12. Finnish Mortgage System for Means of Transport: Outdated and Overly Complex?

In this chapter, references to statutes are given with their respective numbers in the Statutes of Finland, for example, “the Vessel Mortgage Act (211/1927)”. The latter part of the number indicates the year when the statute was published, which is usually also the year of enactment. Most of the statutes have been amended on several occasions, but the numbers do not reveal amendments. The statutes can be found in their original form as well as in their amended and consolidated form, indicating the dates of amendment, in the Finlex Data Bank: http://​www.​finlex.​fi/​en. While Finnish statutes are official only in the Finnish and Swedish languages, the data bank provides unofficial translations in other languages, mostly in English. These translations, when available, have been used in this chapter. In addition, the terminology of the chapter has been supplemented by translations used by The Finnish Transport Safety Agency (Trafi), which functions as the main register authority. The author wishes to thank Janne Kaisto, University of Helsinki, for comments on an early draft, and Christopher Goddard for language editing.

With certain exceptions, the entire movable property of an enterprise can be used as a “floating” security for credit by an enterprise mortgage, under the Enterprise Mortgage Act (634/1984).

Jarno Tepora, Janne Kaisto, and Esa Hakkola, 2009, Esinevakuudet (Helsinki: CC Lakimiesliiton Kustannus), 39–40; Erkki Havansi, 1992, Esinevakuusoikeudet, 2nd ed. (Helsinki: Lakimiesliiton Kustannus), 141–145.

The Region of Åland is an autonomous part of the Republic of Finland. It is located on the Åland Islands, which are an archipelago in the Baltic Sea, at the entrance to the Gulf of Bothnia.

Website accessed 6 Oct 2016.

See Havansi 1992, 187–192, 278.

In a comparative perspective, using the term “mortgage” like this may be misleading. “Mortgage” is by no means a perfect translation of the Finnish term kiinnitys and the Swedish term inteckning, both of which rather denote a technical act of register entry.

“Charge” is not the only possible translation for the Finnish term panttioikeus and the Swedish term panträtt. For example, in the unofficial translation of the Real Estate Code (540/1995) available in the Finlex Data Bank, the term “lien” is used to denote a security right in the context of the mortgage system for real estate. Still, “lien” could be misleading in that it often denotes non-consensual security rights or entitlements to retain possession of the security object until the secured obligation has been discharged. See, for example, Gerard McCormack, 2004, Secured credit under English and American law (Cambridge: Cambridge University Press), 44–46. Another option would be “pledge”, seeing that the above-mentioned Finnish and Swedish terms denote possessory and non-possessory security rights alike. Then again, “pledge” is generally understood as a possessory security right. Against these difficulties, “charge” seems to be the best option available. In comparative legal literature, it has been used “for all security rights in movables or in claims which are neither a security transfer of ownership nor a security assignment nor a possessory pledge”. Eva-Maria Kieninger, ed., 2004, Security rights in movable property in European private law (Cambridge: Cambridge University Press), 154. In the same source, the Finnish vehicle mortgage is referred to as “vehicle charge” (p. 471).

Ari Saarnilehto et al., 2012, Varallisuusoikeus, 2nd ed. (Helsinki: Sanoma Pro), 1206–1207; Tepora, Kaisto and Hakkola 2009, 126–127; Jarno Tepora, 2008, Johdatus esineoikeuden perusteisiin (Helsinki: Helsingin yliopiston oikeustieteellinen tiedekunta), 110–111; Havansi 1992, 278–279.

Saarnilehto et al. 2012, 1207. In that case, the creditor receives the bearer bond with mortgage entry directly from the register authority.

Havansi 1992, 279.

Section 23(5) of the Vessel Mortgage Act confirms that uncompleted vessels entered in the Vessel Building Register are also mortgageable.

See Committee Report 1992:44, 10.

See Section 4 of the Vehicle Mortgage Act. The difference is that the transfer of ownership situations covered by Section 25 Subsections (2) and (3) of the Vessel Mortgage Act are not mentioned.

As for vehicle mortgages, inquiries by text message or via online service are also possible.

A central source of these principles is Chapter 2 of the Promissory Notes Act (622/1947).

Tepora, Kaisto and Hakkola 2009, 160–162. A secondary charge is made effective against third parties by notification addressed to the creditor with the primary charge. See Havansi 1992, 125.

Tepora, Kaisto and Hakkola 2009, 164.

Ibid., 165.

The Aircraft Mortgage Act provision does not seem up to date. It also refers to certain claims related to a repealed Aviation Act (595/64).

See Wassgren 2004, 564–565. He discusses the risk and unexpected consequences of a financial lease being recharacterised as hire purchase.

See Tepora, Kaisto and Hakkola 2009, 370–373. They go a step further, suggesting that a retention of title clause and a recovery clause can be seen as indistinguishable not only as to economic purposes but even as to legal content.

HE 1/1988, Hallituksen esitys Eduskunnalle laiksi kauppakaaren 10 luvun muuttamisesta, laiksi elinkeinonharjoittajan oikeudesta myydä noutamatta jätetty esine ja laiksi merilain 215 §:n muuttamisesta [Government Proposal 1/1988], 9. The provision probably also applies, for example, to charges over book-entry securities and intellectual property rights. Saarnilehto et al. 2012, 1211; Havansi 1992, 389–399; Markku Tuominen, 2001, Teollisoikeudet vakuutena (Helsinki: WSLT), 220–221.

Tepora, Kaisto and Hakkola 2009, 178–179.

Havansi 1992, 383. He also notes that limits to the parties’ freedom of agreement may result from Section 36 of the Contracts Act (228/1929). Subsection (1) provides as follows: “If a contract term is unfair or its application would lead to an unfair result, the term may be adjusted or set aside. In determining what is unfair, regard shall be had to the entire contents of the contract, the positions of the parties, the circumstances prevailing at and after the conclusion of the contract, and to other factors.”

Vessel Mortgage Act, Sections 38 and 39; Vehicle Mortgage Act, Section 11.

Cf. Wassgren 2004, 566. He states that allowing a chargee to grant a lease over a mortgaged aircraft in a default situation is “currently unknown under Finnish law”. However, he probably does not mean that this cannot be agreed on by the parties in a non-insolvency context.

Tepora, Kaisto and Hakkola 2009, 305–306.

Tepora 2008, 23–24. He presents this argument in discussion of security transfer of ownership (sale and lease-back with a security purpose).

Tepora, Kaisto and Hakkola 2009, 306.

See Linna and Leppänen 2007, 506, 611–618.

Tepora, Kaisto and Hakkola 2009, 254–260.

See also the remarks in Sect. 12.10 on a charge or pledge holder’s “separatist position” in relation to the bankruptcy estate.

See Tepora, Kaisto and Hakkola 2009, 262–268.

All translations in this section are free and selective.

Ibid., 24.

On various manifestations of this consensus, see McCormack 2004, 15–22.

See Government Proposal 133/2003 (for the Act on Financial Collateral), 15; Government Proposal 190/1983 (for legislation on enterprise mortgages), 1–2; Committee Report 1992:44 (on reform of the mortgage system for means of transport), 6.

See Tepora, Kaisto and Hakkola 2009, 19–24; Tepora 2008, 104–106; Havansi 1992, 1–5.

The question of justification for priority of secured over unsecured claims on insolvency has not sparked heated debate in Finnish legal literature, although the issues involved have been recognised. See Eva Tammi-Salminen, 2001, Sopimus, kompetenssi ja kolmas (Helsinki: Suomalainen Lakimiesyhdistys), 133–151; Teemu Juutilainen, 2007, Security rights and the lack of a priority debate: How to proceed with choice of law and harmonization?, in Private law and the many cultures of Europe, ed. Thomas Wilhelmsson, Elina Paunio, and Annika Pohjolainen (Alphen aan den Rijn: Kluwer Law International), 343–363.

Tepora, Kaisto and Hakkola 2009, 48, 415–416.

See Real Estate Code, Part IV on Real Estate Liens. Instead of bearer bonds or other promissory notes with mortgage entry, standardised “mortgage instruments” are used.

Symptomatic of this is that the system had to be described in Sect. 12.2 with the help of simplifying assumptions.

Committee Report 1992:44, 10–11.

Tepora, Kaisto and Hakkola 2009, 138; Havansi 1992, 279.

Tepora, Kaisto and Hakkola 2009, 138.

Wassgren 2004, 563.

“Mortgage instrument” is the translation for the Finnish term panttikirja and the Swedish term pantbrev in the unofficial translation of the Real Estate Code available in the Finlex Data Bank. A more literal translation would be “charge deed” or “charge document”.

http://​oikeusministerio​.​fi/​fi/​index/​valmisteilla/​lakihankkeet/​esine-jaymparistooikeu​s.​html. Kuljetusvälineitä koskevien kiinnitysjärjestelmien yhtenäistäminen. Webpage accessed 6 Oct 2016.

http://​oikeusministerio​.​fi/​fi/​index/​valmisteilla/​lakihankkeet/​esine-jaymparistooikeu​s.​html. Liikuteltaviin laitteisiin kohdistuvat kansainväliset oikeudet. Webpage accessed 6 Oct 2016.

See Wassgren 2004, 565–571.