How many claims can be secured by one financial pledge?
It is clear that an ordinary pledge can secure only one claim. In the case of a financial pledge the opinions are divided.
The financial pledge as an instrument for securing claims is not a brand-new institution. It was introduced into the Polish legal system by the Act on Certain Financial Collateral of 2 April 2004, implementing the EU’s Collateral Directive (2002/47/EC). But a debate continues to rage in the commentaries and in practice on whether a financial pledge can secure only one claim or several claims.
To address this issue, it should be determined whether a financial pledge is a variety of an ordinary pledge on rights, or a sui generis pledge—a legal institution separate from an ordinary pledge. There are commentaries answering this question both ways.
Firstly, there is no doubt that an ordinary pledge may secure only one claim. Under Art. 306 §1 of the Civil Code, in order to secure a designated claim, a movable may be encumbered with a right under which a creditor may seek satisfaction out of the item regardless of whose property the item has become, with priority over the personal creditors of the owner of the item, except for those who by law are entitled to special priority.
Meanwhile, under Art. 5(1) of the Act on Certain Financial Collateral, an agreement establishing financial collateral shall specify the financial claims subject to security and the method of security. The literal wording of this provision gives the impression that the drafters were expressly referring to the possibility of securing multiple claims with financial collateral.
But this provision is striking for its terseness and imprecision. Because pledges were established in Polish law as an accessory right securing a specific claim, it seems that any departure from this rule should be express and precise, as is the case with Art. 6 of the Act on Registered Pledges and the Pledge Register of 6 December 1996, which provides that a registered pledge may secure two or more claims arising out of agreements to which a single creditor is entitled, and the claims are specified in the pledge agreement.
Supporters of the view permitting a financial pledge to secure numerous claims, based on an interpretation of the EU directives, also cite the wording of the Collateral Directive, which was implemented by the Act on Certain Financial Collateral. Art. 2(1)(f) of the Collateral Directive provides: “‘Relevant financial obligations’ means the obligations which are secured by a financial collateral arrangement and which give a right to cash settlement and/or delivery of financial instruments. Relevant financial obligations may consist of or include: (i) present or future, actual or contingent or prospective obligations (including such obligations arising under a master agreement or similar arrangement); (ii) obligations owed to the collateral taker by a person other than the collateral provider; or (iii) obligations of a specified class or kind arising from time to time.”
Unfortunately, Polish lawmakers did not introduce this rule into the national legal system in a manner that was clear and transparent and also reflected the terminology of Polish civil law. In particular, the Act on Certain Financial Collateral did not include a specific definition of a financial pledge or any specific regulation admitting the possibility of securing multiple claims with a single financial pledge.
For this reason, it should be concluded that the legislative intent was to recognise a financial pledge as a type of ordinary pledge on rights to which the provisions of the Civil Code apply as relevant.
In our view, given the lack of case law on the issue and the meagre and unclear wording of the Act on Certain Financial Collateral, it should be accepted that a financial pledge, as a variety of ordinary pledge, may secure only one specified claim. The market practice overwhelmingly leans toward this conclusion, although it must be admitted that in practice pledge agreements are also sometimes used providing for a financial pledge to secure multiple claims.
This does not change the fact that in our view, the current Act on Certain Financial Collateral ought to be amended to introduce a clear regulation, along the lines of Art. 6 of the Act on Registered Pledges and the Pledge Register, permitting multiple claims to be secured by a financial pledge. By design, a financial pledge should be a simple and not overly formal instrument to secure claims. Now, instead, in practice it is surrounded by more restrictions and doubts than a registered pledge.
Michał Kalicki and Mateusz Tusznio, Banking & Finance Practice, Wardyński & Partners
