Palestine Monetary Authority

Circular No. (106 / 2016)
To all banks operating in Palestine
Date: Wednesday, June 15, 2016

Subject: Security Rights in Movable Property

Attached for your review is Law Decree No. (11) of 2016 concerning security rights in movable property, published in the Palestinian Gazette Issue (120) dated 26/04/2016, to be implemented accordingly.

Supervision and Inspection Department
Palestine Monetary Authority

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www.pma.ps

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

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The Palestinian Gazette

(The Official Gazette)
Issued by
The Office of Fatwa and Legislation
Issue 120

Correspondence: The Office of Fatwa and Legislation Ramallah - Um Al-Sharatit - Al-Nabali Building - Second Floor Fax: 02-2963627 Email: official_gazette@lab.pna.ps

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Issue (120)

Law Decree No. (11) of 2016

Concerning Security Rights in Movable Property

The President of the State of Palestine
President of the Executive Committee of the Palestine Liberation Organization Based on the provisions of the amended Basic Law of 2003 and its amendments, particularly Article (43) thereof, And the provisions of the Majalla (Civil Code), And the provisions of the Law on Registering Immovable Property as Security for Debt of 1331 AH and its amendments, in force in the Southern Governorates, And the amendment to the Mortgage Law Chapter (95) of 1920, in force in the Southern Governorates, And the Notary Public Law No. (11) of 1952 and its amendments, in force in the Northern Governorates, And the Law on Registering Immovable Property as Security for Debt No. (46) of 1953 and its amendments, in force in the Northern Governorates, And the Law on Disposing of Immovable Property No. (49) of 1953, in force in the Northern Governorates, And the Civil and Commercial Procedure Law No. (2) of 2001 and its amendments, And the Law on Sales of Civil and Commercial Goods No. (4) of 2001, And the Enforcement Law No. (23) of 2005, And based on the proposal of the Council of Ministers dated 14/06/2010, And on the powers vested in us, And in pursuit of the public interest, In the name of the Palestinian Arab People, We have issued 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 implementation of the provisions of this Law Decree.

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The Officer: The officer entrusted by the Minister to manage and supervise the Register in implementation of the provisions of this Law Decree. Security Right: A real right established on a movable property to secure the satisfaction of a financial or non-financial obligation existing prior to, simultaneous with, or subsequent to its creation. Collateral: The current or future movable property placed as security for an obligation under a security agreement. Person: A natural or legal person. Debtor: The person owing the secured obligation. Secured Party: The person in whose favor the security right is created. Priority Right Holder: A person who enjoys a right in movable property by court order, liquidator in liquidation, or any other person enjoying a security right in accordance with the provisions of this Law Decree, excluding the holder of a right of retention. Movable Property: Movable things and intangible things of any kind, and fixtures. Receivables: An unsecured right belonging to the debtor for payments due or deferred from a third party. Credit Account: A bank credit account, including current accounts, deposit accounts, and savings accounts. Consumer Goods: Things designated for personal or household purposes, the utility of which is realized through repeated use while maintaining their substance. Documents: Negotiable instruments transferable by delivery or endorsement that prove ownership of goods, including bills of lading and warehouse receipts. Fixtures: Movable property attached to a building for its service and exploitation, and which is fixed to the building. Goods: All movable things, including fixtures, crops, and livestock, excluding receivables, money, documents, and securities. Instruments: Negotiable instruments transferable by delivery or endorsement that prove entitlement to a sum of money, including commercial paper and bank deposit certificates. Inventory: Goods stored for sale and lease, raw materials, work-in-progress materials, and materials used in production. Notice: The entry recorded in the Register to publicize rights under the provisions of this Law Decree, including the initial notice, amended notice, extension notice, termination notice, and objection notice. Proceeds: The tangible or monetary consideration obtained from disposing of, using, or replacing the collateral, including compensation for loss of value, damage, or any other compensation.

Article (2)

Scope of Application

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

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stipulating the creation of a security right on movable property owned by the debtor, another security guarantor, or the creditor, including:

The following transactions:

a. Floating charge in accordance with the provisions of Article (3) of this Law Decree. b. Sale of movable property with deferred transfer of ownership until the price is fully paid.
c. Sale of movable property with a condition for repurchase or buyback.

2. The provisions of this Law Decree relating to enforceability against third parties and enforcement procedures apply to the following transactions:

a. Pledge of movables. b. Sale of receivables.
c. Lease contracts for movables with a duration of six months or more.
d. Finance lease contracts with a duration of one year or more. e. Right of the seller of goods subject to sale charges. f. Priority right on movable property.

3. The following are excluded from the provisions of this Law Decree:

a. Sale of receivables that are part of the sale of a commercial enterprise. b. Assignment of rights for the purpose of debt collection.
c. Security rights on movable property subject to registration in a special register in accordance with prevailing legislation, including vehicles, ships, and aircraft, and securities.
d. Assignment of labor claims for compensation.

Article (3)

Floating Charge

1. Movable property may be pledged as a floating charge, whereby the pledgor retains possession of the pledged property, and possession is substituted by registering a notice of pledge in accordance with the provisions of this Law Decree for the purpose of perfection, binding effect, and enforceability against third parties.

2. Registration of the notice of pledge in accordance with the provisions of paragraph (1) of this article is prohibited if the pledged property belongs to the creditor, unless his debt is satisfied 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 Right

Article (4)

Creation and Enforceability of Security Right Between Parties

1. A security right is created on the collateral and becomes enforceable between the parties upon the fulfillment of the following conditions:

a. The debtor signs a security agreement. b. The secured party provides consideration to the debtor or commits to doing so.

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

3. The security right is deemed to automatically cover proceeds, unless otherwise agreed.

Article (5)

Security Right on Consumer Goods

A security right may not be created on consumer goods except to secure their price.

Article (6)

Conclusion of Security Agreement

The security agreement is concluded in writing.

Article (7)

Description of Security Agreement

The security agreement must include a general or specific description of the collateral. Furthermore, a security agreement with consumer goods as the subject matter must include a specific description thereof.

Article (8)

Notice to the Account Debtor

If the collateral is a receivable, notice to the account debtor is not a condition for the enforceability of the security right against the account debtor.

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Chapter Three

Enforceability of Security Right

Article (9)

Enforceability of Security Right Against Third Parties

A security right on the collateral becomes enforceable against third parties by one of the following means:

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

Article (10)

Enforceability of Security Right on Proceeds

1. If the security right is enforceable on the collateral, its enforceability on its proceeds continues automatically upon their disposition.
2. Enforceability of the security right on proceeds requires fifteen days to elapse after the debtor's receipt of the proceeds, except for cash proceeds capable of commingling or proceeds described in the notice.

Article (11)

Substitution of Enforcement Means

The enforceability of the security right on the collateral continues if the means of its enforcement is substituted, provided that enforceability is not interrupted.

Article (12)

Assignment of Security Right

If the secured party assigns an enforceable security right against third parties, there is no need to register a notice for the continued enforceability of the security right on the collateral, provided that the debtor is notified thereof.

Article (13)

Termination of Enforceability of Security Right Against Third Parties

If the period of validity of the registered notice expires, the security right 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 right against third parties entails the secured party's right to trace the collateral in the hands of any person to satisfy his rights.
2. Notwithstanding the provisions of paragraph (1) of this article, the collateral vests in its purchaser, lessee, or any other person who acquires a right thereon free of the security right enforceable against third parties, if the secured party consents thereto or if the disposition is within the ordinary course of the debtor's business.

Article (15)

General Rule on Priority

1. Subject to the exceptions provided in this Law Decree, if multiple security rights enforceable against third parties exist or a priority right is established on the same collateral, priority is determined based on the date and time of registration of the notice or the date of enforceability against third parties by any other means stipulated in this Law Decree.
2. Priority is determined according to the date of publication of rights and their date and time of enforceability, as appropriate, such that enforceable rights take precedence over unenforceable ones, provided that enforceability is achieved.

Article (16)

Priority of Security Right of Purchaser of Instrument or Document

The right of the purchaser of the instrument or document takes precedence over the secured party's right if the purchaser, in the context of his ordinary course of business, provided new consideration and took possession of the instrument or document, unless there is an explicit condition assigning rights to the secured party.

Article (17)

Priority of Security Right Created to Finance Purchase

1. A security right on equipment and fixtures to finance their purchase takes precedence over any other security right, provided it is enforced against third parties before their possession by the debtor or within ten days from the date of such possession.
2. A security right enforceable against third parties on goods and fixtures to finance their purchase takes precedence over the rights of their purchasers, lessees, or priority right holders arising during the period between the creation of the security right and the registration of the notice, provided that the notice regarding the security right and fixtures to finance purchase is registered within ten days from the date of the debtor's possession of the goods.
3. A security right enforceable against third parties on inventory or livestock and fixtures to finance their purchase takes precedence 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 enforceable rights on them are notified in writing.