When a creditor takes security the two most important goals
are first, obtaining a proprietary interest in the secured
assets that will remain effective if the security provider
becomes insolvent, and second, enforcing the security to
discharge secured indebtedness at the time, and in the manner,
it deems appropriate.
Until recently, the biggest practical difficulty with
enforcing Russian security was that a creditor was in practice
unable to avoid recourse to the courts. And any secured assets
had to be sold at a public auction. The priority of the secured
creditor was also curtailed if the security provider becoming
insolvent. This placed Russian companies at a disadvantage when
competing for international financing.
A new federal law (effective January 11 2009) amended a
number of acts to improve these issues. It should be noted that
Russian law sets out specific regimes for enforcing security
against certain assets (such as residential apartments...