The Cuban Council of State approved two decree laws, No. 14 on Security and Mortgage and No. 15 on Guarantee Trust, which for now would not have implications for individuals on the island, according to the criteria of experts.
The new norms, published in the Gaceta Oficial Extraordinaria No. 58 of the Republic of Cuba, will make possible the use of commercial guarantees to support the granting of external financing related to foreign investment, the Agencia Cubana de Noticias news agency reported.
The actors of these norms will not be individuals, but entities: state enterprises, commercial associations with totally Cuban capital and the different modalities of foreign investment that exist in Cuba. Its main purpose is to provide confidence and security to investors on the return of the financial amount provided in credit to start a business on the island.
La Gaceta Oficial states that the decree laws aim to “promote the use of the security by individuals and legal entities in the field of their economic relations, extend it to rights, as well as make it possible the shares security and expand the use of the real estate mortgage, as collateral, to other sectors and activities.” For his part, Dr. in Legal Sciences Julio Antonio Fernández explained to OnCuba that the security and mortgage are very important Civil Law institutions as means to guarantee obligations.
Decree Law 14 of 2020 modifies the Cuban Civil Code from articles 270 to 277 and Art. 288. “This modification highlights the possibility of constituting the security with dispossession or without dispossession, that is, that rights and assets can be taxed by the debtors, and the assets may or may not be delivered to the creditor,” Fernández said.
The expert observed that the new norm requires the written form by means of a public or private deed to constitute the security, prohibits the delivery as security goods considered by Cuban law as non-seizable and, likewise, prohibits the use of the goods given as security by the creditors.
“Finally, the assets or rights given as security may be sold at public auction to meet the creditor’s credit for the guaranteed obligation,” he explained. He recalled that the Mortgage is a real guarantee right, also included in the Cuban Civil Code, although in legal practice it was used only in the air and maritime sphere.
Decree Law 214 of 2000 protected the mortgage on real estate of companies engaged in real estate development. Real estate, including homes, was recently allowed to be mortgaged as long as they were for the summer, on the beach or in the countryside, that is, not on the main home of a person or family.
“The fundamental difference between the mortgage and the security is that the first has normally been used for real estate that is mortgaged in favor of a person, creditor of a principal obligation, as a guarantee of the fulfillment of that obligation. The mortgage has a long modern use as a guarantee for bank loans and its essence has been clouded by its consequences, by the loss of assets mortgaged by individuals to large banks or real estate companies,” he said.
The new norm extends the use of the mortgage by Cuban state enterprises, commercial associations and all modalities of foreign investment in Cuba. One of the provisions contained in the decree clarifies that the State has the right of preferential acquisition of mortgage securities by paying their value, for which the parties must
always inform the Council of Ministers.