The Harmonisation of the Law of Personal Security

Author:Matthias E. Storme
Position:Professor at the Katholieke Universiteit Leuven and Universiteit Antwerpen

1. General problems of harmonisation - 2. Structure of personal security as a type of plurality of debtors - 2.1. Dependent and independent security in general - 2.2. Guarantee function and payment function - 2.3. Classification of the internal relationship - 2.4. Four basic types - 2.5. The main content of personal security - 3. Relationship with the general law of contracts and obligations - 3.1... (see full summary)


In this paper in honour of Prof. Drobnig 1 , I would like to deal with the following topics in relation to (the harmonisation of the law of) personal security:

- The level of abstraction fit for a European restatement on this matter (1)

- The structuring of the different institutions in a conceptual and regulatory framework (2)

- The relationship between the specific rules for personal security and general contract law in the proposed Draft Common Frame of Reference 2 (3)

- The rules applicable to provision of proprietary security by a third party (4)

1. General problems of harmonisation

The draft common frame of reference tends to formulate rules as much as possible on a general level, and this is clearly also true in the field of personal security. As we will see, many questions are already dealt with in general terms in Book II, on contracts and juridical acts in general, or in Book III, on obligations in general. Further, within the field of personal security, matters are regulated basically for two broad categories of personal security, dependent and independent personal security, with even a substantial general part for both of them.

Is this tendency merely a revival of the Pandectist temptation, as some opponents have cried, reducing the Pandektenschule further unjustly to mere Begriffsjurisprudenz? There are some objective elements explaining and probably also justifying this style. I would like to mention four. All four were to some extent - and mutatis mutandis - also present in the context of 19th-century Germany.

1) The lasting importance of freedom of contract, allowing private parties to create new forms or variations of contractual relationships, including personal security. There is no numerus clausus of nominate contracts. This obliges the legislator to use general categories.

2) The growing pressure of the equality principle as a principle of good legislation. Differences in rules have to be justified. Thus, even more than in Germany, private law is weekly under scrutiny by the Belgian Constitutional Court and private law rules are regularly declared unconstitutional because there is not sufficient justification for differences between comparable situations.

3) The transnational character, which imposes pressure to use categories in which more specific national institutions can be classified.

4) Ockham's razor: where the rule is the same, it is not rational to repeat it many times.

On the other hand, the criticism addressed to such general rules is known also, the well-founded as well as the unfounded criticism. On the one hand, the arguments criticising the intellectual level of abstraction are an expression of laziness. But the arguments criticising the societal level of abstraction, rules abstracted from the concrete societal contexts they regulate, have to be taken seriously. However, this has to be done by providing compensatory mechanisms with an equally general playing field, not pointillist measures.

I have strongly objected to putting 'general principles' in a legal code or DCFR, as these principles are always in competition, contradicting each other, and their balance can only be expressed in rules, not in principles themselves. It is the task of the rules to indicate in which circumstances one or another underlying principle prevails. 3 But this is not an objection against rules of a general character, as long as they are still rules - i.e., containing their conditions of application. It does not make sense to formulate large-scale principles and then add here and there some exceptions without reflection on the principles underlying such exceptions. The balance to be found, e.g., between parties' autonomy and consumer protection is not a balance to be found only for very specific types of cases; it is a more general problem. Many rule-makers tend to formulate consumer protection rules too strictly (as to their field of application), allowing business parties to circumvent them too easily.

Thus any consumer protection legislation that has been drafted in terms of suretyship (Bürgschaft) alone is immediately circumvented by stipulating co-debtorship instead of suretyship in the strict sense, which necessitates 'reparation statutes' to broaden the field of application. We have seen this in Belgium, but it has not prevented the legislator from repeating the same mistake over and over again. The DCFR's Book IV G has rightly chosen to formulate consumer protection for personal security in a general way, in Chapter 4.

By virtue of Article IVG-4:102 4 , the rules on dependent personal security will apply to any personal security given by a consumer to a business 5 , thus converting independent personal security as well as co-debtorship for security purposes into dependent personal security (Bürgschaft). While co-debtorship for security purposes by a consumer is not explicitly excluded, it follows from Article IVG-4:102 that it too is converted into dependent personal security.

I will illustrate the general tendency in this draft more specifically by analysing two perspectives on the draft rules:

- firstly, the general structure of the different types of personal security and how they fit into the law of obligations in general (2);

- secondly, the relationship between the specific rules and general contract law (3).

2. Structure of personal security as a type of plurality of debtors

The basic idea in all cases of personal security is that there are at least three parties involved and that there is some form of plurality of debtors.

2.1. Dependent and independent security in general

In most legal traditions, the various forms of plurality of debtors can first of all be classified into the following three general categories:

1) Co-debtors liable for the same obligation, either solidarily or jointly. A performing debtor performs an obligation, which is its 'own' obligation but not merely its own obligation. It is also someone else's obligation, each of them having a 'share' to bear. These situations are in the DCFR governed by Book III, Chapter 4.

2) A debtor liable for a debt that is the debt of someone else, the main debtor. The first mentioned has no 'share'; internally the debt is apportioned solely to the main debtor. The main figure is the dependent personal security. This category encompasses, in my view, also the cases where a third party grants a proprietary security right to secure someone else's debt (see also 4. below).

3) Two debtors each liable for a different obligation. Their obligations are concurrent, not cumulative, and in the internal relationship the debt is apportioned to one of them while the other has no share to bear. One of the main figures is the independent personal security, in the DCFR governed by Book IV G, Chapter 3.

The 'odd' figure is the co-debtorship for security purposes, where the creditor stipulates that the personal security's guarantor is nevertheless liable as a main debtor. The DCFR has not abolished this figure, except for B-to-C relationships.

The main difference between the second and third category above is evidently expressed by the words 'dependent' and 'independent'. The obligation with the personal security is either dependent on or (wholly or partially) independent from the 'valuta relationship', the relationship between the creditor and the 'main' debtor (whose debt it primarily is). The word 'independent' is to be preferred over 'abstract', because the abstraction of their obligation describes the relationship to the internal relationship between the debtors, the 'provision relationship', and both types of personal security are in principle 'abstract' in that sense.

Figure: Dependent personal security


Figure: Independent personal security


2.2. Guarantee function and payment function

The different forms of plurality, or at least the second and third type, can, however, also be classified on the basis of another criterion, according to whether the addition of a debtor has first of all a security (guarantee) function or a payment function. A third possibility is that a new debtor is fully substituting for the old debtor, who is discharged (perfect or complete substitution of a debtor - see Article III-5:203 and 204 of the DCFR).

Leaving aside the last figure, wherein there is no longer a plurality of debtors, this brings us the four following categories of plurality of debtors other than simple co-debtorship.

Dependent on valuta relationship Independent from valuta relationship
Guarantee function (whether subsidiary or solidary) Dependent personal securitySubsidiary liability, old debtor Independent personal security- borderline cases: demand guarantees; standby letter of credit
Payment function Dependent delegatio solvendi, such as contract bondsCompare substitute debtor when old debtor not discharged Independent delegatio solvendi, such as:- credit card- documentary credit- money transfer- bill of exchange

The distinction between security instruments and payment instruments...

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