Cape Town Convention The default remedies under the Convention system are characterized by two essential elements. First of all, they leave wide room to parties’ autonomy, and secondly, they provide for speedy enforcement measures. A set of opt-in and opt-out declarations by contracting States complemented the conventional design in order to ensure a wider adoption of the Convention and the Protocols. The only mandatory declaration under the Convention relevant to a contracting State concerns the possibility for the creditor to exercise out of court remedies (if the leave of the court is not required in the Convention itself).
Default remedies are different depending on whether the creditor is a chargee or the holder of a retention of title. A chargee may repossess the collateral, sell it, lease it unless declared otherwise by the contracting State where the asset is located at the time of enforcement, or may collect or receive any income or profit from the operation of the asset. The debtor’s agreement is needed to exercise any self-help remedy. Surplus proceeds are to be accounted for and due notice should be given to all interested persons. The chargee may also appropriate the collateral by agreement with the debtor and other interested parties or by court order if the value of the outstanding obligations is commensurate with the value of the collateral. A conditional seller or a lessor, on the other hand, may either terminate the contract or exercise possession or control, without the need for debtor’s agreement and with no accounting of surplus proceeds. All remedies (including the conditional seller’s and lessor’s) must be exercised in a commercially reasonable manner.
The Cape Town Convention contains a further set of rules that are crucial to an efficient enforcement system, i.e. the provisions on relief pending final determination. Under specific objective circumstances, the holder of an international interest may obtain from the competent national court speedy relief pending final determination of the creditor’s claim, in the form of one or more of the orders listed in Article 13(1) (a) to (d) and as requested by the creditor.
Again, contracting States may modify the conventional regime by opting out of Art. 13, in whole or in part (a choice that was not, however, favored by contracting States) and/or by opting in the Protocols provisions on interim relief (which allow States to determine the number of days within which a remedy under Article 13 will be granted and parties to exclude the court’s power to impose protecting terms in favor of the interested persons’ for the contingency that the creditor breaches its obligations or fails to eventually establish its claim).
Italian Law One important obstacle to a more widespread use of non-possessory security rights in Italian law is represented by the cumbersome enforcement procedures. Possessory pledgees enjoy speedier remedies upon debtor’s default and may choose between the normal execution rules of the Civil Procedural Code (Codice di procedura civile) and the self-help provisions contained in the Civil Code (the latter allowing the creditor to ask a court for appropriation of the collateral after appraisal of its value and with an accounting to the debtor of any excess, or to seize the asset and have them sold by an official agent - at auction or market price - or, if previously agreed upon with the debtor, to use a different method of sale). No such direct remedy is available to the creditor in the case of a non-possessory security right: the ordinary rules of the Procedural Code must be followed (Art. 502 et seq. Civil Procedural Code), which require a judicial decision and formal (and lengthy) enforcement proceedings, aiming at liquidation. This is especially true for consensual liens and for Art. 46 Bank Charge. Relatively more flexible enforcement provisions were introduced for the recently approved (and not yet operational, see fn 15) non-possessory pledge for enterprises.
aircraft and export or physical transfer of an aircraft object (Art. IX Aircraft Prot.).
Chattel mortgages on aircrafts are governed by specific enforcement rules that are no less cumbersome than the ordinary ones. An interesting aspect, however, is the fact that the competent court may permit the continuing use of the equipment if adequate insurance is provided. The proceeds of such activity may be sufficient to cover the mortgagee’s outstanding credit thereby avoiding the enforced sale and its inefficiencies.
Italian procedural law allows for interim relief remedies under Arts. 669 bis et seq. of the Procedural Code (and in particular Arts. 700 et seq. for urgent measures - left to the court’s discretion - if the creditor demonstrates a well-founded risk of imminent and irreparable prejudice). Such rules do not admit derogations by party autonomy (differently from what is provided in the Aircraft Protocol) nor do they set a mandatory time-limit for the giving of relief.
Conditional sellers and lessors are, in contrast, considered to be the “owners” of the asset and, as such, can exercise all actions available to the holder of title. The title-retaining seller may terminate the contract and recover the asset. Special provisions protect the defaulting buyer from abuse in the case of an installment sale. The financial lessor’s rights upon default depend on the contract; the lessor is usually granted automatic termination and may repossess the asset, while the protective measures applicable for installment sales do not apply.
-  According to the Aircraft Protocol, furthermore, all creditors may ask for deregistration of the
-  A remedy is deemed to be exercised in a commercially reasonable manner if exercised in conformity with the provisions of the agreement, except where such provision is manifestly unreasonable(Art. IX (3) Aircraft Prot.).
-  Art. 13 Conv.; Art. X Aircraft Prot.; see also Art. VIII Rail Prot.; Art. XX Space Prot.
-  The creditor should adduce evidence of default; the debtor has to have agreed to the relief at anytime: Art.13 (1) Conv.
-  Art. 13 lists the following orders: (a) preservation of the object and its value; possession, controlor custody of the object; (c) immobilisation of the object; (d) lease or, except when covered by (a)to (c), management of the object and the income therefrom. The Aircraft Protocol adds the possibility of asking the court to sell the collateral and apply its proceeds to the creditor’s satisfaction.
-  Art. X (2) and (5) Aircraft Prot.
-  See Art. 1055 et seq. Maritime Code. Righetti, G, Ipoteca navale ed aeronautica, in Digesto IV,Discipline privatistiche, sez. comm., Vol. VII (Torino, UTET, 1992) 535, 557.
-  Art. 1063 Maritime Code. D’Ovidio Lefevbre, A, Pescatore, G and Tullio, L (above, fn. 21), 764.
-  See Tucci, G, The preliminary draft UNIDROIT Convention (above, fn. 14), at 390.
-  Arts 1525 and 1526 Italian Civil Code.