16. The Cape Town Convention and Italian Law on Secured Transactions

Regarding international contracts see the General Report by Michael Joachim Bonell in Bonell, MJ (ed), A New Approach in International Commercial Contracts. The UNIDROIT Principles of International Commercial Contracts (Kluwer Law Int, 1999); in the field of asset-based financing see the General Report by Herbert Kronke: Kronke, H, Financial Leasing and its Unification by Unidroit, (2011) Unif L Rev 23.

2001 Convention on International Interests in Mobile Equipment, available at http://​www.​unidroit.​org/​instruments/​securityinterest​s/​cape-town-convention. From now on “Cape Town Convention” or “Convention”.

2001 Protocol to the Convention on International Interests in Mobile Equipment on Matters Specific to Aircraft Equipment, available at http://​www.​unidroit.​org/​instruments/​securityinterest​s/​aircraft-protocol. From now on “Aircraft Protocol”.

2007 Luxembourg (Rail) Protocol to the Convention on International Interests in Mobile Equipment on Matters Specific to Railway Rolling Stock, available at http://​www.​unidroit.​org/​instruments/​securityinterest​s/​rail-protocol. From now on: “Rail Protocol”.

2012 Protocol to the Convention on International Interests in Mobile Equipment on Matters Specific to Space Assets, at http://​www.​unidroit.​org/​instruments/​securityinterest​s/​space-protocol. From now on: “Space Protocol”.

Ranging from instrument intending to become legally binding such as Cape Town Convention and its Protocols, to soft law products such as the 2010 Legislative Guide on Secured Transactions (and its 2012 Supplement on Electronic Registries) by the UN Commission on International Trade Law UNCITRAL (a legislative guide discussing policy issues and containing recommendations with the aim of paving the way to domestic law reforms), or the recently approved UNCITRAL Model Law. Other instruments at global level have specifically addressed security rights in the capital markets: 2006 Hague Convention on the Law Applicable to Certain Rights in Respect of Securities Held with an Intermediary; 2009 Unidroit (Geneva) Convention on Substantive Rules for Intermediated Securities. See Goode R, Kronke H, McKendrick E, Transnational Commercial Law. Text, Cases and Materials (2nd ed., OUP, 2015), 432; 453.

In the relatively short time since the July 2014 IACL Congress, twelve additional States have ratified or otherwise accessed to the Convention, for a total of 72 States; the contracting States to the Aircraft Protocol are 65, the Aircraft Protocol being the only one that entered into force so far, triggering the effects of the Convention (data checked up to 3 October 2016). This is a staggering number in view of the recent adoption of the two instruments and is steadily increasing every year. The European Community/European Union has also approved the Convention and the Aircraft Protocol, and end of 2014 the Rail Protocol, in its capacity as a Regional Economic Integration Organisation (REIO. Most recently, the Rail Protocol (already ratified by Luxemburg and signed by four other States including Italy) has been signed by the United Kingdom with a view towards ratification.

See for all: Drobnig U, Security Rights in Movables, in Hartkamp, AS, Hesselink, MW et al. (eds.) Towards a European Civil Code (4th ed., Wolters Kluwer, 2010), Chapter 43, 1025; Kieninger, E-M (ed.) Security Rights in Movable Property in European Private Law (CUP, 2009); Beale H, Bridge M, Gullifer L, Lomnika E, The Law of Security and Title-Based Financing, (2nd ed., OUP, 2012).

See Cuming, RCC, International Regulation of Aspects of Security Interests in Mobile Equipment, (1991) Unif L Rev 75; Goode, R, Transcending the Boundaries of Earth and Space: the Preliminary Draft Unidroit Convention on International Interests in Mobile Equipment, (1998) Unif L Rev 52.

Security rights over movables and immovables were the topic of an earlier Italian national report to the International Academy: see Bussani, M, Le présent et l’avenir des sûretés réelles, in Rapports nationaux italien/Italian National Reports, XVI International Congress of Comparative Law, Brisbane 2002 (Milano, Giuffrè, 2002) 245.

See among others (in English and French): Tucci, G, Towards a Transnational Commercial Law for Secured Transactions: the Preliminary Draft UNIDROIT Convention and Italian Law, (1999) Unif L Rev 371; Ferrarini, G, Changes to personal property security law in Italy: a comparative and functional approach, in Cranston, R (ed.), Making Commercial Law. Essays in Honour of R.M. Goode (OUP, 1997) 477; Bussani, M, Rapport italien, in Les garanties de financement, Travaux de l’Association Henri Capitant (LGDJ, Paris, 1998) Vol. XLVII, 213.; Veneziano, A, Italy, in Sigman, HC and Kieninger, E-M (eds), Cross-Border Security over Tangibles (Sellier, 2007), 159; Italian Report by Graziadei, M and Candian, Alb, in Kieninger, E-M (ed.) (above, fn 10).

A first attempt was made through one provision contained in a proposal to delegate to the Government the legislative power to introduce reforms towards, inter alia, the reoganisation of secured transactions law, presented to the Parliament on 12.2.2014 but never approved. This provision recently resurfaced in another legislative proposal aimed at reforming insolvency law and approved by the Council of Ministers on 12.2.2016 not yet approved by Parliament; Finally, a parallel legislative initiative was approved when this book was in its final stages of editing and will be only mentioned here: a new registered non-possessory pledge for enterprises was introduced by way of Governmental Decree (3 May 2016, No. 59). The new pledge is not yet operational since it awaits secondary legislation on the setting up of the centralised, fully electronic registry. It excludes, however, from its scope of application “registered mobile assets” such as aircraft.

Art. 2740 (1) Italian Civil Code.

On the pledge in Italian law and its recent developments see among others Gabrielli, E, I diritti reali, Vol. 5, Il pegno, in Trattato di diritto civile directed by R Sacco (Torino, UTET, 2005); Mastropaolo, F, De Vecchis, P and Mastropaolo, EM, in Mastropaolo, F (ed.), I contratti di garanzia, 1, Trattato dei contratti directed by P Rescigno and E Gabrielli (Torino, UTET, 2006), 1192; Fiorentini, F, Il pegno, in Gambaro, A and Morello, U (eds), Trattato dei diritti reali, Vol. V, Diritti reali di garanzia (Milano, Giuffrè, 2014) 1 (with a comparative introduction).

Cf. Art. 565 Italian Maritime Code (mortgage over ships); Art. 1027 Italian Maritime Code (mortgage over aircrafts); r.d.l. 15.3.1927, No. 436, implemented by Law 19.2.1928, No. 510, and Art. 2810 Italian Civil Code (consensual lien (that is, a mortgage) over motor-vehicles). See Lefebvre D’Ovidio, A, Pescatore, G, Tullio, L, Manuale di diritto della navigazione (13th ed., Milano, Giuffrè, 2013) 723 et seq.; Chianale, A, L’ipoteca, Trattato di diritto civile diretto da R. Sacco, I diritti reali, Vol. 6 (2nd ed., Torino, UTET, 2010) 142, 189.

See Deschamps, M, The perfection and priority rules of the Cape Town Convention and the Aircraft Protocol- A comparative law analysis, (2013) Cape Town Convention Journal, 51, at 53, available at http://​www.​ingentaconnect.​com/​content/​hart/​ctcj/​2013/​00002013/​00000001/​art00004.

Arts 8 and 9 Conv.; Art. IX Aircraft Prot. See also below, para. 4.3.

Art. 10 Conv. The Aircraft Protocol extends the obligation to exercise any remedy in a commercially reasonable manner to sellers and lessors. See below, para. 4.3.

Goode, R, Convention on International Interests in Mobile Equipment and Protocol Thereto on Matters Specific to Aircraft Equipment, Official Commentary (3rd ed., Rome, Unidroit, 2013) 45.

See above, fn. 14.

This requirement was later simplified by allowing also a mere ‘registration’ of a written document by other competent authorities, cf. Law No. 248/2006.

The charge must be create by a written document ‘exactly describing’ (1) the collateral; (2) names of lender and debtor or third party provider of security; (3) amount of the loan and its terms; (4) sum secured.

Veneziano, A, Italy (above fn. 14), 172.

With the exception of assets that are registered in public registries.

For this comment and a review of what could be the abstractly possible solutions as to the relative priorities see Veneziano, A, Italy (above, fn. 14), 173.

Arts 8–15 Conv. And IX–XIII Aircraft Prot. On the following see Goode, R, Official Commentary (above, fn. 25), 51; Wool, J, Treaty Design, Implementation and Compliance Benchmarking Economic Benefit - a Framework as Applied to the Cape Town Convention,(2012) Unif L Rev633.

According to the Aircraft Protocol, furthermore, all creditors may ask for deregistration of the aircraft and export or physical transfer of an aircraft object (Art. IX Aircraft Prot.).

A remedy is deemed to be exercised in a commercially reasonable manner if exercised in conformity with the provisions of the agreement, except where such provision is manifestly unreasonable (Art. IX (3) Aircraft Prot.).

Art. 13 Conv.; Art. X Aircraft Prot.; see also Art. VIII Rail Prot.; Art. XX Space Prot.

The creditor should adduce evidence of default; the debtor has to have agreed to the relief at any time: Art.13 (1) Conv.

Art. 13 lists the following orders: (a) preservation of the object and its value; possession, control or custody of the object; (c) immobilisation of the object; (d) lease or, except when covered by (a) to (c), management of the object and the income therefrom. The Aircraft Protocol adds the possibility of asking the court to sell the collateral and apply its proceeds to the creditor’s satisfaction.

Art. X (2) and (5) Aircraft Prot.

Art. 1063 Maritime Code. D’Ovidio Lefevbre, A, Pescatore, G and Tullio, L (above, fn. 21), 764.

Arts 1525 and 1526 Italian Civil Code.

The Convention does not expressly refer to rescue or similar procedures, which are not autonomously defined in the Convention, but mentions “rules of procedure relating to the enforcement of rights to property which is under the control or supervision of the insolvency administrator”. The Official Commentary, however, refers to an automatic stay on the enforcement of proprietary rights after commencement and illustrates it with a case concerning reorganization. See Goode, R, (2013) Official Commentary, cit. above, fn. 25, 344.

Alternative A, see Art. XI Air Prot.; Art. IX Rail Prot.; Art. XXI Space Prot.

Alternative B

The Rail and Space Protocols introduced a third option (Alternative C), which is aimed at striking a balance between the other two alternatives, for more details see Goode, R, Convention on International Interests in Mobile Equipment and Luxembourg Protocol Thereto on Matters Specific to Railway Rolling Stock. Official Commentary (2nd edn., Unidroit, Rome, 2014), 421.

Art. 1023 Italian Maritime Code.

Concordato fallimentare (Art. 124 et seq. Royal Decree No. 267/1942 on insolvency law); concordato preventivo (Art. 160 et seq. ins.law).

From a public international law perspective, Italy is a party to both the 1933 Rome Convention on the precautionary arrest of aircrafts and the 1948 Geneva Convention on the recognition of rights in aircrafts. According to Arts. XXIV (1) and XXIII of the Aircraft Protocol, the Cape Town Convention prevails over both instruments. A derogation to Art. XXIV (1) would be possible by declaration of the State ratifying the Protocol, but does not appear to be advisable in the light of the limited international recognition of the Rome Convention and its obsolete regulation as regards modern developments of air services and the present needs of aircraft financing.