3.5. Registration rules

The pledge registration law does not deal with a number of important issues, such as the impact of a change in the pledgor identifier or the transfer of the pledged assets sufficiency of the description of the pledged assets in the notice, the consequences of an incorrect statement or insufficient description, the time when a notice may be registered, and the sufficiency of one notice to cover multiple transactions between the same parties. These issues would need to be addressed in the law <1> and, to some extent, in the regulations <2>.

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<1> Recommendations 61 - 71.

<2> Draft Registry Guide, recommendations 10 - 13.

3.6. Registration, amendment and cancellation

While the pledge registration law addresses the process of registration, it is not clear how it applies to amendments and cancellations. Under the Guide, a registrant must amend or terminate a registered notice at the request of the grantor, if no security agreement has been concluded (or the security agreement has been amended), the registered notice has not been authorized by the grantor at all or with respect to some aspects of it or the security rights has been extinguished by full payment or otherwise and there is no commitment for the secured creditor to extent further credit. If the secured creditor does not comply within a short period of time, the grantor may request a court or administrative authority to amend or terminate the registered notice <1>. The draft Registry Guide provides additional details as to how a registered notice is to be amended or terminated <2>.

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<1> Recommendation 72.

<2> Draft Registry Guide, recommendations 28 - 31.

3.7. Registry costs and registry fees

The new Russian law on the registration of pledges provides for law registration and search fees (Rub. 300 and 100 respectively). If there are no additional fees, this is an important advantage of the proposed registry system. Low registration fees will encourage parties to register and this would enhance certainty and transparency of rights and thus promote secured credit. However, the fact that reference is made to other services and notarial acts creates the impression that there will be additional fees. In addition, the involvement of notaries in any function other than the function of the registrar will make the registration complex, time-consuming and costly.

The Guide recommends that registry fees be set at a level no higher than necessary to ensure recovery of the cost of establishing an operating a registry <1>. The cost of establishing and operating a registry will differ from country to country. If a costrecovery approach is followed, in order to set the registry fees, it would be necessary to calculate the cost of establishment of the registry (for hardware, software, marketing and training) and the cost for operation of the registry (salaries, office rents, hardware and software maintenance and upgrading, marketing and communication costs) and the number of registrations expected over a period of time, such as five years. For example, if the initial expenses amount to $500.000, 5-year operation expenses amount to $500.000 (total $1.000.000), 5-year registrations are about 500.000 and searches about 125.000, the fee per registration may be $15.00 and the fee per search may be $5.00 (or the registration fee may be $20.00 and the search may be free of charge, at least, if it is electronic).

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<1> Recommendation 54, subpara. (i).

It may also be useful to also look at the fee schedules of modern registries. For example, the registry of New Zealand charges $20.00 for the online registration of a notice, $20.00 for a renewal, $3.00 for an online search and $25.55 for a paper search certificate <1>. The registry of Australia charges $7.40 for a 7-year long online registration ($37.00 for a 25-year long registration and $ 130.00 for an infinite time), $22.70 for the registration of a paper notice, $3.70 for an online search and $29.50 for a paper search certificate. The registry of Ontario in Canada, charges $8.00 for a registration or renewal (with a duration of up to 25 years), $12.00 for an amendment, no fee for cancellations, and $8.00 for a verbal/printed response to a search request <2>. The registry of California in the US charges $5.00 for the online registration, amendment or cancellation of a notice (financing statement), $ 10.00 for the registration of a mailed notice (up to 2 pages), $5.00 for an online search by the debtor's name and $10.00 for a mailed paper search certificate <3>.

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<1> http://www.ppsr.govt.nz/cms

<2> http://www.ontario.ca/en/services_for_business/access_now/STEL02_115699.html

<3> https://uccconnect.sos.ca.gov

Finally, it may be useful too look at the numbers of registrations made in each registry to see whether the registry is actually both trusted and used widely. For example, when the Slovakian registry was launched in 2003, there were over 10,000 registrations. The number peaked in 2007 and 2008 with about 24,000. In 2011, it was less than 12,000. It is rather strange that the number of registrations has gone down so dramatically <1>.

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<1> See http://www.notar.sk/en/Mainpage/Centralnotaryregisterofdeeds/Pledges/tabid/556/language/en-US/Default.aspx. Here are a few of the problems of the Slovakian law as compared with the recommendations of the Guide: (a) the substantive law (i.e. the Civil Code) does not follow the functional approach which means that certain security devices are not subject to registration and yet they are effective against third parties (e.g., retentions of title, fiduciary assignments of title, etc.); (b) the law also requires registration of possessory pledges; (c) the registry is operated and maintained by the N otaries Chamber, which means that all registrations must be submitted through a notary (i.e. the secured creditor cannot register directly); (d) the notary must verify the identity of the person that is requesting the registration and determine whether the underlying documentation complies with the law; (e) although the registration fee is only 15 Euro, the notaries charge for notarization of the underlying documentation; (f) the registry allows searches by the creditor identifier and general collateral description (online and free of charge); (g) there are no rules in the substantive law or regulations that determine whether the registration is effective (e.g., the rules that address errors and omissions are absent).