1.         The global market for mining, agricultural and construction (“MAC”) equipment is hugely important, accounting for approximately $200 billion annually. Yet, the financing of MAC equipment remains challenging in many parts of the world. Financial institutions are unwilling to provide credit to companies in the MAC sectors to purchase or lease equipment, due to uncertainty created by domestic laws, the possible movement of assets across borders, or challenges in enforcing their rights upon default or insolvency. This uncertainty limits the availability of secured finance for MAC equipment across the globe.

2.         Credit availability in the MAC sectors remains constrained in many regions. Credit may cover as little as 20% of product value in developing country markets. In certain markets, borrowers have no choice but to self-finance entire sales. Companies also face challenges in securing credit using MAC equipment they already own as collateral. Consequently, many entities involved in the MAC sectors cannot access credit on reasonable terms and thus lack the ability to acquire the equipment needed to improve productivity and performance.

3.        To address these problems, a fourth Protocol to the Convention on International Interests in Mobile Equipment has been developed to provide a clear international framework for asset-based financing of MAC equipment (the “MAC Protocol”). This Protocol will allow financiers to provide credit in countries where they are currently unable to do so. In other countries, the MAC Protocol will allow financiers to provide credit at a lower cost. Increasing the availability and lowering the cost of credit will give entities in the MAC sectors better access high value, technologically advanced equipment.



4.        The Convention on International Interests in Mobile Equipment, adopted in 2001 in Cape Town, South Africa (the “Cape Town Convention”) is considered to be one of the most economically significant international commercial law treaties ever adopted. The overarching goal of the Convention is to facilitate the efficient financing and leasing of mobile equipment by reducing risks for financiers. The Convention establishes uniform international standards for the creation, enforcement, registration and priority of security interests in certain categories of high-value, uniquely identifiable, and mobile equipment. The Convention allows for “international interests” to be created in relation to security agreements, title reservation agreements and leasing agreements where the debtor is located in a State that has adopted the Convention.

5.       The Convention is applied to specific categories of mobile equipment through Protocols. The Aircraft Protocol, adopted alongside the Convention in 2001, is the most widely ratified Protocol and has enjoyed great success in lowering the cost of aircraft financing worldwide. The Convention was subsequently extended by the Rail Protocol in 2007, and the Space Protocol in 2012. The MAC Protocol is the fourth Protocol to the Cape Town Convention.

6.        The Cape Town Convention has already attracted 79 Contracting States and has proven to be one of the world’s most ambitious and widely adopted international commercial law treaties. The Convention has experienced tremendous success in increasing the availability of finance in the aviation sector through its 2001 Aircraft Protocol (which has 76 Contracting States). By 2019, the International Registry created pursuant to the Aircraft Protocol contained over one million registrations in relation to aircraft objects.



A.        Development

7.         Initiated in 2006, the MAC Protocol has been developed in close consultation with legal experts, governments and the private sector. In 2014, a Study Group comprised of leading international experts in secured transactions law prepared a first draft of the MAC Protocol. At the same time, the MAC Working Group was also formed to provide private sector input for the project.1 Over two sessions in 2017, the substance and operation of the treaty were further negotiated by a Committee of Governmental Experts comprising 126 representatives from 51 countries. The Diplomatic Conference in November 2019 was the final step in the negotiation process.


B.        Equipment covered by the instrument

8.        The MAC Protocol is designed to establish an international legal framework for the financing of mining, agriculture and construction equipment. In order to limit its scope to commercially used equipment, the MAC Protocol applies only to certain specified categories of MAC equipment, as defined using six digit Harmonised System codes (“HS codes”). Administered by the World Customs Organization, the HS is used globally to classify goods for the purposes of customs tariffs, encompassing around 98% of international trade. The HS codes within the scope of the MAC Protocol tend to cover high-value items, typically worth approximately $100,000.2 The Protocol categorises HS codes into three Annexes: Annex 1 for HS codes covering mining equipment, Annex 2 for HS codes covering agricultural equipment, and Annex 3 for HS codes covering construction equipment. A total of 56 individual HS codes are listed in the MAC Protocol Annexes, which account for over $100 billion worth of MAC equipment traded globally each year.


C.        Basic legal rules

9.      The Protocol establishes a system for parties to create international interests or prospective international interests (during loan negotiations) in MAC equipment that enjoy cross border effectiveness. The Protocol establishes an online international Registry for the registration of these international interests. A registered international interest attains priority over existing security interests under domestic law, subsequently registered international interests and unregistered interests.

10.        The Protocol also offers a set of remedies that the creditor can exercise in the event of a default by the debtor. It allows Contracting States to make certain declarations enabling creditors to obtain relief pending final determination of a claim, and exercise extra-judicial remedies in certain circumstances. It also allows Contracting States to make declarations in relation to (i) the remedies available in insolvency, (ii) whether the Protocol applies to inventory financing and (iii) the legal relationship between MAC equipment and immovable property.



1     The Working Group comprises of manufacturers, financiers, legal firms and representative associations working in the mining, agricultural and construction sectors. Further information on the MAC Working Group is available at https://www.macwg.org/.

2     There is no minimum value threshold for the application of the MAC Protocol. In certain instances, lower value equipment in the range of $10,000 – $20,000 may fall under an HS code within the scope of the MAC Protocol, however such cases are the exception rather than the norm.