Dear reader,

Karin Sein
pp. 1-1 [PDF] [Cover PDF]

There have been many discussions this year about the problems arising from fast or ‘instant’ loans, and the first proposals have been prepared for solving these problems legally. The topic is not characteristic of Estonia alone: excessively easy access to consumer loans has brought with it over-borrowing by consumers in all of the Nordic and Baltic countries. However, there are slight and sometimes even quite significant differences in the methods used in a bid to tackle these problems from one country to the next. In this Juridica International publication, consumer‑credit experts from seven Nordic and Baltic countries share and reflect upon their national experiences. Their research results demonstrate that so-called soft solutions such as a notification obligation for lenders or additional requirements imposed on advertising of fast loans do not produce the desired effect on their own. Rather, the experiences of our neighbours indicate that a requirement of licensing for creditors, establishment of interest-rate restrictions, and measures under procedural law should be central if one is to avoid implementing requirements related to consumer credit without having holistically and fully assessed what is necessary. It is pleasant to see that Estonia is among those moving toward the above-mentioned solutions. We would like to offer a big ‘thank you’ to the Estonian–Norwegian scientific co‑operation programme that has enabled publishing the outcomes of the research carried out under the project EMP205.

Last year marked the passing of 20 years since the adoption of the Law of Property Act. For an Estonia that had just restored its independence, the Law of Property Act was the legislation that served as the first pillar in shaping a legal order focused on market economic relations, and its importance for the functioning of modern economic circulation cannot be overestimated. The jubilee of the Law of Property Act was celebrated on 28–29 November 2013 in Tartu with an international conference, and selected works from among the presentations at that event make up the first portion of this issue, examining developments in the law of property. Also here, via a recurring theme of the articles, we are given a look at the experiences of other countries and have an opportunity to learn from them: there is land-register reform in progress both in Scotland and in Latvia, and it seems that the systems there are becoming increasingly similar to the one we are using. W. Faber provides us with an opportunity for comparison, to consider whether and to what extent the Estonian law on proprietary security rights corresponds to the modern solutions of the Draft Common Frame of Reference (DCFR). C. Von Bar and C. Martinson show well that any kind of legislative solution requires a clear understanding of the main concepts of the law (here, of property).

But the traditional concepts of law are exactly what our fickle and rapidly changing time has challenged. The relevance of things as physical objects is constantly decreasing in a digital world and digital business. In a loan taken out online or via a mobile phone, personal contact between the lender and the borrower is lost and readiness to take loan decisions on the spur of the moment increases. However, just as progress requires innovation, people need something routine and secure to manage their lives. Accordingly, it is especially nice that Juridica International is once again published on paper, not only as an online version. Then again, you could just as well read it on a tablet as you relax in a rocking chair beside a fireplace. Enjoy the reading!

pp. 1-1 [PDF] [Cover PDF]

  • Why do We Need Grundstücke (Land Units), and What are They? On the Difficulties of Divining a European Concept of ‘Thing’ in Property Law
    Christian von Bar pp. 3-15 [PDF]

    The article analyses one of the most fundamental but surprisingly difficult and contested concepts of European property law: the notion(s) of land, immeuble, immovable, and Grundstück. Grundstück and ownership in ‘land’ are reciprocal ideas, with each depending on the other. Grundstücke are constructs of the law and products of legal fantasy; they are not natural entities. To describe them as ‘corporeal’ things is as imprecise and incorrect as the notion of ‘immovables’ is. A piece of land (or land unit) is an item of property not because it is ‘corporeal’ but because the law creates its corpus. A Grundstück (equivalent to the Estonian maatükk) is a ‘normative thing’. Therefore, the paper discusses why the law needs Grundstücke (or their linguistic equivalents in other European languages), what is requires for bringing them into existence, and what space they encompass.

    Keywords: European private law; European property law; land, land units; Grundstücke, immeubles; comparative property law; ownership in land; real things and normative things

  • The Scandinavian Approach to Property Law, Described through Six Common Legal Concepts
    Claes Martinson pp. 16-26 [PDF]

    The Scandinavian approach to property law is relational and contextual. It is an approach that could be described as particular. As such, it might contribute to the European project with some reflections. One way to arrive at these reflections is by way of consideration of certain basic legal concepts. Through the concepts of ownership, transfer of ownership, unjustified enrichment, the coming into existence of a claim, acessio, and traditio, the paper gives a few glimpses of the Scandinavian approach. These glimpses are at the same time reflections on law and legal reasoning. Therefore, it is actually not important that they show something Scandinavian in essence; the important message is, rather, the questioning of how legal concepts are used.

    Keywords: approach to property law; legal reasoning; legal concepts; ownership; transfer of ownership; unjustified enrichment; the coming into existence of a claim; acessio; traditio; begriffsjurisprudenz

  • Proprietary Security Rights in Movables—European Developments: A Spotlight Approach to Book IX DCFR
    Wolfgang Faber pp. 27-36 [PDF]

    The article throws some light on how the law on proprietary security rights in movable assets might move forward in Europe. It does so by spotlighting a handful of core features of Book IX of the Draft Common Frame of Reference (DCFR), which could be used as a model for law reforms related to secured transactions on national or European level. It is argued that the DCFR approach could achieve a number of practical advantages when compared to existing national laws in this area, although the improvements brought about may be different from the perspective of individual countries.

    Keywords: proprietary security rights in movables; secured transactions; Book IX Draft Common Frame of Reference (DCFR); notice-filing; functional approach; registration of security interests; retention of title

  • Developments in the Scottish Law of Land Registration
    Andrew Steven pp. 37-42 [PDF]

    The article considers the development of land registration in Scotland, beginning with the Registration Act 1617. This introduced the Register of Sasines, a deed-based register. In the twentieth century, it was decided to move over to a register of title allowing all land to be mapped, but the Land Registration (Scotland) Act 1979, which introduced the new Land Register, was inadequate and problematic. In particular, it was inconsistent with underlying Scottish property law. In addition, the speed at which properties have moved from the old register to the new has been slow. The 1979 legislation has now been replaced with the Land Registration etc. (Scotland) Act 2012. This is a far more impressive piece of legislation. It reforms the Land Register so that it fits with general property law and simultaneously speeds up the process of moving properties into it. The 2012 legislation also brings Scottish land‑registration law closer to its German and Estonian counterparts.

    Keywords: land; registration; Sasines; property; law; cadastral

  • Reform of Land Registration in Latvia
    Janis Rozenfelds pp. 43-50 [PDF]

    The principle of superficies solo cedit is prescribed by Section 968 of the Latvian Civil Law: ‘A building erected on land and firmly attached to it shall be recognised as a part thereof.’

    The law ‘On Time and Procedures for Coming into Force of Introduction, Inheritance and Property Law Part of the Renewed Civil Law of the Republic of Latvia dated 1937 of 7 July’, effective since 1 September 1992, applied several exceptions to Section 968 of the Latvian CL with respect to buildings erected during the Soviet occupation. As a consequence of the associated ‘dual property rights’, the owner of the building has to pay ‘mandatory rental payment’ to the landowner.

    This situation has become known as one of ‘dualistic property’, a concept sometimes erroneously identified with that of divided property. This dual situation calls for legal reform in the relevant field, for purposes of re-establishing the principle of unity of the land and the building erected on it. The problem can be partly solved by introduction of new institutions – the long lease (emphyteusis) and the right to erect a building on another’s land (superficies).

    Keywords: superficies solo cedit; dualistic property; divided property; mandatory rental payment

  • Norway: Non-secured Instant Loans to Consumers
    Kåre Lilleholt pp. 51-56 [PDF]

    The article deals with the Norwegian legal framework related to non-secured ‘instant’ loans to consumers. Financial services, including the provision of credit, are subject to licensing and supervision by Norwegian authorities; this applies even to foreign credit institutions offering financial services in Norway. The Financial Contracts Act contains rules on credit contracts, addressing both 1) marketing, pre-contractual information, assessment of creditworthiness, and a duty to warn the consumer against irresponsible loans and 2) rules on the content of the credit contract. A scheme for consumer insolvency has been in place since 1992. Rules on unfair contract terms and on usury in criminal law are of scant interest in connection with instant consumer loans.

    Keywords: instant loans; consumer credit; financial licensing and supervision; unfair contract terms; usury

  • Regulation of Instant Loans and Other Credits in Swedish Law
    Annina H. Persson, Ann-Sofie Henrikson pp. 57-70 [PDF]

    Since the deregulation-oriented reform in Sweden in the 1980s, the range of consumer loans has increased dramatically and Swedish households have increased their debt levels significantly. In consequence, many people experience problems repaying their loans, in particular with instant loans often used to solve urgent payment problems. In 2012, there were 53,709 applications for an order for repayment of instant loans filed with the Enforcement Agency. This represents an increase of 40% when compared to 2011 levels. According to the Enforcement Agency, about 50,000 persons in Sweden have a record of non-payment registered with the Enforcement Agency because of instant loans.

    The aim of the paper is to give an overview of the legal regulation of the Swedish consumer‑credit market, particularly shedding light on the legal weakness of the rules protecting the debtor from over-indebtedness in the Swedish consumer-credit market. Firstly, we intend to outline the types of creditors and credit institutions offering credit to consumers and the various credit categories they offer, like mortgage loans, mobile-phone subscriptions, e-trade invoices, or instant loans. According to statistics from the Enforcement Agency, it is not uncommon that the first order to pay has to do with a mobile-phone subscription, the second with e-trade, and the third with an instant loan.

    Secondly, we will investigate the legal regulation that is relevant for both debtors and creditors in the consumer-credit market. The Swedish regulation includes administrative measures for this purpose (in particular, licence requirements and marketing restrictions); contract-law measures, such as unconscionability and responsible lending doctrine; and insolvency measures – for example, the Debt Restructuring Act and the Act on Order for Payment Procedure. Finally, we will mention the current legislative developments aimed at improving the situation for people who have difficulties in paying back the creditors.

    Keywords: consumer credit; responsible lending; instant loans; interest-rate restrictions; over indebtedness; debt restructuring; debt adjustment

  • The Way to Over-indebtedness—Intensive Marketing, Easy Access to Loans, and Insufficient Legislation (Denmark)
    Tanja Jørgensen pp. 71-95 [PDF]

    Consumer credit is increasingly offered, for various purposes and in various ways. In particular, electronic Web and SMS loans have been growing considerably over the last few years, and they attract attention owing to their high costs. The easy access to credit, in combination with intensive marketing, contributes to increased private borrowing, thus creating a debtor culture. The fact that easy access to credit is not purely to the benefit of the consumer is reflected in the main register for default on private debt in Denmark. Here more than one in 20 adult Danes are registered with a bad credit history, and the defaulted debt has doubled in the last six years. The focus of the article, therefore, is on the legal problems related to easy access to non-secured consumer credit as illustrated by Danish legislation. It is suggested that the legislation is not functioning effectively and that more well-proportioned solutions are needed. A modern approach should recognise that consumer credit differs from other consumer arrangements, in that consumers run a special risk of becoming over-indebted – not only to their own detriment but ultimately also to that of society. One of the possible solutions is to limit marketing and introduce responsible lending standards.

    Keywords: consumer credit; instant loans; maximum cost; over-indebtedness; responsible lending; SMS loans; usury

  • Instant Loans: Problems and Regulations in Finland
    Antti Makkonen pp. 96-119 [PDF]

    The article provides an overview of instant-loan-related regulation and associated topical problems in Finland. Instant loans are a problematic loan product, and they account for a remarkable proportion of all indebtedness problems of consumers. One factor here is that instant loans are provided by credit companies outside the banking sector.

    Finland has adopted responsible lending regulations, on good lending practice, a creditworthiness assessment obligation, and identity verification. Consumer lending is a business subject to licence. Also, credit costs and debt-collection costs are regulated, and usury in connection with credit is criminalised by the law. Furthermore, credit-data regulation plays a significant role in consumer lending.

    The new laws seem to have solved some of the problems, but new problems have emerged. Most significantly, regulation pertaining to a maximum annual percentage rate of charge has caused some decrease in instant loans’ numbers and amounts, but, meanwhile, average repayment periods have increased and more complex loan products have emerged. Other noteworthy topical issues in this connection include the multi-layered system for supervision of consumer creditors and the lack of provisions regarding the financial reliability of consumer creditors.

    Keywords: instant loans; payday loans; consumer credit; consumer protection; financial markets

  • Legal Problems and Regulations related to Easy-access Non-secured Consumer Loans in Estonia
    Karin Sein, Urmas Volens pp. 120-137 [PDF]

    The article analyses the current market situation related to electronic non-secured consumer loans (instant loans) in Estonia and social problems related to them. Firstly, the authors provide a legal and institutional overview of the instant‑loan market. The article further covers the market situation and statistics related to the credit products and possible numbers of users and providers of instant loans. Then, the administrative and also civil-law consumer‑protection measures currently in force in Estonia are described, and the authors assess whether those measures have been functioning efficiently in practice. Finally, the ongoing discussions of further legislative measures are described and the associated legislative proposals evaluated.

    Keywords: consumer credit; electronic non-secured consumer loans; instant loans; usury; responsible lending; interest-rate restrictions

  • A Strict Regulatory Framework for SMS Credit and Its Effectiveness in Latvia
    Inga Kačevska pp. 138-148 [PDF]

    The aim of the article is to provide an overview of the legal framework for regulation of SMS‑based credit in Latvia, to assess its effectiveness, and to analyse the relevant case law. The author discusses the effectiveness of licensing of SMS creditors and debt-collection companies. It is concluded that the licensing has facilitated uniformity and improvement of the conditions of consumer contracts, also creating limitations in the realm of advertisement and to the activities of collection services. For example, Latvian law imposes specific restrictions on the advertisement of SMS loans. One of these is that the advertisement may not encourage irresponsible borrowing, and the law sets forth a prima facie list of examples of advertisement encouraging irresponsible borrowing. Also, the SMS creditors’ activities are subject to rules designed for prohibition of unfair commercial practices.

    Keywords: consumer loan; responsible lending; unfair commercial practices

  • The Future of Consumer Credit in Lithuania: Quo vadis, Consumer Credit?
    Danguolė Bublienė pp. 149-167 [PDF]

    Analysis of the facts of the current situation in Lithuania with respect to the consumer-credit market clearly reveals that the market is rapidly developing, and some statistical data are thought‑provoking here with respect to the question of whether the state should take any measures in this connection (via stricter regulatory measures or other actions).

    The article addresses several aspects of the consumer-credit landscape: it i) provides a general overview of the regulation of consumer credit in Lithuania; ii) examines the particular fields of regulation of consumer credit, taking into account, where applicable, the provisions specific to control of easy-access non-secured consumer loans extended via electronic means; ii) and offers analysis of the proposed amendments to the regulations on consumer credit that are now under discussion at the ministerial level.

    Analysis of existing consumer-credit regulation in Lithuania reveals that, on one hand, even now there are some norms regulating the consumer-credit market that could protect the interests of consumers and prevent excessively easy access to non-secured consumer loans via electronic means – if applied effectively. However, the proposals made in the draft for amendments to the Law on Consumer Credit reflect a quite clear tendency toward tighter and more extensive regulation of the consumer-credit market. It seems that this regulation is not being undertaken understandably as the last resort; instead, it is only one option for the resolving of issues related to the consumer-credit market, and proper justification of such regulations remains absent. Moreover, some of the proposals (even for consumers) are extremely drastic. The author of this article is quite convinced that the problems of the consumer-credit market cannot be remedied through purely legislative means anyway, especially as the practical application of most of the legal norms suggested has not been tested. Rather, the state should take coherent extensive and systemic measures that could help to increase consumers’ conscientiousness, financial awareness, and financial literacy, with particular attention paid to young people who do not have enough experience in the management of their finances. Only a conscientious, financially literate society can be a counterbalance to the unfair commercial practices employed by many financial service providers. It is clear that supply quickly follows wherever demand exists, and the same can be said with regard to unfair commercial practices. Accordingly, what is the future of consumer credit? Quo vadis, consumer credit?


    Keywords: consumer-credit market; consumer; consumer-credit lender; consumer-credit contract; responsible lending