Security interests across borders in Sint Maarten

Categories: Civil
Sint Maarten is unique in the sense that two countries share a relatively small island, with an open border. Because of this almost every inhabitant regularly enters the French side. There is, however, an invisible legal reality that governs these border crossings.
As soon as cars, cargo or any other personal property cross the border, the security interests on this personal property are governed by a different legal system. As outlined below, the transfer to another legal system can have unexpected consequences for the functioning of security interests.

What are security interests?

A security interest is a legal right established on personal property of a debtor and is granted in favour of a creditor. Take for example this simple scenario: a debtor has to pay back his loan to the bank. The debtor can agree that his car functions as security in case he fails to pay his monthly instalments. As long as the debtor pays his monthly instalments he won’t notice a thing. However, if the debtor indeed fails to pay his instalments, the security interest enables the bank to sell the car and keep the proceeds of the sale.

Examples of security interests in Sint Maarten are: the Silent Pledge, the Retention of Title and the Fiduciary Transfer.

Security interests are often “real rights”, meaning that they can be invoked against any person. However, issues may arise if various legal systems are involved. The creation, validity and enforcement of security interests is often ruled by the law where the secured property is.

Bienvenue en France

A security interest on a car (or any other personal property) that enters the ‘Collectivité de St. Martin’ may become null and void or unenforceable if it’s not established in a way that is compatible with the laws of France.

An example of a security interest which may lose its effectiveness when crossing the border is a Silent Pledge on a car. This is a Sint Maarten security interest which does not need to be registered in a public register. In France a security interest must be registered in a public register for it to be effective against third parties. This gives rise to the following questions: what happens if the car is driven to the French side and another creditor places a French Pledge on the car or an attachment? Or a garage shop on the French side refuses to return the car until repairs are paid in full?

These questions refer to the same problem: a third party has established a right in accordance with the laws of France on the same personal property. If the necessary steps to make the Silent Pledge fully effective in both countries were not taken, the posterior French right may prevail.

Within the Kingdom of the Netherlands

Even within the Kingdom of the Netherlands, security interests will not always be effective in full. The European part of the Netherlands forbids almost all Fiduciary Transfers, which opposes the laws of Sint Maarten that do allow Fiduciary Transfers. Also, the Retention of Title of Sint Maarten differs in effect from its equivalent in the European part of the Netherlands because of the different standpoints on Fiduciary Transfers.

Consult a specialized lawyer

Security interests are there to curtail risks, but do not necessarily account for legal risks abroad. Always consult a lawyer if you want to secure your claims with security interests. Security interests may have unintended consequences, therefore, also consult a lawyer if someone wants to obtain a security interest for a claim against you.

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