The Reappearance of Ownership as a Means of Security in Mexican and French Law, the Battles Between Legal Technique and Legal Policy in Insolvency Law

In Mexican and French law ownership is at the heart of several legal techniques that secure the performance of an obligation. There is nothing new in using ownership as a means of security; in fact, Romans had a trust like device named fiducia cum creditore, by which the settlor would transfer ownership to the trustee as a way to secure the performance of an obligation (the trustee was the creditor and the settlor the debtor). This mechanism disappeared because of legal and economic flaws and gave way to new security devices such as the pledge and the mortgage. In other words, the fiducia cum creditore disappeared when better techniques where created for the same purpose. If the right of ownership ceased to be used to secure the performance of an obligation under Roman law, why has it reappeared in Mexican and French contemporary law? The answer of this question can be found in the legal policies that underlie Mexican and French bankruptcy law. These policies have as an effect a decline in the effectiveness of other security devices (such as the pledge and mortgage) when the creditor needs it the most: the bankruptcy of his debtor. Therefore legal practitioners had to find legal means by which their clients would be protected in the case of bankruptcy of their debtor. They found in the right of ownership the legal technique to offset the legal policies of bankruptcy law. Indeed, if ownership is retained by, acquired by or transferred to the creditor, then those assets cannot be considered as part of the estate of the bankrupt and therefore the creditor will be in a better position than if he would have executed another security which is not based on the right of ownership. Thus, the battle between legal technique and legal policy.