Home Law Implementing the Cape Town Convention and the Domestic Laws on Secured Transactions
Effects of an International Registered Interest as Against Third Parties Under the Cape Town Convention. Priority of Competing Interests
I. Article 29 of the Convention lays down some rules governing the priority of a registered interest in relation to other registered interests and also to every kind of unregistered interests, whether or not registrable.
Paragraph 1 contains two fundamental priority rules:
According to paragraph 2, the priority of the first-mentioned interest under the preceding paragraph applies: (a) even if the first-mentioned interest was acquired or registered with actual knowledge of the other interest; and (b) even as regards value given by the holder of the first-mentioned interest with such knowledge.
In the following paragraphs of Article 29 we find some consequences of these priority rules:
- the buyer of an object acquires its interest in it: (a) subject to an interest registered at the time of its acquisition of that interest; and (b) free from an unregistered interest even if it has actual knowledge of such an interest (paragraph 3);
Under Article 29(6), any priority given by this Article to an interest in an object extends “to proceeds”, as defined in the Convention.
On the other hand, Article 29 does not deal with the priority between competing unregistered interests: this question is left to the applicable law.
II. The priority of competing interests or rights under Article 29 may be varied by agreement between the holders of those interests, but an assignee of a subordinated interest is not bound by an agreement to subordinate that interest unless at the time of the assignment a subordination had been registered relating to that agreement (paragraph 5).
Article 29 also states that the Convention does not affect the rights of a person in an item (other than an “object”, in the meaning of the Convention), held prior to its installation on an object if under the applicable law those rights continue to exist after the installation; and does not prevent the creation of rights in an item (other than an “object”, in the meaning of the Convention), which has previously been installed on an object where under the applicable law those rights are created (paragraph 7).
III. By declaration of a contracting State, it is possible:
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