Beyond Conflict of Interest: Lessons from the Cape Town Convention

Abstract

This paper focuses on several unique devices of the Cape Town Convention 2001. The Convention aims to establish a stable international legal framework for the protection of secured creditors in case of a debtor's default in relation to asset-based financing and leasing of mobile equipment, that is essential to facilitate aircraft financing in an efficient manner. In the drafting process of the Convention, the International Institute for the Unification of Private Law (UNIDROIT), an intergovernmental organization that took charge of drafting the Convention, was on the horns of a dilemma as to what the prospective Convention should be. In order to realize cost-effective asset-based aircraft financing, it is indispensable to establish an international legal order that excludes the discretion of state authorities upon airline's default, and thereby to ensure the smooth enforcement of security interest on aircrafts even in countries fraught with political risk. However, pursuing this commercial ideal excessively may lead to a situation where such a convention is not acceptable to numerous countries. The reason for this is that institutional differences in the legal field are so wide among jurisdictions and some countries may hesitate to ratify that convention. In order to resolve this dilemma, various unique devices were incorporated into the Convention.