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Treatment of Security Interests Under the Insolvency Procedure

Effects of Insolvency Under the Cape Town Convention

I. The general rule is included in Article 30(1) of the Convention: in insolvency proceedings against the debtor an international interest is effective if that interest was registered in conformity with this Convention prior to the “commencement of the insolvency proceedings”.

This provision about the effects of insolvency does not affect:

- the effectiveness of an international interest in the insolvency proceedings where that interest is effective under the applicable law (Article 30(2));

  • - any rules of the law applicable in insolvency proceedings relating to the avoidance of a transaction as a preference or a transfer in fraud of creditors (Article 30(3)(a));
  • - any rules of procedure relating to the enforcement of rights to property which is under the control or supervision of the insolvency administrator (Article 30(3)(b)).

II. Article XI of the Aircraft Equipment Protocol makes some changes in Article 30(3) of the Convention, by establishing two categories of remedies (Alternatives A and B). The purpose is to strengthen the position of the creditor before the insolvency administrator or before the debtor, in cases of commencement of the insolvency proceedings against the debtor, as well as in cases of declared intention to suspend payments (or of actual suspension of payments) by the debtor. But this provision only applies where a Contracting State that is the primary insolvency jurisdiction has made a declaration pursuant to Article XXX(3).[1]

  • [1] See also: Article XXI of the Space Assets Protocol; Article IX of the Railway Rolling StockProtocol.
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