HISTORICAL DRAFT OF UCC ARTICLE 9 AMENDMENTS 
CONSIDERED BY THE COMMITTEE


Draft – July 27, 2006

§ 9-301

	. . .

	(5)  This section is subject to Section 9-307A.

Drafting Note:  We might consider making the existing subsections (1) – (4) a subsection “(a)” and making new subsection “(5)” a subsection “(b)”.  

§ 9-307

	. . .

	(l)  [Special rule for certain (international) transactions] This section is subject to Section 9-307A.

Drafting Note:  There was a suggestion at the meeting to change the “subject to” language in 9-301 and 9-307 to something like “to the extent”; other existing uses of “subject to” in Article 9 use that phrase with an implicit “to the extent” so I have not changed the language here.  See e.g. 9-201(b), 9-203(c), 9-210(b), 9-306(a).

§ 9-307A.  Special Rules (International) for Security Interests in Certain Rights to Payment

(a)  [Definitions] In this section:

      (1)  “place of business” has the meaning given to that phrase in section 9-307(a); and
      
      (2)  “territorial unit” means a province or territory of Canada or a State.
      
Drafting Note: Reference to México deleted because commercial law is at federal level in México.
 
(b)  [Location of persons] For purposes of this section, the following rules apply:

(1)  An account debtor, debtor, or secured party that is an individual who does not have a place of business is located at the individual’s principal residence.

(2)  An account debtor, debtor, or secured party that is an individual or organization that has only one place of business is located at its place of business.

(3)  An account debtor that is an individual or organization that has more than one place of business is located at the place of business that has the closest relationship to the contract from which collateral of a type described in subsection (e)(1) arose.

(4)  A debtor or secured party that is an individual or organization that has more than one place of business is located at its chief executive office.

(5)  A person that ceases to exist, have a residence, or have a place of business continues to be located in the jurisdiction specified by paragraphs (1)-(4).

      (c)  [Governing law]  Subject to subsection (e) and except as otherwise provided in subsection (d), while a debtor is located in a jurisdiction, the local law of that jurisdiction governs perfection, the effect of perfection or non-perfection and the priority of a security interest in collateral of a type described in subsection (e)(1).

      (d)  [Local law of another territorial unit] If, under the conflict-of-laws rules in force in the jurisdiction specified in subsection (c), the local law of another territorial unit in the same nation would govern perfection, the effect of perfection or non-perfection, or priority of the security interest, then the local law of the other territorial unit governs that issue.  For purposes of this subsection the conflict-of-laws rules in force in a State that has enacted this section are those that would apply without giving effect to this section.

Drafting Note: Subsection (d)(2) deleted on the assumption that Canada will not have any rules at a territorial unit level that apply only in the case of a transaction subject to this section.  Thus the last sentence (formerly (d)(1)) applies only to States.
 
      (e)  [Limitation on applicability of section] Subsections (a) through (d) apply to a security interest only if:

(1)  the collateral is an account, chattel paper, a payment intangible, or a promissory note;

Drafting Note: § 9-307A’s applicability to “promissory notes” and not to “instruments” generally is based on an interpretation of the Convention that the Convention does not apply to assignments of checks.  A Comment will note that § 9-307A does not apply to some types of receivables covered by the Convention, such as certain types of insurance claims and real estate rents.  The Comment will also explain the effect of negotiable instruments law on transactions subject to this section.

(2)  at the time the security agreement is entered into the debtor is located in México or a territorial unit;

(3)  if the debtor is located in a territorial unit, the jurisdiction whose local law would govern the perfection, the effect of perfection or non-perfection, and the priority of the security interest under the conflict-of-laws rules in force in that territorial unit is the same jurisdiction specified by subsections (c) and (d) as the jurisdiction whose local law governs those issues; and

Drafting Note: Determining the applicability of subsection (e)(3) may require some difficult interpretations of non-U.S. law (similar to those that might occur under § 9-307(c)).  Presumably the “cure” period of § 9-316(a)(2) would apply if the location of the debtor changes because the condition of this subsection later fails.  A Comment could explain that.

(4)  one or more of the following conditions is met:

(A) the debtor and the secured party are located in different nations at the time the security agreement is entered into;

(B)  the debtor and account debtor are located in different nations at the time the account or payment intangible arises, the chattel paper is entered into, or the promissory note is issued; or

(C)  a previous security interest in the account, chattel paper, payment intangible, or promissory note was granted to the debtor in a transaction to which subsection (c) applies.

Drafting Note: The comment will explain that the term “different” means that (i) the two named persons are not located in the same nation, and (ii) one of the persons could be located in the State whose law is being applied.

      (e)  [Transition] [Will be completed later]


Additional drafting notes:

1. This section is intended to produce the same result as would the Convention with respect to which nation and which territorial unit within a nation would govern questions of perfection, the effect of perfection or non-perfection, or priority of a security interest in rights to payment of the kind described, but only if the nation whose law would apply is Canada, México, or the U.S. and the application of the choice-of-law rules of that nation or its territorial unit would generate the same applicable law for these issues as would this section.
2. This section is limited to a definition of “location” that would apply to the covered transactions and a choice-of-law rule.  It does not attempt to conform Article 9 to other provisions of the Convention that might produce results different from those that would occur in some circumstances under Article 9 (e.g. Article 9’s anti-assignment overrides in §§ 9-406 – 9-408 produce different results in some circumstances than do the comparable rules in the Convention).
3. This section, and not § 9-301(4), would apply to accounts that constitute as-extracted collateral.


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