One Flight Over Czech Security Interests: Priorities and Other Monsters of Post-Transformation Debtor/Creditor Law

IES Occasional Paper No. 3/2006

33 Pages Posted: 1 Nov 2006

See all articles by Tomas Richter

Tomas Richter

Charles University in Prague - Department of Economics

Date Written: October 2006

Abstract

This article contains a relatively comprehensive review of current Czech law of security interests. Starting from a basis of socialist law of security interests, utterly useless in a market economy, the Czech legislator must be credited with having made some progress since 1989. However, that progress has been moderate at best. While Czech law of security interests contains some particular features conducive to taking security over business assets (such as a register of movables allowing the creditors to take non-possessory charges over chattels), confusion prevails about some of the most fundamental principles of this field of law, in particular the rules of priority. As will be shown in the article, these fundamental confusions and conceptual misunderstandings appear time and again in dubious and unclear statutory provisions that reduce legal certainty and increase transaction costs in the Czech credit market.

In part 1, the article first defines its scope. Part 2 briefly discusses the economic theories of secured credit. Part 3 reviews what could be called the general principles of the law of security interests, including in particular the rules on priority. Part 4 briefly mentions consumer protection issues. Part 5 contains a discussion of the most typical assets taken as security, the ways these assets may be charged and the way the charges may be enforced. Part 5 concludes with some recommendations for legal reform.

Keywords: secured credit, security interests, priorities, debtor/creditor law, bankruptcy, insolvency, transformation

JEL Classification: G33, K3

Suggested Citation

Richter, Tomas, One Flight Over Czech Security Interests: Priorities and Other Monsters of Post-Transformation Debtor/Creditor Law (October 2006). IES Occasional Paper No. 3/2006, Available at SSRN: https://ssrn.com/abstract=941119 or http://dx.doi.org/10.2139/ssrn.941119

Tomas Richter (Contact Author)

Charles University in Prague - Department of Economics ( email )

Opletalova 26
Prague, 11000
Czech Republic

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