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The starting point here, being a function of the common law of contract — not to mention common sense — is that every merchant is liable for its own costs and expenses of performing a contract, so if there you incur costs in running a collateral operation, as a general matter, they are for your own account.

Where this might change is as a result of a pledge. Specifically in the context of tax.

Bear in mind the pledge is designed purely as the Secured Party’s comfort it will be made whole if the Pledgor defaults, by the Pledgor handing over some assets as collateral, on the premise that the Pledgor will get them back. This is different from the title transfer CSA, where you get the collateral to keep and do with as you wish, and collateralisation works by way of offset.

Now, the idea is not to stick a Secured Party with any additional expenses as a result: if Pledgor delivers collateral to Secured Party to hold hostage, then if the Secured Party suffers any costs, be they by way of tax — the classic is a stamp duty or similar transfer tax — or perfection and registration of security, and then enforcement and realisation should the Pledgor default, these should be for the Pledgor’s account, as the Secured Party gets no benefit from incurring that cost. All the more so any costs I incur when transferring the assets back to the Pledgor at the end of the affair.

These considerations do not — quite so straightforwardly, at any rate — pertain to title transfer arrangements. Once you have the asset, it is yours.

This is a not entirely ironclad justification, by the way - especially when you take into account the effects of rehypothecation.

security interest CSAs

How to deal with stamp duties is the subject of Paragraphs 10(b) and 10(c), of which there is no equivalent in the English law document.

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