debtor who is liable in the end for the secured obligation, and obviously there is no point in subrogating the debtor into rights against itself.

18.Counter-exceptions. Some provisions in this Article, however, are expressly declared to apply also to proprietary security rights granted by the debtor (para (1) sent. 1 and para (2) sent. 1; see also supra no. 8). These provisions are dealing with the exercise of or the subrogation into rights against the debtor, which for the purposes of this Article follows identical rules for personal as well as proprietary security rights.

National Notes

I. General . . . . . . . . . . . . . . . . . . . . . . . . . .

no. 1

II. Entitlement of Other Security Providers to Rights against

the Debtor . . . . . . . . . . . . . . . . . . . . . . . nos. 2, 3

III. Entitlement of Other Security
Providers to Benefits Received
from the Debtor or Third
Parties . . . . . . . . . . . . . . . . . . . . . . . . . . .	nos. 4-6
IV. Consequences of Conduct
Disadvantageous to Other
Security Providers . . . . . . . . . . . . . .	no. 7

I. General

1.In most countries, it is a well-known principle that after performance towards the creditor, the security provider acquires rights against the debtor. Equally accepted and similarly prominently dealt with in the legal systems of most member states is the principle of an internal recourse between several security providers, which typically follows the idea of sharing the burden between all providers of security for the same

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