The case for a new Protocol to the Cape Town Convention covering security over ships

Abstract

The Cape Town Convention on International Interests in Mobile Equipment is one of the most successful international conventions in the field of private law. The harmonisation and modernisation of the regime for secured transactions concerning the classes of mobile assets of high value covered by the Convention and the Protocols thereto confers substantial economic advantages for market participants in the Contracting States, especially through a stronger and more reliable position for the secured creditor which in turn leads to an increase in the availability of financing and to a reduction of its costs. This article argues that there is a clear case for extending this regime for secured transactions to ships through the preparation of a new Protocol to the Cape Town Convention covering security over ships. The business of shipping finance is in crisis and the extension of the Cape Town Convention system would be a suitable solution to many of the major legal obstacles currently encountered in the shipping finance market in cross-border transactions, especially through the reduction of the risk of non-recognition of ship mortgages or hypothecations under a foreign law of the flag or through a more efficient harmonised system of registration and priorities. Previous attempts at legal harmonisation in this field of law have not been successful: the Cape Town Convention system, however, with its core features of an international proprietary interest and a system of registration in a single uniform international register can be expected to find more support, also by avoiding the highly contentious issue of maritime liens, i.e. non-consensual security over ships.