The Shortcomings of
and Need for Reform
The roots of modern-day generic business security go back to 19th-century England, where the case law
for the ﬁ rst time recognised a universal non-possessory charge over all present and future assets of a com-
pany*1. To this day, jurisdictions vary greatly in their approach to the ‘universal pledge’ of the company’s
assets. There are countries, such as Austria, that require a high degree of creditor possession and speciﬁ city,
thereby ruling out the possibility of a general pledge and a pledge on future assets*2. At the other end of the
spectrum are common-law countries such as England and the United States. In England, the creditor has
the possibility of a truly global security right for all assets of the company, both present and future, real and
personal property*3. The United States ‘ﬂ oating lien’ is of identical nature, allowing for a security right over
present and future movables, with the difference from its English counterpart being that the US version
can be given by companies and individuals alike whilst the English ﬂ oating charge may be granted only by
companies. Also, in the United States there are separate state regimes for real property*4. The availability
of a general pledge on a company’s assets seems to go hand in hand with the availability of general debtor-
indexed registries and notice-ﬁ ling systems as opposed to strictly asset-title registries. The wider the scope
of the general pledge on company assets, the greater the interest in minimising the possibility of the same
asset being pledged via a speciﬁ c ﬁ xed security right without the knowledge of the general pledge holder.
The Estonian Commercial Pledges Act took effect on 1 January 1997*5 and in its core aspects has
remained the same to this day. From the early days of its creation, the commercial pledge has received the
treatment of a pledge non grata. It has been called a ‘threat to trade credit’*6, a ‘peculiar phenomenon’ that
exists in parallel with ‘decent securities’, and ‘an outsider’ to the speciﬁ city system for reason that it violates
1 E. Ferran. Principles of Corporate Finance Law. Oxford: Oxford University Press 2008, p. 369.
2 W. Faber, B. Lurger. National Reports on the Transfer of Movables in Europe – Volume I: Austria, Estonia, Italy, Slovenia, Euro-
pean Legal Studies. Munich: Selliers, European Law Publishers 2008, p. 182 DOI: http://dx.doi.org/ 10.1515/9783866537019.
3 P.R. Wood. Comparative Law of Security Interests and Title Finance, Vol. 2 in the Law and Practice of International Finance
Series. London: Sweet & Maxwell 2007, p. 6-011.
4 Ibid., p. 6-015.
5 Kommerstpandiseadus. – RT I 1996, 45, 848; RT I 21.06.2014, 31 (in Estonian). English text available at https://www.
riigiteataja.ee/en/eli/527012015013/consolide (most recently accessed on 22.3.2015).
6 M. Wenckstern. Ekspertiis Eesti kommertspandi seaduse eelnõule (Expert Assessment to Draft Act of the Estonian Commer-
cial Pledge Law), 31.10.1995, via P. Varul et al. Asjaõigusseaduse kommentaarid (Law of Property Act, with Commentary).
Tallinn: Juura, p. 368 (in Estonian).
52 JURIDICA INTERNATIONAL 23/2015