The Convention on International Interests in Mobile Equipment concluded in Cape Town on 16 November 2001. In the same period, the Protocol on Matters Specific to Aircraft Equipment concluded. The Convention and the Protocol, has been adopted under the joint auspices of ICAO and UNIDROIT.
Four protocols to the convention are specific to four types of movable equipment:
- Aircraft Equipment (aircraft and aircraft engines; signed in 2001)
- Railway rolling stock (signed in 2007)
- Space assets (signed in 2012)
- Mining, Agricultural and Construction Equipment(signed in 2019).
The aircraft Protocol entered into force in 2006, and the railway rolling stock Protocol entered into force in 2024. The others are not yet in effect.
The primary aim of the Convention and the Protocol is to resolve the problem of obtaining certain and opposable rights to high-value aviation assets. These are airframes, aircraft engines and helicopters which, by their nature, have no fixed location. This problem arises primarily because legal systems have different approaches to securities, title retention agreements and lease agreements. Consequently, it creates uncertainty for lending institutions regarding the efficacy of their rights. This hampers the provision of financing for such aviation assets and increases the borrowing cost.
Advantages of the Convention and the Protocol
Predictability & enforceability. By creating an international interest recognized in all of the Contracting States and establishing an international electronic interest registration system, the Convention and Protocol improve predictability with respect to the opposability of the securities and the interest held by sellers of aviation assets. Indeed, it is estimated, based on World Bank data, that the mean worldwide contract enforcement delay is 10 months.
Cost savings. The Convention and Protocol are intended to reduce risks for creditors, and consequently, the borrowing costs to debtors, through the resulting improved legal certainty. This promotes the granting of credit for the acquisition of more modern and thus more fuel-efficient aircraft. The airlines of States that adopt the Convention and the Protocol may receive a ten percent (10%) discount on export credit premiums.
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