 So I'd now like to introduce our speaker. It's quite hard to know where to start. Professor Sir Roy Goode is one of the most eminent commercial law professors in the world. He was the proud of Professor of Credit and Commercial Law at Queen Mary University of London where he was the founder and first director of the Centre for Commercial Law Studies and he then became Professor of Commercial Law at the University of Oxford and he's still an emeritus professor there. I'm sure many of you will have come across his textbooks. Any of you who are studying now or have studied commercial law will probably have used his or be using his classic textbook on commercial law and many of you will know his books for example on corporate insolvency and the book of legal problems with credit and security such which I now edit but he's written about many many aspects of commercial law both as regards English law and international law and including transnational commercial law and that is the subject of today's talk. Now transnational commercial law takes many forms. The strongest form if you like is a treaty where a uniform law is set out in a convention and can be ratified and implemented by states and there are very few private law conventions that could be said to be wildly successful. Maybe the Vienna Convention on the International Sale of Goods which has 93 ratifications and the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards that's got 166 ratifications but it has been around a very long time and those two could be said to be two of the leading ones particularly with the third being the Cape Town Convention which currently has 82 ratifications. So the success of the Cape Town Convention can be attributed largely to its design and to its text and one of the chief architects of this was Professor Good who was rapporteur for all the meetings and the conference leaned towards adoption and was chair of the drafting committee and when the convention was adopted the diplomatic conference passed a resolution but there should be an official commentary on the convention and its protocols to aid in the use and interpretation of the treaty and Professor Good was mandated to write this official commentary. The official commentary for the convention and the aircraft protocol is now in its fourth edition and Professor Good was also the rapporteur for the recent diplomatic conference which adopted the Pretoria Protocol and is now in the process, he is now in the process of finalizing the official commentary for that protocol. Now you'll notice I haven't said anything about the subject matter of the Cape Town Convention in its protocols because Professor Good is going to tell you about that if you're not familiar with it but I just wanted to let you know how fortunate we are to hear from probably the person who's been the most instrumental in formulating these instruments and in guiding their use in practice and I should also add that the importance of these instruments is not just measured by the number of ratifications. The Cape Town Convention and the aircraft protocol which are enforced they've enabled finance for aircraft to be obtained at favorable rates for very many years and it's very much to be hoped that the Pretoria Protocol will do the same for equipment that is of vital importance particularly in developing economies all over the world. So this is law designed to bring economic benefit both from its content and from the uniformity that comes from its form as a treaty. So by now I hope you've downloaded all the relevant documents and I will hand over to Professor Sir Roy Good to tell us about pits, plows and plants. Thank you. Thank you very much Louise. Can everybody hear me all right? Yes. I think it's fine. I think it's fine okay. So first of all my thanks to Louise for her kind introduction and secondly a very good afternoon to you all. I'm only sorry that I'm not able to be with you in Cambridge for those of you who are in Cambridge but this is a case of force majeure. My talk is what you said is on the Cape Town Convention on International Interest in Mobile Equipment and the Protocol on Mining, Agricultural and Construction Equipment. Now I think you should have had some notes for this lecture. Let me tell you I do not intend to go through these which would be very tedious. They're an aid memoir. Having said that I am an expert exponent of what Hilare Bellock once described in an essay as the art of boring people. So I'm going to try and exempt you from this and I will speak for 35 minutes so as to allow plenty of time for questions. This is an initiative of Unidire, the International Institute for the Unification of Private Law, working on the Convention and for aircraft protocol with the International Civil Aviation Organization. Unidire is an international intergovernmental organization which conducts studies into law affecting a number of jurisdictions to see whether there are difficulties in the operation of these laws which would make it desirable to try and harmonize them through a convention and model law or something of that kind. Like most institutions involved in this not everything has been successful but the Cape Town Convention and aircraft protocol are 82 ratifications of the Convention and 79 of protocol together in each case with what is now the European Union. Let me try and give you an illustration of why this is necessary and it is because if I can take a case of aircraft financing I'm not going to talk much about aircraft but this illustrates it very well. You're financing an aircraft say under English law, aircraft register in England, you take a security interest, you register everything is fine in England but then suppose that this aircraft can fly all over the place it may land in a country whose legal system is less developed whose laws are very debtor friendly and make it difficult to enforce. You don't quite know to what extent your interests will be recognized and also you have no means of protecting your priority as against other grantees of a security interest because each country will apply its own law where the aircraft is situated to determine priority issues. So this is a great problem for creditors when tending creditors because they have to take an assessment of the risk involved the more uncertainty the higher the risk and this will inhibit lending particularly in developing countries and even if the loan is made it may be a lot more expensive than it would otherwise be the case. So this is what the Cape Town Convention protocols are about. They're about trying to laying down uniform substantive law rules to regulate the creation and the perfection by registration and the priorities of international interests in mobile equipment and it's primarily concerned with equipment of a kind that is liable to be moving across national borders which is why you get the problem of different legal systems and it is concerned with high value equipment and equipment that is uniquely identifiable. The reason for the uniquely identifiable being that the convention having provided for the constitution of an international interest which I'll explain in a moment also provides basic default remedies and an international registry to register your interest. The international registry is asset based not database so people who want to know if there's an interest have to search the register and have to they do so against the asset which means that for registration purposes every item equipment in which you take an international interest has to be uniquely identifiable typically by serial number supported by supplementary information that's the way the thing works. And so the convention lays down these rules supported by protocol for creation, perfection, priority of international interest and they are and also safeguards for the credibility against the event of the debtors and so on. All that is I think quite clear what is an international interest? An international interest is basically an interest granted to a chargeee under a security agreement or held by a person who is conditional seller under a title reservation agreement or less or under leasing. Those are the three things that are covered. The convention itself covers aircraft objects, railway running store, space assets, satellites and things like that and now mining agricultural and construction equipment. Harmonization is a difficult process because people involved in it come from any number of different legal systems along with different legal families. So you have the common law, the civil law, Scandinavian legal legal system, legal family I should say and so on. So how does one go about it? One way would be to go for the lowest common denominator and try and find out what it is that's common to the system. It would be a rather futile exercise and that's not the way it is done. The way it is done is to identify the practical problems created by these differences in national legal systems and then to come up with legal rules which answer these problems. In other words, practical solutions, the so-called functional approach and when that happens people from a number of different legal systems find they can reach agreement on rules by passing any doctrinal differences don't really matter. For the most part, you just come up with a rule which solves the problem. This involves being very creative and meeting all sorts of apparently impenetrable obstacles. It can be a good thing because then you're forced to raise your game and come up with creative solutions. It's not so different if you're studying for doctrine and you come up with intractable problems then you have to raise your game and jump over them. Now one of the problems that's affected all these instruments is how to define the subject matter whether it's aircraft, railway or any sort of what have you in order to limit it to types of item that are of high value and uniquely identifiable. And sometimes this is difficult. Space assets for example satellites are in outer space and they may be identified possibly by a serial number but you won't be able to see them from the ground. So another solution has to be found for that. With MAC Equipment there was a really intractable problem as it seemed because we don't want to cover every shovel or spade. We want to limit this to high value. We want to limit it to equipment that has a serial number. A lot of this type of equipment does not have a serial number or else the same serial number applies to different types of equipment. So how to deal with this? Now the money agriculture with this unidirectional study group supported by an industry working group came up with a very clever solution. They said look the World Customs Organization publishes something like 5244 code classification. The code what the code does is to classify the customs purposes almost every kind of equipment you can think of. So this what we'll do is to select 56 of these codes being codes that are indicative of high value unique registration by serial number. Actually the serial number is only needed for registration. It doesn't matter when it comes to the agreement between the parties. They can agree on any any type of description that would for example be inconformative with English law. So you could take security over classes by description. You could take security over present and after acquired dealers inventory and so on. It is only for registration that this is required. Now the protocol contains three annexes inspected with the mining agriculture and construction equipment. Of course I'm only concerned with the agricultural equipment. It is owned to a contracting state to exclude the convention of protocol in relation to one or two of these. But there are codes that are common to all three and in that case if a code which has been excluded in A and B for example then is found in the third annex then the exclusion will not prevent the application of the convention. But let me just pause a moment to say that you can receive my lecture in either of two ways for which my students used to use my book on commercial law. One is you use it as an instruction. The other is that my students told me as an infallible cure for insomnia. One page and you're up. So if you feel the eyelids closing may I urge you to yield temptation and and just and just fall off and I'll give you a shout when I get to the end. The only thing I would say is that this can be a problem. The sense of on week and cross to the other side of the desk especially if you've been giving the identical lecture for 20 years and I had a colleague once who had a green you dreamt he was giving a lecture and then you woke up and discovered he was. So you can see we have our problems too. Now let me I'm only concerned myself we haven't got much time with three issues on the MAC protocol. One is the concept of immovable associated equipment because of all the categories of equipment covered by the four protocols. Mining agricultural and construction equipment are the most likely to have the prospect of becoming attached to land. Then the question is what happens? What is the effect? The second thing I want to deal with is inventory. That is to say the application of the protocol to stock which is held by a dealer for the purpose of sale or leasing that sort of thing in the ordinary course of business. And the third thing is relevance of this protocol particularly to subsistence farming, for example in places like Africa and so on. So let me take the immovable associated equipment. This is defined in Article 12K of the protocol as equipment that is so associated with immovable property that an interest in the immovable property extends to the equipment under the law of the state in which the immovable property is situated. This doesn't actually indicate any priority rule of the kind. It's purely there as definition and substantive provision will be found in Article 7 of the of the protocol. And Article 7, which I don't know you touch on briefly, is the following situation. The first is where the immovable associated equipment is located in a non-contracting state. Of course in that situation the rights of the holder of the immovable interest are not affected at all. Then there's the case of what happens if the immovable property is situated in a contracting state. That's the one who is a part of the convention and this protocol. And there there are three options a contracting state can choose alternative A, alternative B, alternative C. Alternative A deals with the case where the immovable associated equipment is severable from the immovable property. That's alternative A and what is said there is that where it is severable, I'll talk about what that means in a minute, where it is severable then the association with the immovable property does not affect the application of the convention of the protocol to the international interest which includes creation, existence, priority and so on. So the international interest is not affected in those cases where the equipment can be severed and that means it can be severed only if it's estimated value after physical disconnection of the equipment from the immovable property would be greater than the estimated cost of disconnection and of any restoration of the immovable property. So that's alternative A in other words provided it's economic to take the equipment away to touch it from the land building then your interest is not affected. So this is an economic test not a legal test. That's alternative, that's basically alternative A and there's a rebuttable presumption that if it was severable at the beginning then it's going to continue to be severable. Alternative B is definitely, this is a legal based one, it's not an economic test. It does not affect the application of any law of the state where the immovable property is situated that determines whether the international interest in the immovable property can't be created or has been lost and so on because of the attachment. So you simply apply what you're allowed to apply the law governing the immovable property. It's all quite straightforward. I hope everybody's following CFR, we shall hear soon enough anybody's got any problems with that. And then after that we have as part of alternative, that's alternative B and then there's an addition proposed by the German delegation that's accepted where the equipment has not lost its individual legal identity then in accordance with the law of the state where the immovable property is situated the holder of the interest in the immovable property only has priority of two conditions of fulfilment. One is the interest in the immovable property has been registered in accordance with requirements of domestic law. The second is the equipment became associated with the immovable property prior to the time of registration of the international interest in the equipment and the alternative C says protocol does not affect the application of any law of the state that returns where the immovable property is situated, doesn't it? So those are the things. Now the priority rules I should explain. We have convention create provides for the creation of international interest and it provides for default remedies and it provides for registration and the registration is key because the basic priority rule and all the priority rules except for assignments are in one article. We're quite proud of that one article because it's the simplicity rather subtlety and complexity registered international interest has priority over subsequently registered international interest or over an unregistered international interest whether it is registered or not. Very very strong priority rule and then we have provisions in the protocol based on those of the aircraft protocol which if applied by contracting state give the credit of very powerful enforcement remedies. In other words what they basically do is to say the death or the insolvency administrator in the event of insolvency has a waiting period as declared by contracting state within which to remedy all defaults cure and undertake to perform future obligations. If that doesn't happen within the waiting period then the predator can repossess no court can intervene to stop the repossession or to modify the death's obligations in any way at all. Very very strong remedy. The Cape Town Convention as protocols really blazed a trail in many ways they broke through all sorts of taboos. First you have this new animal the international interest created by security or under title reservation agreement or this agreement which it does not derive from national law is purely a function of the convention and then we are invading areas previously regarded as taboo because it was thought that there were two sensitive in terms of local jurisdictions so property rights always regarded as how can we get in property rights well this convention does and does so in a big way how can we get into priority rights again it does as I say in this one article then the next thing is well there are certain provisions which since contracting states may be very sensitive about they might run counter to their fundamental legal philosophy so there's an elaborate system of declarations by which you can by which a state can opt out or indeed it will not be bound unless it opts in by a declaration to a particular provision. Thirdly we got the two instrument approach and this is very interesting but the convention does not operate as regards any class of equipment until there's a protocol relating to that equipment what is unusual is the protocol controls the convention the convention can't come forced until the protocol is enforced and the protocol can override the convention this I think is pretty unique but it's a very very useful feature so we have all these trailblazing rules and they're partly I think reason why the convention in the aircraft protocol been so successful the only one currently enforced Luxembourg will likely come into force during the course of next year and space space is more difficult railway running and so that's that's how things are going now let me come back to subsistence farming and the relevance of this grounds of this protocol to subsistence farming particularly in countries like Africa well I say countries and continents the study by the food and agriculture organization 2016 said that African farm systems were the least mechanized over all continents but farming in sub Sahara they said was almost entirely subsistence farming in other words the farmers would grow enough just about enough to keep themselves and their family alive but no spare over to keep us a sort of storage for a rainy day or to sell and the main reason for this is that the farmers could not afford cost of modern farming tools they could not afford the cost of for example bull gloses tractors plows freshers all had to be done by hand and by home so the idea is that this will protocol will help to promote finance by giving credit as greater confidence greater security open up finance they will be able to buy this equipment they'll be able to farm more effectively and produce much more maybe have enough to be able to actually market the spare produce and so on there was an economic impact assessment done they said that mac equipment accounts for roughly $100 billion worth of year in world trade and that the protocol could increase stock of mac equipment by 90 billion over 10 years that's that sort of serious serious investment so that is a very brief outline the the road to success in these things is very very hard you have to be patient and you have to persevere Cape Town was pretty fast as things go took something like four and a half years on the time of the time of the convention aircraft to the kind that's coming into force but of course the lead time before that was quite long it all the things started in 1988 so it took 30 years to get to the adoption of the convention another four and a half years before it came to force the Luxembourg protocol requiring four applications up to 30 years still only has three but the fourth is imminent and space has got nowhere very far not because there's nothing wrong with it but because there's a little oligarchy which is very happy with being with its oligarchy position does not want to make it easier for other people to come into the market so now I'm sort of just about coming to the end of my time I have been very conscious of time since I've heard about Lord Denning who was presiding in Portfield over a case in which the advocate was going on and on and on advocate for one of the parties impervious to the increase increasing tapings of the judicial pencil of the judicial pencil and the increasingly increasing frowns on the judicial brow but eventually it occurred to him thick as he was that maybe he was going on a bit long so he said to Lord Denning my lord I hope I have not exceeded my time and Lord Denning looked down and he said in that Hampshire bird that I can't replicate time Mr Smith he said time you have exhausted time and trespassed on eternity I don't want to do that so I'm stopping well thank you very much Roy um one of the weird things about these webinars is that you know you have uh you have no idea you can't see people laughing you can't see people reacting but I'm sure who was laughing at your last mark from some of some of your other jokes um now I would like very much to urge people to ask questions to make comments um I I see from the attendees that I think we have some people who probably know a bit about the Cape Town Convention and for others it may be totally new and particularly I see some of the um my students in the commercial law group commercial law course for whom um security the concept of security is is quite new because we haven't tackled on to that yet I'm going to be doing the lectures for that over the next week or so uploading those so we have people for for whom this is all extremely new and I can see that it may be may be a bit confusing but I would urge you to um ask some questions you have to type them in the q and a so that I can see them and then I can ask you to to to speak to them so please if you could think about some questions and do that because this is a great opportunity for you to ask um at the moment we don't have any questions so while you're thinking of them um maybe Roy you did say that you would um say a few words about inventory under the um oh yes and it might be rather than one and I do urge you to think of your questions but while they're thinking of questions perhaps you'd like to just say a few words about that well quite right it's advancing years you know one gets more and more forgetful I'm so forgetful that I once went back to the house went up this familiar street we'd moved house but I went back to the original house rang the front door while I had no key strange woman opened the door I said excuse me I said politely what are you doing in my house she said equally politely well Mr. God you remember we bought your house three months ago so this is one of my problems inventory you're quite right now um generally speaking the asset based registration system worked well not so good for inventory and say dealers stock because first of all a dealer can stop a large number of items of inventory so it's giving a security interest and you have to have unique identification with each asset you get a multiplicity of registrations which is very cumbersome not only that but the registrations are likely to be temporary the security interests are likely to be temporary uh because they will disappear as items of inventory are sold which is the purpose which they're held or leased and therefore you have to have a multiplicity of discharges of registration very soon after the registration being made so that's why the protocol allows a contracting state to make a declaration excluding most of the convention as regards inventory and in particular the registration in priority rules therefore enabling it instead to use their own database registration systems where the problem of individual individualization doesn't arise just pile against the data cover all present and future inventory and so on that I think is probably what I needed to say about there are there are some other things but I mean that that's the essence of it thank you Louise for reminding me well I must say that so you know I remember I was involved in this as well that that was one of the most difficult areas we had to deal with and of course it isn't really a problem one has to deal with with aircraft you don't have a an aircraft shop but you could have a tractor shop and that was why you had the tractor dealership and that's why we had this this issue