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Ensuring the Prevailing Effect of the Cape Town Convention

If the economic benefit from the rules conducive to asset-based financing is not only theoretical but is realised through the Cape Town Discount under the ASU, it is important to ensure that the rules in the Cape Town Convention are implemented with strict compliance in the States Parties. Some States Parties have assured, when ratifying the Convention, that any conflicting rules in the domestic law will be excluded. For example, the implementation law of Indonesia provides that the Cape Town Convention directly applies and that the Convention prevails over the domestic law in case there is a conflict. The same legislative technique is adopted also by other States, such as Malaysia and the Russian Federation.[1]

Still, there could be the problem of actual compliance, namely the application of the Cape Town Convention’s rules by government officials or interpretation of the Convention by the court. The AWG as a group of industry experts monitors such actual compliance through a network of national contacts groups.[2] The finding of non-compliance may result in the removal of the State from the Cape Town List.[3]

While all these will be valid mechanisms to ensure compliance, the Cape Town Convention stopped short of including the dispute resolution mechanism between the creditor and the non-complying State. One commentator argues that a dispute resolution mechanism modelled after the investor-State dispute resolution will be useful in enhancing the trust in the Convention, given the commonality in nature of the Cape Town Convention with investment treaty.[4] The question here is whether the incentives due to the pressure of the “law market” is sufficient to ensure compliance, or the Cape Town Convention needs to create a global regime accompanying a judicial mechanism for the strict compliance.

  • [1] See Chaps. 5, 6 and 8.
  • [2]
  • [3] Article 44 of the Appendix II to the ASU 2016.
  • [4] Charles W. Mooney, Jr., The Cape Town Convention’s Improbable-but-Possible Progeny PartTwo: Bilateral Investment Treaty-Like Enforcement Mechanism, Virginia Journal of InternationalLaw, Vol.55, p.451 (2015).
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