Property rights and liquidation
PhD student: Mr S. Baeyens
Promotor: Prof V. Sagaert
Duration: 1/10/2016 - 31/8/2021
a. The conflict between bankruptcy law principles and property law principles
Two basic principles of bankruptcy law are (1) the fixation principle and (2) the ‘paritas creditorum’-principle. The fixation principle means that the nature and amount of the rights of competing creditors to the debtor’s property are measured and determined at the moment of the opening of the bankruptcy proceedings. The rights of the competing creditors receive third party effect (‘zakelijke werking’ or ‘opposabilité aux tiers’). The ‘paritas creditorum’-principle means that all creditors in the same position should be treated equally. Property law, on the contrary, embodies the anteriority principle (‘prior tempore potior iure’) and the right of priority (‘recht van voorrang’ or ‘droit de préférence’). The anteriority principle means that the prior property right prevails over the more recent one. As a consequence, the prior property rights would prevail over the rights of the competing creditors as these rights only get third party effect at the moment of the opening of the bankruptcy proceedings. The right of priority means that property rights are resistant to bankruptcy proceedings as they are excluded from the bankruptcy estate.
Neither the bankruptcy law principles nor the property law principles are absolute in nature. They are mitigated and refined in various manners to strike a balance between the creditors of the bankruptcy estate and the property right holders. The balance is reflected on two levels: the enforceability of property rights and the termination of property rights. The outcome is different at and within each level. The problem is that the legal scope of the balance is often uncertain and debated in case law and in legal scholarship. This leads to legal uncertainty which risks to have an adverse effect on business activity. The research project will map and reveal the elements of legal uncertainty and incoherence and provide for more consistent solutions.
b. The conflict between functional bankruptcy law and the dogmatic difference between property rights and personal rights
The dogmatic difference between property rights (rights in rem) and personal rights (rights in personam) is an enigma which for centuries has not been overcome by legal scholars. That is the reason why the research project will approach this divide from the viewpoint of the conflict between bankruptcy law principles and property law principles. The enigma comes to its realm in the functional domain of bankruptcy law, in which the conceptual differences between contracts establishing personal rights and contracts establishing property rights are not always taken into account. E.g. from a bankruptcy law perspective, a lease agreement and a right of emphyteusis are two contracts that require the debtor to fulfil certain obligations. The objective of bankruptcy law is the efficient administration and liquidation of the bankruptcy estate, notwithstanding the clear distinction between the proprietary nature of the one agreement and the obligatory nature of the other. Preliminary research reveals that the functional approach of bankruptcy law may contravene with the dogmatic difference between property rights and personal rights.