Note to the Working Group Under the definition of control in the terminology section, the secured creditor has control of an independent undertaking where (i) the issuer guarantor or nominated person paying the proceeds is the secured creditor (ii) the issuer guarantor or nominated person paying the proceeds has acknowledged the security right in the proceeds from the drawing under an independent undertaking or (iii) the secured creditor is the beneficiary.

(jj) Non possessory security right means a security right in (i) tangibles that are not in the actual possession of the secured creditor or another person holding the tangibles for the benefit of the secured creditor, or (ii) intangibles.

(e) Debtor means a person that owes performance of the secured obligation and includes secondary obligors, such as guarantors of a secured obligation .

Under the third method of obtaining control, as between the issuer guarantor or nominated person paying the proceeds and the secured creditor, the secured creditor is the beneficiary of the independent undertaking.

(ii) Possessory security right means a security right in tangibles that are in the actual possession of the secured creditor or of another person (other than the debtor or other grantor) holding the asset for the secured creditor.

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(aa) Guarantor Issuer means a bank or other person that issues an independent undertaking.

(b) Security rights securing the obligation of the obligor on the negotiable instrument.

In the insolvency of a non grantor debtor, the creditor is an unsecured creditor with an unsecured claim against the non grantor debtor.

(f) Grantor means a person that creates a security right in one or more of its assets in favour of a secured creditor to secure either its own obligation or that of another person (see debtor).

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Protection of secured creditors

Without sponsor.

Where the security right at issue (which secures the debtor's obligation) is granted by the debtor, the term debtor also refers to the grantor.

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The purpose of conflict of laws rules is to determine the law applicable to each of the following issues the creation of a security right the pre default rights and obligations between the secured creditor and the grantor the effectiveness of a security right against third parties the priority of a security right over the rights of competing claimants and the enforcement of a security right.

Rights and obligations of the grantor and the secured creditor

The law should provide that a secured creditor with a security right that is not effective against third parties has towards third parties no right other than as an unsecured creditor priority over unsecured creditors unless the unsecured creditor has taken steps to reduce its claim to a judgement or the grantor has become insolvent .

To the extent that the value of the encumbered asset is insufficient to satisfy the secured creditor's claim, the secured creditor may participate as an ordinary unsecured creditor.

A second approach to protecting the interests of secured creditors is to protect the value of the secured portion of the claim.

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If the value exceeds the claim, the secured creditor will not be harmed by the diminution of value until that value becomes insufficient to pay the secured claim.

(b) an indication whether secured creditors need to file their secured claims and

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By requiring authorization of the guarantor issuer, the Convention does not recognize as confirmations quot silent quot confirmations, i.e., confirmations added without the assent of the guarantor issuer.

Accordingly, the focus of the Convention is on the relationship between the guarantor (in the case of an independent guarantee) or the issuer (in the case of a stand by letter of credit) (hereinafter referred to as quot guarantor issuer quot ) and the beneficiary.

If the secured creditor is the depositary bank, the depositary bank's security right has priority over any other security right.

The law should provide that a security right in a bank account is effective as between the secured creditor and the grantor notwithstanding an agreement between the grantor and the depositary bank limiting in any way the grantor's right to create a security right in its bank accounts.

The term includes a bank or other person that confirms the independent undertaking ( confirmer ).

The law should provide that the security agreement must, at a minimum, identify the secured creditor and the grantor, and reasonably describe the secured obligation and the assets to be encumbered.

(ii) The secured creditor will be protected against diminution of the value of the encumbered asset in which it has a security interest.

15. The Convention also includes in its scope confirmations of undertakings, i.e., an undertaking added to that of, and authorized by, the guarantor issuer.

(g) Security agreement means an agreement between a grantor and a creditor, in whatever form or terminology, that creates a security right.

It may be that, as between the grantor and the secured creditor, the secured creditor has agreed to treat the proceeds as encumbered assets.

The ship apos s insurer had furnished the consignee with a letter of guarantee as security for any penalties imposed on the ship owner in his capacity as carrier.

If the secured creditor and the depositary institution are the same person, the law should provide that the secured creditor automatically has control upon the creation of the security right.

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(5) Where, pursuant to paragraph (1) of this article, security has been provided, the person providing such security may at any time apply to the Court to have that security reduced, modified, or cancelled.

(5) Where pursuant to paragraph (1) of this article security has been provided, the person providing such security may at any time apply to the Court to have that security reduced, modified or cancelled.

(j) Treatment of secured creditors

(b) Acquisition security right means a security right in an asset that secures the obligation to pay any unpaid portion of the purchase price of the asset or other obligation incurred to enable the grantor to acquire the asset.

The same may be said of the relationship between a guarantor issuer and its instructing party (the instructing party being, for example, a bank, requesting, on behalf of its customer, the guarantor issuer to issue an independent guarantee).

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Any such agreement does not affect the relationship between the issuer guarantor or nominated person paying the proceeds and the beneficiary (the secured creditor).

(b) indicate whether secured creditors need to file their secured claims and