Norton Rose Professor of English Law in the University of Oxford and Fellow of St. John's College, Oxford;
Chairman of the Unidroit Study Group for the preparation of the Unidroit Convention on International Interests in Mobile Equipment

This paper briefly describes the current draft of what promises to be one of the most significant international conventions ever to be made in the field of private transnational commercial law, the Unidroit Convention on International Interests in Mobile Equipment. The purpose of the convention is to establish an international legal regime for security and related interests in equipment of a kind normally moving from one state to another in the normal course of business - for example, aircraft and railway rolling stock - and in satellites and other space objects, which are not, of course, located on earth at all.

Evolution of the draft convention

 This ambitious project resulted from a proposal by Mr. T.B. Smith QC, the Canadian member of the Governing Council of Unidroit, shortly after conclusion in Ottawa of the 1988 Unidroit Convention on International Financial Leasing. Studies by Professor Ronald Cuming and a Unidroit restricted exploratory working group established both the need for and the feasibility of such a project, and a study group was set up by the Governing Council to carry it forward. From an early stage the project attracted the keen interest of the aviation industry, and an Aviation Working Group, co-ordinated by Mr. Jeffrey Wool (who was subsequently appointed expert consultant to Unidroit on the aviation aspects) was set up to work with Unidroit on the proposed convention as it affects aircraft. Intensive work covering a period of several years was then undertaken by the study group, its sub-committee and its drafting group, a registration working group set up under the chairmanship of Professor Cuming to examine registration aspects, and the Aviation Working Group. At a later stage the International Air Transport Association (I.A.T.A.) lent its strong support and contributed its own expertise, and more recently the International Civil Aviation Organization (I.C.A.O.), the intergovernmental organisation for aviation, has agreed to participate in the work in relation to aircraft. These organisations came together as the Aircraft Protocol Group to prepare a protocol ("the aircraft protocol") on international interests in aircraft equipment.¹ On public international law issues, in particular fast-track procedures for new protocols (see below) and the relationship between the UNIDROIT Convention and other conventions expert assistance is being provided by Professor Christine Chinkin, with the assistance of Professor Catherine Kessedjian, Deputy Secretary General of the Hague Conference on Private International Law, who is also advising on conflict of laws issues. The study group completed its task in November 1997, producing a draft which was approved by the Governing Council in February 1998. In June 1998 the two texts were revised by a Steering and Revisions Committee in the light of comments received and are now being transmitted to Governments with a view to the first meeting of governmental experts in January 1999.

 Successive drafts of the convention have been exposed to comment by Governments and interest groups and have been the subject of numerous seminars around the world. It is clear from these that there is a widespread acceptance of the need for such a convention, and support for the approach adopted by the study group. The Aviation Working Group and I.A.T.A. have been particularly vigorous in promoting an awareness of the draft convention and have invested a considerable amount of resources towards securing a regime that is suitable for interests in aircraft. The Aircraft Protocol Group commissioned an economic impact study under the auspices of the Institut Européen d'Administration des Affaires (INSEAD) and the New York University Salomon Center. This study, currently in final draft form, is being conducted by Professors Saunders and Walter and concludes that the proposed convention has the potential to attract significant microeconomic and macroeconomic benefits, including reductions in borrowing costs for airlines. More recently, separate working groups have been established to examine the draft convention in the context of space objects and railway rolling stock, and they are now making good progress.

 The draft convention embodies a number of innovative techniques which break new ground in treaty-making. The most striking is the concept of a framework convention supplemented by a series of equipment-specific protocols.² These techniques undoubtedly help to make the convention an unusually complex instrument but greatly enhance its utility. Particularly significant also are the public/private partnership engendered by the co-operation between intergovernmental and non-governmental bodies and the combination of private law and public law provisions.

 The nature of the problem

 Few areas of law are subject to such wide diversity of legal regimes as security and related interests in personal property.³ In a number of jurisdictions, particularly common law jurisdictions, the attitude towards security is very liberal. Security interests may be freely created in any kind of property, tangible or intangible, and may readily be perfected by registration without the need for the creditor to take possession. The parties to a security agreement are allowed a wide degree of autonomy in agreeing on the rights and remedies of the secured party, and self-help - for example, by repossession and sale without a court order - is generally permitted so long as there is no breach of public order. At the other end of the spectrum are States whose laws are hostile to non-possessory security interests of any kind and, indeed, may be unwilling to recognise security rights at all in anything other than land. Between these two ends of the spectrum are laws occupying diverse intermediate positions. Many of these do not accept the concept of self-help, nor will they necessarily be prepared to recognise security interests created in another jurisdiction which have no analogue in their own. Moreover, there is no guarantee that a security interest which is created in one jurisdiction and is valid against the debtor's trustee in bankruptcy in that jurisdiction will be treated as effective in a bankruptcy in another State.

It will be evident that these problems cannot be addressed by a uniform conflict of law rule, even if a satisfactory rule could be devised. The lex situs, widely adopted in relation to dealings in movable property, is manifestly unsuitable for mobile equipment. There are, it is true, international conventions governing security rights in aircraft and ships, and based on the concept of nationality registration, but the aircraft conventions, valuable though they have been, are now seen as inadequate for the future requirements of the aviation industry, while the 1993 International Convention on Maritime Liens and Mortgages has not yet received the number of ratifications required to bring it into force. Given that a single commercial aircraft can cost in excess of US$ 100 million and that the total value of orders anticipated over the next 20 years has been estimated at no less than one trillion dollars, the importance of an effective international legal regime which lays down substantive law rules, not merely conflicts rules, cannot be over-stated.

 Objects and key elements of the draft convention

 The draft Convention on International Interests in Mobile Equipment has four primary objectives: to give international protection to security interests in high-value, uniquely identifiable mobile equipment; to provide the holders of such interests with a basic range of default remedies that can be expeditiously exercised; to provide a regime by which those interests can be perfected by registration, thereby enabling third parties to discover their existence; and to lay down rules for the recognition and priority of those interests, both within and outside the debtor's bankruptcy. At the heart of the convention are the provisions for the creation of an autonomous international interest in mobile equipment, an interest constituted by the convention itself and not derived from or dependent on national law. This interest, if created in accordance with the very simple formalities prescribed by the convention, will be enforceable against the debtor whether or not the interest has been registered. But registration will be necessary to ensure priority over subsequent interests, including those of creditors in the debtor's bankruptcy. The convention also contains rules governing the assignment of international interests, and tentative provisions permitting the registration of certain kinds of non-consensual interest.

 The framework and the protocols

 As work on the convention progressed it became clear that it would be impossible to devise rules that would be equally suitable for all types of equipment. For example, the remedy of deregistration from a nationality register⁴ was specific to aircraft; space objects involved rules incapable of application to earth-bound equipment; even priority rules might need to vary with the type of equipment involved. At first, it was thought that these problems could be addressed by having separate parts of the convention for distinct types of equipment. But in the course of drafting other difficulties emerged. For example, the Aircraft Protocol Group found that it was far from easy even to define airframes and aircraft engines. This was partly because of the need to take account of accessories and partly because the definitions had to incorporate elements that would confine the convention to uniquely identifiable objects of high unit-value. However, the Group was eventually able to work out appropriate definitions as well as a criterion for identifiability and other provisions of particular application to aircraft.

But other interest groups had not yet reached this point. The problem, then, was how to avoid slowing up the whole project while waiting for these other sectors to catch up. One way would have been to confine the equipment-specific parts of the convention to aircraft and those other types of equipment (if any) for which the relevant industry group was in a position to supply the requisite data and equipment-specific rules in sufficient time to avoid delaying the convening of the projected Diplomatic Conference. But this approach would have had several drawbacks. It would have made the convention excessively long; it would have given undue emphasis to one or two types of equipment, creating the false impression that the convention was aimed exclusively at those types; and it would have deprived States of the ability to choose from a menu of equipment-types, or to add new types subsequent to the convention, except by going through the full panoply of further Diplomatic Conferences. An alternative would be to have a series of stand-alone conventions, each confined to a particular type of equipment. But this approach too has its drawbacks in that it would involve a good deal of duplication and also a risk of inconsistency between the general (i.e. non-equipment-specific) provisions of the different conventions, as well as losing the advantages of a projected fast-track procedure for the adoption of subsequent protocols.

 The ingenious solution that came forward from the Aviation Working Group and IATA was to require that for each type of mobile equipment the convention should be modified by a protocol containing provisions specific to that type which would add to or vary the generic provisions of the convention.⁵ The protocol device not only overcomes what might otherwise have been an insuperable delay problem but it has a number of other advantages. By ensuring that the convention is not equipment-specific it facilitates its extension to new categories of equipment when the definitions, descriptions and special provisions required for such equipment have been fashioned; it enables the convention to be kept down to a reasonable length and avoids cluttering it with detail; and it allows states to choose from a menu of protocols as these are brought into being. Moreover, it is envisaged that a fast-track procedure will be devised for the making of additional protocols after the conclusion of the convention. Thus the convention is a framework convention which will come into force as regards any particular type of equipment only when a protocol has been made in relation to that type, and on the terms of, and as between Contracting States parties to, that protocol. Reference has been made earlier to the aircraft protocol prepared by the Aircraft Protocol Group.

 Structure of the draft convention

 The current draft contains 13 chapters:

Chapter I - Sphere of application and general provisions
Chapter II - Constitution of an international interest
Chapter III - Default remedies
Chapter IV - The international registration system
Chapter V - Modalities of registration
Chapter VI - Liabilities and immunities of the International Registry
Chapter VII - Effects of an international interest as against third parties
Chapter VIII - Assignments of international interests
[Chapter IX - Non-consensual rights and interests] [tentative adoption]
Chapter X - Application of the Convention to sales
Chapter XI - Jurisdiction
Chapter XII - Relationship with other conventions [to be drafted]
Chapter XIII - Other final provisions [partly drafted]

Sphere of application

 The provisions on the draft convention's sphere of application cannot be fully understood without some perception of the evolution of the thought-processes that led up to them. It was originally intended to follow the model of Article 9 of the Uniform Commercial Code by adopting a functional approach to the concept of a security interest so as to take in conditional sale agreements and leases intended as security, and by utilising a system of debtor registration that would allow the perfection of security interests in after-acquired property and proceeds. But it soon became clear that this approach would cause serious difficulties. In the first place, the equation of title retention with security is confined to North American jurisdictions. Elsewhere, in the common law as well as the civil law world, a sharp distinction is drawn between the grant of security by a debtor over an asset it currently owns and an agreement between seller and buyer that title should not pass to the buyer at all until completion of payment. Security interests are in general registrable, title reservation is not, and there are other fundamental differences in treatment. While there was much admiration for Article 9, it became evident that the recharacterisation that would be involved was too great to be accommodated in those jurisdictions that were not attuned to it. There were also concerns, particularly among leasing interests, that to treat conditional sale and leasing agreements as security agreements might influence their treatment for tax purposes, with potentially adverse consequences. Moreover, leasing interests objected even to having leasing agreements characterised as title-retention agreements. So in the end it was decided to have three categories: security agreements, conditional sale agreements and leasing agreements. Secondly, extension of the convention to after-acquired property and proceeds would lead to its application to classes of asset quite outside those for which it was designed. For example, application of the convention security interest to accounts resulting from the sale of an aircraft would lead to the detachment of the security interest from the aircraft itself and take the convention into the realm of security in receivables. This would not only be inconsistent with the raison d'être of the convention, it could also bring it into conflict with the proposed UNCITRAL convention devoted specifically to receivables financing.

 It was therefore decided to restrict the convention to equipment in existence at the time of the security agreement, and to exclude interests in proceeds other than insurance proceeds. In line with this, the register of security interests would be organised by asset, not by debtor, thus making it necessary for the equipment to be uniquely identifiable, typically by serial number. This approach, while restricting the convention in one way, enables it to be extended to payment and other rights dealt with in association with registered interests in equipment.

 The sphere of application of the convention is determined by reference to four key factors, some of which feature in the convention while other will appear in the relevant protocol:

(1) The convention is focused on consensual interests within one of three categories: that granted by the chargor under a security agreement; that vested in a person who is the seller under a conditional sale agreement; and that vested in a person who is the lessor under a leasing agreement.⁶ The characterisation of the agreement is left to be determined by the applicable law. Consideration is being given to tentative provisions allowing Contracting States to declare types of non-consensual interest that would be registrable in the international registry,⁷ but no final decision has been taken on this. Article 41 of the convention enables the relevant protocol to extend the convention, wholly or in part, to outright sales and prospective outright sales, and Article IV of the draft aircraft equipment protocol so provides in relation to such articles of the convention as are appropriate to such sales.

 (2) The convention will be restricted to mobile equipment of a uniquely identifiable kind and of high unit-value.

(3) The convention will be confined to equipment in existence at the time of the security agreement.

(4) There will need to be an appropriate connection to a Contracting State.⁸

Other general provisions

 Article 6 reflects the general principle of party autonomy underlying the convention. Security agreements relating to mobile equipment are typically large transactions in which both parties are highly experienced. Indeed, many of the world's leading airlines either are or were owned by Governments. So Article 6 allows the parties, in their relations with each other, to derogate from or vary most of the provisions of the convention, though there are some that are mandatory.¹⁰Article 7, which deals with the interpretation of the convention, is modelled on Article 7 of the 1980 Vienna Convention on Contracts for the International Sale of Goods (CISG), which has now been adopted by 52 States. But while Article 7 has become the paradigm for transaction-related conventions, such as Unidroit's own Convention on International Financial Leasing and Convention on International Factoring, the text of the present draft contains two significant departures. The reference to good faith has been dropped, on the ground that in transactions potentially involving very large sums it introduced too great a degree of uncertainty. In its place is an emphasis on the need to promote predictability in the application of the convention.

 Constitution of an international interest

 Article 8 provides a straightforward regime for the constitution of an international interest. All that is required is that the agreement creating or providing for the interest is in writing, relates to an object in respect of which the debtor has power to enter into the agreement, enables the object to be identified in accordance with the applicable protocol and, in the case of a security agreement, enables the secured obligations to be identified. An agreement which fulfils these requirements is effective to constitute an international interest whether or not it would be effective to create a security interest under the otherwise applicable law. This represents a major advance. The international interest derives solely from the convention and is not dependent on national law. In many cases a security agreement conforming to Article 8 will also satisfy the requirements of local law for a domestic security interest but that is not a prerequisite of a valid international interest. Article 8 will thus be of particular value in relation to those countries whose law is hostile to security in general or is still in a state of development in its treatment of security interests. Conversely, an interest provided for by an agreement which does not conform to Article 8 will not be an international interest even if under the applicable law it would be effective to create a security interest.

 Default remedies

 Chapter III is devoted to the default remedies of the secured party. This is capable of coming into play in relation to any international interest created under Article 8, whether or not it has been registered in the International Registry. This reflects the principle that the function of registration is to give public notice to third parties and to determine priorities outside and within the debtor's bankruptcy. Outside bankruptcy, registration has no rôle to play as regards the relations between the parties themselves, for the debtor obviously knows already that it has granted the interest. The provisions relating to default remedies are default provisions in a different sense in that (except where they are mandatory) they apply only to the extent that the security agreement does not otherwise provide. So in principle it is open to the parties to enlarge, restrict or modify the remedies given by Chapter III and the conditions in which these become exercisable. There are some kinds of remedy that are equipment-specific and are thus appropriately provided by the relevant protocol rather than in the convention. Thus in aircraft financing, as previously stated, an important remedy is deregistration of the aircraft from the nationality register in which it is registered, and the draft aircraft protocol makes express provision for this.

 The bulk of the provisions are devoted to the rights of the chargee under a security agreement. The reason for this is that such an agreement gives rights over the debtor's property, and thus necessitates more detailed provisions than are considered necessary for the recovery by a seller or lessor of equipment which has always remained in its ownership. Under Article 9(1) the prescribed remedies, which may be exercised singly or in combination, are to take possession of the equipment, to sell or grant a lease, to collect or receive any income or profits arising from the management or use of the equipment and to apply for a court order authorising or directing any of the above acts. There are, however, certain non-excludable rules governing the exercise of some of these remedies. Remedies are required to be exercised in a commercially reasonable manner¹¹ and a chargee proposing to sell or grant a lease must first give reasonable prior notice in writing to interested parties. Any surplus resulting from sale must be paid to the next registered chargee, or if there is none, to the chargor. Article 10 allows equipment to be forfeited to the chargee in satisfaction of the debt but only if all interested parties agree or the court so orders. In the case of conditional sale and leasing agreements the remedies specified are termination of the agreement and repossession, but agreements will invariably add a range of other remedies.

 In general, remedies not specified as requiring leave of the court may be exercised without such leave except in a Contracting State which has made a declaration to the contrary. Subject to this, remedies are required to be exercised in accordance with the procedural law of the place of exercise.¹²

 Article 15 contains an important provision enabling the secured party who adduces prima facie evidence of default to obtain speedy judicial relief designed to protect or maintain the value of the equipment pending final determination of its claim. Such relief takes the form of one or more of the following orders, namely, preservation of the equipment and its value, possession, control, custody or management of the equipment, sale or lease of the equipment, application of the proceeds or income of the equipment, and immobilisation of the equipment. Article 42, discussed later, provides for the courts which are to have jurisdiction to grant interim relief under Article 15.

 The international registration system

 Central to the operation of the convention is the International Registry in which would be recorded international interests and prospective international interests.¹³ and assignments, prospective assignments and subordinations of such interests. In practice, there would be separate registries for different types of equipment. Under the current text each registry would be established and overseen, and each Registrar would be designated, by an Intergovernmental Regulator and would be administered by the Registrar and operated by a duly appointed operator.¹⁴ Chapter VI deals with the liabilities and immunities of the International Registry. By Article 27(1) any person suffering loss by reason of any error or system malfunction in the International Registry will be entitled to an indemnity in respect of such loss. Subject to this, the International Registry, the Registrar and staff of the Registry, and the operators and staff of the registration facilities will, in the exercise of their functions, enjoy immunity from legal process except to the extent of any waiver of immunity by the International Registry or as otherwise provided by agreement with a State in which the International Registry is situated. Similarly, the assets, documents and archives of the International Registry will be immune from seizure or legal process.

An issue yet to be worked out is the rôle of the operator of the registry. Is its task essentially administrative or has it a quasi-judicial function to perform in evaluating eligibility for registration? For example, should the Registrar concern himself with whether a security agreement appears to conform to the requirements of the convention?

Modalities of registration

 Chapter V contains detailed provisions governing the modalities of registration. These will be supplemented by the relevant protocol and by regulations. They provide for the registration of international interests and the subordination of international interests and for the amendment, extension or discharge of a registration. Particularly useful is Article 21(1) permitting registration of a prospective international interest, defined by Article 1 as an interest that is intended to be created or provided for as an international interest in the future, whether or not upon the occurrence of an uncertain event. This provision, which borrows from a similar concept in Article 9 of the American Uniform Commercial Code, permits a prospective secured creditor, with the consent of the debtor, to protect its priority during negotiations for the security by registering a notice of its intended interest in identified equipment within the scope of the convention. Any international interest resulting from such negotiations would then be deemed to have been registered as from the time of its registration as a prospective international interest¹⁵ and its priority would be determined on this basis.

 Priorities

 The ordering of priorities of competing security interests in national legal systems is usually a matter of considerable complexity. For example, should a party who has notice of an unregistered interest be bound by it or should it be entitled to rely on the want of registration? Where security is taken to secure future advances, should the secured creditor, after receiving notice of a second security interest, be permitted to tack such further advances to its security in priority to the second chargee? After considering the different ways in which problems of this kind might be dealt with, the Study Group opted for simplicity rather than sophistication. The result is a remarkably simple set of priority rules confined to a single article, Article 28. A registered interest has priority over any other interest subsequently registered and over an unregistered interest. This priority is given even where the registered interest was acquired or registered with actual knowledge of an earlier unregistered interest. This rule may seem hard but has numerous precedents in national legal systems and is designed to avoid factual disputes as to whether a party did or did not have knowledge of an earlier interest and thus to maintain the integrity of the registration system. Again, the priority will extend to further advances or other value even if made or given with actual knowledge of another interest. It is for the person holding or intending to take such other interest to negotiate a priority agreement with the senior creditor.

 There is one special rule. The outright buyer¹⁶ of equipment takes subject to an interest registered at the time of the purchase but free from an unregistered interest even if taking with actual knowledge of it. This rule is necessary because the interest acquired by an outright buyer is not an international interest and is therefore not registrable under the convention, and it would be unfair to give priority to the holder of a registered interest over an earlier buyer who lacked the machinery for giving public notice ofits interest.¹⁷

 Bankruptcy of the debtor

 Under Article 29(1) an international interest is valid against the debtor's trustee in bankruptcy if registered in conformity with the convention prior to the commencement of the bankruptcy. This is a rule of validity, not a rule of invalidity. Accordingly even an international interest not so registered will be effective against the trustee where it is valid under the applicable law. For example, the international interest may also constitute a national interest under the applicable law which has been perfected in accordance with the requirements of that law so as to be valid against the trustee; and in many jurisdictions the interest of a conditional seller or lessor is not registrable but can nevertheless be asserted against the trustee of the buyer or lessee.

 Assignments and rights of subrogation

 Chapter VIII allows an assignment of an international interest in accordance with the same simple formalities as apply to the creation of such an interest. For this purpose "assignment" means a consensual transfer, whether by way of security or otherwise, which confers on the assignee rights in the international interest.¹⁸ By Article 31(1) an assignment operates to transfer to the assignee all the interests and priorities enjoyed by the assignor and any associated rights to payment, to the extent agreed by the parties to the assignment. The debtor becomes bound to pay the assignee on being given a notice of assignment which complies with the requirements of Article 33(1). By Article 35 the rules governing priority of competing international interests are applied mutatis mutandis to the priority of competing assignments where at least one of them is registered. Under Article 38, which is provisional, nothing in the convention is to affect rights or interests arising by way of legal subrogation under the applicable law.

 Non-consensual rights and interests

 Article 39, which has been only provisionally adopted, is designed to broaden the scope of the convention by permitting a Contracting State to make a declaration that categories of non-consensual interest it might designate should be registrable as international interests and should thereafter be treated as such for priority purposes. It is envisaged that a State might wish to avail itself of this right in relation to non-consensual interests which do not already enjoy preferential status under its domestic law, such as claims for taxes or unpaid wages, the priority of which does not depend on registration. Categories to which such a declaration might relate are, for example, the claims of a creditor who has attached equipment by way of execution of a judgment or provisional relief or the claims of a lien creditor for work carried out on the object. Article 40 deals with non-consensual interests which under the applicable law would have priority over the local equivalent of an international interest, and makes the giving of such priority over an international interest dependent on the State setting out that priority in an instrument deposited with the depositary, thus alerting potential secured creditors. Again, Article 40 has only been provisionally adopted.

 Jurisdiction

 By Article 42 jurisdiction to grant interim judicial relief under Article 15(1) is conferred on a court of a Contracting State where (a) the object is within [or is physically controlled from] the territory of that state, (b) [one of the parties] [the defendant] is located within the territory of that State, or (c) the parties have agreed to submit to the jurisdiction of the courts. The bracketed words indicate matters for consideration by governmental experts. The phrase "or is physically controlled from" is intended to deal with space objects, which are not located within the territory of any State. The alternative to (b) has been inserted in case there is concern that to accord jurisdiction automatically to the courts of the plaintiff's country might give excessive power to the secured party and run counter to internationally established jurisdiction rules, which always allow suit against a defendant in its own jurisdiction but do not extend this principle to confer jurisdiction on courts in the plaintiff's jurisdiction. The jurisdiction given by Article 42 may be exercised even if the substantive trial of the dispute will or may take place in a court of another Contracting State or in an arbitral tribunal. By Article 43 a court of a Contracting State having jurisdiction under Article 42 also has jurisdiction in all proceedings relating to the convention. However, Article 43 also provides that no court may make orders or give judgments or rulings against or purporting to bind the International Registry, for this would conflict with the principle of immunity of the International Registry described earlier and would also carry the risk of conflicting orders from different courts. The remedy of a person who considers that, for example, a security interest has been wrongly registered against its asset when there was no valid security agreement is to apply to a court of competent jurisdiction for an order in personam directing the person registering the security interest to remove the registration.

 Relationships with other conventions

 A chapter yet to be drafted will deal with relationships between the draft convention and existing conventions and prospective conventions, such as the 1988 Unidroit Convention on International Factoring and Convention on International Financial Leasing. This is a highly complex matter involving numerous conventions. There are some conventions which defer both to past conventions and to future ones. It only needs two such conventions in the same field to produce a total impasse! It is probable that the convention itself will deal only with the relationship with the earlier Unidroit Conventions and that relations with other conventions, and in particular those that are equipment-specific, will be left to the relevant protocol.

 Future progress

 The Unidroit draft convention has now gained considerable motive power and support. This is in no small measure due to the work of the Aviation Working Group and the larger Aircraft Protocol Group, including ICAO and IATA, co-ordinated by Mr. Wool. Progress is now being made by the working groups for space objects and railway rolling stock. In January 1999 the latest texts will be reviewed at the first meeting of governmental experts, and subject to the agreement of ICAO the aircraft protocol will proceed under the joint aegis of Unidroit and ICAO, with a continuing involvement of IATA and representation of the Aviation Working Group. The hope is to bring the finalised text, together with the aircraft protocol and any protocols then prepared, before a Diplomatic Conference by the start of the third millennium. Much work still needs to be done, but the potential benefits are immense. There seems little doubt that the Unidroit Convention on International Interests in Mobile Equipment will make a significant contribution to the future development of transnational commercial law.

* This paper is an update of the article published in Uniform Law Review, 1998-I, 52 and has been prepared for the assistance of governmental experts engaged in work on the draft Convention. [Back to text]

¹ For a description of the protocol concept, see post, p. 3.[Back to text]

² See p. 3.[Back to text]

³As will be seen, the draft convention covers not only security interests as traditionally conceived but the interests of those who are sellers under conditional sale agreements or lessors under leasing agreements. Except as otherwise indicated, the terms "security interest" and "security agreement" will be used to embrace all these types of interest and agreement and the term "debtor" to include the buyer under a conditional sale agreement and the lessee under a leasing agreement. [Back to text]

⁴ This is a necessary condition of effective disposal of an aircraft in order to enable the buyer to register it in the country where it is to be operated or (dependent on the local law) owned. [Back to text]

⁵ Cf. Jeffrey WOOL, "Rethinking the Notion of Uniformity in the Drafting of International Commercial Law: a Preliminary Proposal for the Development of a Policy-based Unification Model", Uniform Law Review, 1997-1, 46. [Back to text]

⁶ The difference in the formulation of paragraph (a) and paragraphs (b) and (c) is necessitated by the fact that the interest of the seller or lessor does not derive from the conditional sale or leasing agreement but exists prior to and independently of that agreement. For the same reason phrases such as "vested in a person as conditional seller under a conditional sale agreement" and "vested in a person as lessor under a leasing agreement" were replaced by the present text. [Back to text]

⁷ See post, p. 8. [Back to text]

⁸ See Art. 4. This is likely to require some revision.[Back to text]

⁹ Article V. Contrast Art. III(2) of the aircraft protocol, which would disapply this Article. [Back to text]

¹⁰ These relate to default remedies and are designed to preserve requirements for the observance of reasonable behaviour by the secured party. They are to be found in arts. 9(2) - (6), 10(2) and (3), 13(1) and 14. [Back to text]

¹¹Art. 9(2). A remedy is deemed to be exercised in a commercially reasonable manner where exercised in conformity with a provision of the security agreement except where the court determines that such a provision is manifestly unreasonable. This provision is modified in the aircraft protocol (Art. IX(3)(b)).[Back to text]

¹² Art. 13. [Back to text]

¹³ See below. [Back to text]

¹⁴ The aircraft protocol includes an alternative provision by which an intergovernmental body would both operate and regulate the registry.[Back to text]

¹⁵ Art. 20(3). [Back to text]

¹⁶ As opposed to a buyer under a conditional sale agreement. [Back to text]

¹⁷ The aircraft equipment protocol provides for the extension of the convention to cover outright transfers of aircraft equipment, and as a corollary Article XIV(1) of the protocol disapplies this special provision, which then becomes unnecessary, since the outright buyer will be able to register its interest.[Back to text]

¹⁸ Art. 1. [Back to text]