Unsecured International Finance Legal Issues Studied

This dissertation firstly analyses the international financing, dividing it into secured international financing and unsecured international financing, and reviews the advantages and disadvantages of unsecured international financing, as well as the interaction between the secured and unsecured international financing. The author tries to find out the major forms of unsecured international financing, probes into the important legal issues in the unsecured international financing with the examples like Eurobond, and finally predicts the future of unsecured international financing. This article consists of three parts.Part One: General Description of International FinancingOne of the very important legal issues in the international financing is debtor-creditor relationship, although there are other legal relationships like the shareholder-corporation relationship in the financing through listing in overseas stock markets. International financing is the international "obligation", with the subject, object or content of the financing shall be "international".There may have quite a lot of classifications of international financing. Since the security issue is of great legal implication, the international financing may be divided into the secured international financing and the unsecured international financing according to the criteria of whether there is any security.For the sake of comparison with the unsecured international financing, this part lists the major forms of secured international financing, which include the secured bond, the letter of credit, the international factoring with recourse, advance payment, BOT, direct loan, forfaiting, project financing etc.Part Two: General Description of Unsecured International FinancingIn this dissertation, the unsecured international financing is ofbusiness nature. The unsecured international financing does not have mortgage, pledge, lien, guaranty, pawn or any other kind of security. The legal arrangements of unsecured international financing have at least two features: one is that it tries to make sure that the transaction is performed smoothly, e.g. creditors or investors etc may get the money back or obtain investment return. The other is that the unsecured international financing is not as attractive as the secured international financing in the international financial market. Therefore, lenders or investors etc. sometimes try to make special arrangements in the unsecured international financing to protect their rights effectively. The unsecured international financing includes the unsecured international loan, unsecured bond, factoring without recourse that provides international financing, financing through listing in overseas stock markets etc.The author believes that the unsecured international financing may be divided into the credit-based unsecured international financing and the speculation-based unsecured international financing. However, the said classification is not always correct because there may have some unsecured international financing based on both credit and speculation.On one hand, the advantages of unsecured international financing usually include the relatively simple formalities, without the cost of providing security, satisfying the needs of international business etc. On the other hand, unsecured international financing may have the following disadvantages: higher requirement of risk management, the stricter requirements for borrowers etc. It is noteworthy that there may have transformation and cooperation between the secured international financing and the unsecured international financing.Part Three: Important Legal Issues in Unsecured International Financing and the Future of Unsecured International FinancingThe legal rules of unsecured international financing include relevant international law like the UNIDROIT Convention on International Factoring, and the domestic laws of many nations on the regulation of international financing etc. But there are not complete and systematic legal rules to regulate the...