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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:

  • - a registered interest has priority over any other interest subsequently registered;
  • - a registered interest has priority over an unregistered interest;

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)[1];

  • - the conditional buyer or lessee acquires its interest in or right over that object:
  • (a) subject to an interest registered prior to the registration of the international interest held by its conditional seller or lessor; and (b) free from an interest not so registered at that time even if it has actual knowledge of that interest (paragraph 4).

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[2]), 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:

  • - to give priority, without registration, to certain categories of “non-consensual right or interest” created under a national law (Article 39);
  • - to register in the international registration certain categories of “registrable nonconsensual rights or interests”, created under a national law, which by these means are treated as registered international interests (Article 40).

  • [1] This regime does not apply in its terms to “aircraft equipment”, to “space assets” and to “railwayrolling stock”, because the relevant Protocols create special priority rules (Article XIV of theAircraft Equipment Protocol; Article XXIII of the Space Assets Protocol; Article VIII of theRailway Rolling Stock Protocol).
  • [2] That is, an item not included in the categories “aircraft object”, “railway rolling stock” or “spaceasset”, as defined in the relevant Protocol.
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