| In a broad sense, international loans equal to international finance, including international loans, international securities and so on. Narrowly speaking, international loans only refer to money borrowing and lending between debit and credit sides from different countries. In this paper, international loans are confined to international commercial banks loans, in which international commercial banks sign loan contract with foreign enterprises to provide commercial loans.In international loans, lenders usually ask for securities in order to protect their debts. Though with various forms, securities should be divided into two types-positive and negative. Chinese "Security Law" prescribes guarantee, mortgage, charge, pledge, lien etc., and do not say a word to negative pledge. Native scholars spend a lot of time and efforts to study positive pledges and give few notice to negative pledge. However, as an important protective measure, negative pledge is widely used in international loans.With the development of Chinese economy, especially after China's access into WTO, more and more Chinese enterprises and commercial banks take part in international loans. So it's time for us to take efforts to study negative pledge in order to put it into practice and make our security law perfect.The first part of this paper focuses on the definition of negative pledge and make a deep analysis. There exist several different definitions of negative pledge. After comparing their advantages and disadvantages, the author redefines "negative pledge" as "before clearing off its debts, the borrower will not (and will procure that none of its subsidiaries) create any mortgage, charge and any other security interest upon all or any of the assets of the borrower or any of its subsidiaries ".Part two answers a question--why lenders set negative pledgecovenants. With negative pledge clause, the lender's purpose is not to obtain a preferential right, but rather to prevent a subsequent third partyfrom acquiring rights in the property superior to those of the lender.Part three mainly explores the existing forms of negative pledge in international loans. Firstly, negative pledge is solely used as one of negative covenants in the international loan contract. Secondly, negative pledge clause can be used together with guarantee or security interest. The lender takes advantage of both positive and negative pledges to gain two-fold protection. Thirdly, combined security, which combines fixed security and floating charge as well as negative pledge, forms an independent one. This combined security often appears in project finance.Part four examines the dysfunction of negative pledge and proposes to overcome it. The negative covenant can not prevent third parties from acquiring a security interest, but merely confers on the lender a cause of action against the borrower for contract damage in the event of breach. Therefore, negative pledge covenants in fact provide little protection to unsecured lenders when the breach is accompanied by dissipation of assets. In order to make negative pledge enforceable to the third party, some scholars propose to register negative pledge to perfect it and some recommend "affirmative negative pledge covenants" to protect lenders. To the author, the latter is preferable to protect lenders' right and interest.Part five lists several important exceptions to negative pledge and the quasi-security transactions.In conclusion, the author holds the idea that negative pledge should be put correctly into our practice of international loans and further be stipulated as one of independent securities in our "Security Law"... |
