Security in International Syndicated Lending

This research paper is aimed to determine the most suitable legal instruments for creation of a valid continental law security for a syndicated loan. Issues of law applicable to a security, mainly to a pledge, are analysed in the first chapter of this paper. The regulation of a pledge as a limited property right in private international law and international instruments regulating the property security in respect of particular objects of civil rights are considered. The second chapter of the research paper is dedicated to legal means of syndication of a secured loan. A role of a security agent and legal instruments used in the continental law jurisdictions to allow a smooth transfer of creditor’s rights, while preserving the valid security, are presented. The conducted research leaded to the following conclusions. Largely ratified international instruments on the property law do not exist, save for the Cape Town convention. Generally, the law applicable to property security is the law of the location of the  asset. Some assets require laws of more than one jurisdictions to be taken into account, in particular, if an encumbered asset is relocated between states or it is problematic to unequivocally determine the law applicable to it (as it is the case for uncertificated intermediated securities). The fact that a security under continental law is accessory and common law trusts are not recognised to the full extent resulted in the need to use special instruments for the creation of a valid security for a syndicated loan. As a solution of the problem it is possible to use, inter alia, a parallel debt or specific instruments of local law, an agreement on the management of a pledge is considered to be such an instrument in Russia.