International Trade Law News

The Convention on International Interests in Mobile Equipment, also known as the Cape Town Treaty, is moving closer to being ratified by the United States. The treaty, negotiated in Cape Town, South Africa, in 2001, establishes an international legal framework intended to reduce the risk assumed by creditors in financing purchase and lease transactions for high-value transportation equipment.

The Senate Foreign Relations Committee approved the Cape Town Treaty on June 22, 2004 and on the same day the House of Representatives on the same day approved H.R. 4226, implementing legislation that would make technical changes to current law to make it consistent with the convention. For the treaty to become law, both chambers of Congress need to pass implementation legislation and the Senate must approve treaty's ratification.

Only technical changes to United States law and regulations are required since the asset-based financing and leasing concepts embodied in the Cape Town Treaty are already reflected in the United States in the Uniform Commercial Code.

The treaty, which went into force on April 1, 2004, applies to equipment only in conjunction with type-specific protocols. For example, the aircraft protocol, which covers aircraft, aircraft engines and helicopters, is expected to come into force late in 2004. Protocols on railroad and space equipment are in different stages of negotiations.