Palestine Monetary Authority

PALESTINE MONETARY AUTHORITY

Circular No. (167/2016)
To all public lending institutions in Palestine Date: Wednesday, June 15, 2016

Subject: Security Rights in Movable Property

Attached for your information is Law Decree No. (11) of 2016 concerning Security Rights in Movable Property, published in the Palestinian Gazette Issue No. (120) dated 26/04/2016, to be implemented accordingly.

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Supervision and Inspection Department
Palestine Monetary Authority

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Ramallah - Palestine P.O. Box 452 | Tel: +970 2 2415250 | Fax: +970 2 2409922 | Phone: +970 2 2415250 | Fax: +970 2 2409922 | Ramallah - Palestine P.O. Box 452 Gaza - Palestine P.O. Box 4026 | Tel: +970 8 2825292 | Fax: +970 8 2844487 | Phone: +970 8 2825292 | Fax: +970 8 2844487 | Gaza - Palestine P.O. Box 4026 Email: info@pma.ps | Email: info@pma.ps www.pma.ps

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Palestinian Gazette

Issue No. (120)
2016/4/26

Law Decree No. (11) of 2016

Concerning Security Rights in Movable Property

President of the State of Palestine
President of the Executive Committee of the Palestine Liberation Organization

Pursuant to the provisions of the Basic Law amended in 2003 and its amendments, particularly Article (43) thereof, and the provisions of the Majalla (Ottoman Civil Code), and the provisions of the Law on Registering Immovable Property as Security for Debt dated 1331 AH, and its amendments applicable in the southern governorates, and the amendment to the Mortgage Law Chapter (95) dated 1920, applicable in the southern governorates, and the Notary Public Law No. (11) of 1952 and its amendments, applicable in the northern governorates, and the Law on Registering Immovable Property as Security for Debt No. (46) of 1953 and its amendments, applicable in the northern governorates, and the Law on Disposing of Immovable Property No. (49) of 1953, applicable in the northern governorates, and the Civil and Commercial Procedure Law No. (2) of 2001 and its amendments, and the Evidence in Civil and Commercial Matters Law No. (4) of 2001, and the Execution Law No. (23) of 2005, and based on the appointment of the Council of Ministers on 14/06/2010, and the powers delegated to us, and in pursuit of the public interest, and in the name of the Palestinian Arab people,

We hereby issue the following Law Decree:

Chapter One

General Provisions

Article (1)

Definitions

• The Ministry: The Ministry of National Economy.
• The Minister: The Minister of National Economy.
• The Register: The electronic register established by the Ministry in accordance with the provisions of this Law Decree.

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Article (2)

Applicability of the Law

1. The provisions of this Law Decree shall apply to transactions and contracts governed in Palestine that include a condition

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Article (3)

Floating Charge

1. Movable property may be pledged under a floating charge, whereby the pledgor retains possession of the pledged asset, and possession may be substituted by registering a notice of pledge in accordance with the provisions of this Law Decree for the purposes of perfecting the pledge, its binding nature, and its enforceability against third parties.

2. Registration of the notice of pledge in accordance with paragraph (1) of this Article grants the secured creditor all the rights enjoyed as if they were in possession of the pledged property, including the right to trace it in the hands of any subsequent possessor, and to take priority over other creditors in recovering their debt from the proceeds of the sale of the pledged property upon enforcement, in accordance with the provisions of this Law Decree.

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Chapter Two

Security Interest

Article (4)

Creation and Enforceability of Security Interest Between Parties

1. A security interest in the collateral is created and becomes enforceable between the parties when the following conditions are met:
   a. The debtor signs a security agreement. b. The secured party provides value to the debtor or commits to do so.

2. A security interest shall not be created unless the debtor has the right to create it on the collateral.

3. The security interest automatically extends to proceeds, unless otherwise agreed.

Article (5)

Security Interest in Consumer Goods

A security interest may not be created in consumer goods except to secure their purchase price.

Article (6)

Execution of Security Agreement

The security agreement shall be executed in writing.

Article (7)

Description in Security Agreement

The security agreement must include a general or specific description of the collateral. Furthermore, a security agreement covering consumer goods must include a specific description thereof.

Article (8)

Enforcement Against the Debtor's Obligor

If the collateral is a debtor's obligation, notice to the debtor thereof is not required for enforcement against the obligor.

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Chapter Three

Enforceability of Security Interest

Article (9)

Enforceability of Security Interest Against Third Parties

A security interest in the collateral becomes enforceable against third parties through one of the following means:

1. Registration of the notice.
2. Possession of the collateral, directly or indirectly.
3. Automatic enforceability without taking any further action if the security interest is created in consumer goods.

Article (10)

Enforceability of Security Interest in Proceeds

1. If the security interest is enforceable in the collateral, its enforceability in the proceeds continues automatically upon disposition.
2. Enforceability of the security interest in proceeds lapses fifteen days after the debtor receives the proceeds, except for cash proceeds related to insurance or proceeds described in the notice.

Article (11)

Substitution of Enforcement Method

The enforceability of the security interest in the collateral continues if the enforcement method is substituted, provided that enforceability is not interrupted.

Article (12)

Assignment of Security Interest

If the secured party assigns an enforceable security interest against third parties, registration of a notice is not required for the continued enforceability of the security interest in the collateral, provided that the debtor is notified thereof.

Article (13)

Expiration of Enforceability Against Third Parties

If the validity period of the registered notice expires, the security interest becomes unenforceable against third parties, unless enforcement is achieved by another means before the expiration of the notice's validity period.

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Chapter Four

Right of Tracing and Priority

Article (14)

Right of Tracing

1. Enforceability of the security interest against third parties entitles the secured party to trace the collateral in the hands of any person to satisfy their rights.
2. Notwithstanding paragraph (1) of this Article, the collateral vests in its purchaser, lessee, or any other person who acquires a right therein, free from the enforceable security interest against third parties, if the secured party consents thereto or if the collateral is disposed of within the ordinary course of the debtor's business.

Article (15)

General Rule of Priority

1. Subject to the exceptions set forth in this Law Decree, if multiple security interests enforceable against third parties conflict or a privilege attaches to the same collateral, priority shall be determined based on the date and time of registration of the notice or the date of enforceability against third parties by any other means specified in this Law Decree.
2. Priority shall be determined according to the date of publication of rights and their date and time of enforceability, as applicable, such that enforceable rights take precedence over unenforceable ones, provided that there is no interruption in enforceability.

Article (16)

Priority of Security Interest in Favor of Purchaser of Instrument or Document

A new value provider who has taken possession of the instrument or document shall take priority over the secured party if the purchaser, in the ordinary course of their business, provided new value and took possession of the instrument or document, unless the agreement explicitly assigns rights to the secured party.

Article (17)

Priority of Security Interest Created to Finance Purchase

1. A security interest in equipment and fixtures created to finance their purchase shall take priority over any other security interest, provided it is enforced against third parties before possession by the debtor or within ten days from the date of such possession.
2. A security interest enforceable against third parties created to finance the purchase of goods and fixtures shall take priority over the rights of their purchaser, lessee, or privilege holder arising during the period between the creation of the security interest and the registration of the notice, provided that the notice for the purchase-money security interest is registered within ten days from the date the debtor takes possession of the goods.
3. A security interest enforceable against third parties created to finance the purchase of inventory or livestock and fixtures shall take priority over other rights, provided that a notice regarding it is registered within ten days from the date of their possession, and provided that holders of existing enforceable rights are notified in writing.