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Enforcement of International Interests—Outside of a Debtor’s Insolvency Proceedings

Under the Cape Town Convention in the event of a default a chargee under a security agreement[1] is entitled to take possession of an object, sell or lease the object, and collect income or profits from the management of the object[2] and may apply for a court order in aid of these remedies.[3] The parties may by agreement determine which events constitute a default and give rise to the Convention’s remedies provisions.[4] Convention remedies must be exercised in a commercially reasonable manner.[5] A chargee must give reasonable notice to interested persons of a proposed sale or lease of an object.[6] Sums received or collected from a chargee’s exercise of its remedies must be applied towards the satisfaction of the secured obligation.[7] The chargee must distribute any surplus in excess of the secured obligation and reasonable expenses to junior interest holders in the order of their priorities.[8] The Convention also permits a chargee and all interested persons to agree, after default, that the chargor’s interest vests in the chargee in (or towards) satisfaction of the secured obligation. These remedies and duties are remarkably similar to those applicable to the enforcement of security interests under UCC Article 9.[9]

The United States has made the following declaration in connection with Article 54 of the Convention:

Pursuant to Article 54 of the Convention, all remedies available to the creditor under the Convention or Protocol which are not expressed under the relevant provision thereof to require application to the court may be exercised, in accordance with United States law, without leave of the court.[10]

As mentioned above, UCC Article 9 permits a secured party to take possession of collateral following a default without judicial process if it does so without a breach of the peace. It also permits non-judicial collections on and dispositions of collateral.

Article 10 of the Convention provides that on default a conditional seller or lessor is entitled to take possession of an object and to terminate the agreement and to apply to a court in aid of these remedies. Otherwise it leaves the remedies to the applicable law. Under UCC Article 9 a conditional seller is treated as a chargee under a security agreement. The remedies of a lessor are governed by UCC Article 2A.[11]

  • [1] Because under UCC Article 9 a title reservation agreement is treated as a security agreement,Article would apply also to an agreement structured as a title reservation agreement.
  • [2] Convention art. 8(1).
  • [3] Convention art. 8(2).
  • [4] Convention art. 11(1).
  • [5] Convention art. 8(3). This requirement extends to remedies under art. 8(1) and 13 (relief pendingfinal determination. Under the Aircraft Protocol, however, this requirement extends to all remedies. Aircraft Protocol art. IX(3). If a remedy is exercised in accordance with a provision of theparties’ agreement such exercise is commercially reasonable “except where such a provision ismanifestly unreasonable.” Convention art. 8(3); Aircraft Protocol art. IX(3).
  • [6] Convention art. 8(4).
  • [7] Convention art. 8(5).
  • [8] Convention art. 8(6).
  • [9] See, e.g., UCC §§ 9-601, official comment 2 (circumstances giving rise to a default left to theagreement of the parties); 9-607 (collection and enforcement); 9-608 (application of proceeds ofcollection or enforcement); 9-609 (right to take possession following default); 9-610 (dispositionof collateral after default); 9-611 - 9-614 (notification of disposition); 9-615 (application of proceeds of disposition); 9-620 (acceptance of collateral full or partial satisfaction of securedobligation).
  • [10] Declarations lodged by the United States of America under the Cape Town Convention at thetime of the deposit of its instrument of ratification, available at
  • [11] See UCC §§ 2A-523 - 2A-532 (lessor’s remedies on lessee’s default).
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