Mining, agricultural and construction equipment financing

Development of a fourth protocol to the Cape Town Convention on matters specific to mining, agricultural and construction equipment (MAC Protocol)

12 September 2019

The Convention on International Interests in Mobile Equipment, signed on November 16, 2001, in Cape Town (the "Cape Town Convention") establishes an international regime for the creation, enforcement, registration and prioritization of security interests in categories of high-value, uniquely identifiable mobile equipment.

In addition to Convention protocols specific to aircraft, railway rolling stock and space assets, a fourth protocol — titled the Protocol to the Convention on International Interests in Mobile Equipment on Matters specific to Mining, Agricultural and Construction Equipment (the "MAC Protocol") — is currently under negotiation. The goal of the MAC Protocol is to provide a legal regime regulating security, title-retention and leasing interests on uniquely identifiable mobile construction equipment in the fields of mining, agriculture and construction.

The current draft of the MAC Protocol Annexes lists specific equipment (e.g., bulldozers, angledozers, graders, levelers, scrapers, mechanical shovels, excavators, ploughs, etc.) (the "MAC Equipment") that would be subject to this new international legal regime. Notably, it is expected that the regime will establish default remedies, security priorities, international insolvency procedures and equipment registration at the International Registry of MAC Equipment.

Gowling WLG has been registered as a Professional User Entity at the International Registry since the ratification of the Cape Town Convention by the Government of Canada in 2012. We have the expertise to register entities as a Transaction User Entity ("TUE") at the International Registry and to act as their administrator in order to register and consent to International Interests for TUEs.

The UNIDROIT Governing Council — the body governing the Cape Town Convention — will convene a diplomatic conference in Pretoria, South Africa, from November 11–22, 2019, in order to finalize the current draft and adopt the MAC Protocol. Once the conference is completed, we will publish a follow-up article concerning the final MAC Protocol obligations, which will include a list of signatory nations. Canada has not confirmed yet if it will sign and ratify the MAC Protocol, but it has participated in the development of the MAC Protocol draft by submitting comments.

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.

For further information about the Cape Town Convention and the MAC Protocol please contact Marie-France Béland, national leader of Gowling WLG's Aviation, Aerospace & Defence Group.

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