The Protocol to the Convention on International Interests in Mobile Equipment on Matters specific to Mining, Agricultural and Construction Equipment (the "MAC Protocol") was adopted on November 22, 2019, in Pretoria, South Africa by all signatory nations (the "Contracting States").1
The MAC Protocol is an extension of the Convention on International Interests in Mobile Equipment (the "Cape Town Convention") and both instruments must be applied together.2 All declarations made by a Contracting State under the Cape Town Convention are deemed to be subject to the MAC Protocol.3 However, a Contracting State may choose, using its instrument of accession/ratification, to modify existing declarations under the Cape Town Convention specifically for their application under the MAC Protocol.4
The Cape Town Convention applies to categories of equipment to which a Protocol applies.5 In order for a new Protocol to be established under the Cape Town Convention, three elements of an equipment category must be demonstrated. The equipment category must be: (i) high-value, (ii) mobile and (iii) uniquely identifiable.6 These criteria are met under the specific Harmonized Commodity Description and Coding System ("HS") as identified equipment listed in the respective MAC Protocol Annexes.7 Therefore, the scope of the MAC Protocol is limited to the listed HS-coded equipment.8
A Contracting State can limit the application of the MAC Protocol to specific Annexes, but it cannot select specific HS coded equipment within an Annex.9 Equipment covered under an applicable MAC Protocol Annex will fall within the scope of the MAC Protocol, regardless of the use made of the equipment under another MAC Protocol Annex or of any intended or actual use of the equipment.10
The MAC Protocol proposes several declarations alternatives to Contracting States related to critical aspects of equipment financing, including inventory financing and association with immovable/real property. For instance, the MAC Protocol allows Contracting States to decide whether they want their national legal regimes to apply for inventory financing or to allow the MAC Protocol apply to such financing.11 In the event that a declaration is made by a Contracting State to apply the inventory financing regime, the applicable law cannot contradict the elected MAC Protocol regime. Also, Contracting States must choose between different regime alternatives regarding the association of equipment with immovable/real property to better reflect their national legal regime. The different alternatives proposed to the Contracting States under the MAC Protocol are based on the protocols adopted under the Cape Town Convention.12 As a matter of policy, UNIDROIT recommends that Contracting States be consistent with the previous protocols when choosing an alternative.13
Concerning the remedies on insolvency, if a Contracting State makes a declaration to apply the MAC Protocol insolvency regime, a creditor-friendly approach is adopted allowing for expedited remedies for parties holding international interests.14 In contrast, the Aircraft Protocol provides for two alternative proposals while the Railway Protocol offers three alternative proposals.15
All MAC-Protocol equipment interest constituted as an international interest16 may be registered at the International Registry17 for further enforceability.18 A supervising authority will be responsible for establishing an International Registry for MAC equipment.19. A registration of an international interest made under the MAC Protocol will supersede domestic interests.20
Gowling WLG has been registered as a Professional User Entity at the International Registry21 since the Canadian government ratified the Cape Town Convention in 2012. We have the expertise to register an entity as a Transacting User Entity ("TUE") at the International Registry and to act as its administrator in order to register and consent to International Interests for TUEs.
The MAC Protocol will only take effect in Canada after it is ratified, and Canada has not yet confirmed whether it will do so. In light of the above, creditors involved in mining, agricultural and construction transactions for which the MAC Protocol will be applicable should be aware of new legal obligations and possibilities that could affect their practice.
1. Gowling WLG (Canada) LLP published an article on the announcement of the forthcoming MAC Protocol diplomatic conference. For further details, the article can be read at: https://gowlingwlg.com/en/insights-resources/articles/2019/mac-protocol-mining-agricultural-construction/
2. MAC Protocol Legal Analysis, par. 9; In the event of any inconsistency, the MAC Protocol shall prevail over the Cape Town Convention (6(2) Cape Town Convention).
3. Article XXIX MAC Protocol.
4. Article XXX MAC Protocol.
5. Article 49(1) Cape Town Convention.
6. Article 51(1) Cape Town Convention.
7. MAC Protocol Legal Analysis, par. 27-37.
8. Article I, II and XXXV MAC Protocol ; Annex 1 (Mining Equipment), Annex 2 (Agricultural Equipment) and Annex 3 (Construction Equipment) MAC Protocol.
9. Article II (2) MAC Protocol.
10. Article II(1) MAC Protocol ; There are 96 HS codes listed in the MAC Protocol Annexes, several of which are listed in two or three MAC Protocol Annexes (MAC Protocol Legal Analysis, par. 41).
11. Article XII MAC Protocol; Contracting States can elect to opt out of the MAC Protocol application to inventory financing. This possibility is given in the event that Contracting States have well established national regimes inventory financing systems.
12. The Convention on International Interests in Mobile Equipment on Matters Specific to Aircraft Equipment (the "Aircraft Protocol"), the Convention on International Interests in Mobile Equipment on Matters Specific to Space Assets (the "Space Protocol") and the Convention on International Interest in Mobile Equipment on Matters Specific to Railway Rolling Stock (the "Railway Protocol") were all adopted as protocols under the Cape Town Convention.
13. MAC Protocol Legal Analysis, par. 111.
14. Article X MAC Protocol ;
15. Alternative A is considered creditor-friendly, Alternative B is considered debtor-friendly and Alternative C is a European comprise found is Continental Europe legal regimes. Alternative A and B are proposed under the Aircraft Protocol and all three alternatives are proposed under the Railway Protocol.
16. Article 7 Cape Town Convention.
17. Article 16 and 17 Cape Town Convention.
18. Article 20 Cape Town Convention.
19. Id.; Resolution 2 Relating to the Establishment of the Supervisory Authority of the International Registry for Mining, Agricultural and Construction Equipment convened to invite the International Finance Corporation to act as a supervising authority responsible for establishing an International Registry.
20. Article 29 Cape Town Convention.
21. International Registry for Mobile Objects.
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