Author(s)

YuXin Dai

Affiliation(s)

School of Economics, Shenzhen Polytechnic University, Shenzhen 518055, Guangdong, China.

Corresponding Author

YuXin Dai

ABSTRACT

In the modern credit economy, the tension between statutory priority and consensual security interests has emerged as a focal point in both academic and practical spheres. This study aims to explore the theoretical justification of statutory priority and evaluate its impact on transaction safety and efficiency. Employing methodologies of comparative legal analysis, doctrinal analysis, and law and economics, this paper identifies specific conflicts between statutory priorities and security interests, particularly highlighting inconsistencies in the application of the Civil Code of the People's Republic of China. The study defines the core conflict between the "First-in-Time" rule (temporal priority) and policy-oriented statutory priorities, arguing that the uncertainty of the latter undermines the predictability of secured transactions. Theoretically, the paper contrasts contractarian theory—emphasizing party autonomy and notice filing efficiency—with communitarian justice theory, which justifies protecting vulnerable creditors, while utilizing the "Cheapest Cost Avoider" principle and monitoring cost theory as analytical tools for priority allocation from a law and economics perspective. Through a comparative analysis of the Chinese Civil Code, UCC Article 9 (USA), and German law, the research focuses on case studies regarding construction liens and Purchase Money Security Interests (PMSI). It empirically analyzes the hierarchy of rights involving tax liens, secured claims, and employee claims; specifically, it examines how Article 807 of the Civil Code disrupts the expectations of mortgagees and addresses the conflict between PMSI "super priority" and existing floating charges. Furthermore, the discussion weighs efficiency against fairness, characterizing statutory priority as a "hidden lien" that increases credit costs, and examines the impact of priority rules on the Absolute Priority Rule (APR) in bankruptcy reorganization. Finally, the study proposes a balanced hierarchy model to optimize creditor protection and advocates for a strict registration system for statutory priorities to enhance transparency, concluding with the necessity to limit the scope of statutory priorities to maintain the integrity of the secured credit system and offering suggestions for future judicial interpretations and legislative reforms.

KEYWORDS

Statutory priority; Consensual security interests; Construction liens; Transaction security and efficiency; Chinese civil code

CITE THIS PAPER

YuXin Dai. Statutory priority and security interests: theoretical and practical dimensions in civil and commercial law. World Journal of Sociology and Law. 2026, 4(1): 1-12. DOI: https://doi.org/10.61784/wjsl3030.

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