Academic journal article Law and Contemporary Problems

Asset Identification under the Cape Town Convention and Protocols

Academic journal article Law and Contemporary Problems

Asset Identification under the Cape Town Convention and Protocols

Article excerpt

I

INTRODUCTION

Secured transactions law has attracted huge interest, both domestically and internationally, over the past few decades. While much attention has been devoted at the national level to the modernization of laws governing security interests, international and European organizations have invested great effort in promoting harmonization at the international level. For example, this harmonization has been accomplished on an international level through the UNCITRAL Model Law on Secured Transactions and the UNIDROIT Convention on International Interests in Mobile Equipment and its associated Protocols, and, at a regional level, through the Model Law on Secured Transactions produced many years ago by the European Bank for Reconstruction and Development for the assistance of legislators in economies in transition. Secured transactions law has also generated much law and economics literature as well as attention by national and international regulators concerned with the capital adequacy of banks. This special issue is most timely.

This article is devoted to a small, but crucially important aspect of this vast subject: asset identification under the 2001 Convention on International Interests in Mobile Equipment (the Cape Town Convention) and its associated Protocols. (1) The Convention provides for the creation, perfection, and priority of international interests in high-value mobile equipment. (2) This equipment requires huge financing, but there have thus far been no uniform, substantive laws at the international level to protect the interests of secured creditors and those supplying mobile equipment under title reservation and leasing agreements. The Convention is proving to be one of the most successful private commercial law conventions ever. It has already attracted seventy-four ratifications, while the Aircraft Protocol has secured sixty-eight ratifications; both have been ratified by what is now the European Union. (3) Further ratifications by other countries are in train.

II

SOME GENERAL THOUGHTS ON IDENTIFICATION CRITERIA

The requirements to identify a tangible movable, in order to establish a proprietary right in it, depend on the purpose for seeking the identification. For some purposes, it suffices that the asset falls within a category described in a contract without being uniquely identified--in other words, that it is identified as falling within the scope of the contract. So, a contract of sale may relate to goods forming part of an identified bulk, and this may suffice to give the buyer some form of property interest in the goods. (4) In a system allowing for the creation of inchoate rights in after-acquired property a security interest may be given over all of a dealer's present and after-acquired motor vehicle stock, taking effect on each new acquisition as from the time of the security agreement. (5) It is not necessary to identify any particular motor vehicle in order for the creditor to acquire a proprietary interest. As between the parties to the security agreement, it suffices that an existing motor vehicle falls within the description and that after-acquired property of the dealer consists of, or includes, motor vehicle stock. Even third parties will be bound if public notice, typically in the form of registration in a public register, is given in accordance with legal requirements. Whether this necessitates unique identification depends on the nature of the registration system.

Many legal systems provide for the registration of security interests over tangible movables in a publicly accessible register. There are two main registry modes: registration against the debtor and registration against the asset. There are advantages and disadvantages of each. Debtor-based registration, which is by far the most common, allows for the perfection of a security interest not only against an individual asset, but against assets falling within a given description, or even against all of the debtor's assets, including after-acquired assets. …

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