Home Law Implementing the Cape Town Convention and the Domestic Laws on Secured Transactions
II General Report
The Cape Town Convention and Its Implementation in Domestic Law: Between Tradition and Innovation
The Features of the Cape Town Convention
The Cape Town Convention is a uniform law treaty on the security interests in mobile equipment. It provides a set of rules that the courts in the States Parties shall apply. In the absence of the Convention, the court must first look up its choice of law rules to determine which law should govern the security interests at issue. The governing law may be the law of the place where the asset is located (lex rei siate or lex situs). Or, in particular in the case of security interests in aircraft, it may be the law of the country for whose registry the aircraft is registered (lex registri). In any case, the rules on the creation and perfection of the security interests differ from country to country. The uncertainty arising from these complexities is itself a legal risk to parties to the secured transactions. In some cases, the rules chosen as the governing law could lead to a problematic outcome.
Under the Cape Town Convention, if the security interest satisfies the condition for the creation of a valid international interest, the provisions of the Convention apply in place of the applicable domestic law. Furthermore, the rules under the Convention are designed to facilitate asset based financing. The asset based financing has been a primary method used for the acquisition of transport vehicles such as aircrafts and railway rolling stock. Therefore, the Cape Town Convention is expected to contribute to the growth of the relevant industries using these transport vehicles covered by the Protocols.
The remainder of this Sect. 2.1 offers a concise overview of the Cape Town Convention. In the following sections, it is discussed how the rules of the Cape Town Convention differ from the domestic laws of various countries, and what are the values that the Cape Town Convention as a uniform law treaty brings about to this subject. First, the value in providing for a uniform set of rules when the laws of countries are different is identified (Sect. 2.2). Secondly, the economic benefits to be achieved by applying the Cape Town Convention is discussed (Sect. 2.3). Thirdly, the virtues of the establishment of global institutions, including the International Registry, which is by its nature impossible for a single country, are considered (Sect. 2.4). The final section includes conclusions, offering perspectives for the general theory on the role of private law unification (Sect. 2.5).
As noted in “About This Book,” the term “Cape Town Convention” is used to refer to the Convention and its Protocols as a whole. When referring specifically to the Convention itself and not to Protocols, the term “the Base Convention” is used. The three Protocols are respectively mentioned by the common names “Aircraft Protocol”, “Luxembourg Rail Protocol” and “Space Protocol.”
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