Cambodia's Law on Secured Transaction

Akron Law Review Volume 54 Issue 5 Article 4 2021 Cambodia's Law on Secured Transaction Timothy J. Holzer Pho Sotheaphal Follow this and additional works at: https://ideaexchange.uakron.edu/akronlawreview Part of the International Law Commons, and the International Trade Law Commons Please take a moment to share how this work helps you through this survey. Your feedback will be important as we plan further development of our repository. Recommended Citation Holzer, Timothy J. and Sotheaphal, Pho (2021) "Cambodia's Law on Secured Transaction," Akron Law Review: Vol. 54: Iss. 5, Article 4. Available at: https://ideaexchange.uakron.edu/akronlawreview/vol54/iss5/4 This Article is brought to you for free and open access by Akron Law Journals at IdeaExchange@UAkron, the institutional repository of The University of Akron in Akron, Ohio, USA. It has been accepted for inclusion in Akron Law Review by an authorized administrator of IdeaExchange@UAkron. For more information, please contact , . Holzer and Sotheaphal: Cambodia's Law on Secured Transactions CAMBODIA’S LAW ON SECURED TRANSACTIONS Timothy J. Holzer and Pho Sotheaphal 1 I. II. Introduction ..................................................................870 Discussion ....................................................................873 A. History of Cambodia’s Secured Financing Over Moveable and Intangible Property ...........................873 B. The Mandatory Legal Predicate ...............................875 C. What Property Can Serve as Collateral? ...................876 1. Collateral Such as Goods or Moveable Things ....876 2. Collateral such as Intangible Property and Other Intangible Property ...................................876 3. Claims ...............................................................877 4. Rights and Real Rights.......................................877 5. Accounts ...........................................................880 6. Possible Solutions to Security over Accounts and Nominative Claims ......................................882 1. Timothy J. Holzer, BSEE, JD and a Masters Certificate in Contract Management is a Senior Consultant (Banking & Finance) with DFDL, Asia, and a Principal at Asia Consult. He has worked as a senior legal adviser/consultant for multiple Tier 1 international law firms, has been National Contract Manager for multiple telecommunication companies throughout the world, taught legal principles at three universities (most recently as Adjunct Associate Professor of Law at the American University of Phnom Penh), and has published and lectured frequently at international seminars in Asia. Pho Sotheaphal, LL.M., is a registered lawyer, member of the Bar Association of the Kingdom of Cambodia, and manages the law offices of Sotheaphal, Samnang, Sophy & Partners. He is also a notary public and member of Nitei Niron Notary Public. His areas of active practice include real estate, labor, banking and finance, telecommunications, due diligence, intellectual property, and merger and acquisition. He currently also serves as a law professor at the American University of Phnom Penh, and previously taught at the Royal University of Law and Economics’ English Language-Based Bachelor of Law program. This Article is the first in a series of articles dealing with secured financing in Cambodia. This first article deals with security interest over moveable property and intangibles. Later articles will focus on security interest over land, guaranties and issues related to liens. The authors wish to give special thanks to Patrick H. Gaughan, Assistant Dean for Global Engagement & Associate Professor of Law, The University of Akron School of Law, who while on a Fulbright assignment was instrumental in encouraging universities in the USA and Vietnam to establish a Law Review for the purpose of dealing with law in Asia. 869 Published by IdeaExchange@UAkron, 2021 1 Akron Law Review, Vol. 54 [2021], Iss. 5, Art. 4 870 III. AKRON LAW R EVIEW [54:869 a. Nominative Claim – Structured under Law on Secured Transactions....................................882 b. Nominative Claim – Structured as a Negotiable Instrument ..................................883 c. Nominative Claim – Structure Loan for Consumption (Use of Bank as Trustee) .........885 7. Depository Accounts..........................................885 D. Creation of a Security Interest .................................886 E. Perfection ...............................................................886 F. Five Year Rule........................................................887 G. Enforcement ...........................................................887 H. Conflicts with Other Laws.......................................888 I. Use of Offshore Arbitration .....................................889 Conclusion ....................................................................889 ABSTRACT Cambodian law permits the taking of and the perfecting of a security interest in movables (e.g., goods) and in intangibles (e.g., legally enforceable rights, such as contracts and rights in property.) Cambodia’s system is strongly patterned after Article 9 of the Uniform Commercial Code as developed in the United States. Perfection (i.e. notice to third parties that a security interest exists) is usually effected by the filing of a notice at the Secured Transactions Filing Office (the “STFO”) of the Ministry of Commerce, although sometimes physical possession may be required. However, conflicting or ambiguous provisions in other Cambodian laws may adversely affect the security interest obtained and perfected under the Law on Secured Transactions. Most of these conflicting provisions are found in the Civil Code and the Pawn Shop Regulations. This Article explores key principles and nuances in Cambodia’s Law on Secured Transactions, particularly those issues related to the nature of collateral, the perfection of security interest and the risk and conflicts arising under Cambodian laws. I. INTRODUCTION This Article is directed to onshore practitioners, onshore and offshore lenders including banks and lending institutions, regardless of whether the financing structure is direct, consortium arrangement or syndication, those https://ideaexchange.uakron.edu/akronlawreview/vol54/iss5/4 2 Holzer and Sotheaphal: Cambodia's Law on Secured Transactions 2021] C AMBODIA’S LAW ON S ECURED TRANSACTIONS 871 considering financing by way of factoring and suppliers of equipment, materials and services. This Article first discusses Cambodia’s general legal environment for dealing with secured transactions. Then it describes why the Law on Secured Transactions is the best practice for secured financing over movables and intangibles. Next, it describes the various aspects of a secured transaction including collateral, the security interest, perfection, the five-year rule, and enforcement of a secured transaction. Finally, it discusses the conflict (...truncated)