Spain: Validity of the exploitation clause ("pactum marcianum") in the enforcement of physical collateral
The Directorate General for Registrars and Notaries, in a brief decision, has recognised the validity of the so-called “pactum marcianum”, an exploitation clause, on the basis of which the creditor can directly exploit the object himself/herself and/or can assign it to himself/herself.
“Madrid Spirit”, an oil tanker sailing under Spanish flag had a ship mortgage entered with the above described “pactum marcianum”. The moveables register of Tenerife rejected the entry of this clause, whereupon the General Directorate, in the appeal proceedings decision dated 26 December 2018, in principle recognised its validity in Spain for the first time and established its validity requirements in detail (which were not given in the present case). The requirement is that the exploitation must at least occur at the value which is determined by two independent experts and, if this is above the value of the collateralised receivable, the difference is provided to the remaining creditors by court or notary (or, failing this, the secured debtor itself).
The “pactum marcianum” is an exception to the ban on the exploitation agreement (pactum commissorium). Spanish law prohibits the mortgage creditor, in the event of non-performance of the debtor in principle, from directly appropriating the property (Art. 1859 Código Civil [Civil Code]), instead of its sale via a public auction in the framework of a court or notarial procedure: Firstly, because it can lead to an unjust enrichment of the creditor (if the collateral has a higher value than the collateralised sum) and secondly to protect the successive creditors, who may not be able to satisfy their receivables from the surplus achieved by the exploitation. There have already been isolated exceptions to this principle, for example within the Cape Town Convention of 16 November 2001 on international security rights to movable equipment, by the royal decree-law 5/2005 when the security is money, marketable securities or credit rights exist, as well as e contrario according to decisions by the Supreme Court of Justice of 24 June 2010 and 21 February 2017, if an objective evaluation procedure takes place.
Although the cited decision refers to a ship mortgage, there is no reason not to also apply the decision to other collateral rights. Taking into account the costs and duration of judicial proceedings for the enforcement of security rights and the low prices regularly achieved at auction, the admissibility of the “pactum marcianum” means an added value for this type of security and acceleration of its enforcement, especially if it concerns assets whose value can be assessed objectively.
Author: Carlos Fernández