MINING, AGRICULTURE AND CONSTRUCTION EQUIPMENT PROTOCOL: MORE MOVABLE ASSETS FALLING WITHIN THE CAPE TOWN REGIME
On 22 November 2019, a new Protocol to the Convention on International Interests in Mobile Equipment (Cape Town Convention) was adopted in South Africa. The Protocol on Matters Specific to Mining, Agriculture and Construction Equipment (MAC Protocol) is the fourth protocol to the Convention and will establish an international legal framework for the financing and security of mining, agriculture and construction equipment. The Protocol was immediately signed by 4 states[1] on adoption and it requires one further ratification before it enters into force.
The Cape Town Convention provides the basic legal rules underpinning the international regime for creation, enforcement, registration and priority of security interests for movable assets. The Protocols – which cover aircraft, rail, space and now mining and agricultural equipment – tailor those rules to suit the specific industry to which they apply.
The MAC Protocol will establish a system for parties to create international interests or prospective international interests in MAC equipment with cross-border effectiveness. Following a similar model to the existing protocols, the MAC Protocol will establish 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. Standard remedies for an event of default are also available to the creditor.
There are high expectations for the MAC Protocol, with UNIDROIT estimating that the Protocol will have a USD 30 billion year impact on global GDP. The exact impact it will have remains to be seen as does how the protocol will interact with the Personal Property Securities Act 2009 (Cth) (PPSA) which currently regulates MAC equipment in Australia. As with the Aircraft Protocol, if Australia adopts the MAC protocol it will likely prevail over the PPSA in the event of any inconsistency and such adoption will be subject to optional declarations concerning relief pending final determination of a claim, extra-judicial remedies and remedies available in insolvency.
We will be keeping a watch on any Australian adoption and if you think this protocol may affect your activities, please do not hesitate to contact our office on 02 9230 9400 or contact@nortonwhite.com.
[1] Being the Republic of Congo, the Republic of Gambia, the Republic of Paraguay and the Federal Republic of Nigeria.