A helping hand for Scottish businesses

Our Discussion Paper on Moveable Transactions (DP 151) published today looks at three connected areas of law, all important to the smooth running of the Scottish economy. In all three areas Scots law appears to be out of date, and insufficiently business-friendly. From an international perspective current Scots law would appear to be in need of radical reform. 

(i)         The transfer of financial rights (ie a creditor transferring the right to payment, so that the debtor will have a new creditor). 

(ii)        Security over corporeal moveable property. (“Security” means security for a debt.) Although Scots law, like other systems, allows security by delivery to the lender (eg handing over a gold watch to a pawnbroker), there are legal hurdles in the way of non-possessory security. 

(iii)       Security over incorporeal moveable property. Here too the current law would seem to be capable of considerable improvement. 

The Discussion Paper discusses the current law, identifies its shortcomings, and suggests possible ways forward. Other legal systems are looked at, including the model that originated in the USA and has now been adopted (with some variations) in a number of other countries including Australia, Canada and New Zealand. Although the paper concludes that a wholesale adoption of this model would not be appropriate, at least at the present time, it is suggested that Scots law would benefit from adopting some of its ideas. 

It is proposed that there should be a new type of security right, that could cover both corporeal and incorporeal moveable property. There would be a new online Register of Moveable Transactions, in which the security right would be registered. The new register could also be used to register transfers of financial rights, for example in securitisations and factoring. 

Lord Drummond Young, the Chairman of the Commission, said: “The value of moveable property which may be transferred or used as security for a debt is substantial but much of Scots law in this area is regarded as being out of date and cumbersome in operation.  This may place Scottish businesses at a competitive disadvantage and lead to the loss of legal financial and commercial business to England and elsewhere. Our aim, through the introduction of a new type of security right and improvements to the existing law, is to simplify Scots law making it more efficient in economic terms and thus more attractive to users or potential users. " 

Comments are invited by 30 September 2011, using the electronic response form  if possible.

For further details, see the project page.