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Citation: 8 Edinburgh L. Rev. 118 2004

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THE EDINBURGH LAW REVIEW

V618 2004

them to develop a culture which could reproduce indefinitely. Typically these cells would simply
die," but the researchers altered the natural pattern and by their labour created something new.
The case, as David Johnston has pointed out, was ripe for discussion of specification,' 9 and the
patient might even have won the argument. California being a Common Law jurisdiction,
however, the patient sued for conversion, and lost.
Ernest Metzger
Senior Lecturer in Law
University of Aberdeen

EdinLR Vol

pp 118-126

The Convention on International Interests in Mobile

Equipment and Aircraft Equipment Protocol
encourages European property law reform
A. INTRODUCTION
This article considers the recently-concluded Convention on International Interests in Mobile
Equipment (CIME) and the Aircraft Equipment Protocol (AEP) and focuses u'?on the beneficial effects of these instruments on the member states of the European Union. It concludes
that the new regime is a prospective stepping-stone towards the unification of European security
interests in aircraft and also of other interests.
The CIME/AEP were concluded at a diplomatic conference in Cape Town in November
2001.2 Representatives of sixty-eight states and fourteen international organisations attended.
Upon the conclusion of the conference twenty states signed the CIME and AEP, and since that
time six additional states have signed both instruments. These twenty-six signatory states are
equally representative of both the economically developed and the developing regions. At this
moment in time, many African, Asian, and American countries are in the midst of ratification
procedures in relation to the adoption of these instruments. Moreover, the Commission of the
European Union is currently co-ordinating with the fifteen member states with a view to
ratification of specific sections of the Convention and Protocol. The Commission's action plan is
discussed below. The Convention will enter into force following the deposit of the third
instrument of ratification or accession, and the Protocol following the deposit of the eighth such
instrument. It is expected that the CIME/AEP will enter into force in the first half of 2004.
Ethiopia, Nigeria and Panama have already ratified CIME/AEP in 2003.
B. THE PROVISIONS OF THE CIME/AEP
The provisions of the CIME are not equipment-specific. The CIME is a framework Convention
incorporating general provisions. The regime relates only to certain categories of mobile
18 51 Cal 3d at 127 n 2.
19 D Johnston, "The renewal of the old" (1997) 80 CLJ 92-93.
1 B P Honnebier, "The Convention of Cape Town on International Interests in Mobile Equipment: the
solution of specific European property law problems" 2002(3) ERPL 10.
2 At <http://www.unidroit.org/english/presentation/main.htin#NRIO>.
The authentic text of the CIME
and AEP is also available in the Arabic, Chinese, French, Russian and Spanish languages.

Vo18 2004

ANALYSIS

equipment, which are defined in separate Protocols3. In general, the term mobile equipment
encompasses objects which by their very nature are used internationally, for example, aircraft,
satellites, trains, containers and ships. However, for the purpose of the AEP, the first Protocol to
have been completed, it includes only airframes, aircraft engines and helicopters. The Railway
Rolling Stock Protocol and the Space Assets Protocol are already at an advanced stage of
preparation with a view to adoption in due course. Moreover, Protocols for registered ships,
mobile oilrigs, containers and trucks may follow.
(1) The conflict of laws problems in Europe concerning aircraft financing
In international practice the following three legal devices are used most frequently in relation to
the financing of aircraft objects:4 a charge under a security agreement, a conditional sale under
a reservation of title agreement and a lease agreement. If these methods of finance are to work
effectively to reduce economic risk and to promote the availability of money from the banks and
other private financial institutions they require a secure legal regime. Considering the substantial
funds needed for the financing of the acquisition or use of aircraft objects, it is imperative that
this regime protects the financier's rights when the debtor defaults. The problem is, however,
that presently there exists a great variety of municipal conflict of laws rules regarding the
recognition, enforcement and priority status of foreign proprietary interests in such objects. As
a result of the absence of a uniform conflict of laws rule there is a large degree of legal
uncertainty at the international level and in particular at the European level. The reason for this
is that, traditionally, most member states of the European Union apply the lex situs, also known
as the lex rei sitae, the conflict of laws rule in relation to the recognition of property rights in
movables. In general it is the law of the situs where the equipment is situated at the time that the
property right is created which is applicable.5 These European jurisdictions require, however,
that the characterisation of the kinds of foreign interests that may be protected in the forum state
is dealt with by means of a subsequent transposition. Therefore, the prospective recognition,
enforcement and priority status of a foreign security interest depends on its similarity to an
existing national proprietary right of the new situs. In a practical sense, however, aircraft objects
do not have a specific situs. As these objects are continuously moving from state to state in the
course of business, they are only temporarily or coincidentally connected to a state.
Consequently, there is a danger that each time an aircraft object crosses a border the interest
constituted therein will not be recognised or enforced. For that reason, the lex situs rule is
considered to be manifestly inadequate in relation to mobile equipment. The possibility that the
rights of the financier may not be upheld abroad is regarded as a considerable economic risk. It
will negatively influence the financier's confidence in the financial transaction. As great
economic risk leads to substantial costs, the lex situs rule hinders the financing of aircraft objects.
(2) The property law problems in Europe concerning aircraft financing
Even if a "satisfactory" uniform conflict of laws rule could be created, it could not solve the
problem that presently national property laws dominate the financing of aircraft objects. In
general there is a great diversity of property law regimes at the international level and in
particular at the European level. More specifically, in the European Union there is no uniform
law dealing with security interests in mobile equipment. Moreover, previous international
3 For an extensive overview of the effects of the regime of the Convention of Cape Town and the (forthcoming) Protocols in European States, see the special issue (no 6) of the European Review of Private
Law, 2003.
4 The term "aircraft objects" means airframes, aircraft engines and helicopters (art I(2)(c) AEP).
5 See also B P Honnebier, "The real rights of Dutch airline companies can be the basis of international
interests under the convention of Cape Town" 2003(6) ERPL (forthcoming).

THE EDINBURGH LAWV REVIEW

Vol18 2004

attempts at codifying secured interests in aircraft have been unsuccessful, 6 largely due to the
complexity and diversity of national property rights within Europe. It has in the past proved
difficult to transcend the dogmatic issues that exist in the legal proprietary regimes of the
European states. The reason for this is that Scotland and many European Civil Law jurisdictions
are very restrictive with regard to the creation and effects of security interests, as they have
closed proprietary regimes. Furthermore, currently Scotland and some continental European
states are still more or less hostile to non-possessory security interests. As a result, the financier's
proprietary interests differ from state to state and accordingly it is uncertain as to whether its
rights can be upheld against third parties in other European countries. Consequently, the
absence of uniformity in the European Union in relation to the security interests of the
financiers and airline companies creates barriers to the financing of aircraft objects. Therefore,
the EU needs a secure international system of law to facilitate the use of the above-mentioned
three legal devices which in turn will make the financing of aircraft objects more easily available
and cheaper.
(3) The inadequacy of the Geneva Convention
Furthermore, the existing Convention on the International Recognition of Rights in Aircraft
(Geneva Convention, 1948) is inadequate. Although it was an achievement in 1948 to reach
international agreement on one jurisdiction recognising specific proprietary interests duly
created under the laws of and recorded in another state, it has been regarded from the outset as
no more than a provisional body of rules.7 The major problem is that being merely a conflict of
laws treaty, it does not provide for uniform substantive property law. Consequently, no
proprietary rights can be derived therefrom." At that moment in time, however, a Convention
providing for uniform rules for aircraft financing was not an option. Moreover, the four
categories of rights in aircraft9 that have to be recognised by the contracting states are of
American origin. These typical American security interests, for example the rights to acquire or
possess an aircraft for a period longer than six months, have not been incorporated into the
national property law regimes of most European states.'0 Furthermore, although the Convention
endorses the view that the lex situs is unsatisfactory and replaces it with the more identifiable lex
registry conflict of laws rule, its applicability is highly conditional upon specific circumstances.
For example, it has not been ratified on a global level. Moreover, a third of the member states of
the European Union have not accepted it, including the UK. Finally, the Convention takes no
account of new developments in international financing practice, such as the fact that at present
aircraft engines are financed and registered separately.
(4) The regime of the CIME/AEP solves the problems at hand
The Convention and Protocol resolve the problems at hand. Without any doubt, these
instruments represent the most innovative set of instruments in the history of property law in the
6 In 1933 the Comit6 International Technique d' Experts Juridiques Mrien (CITEJA) produced two draft
Conventions, one relating to registration and the other to mortgages and other secured interests in
aircraft. See CITEJA Doc 162 at 158 and 164. However, the time was not ripe for either of these
Conventions.
7 ICAO Doc 5722 at 345.
8 It is incorrect to assume that proprietary rights can be derived from the Geneva Convention. See for an
opposite view for instance B J H Crans, "Selected pitfalls and booby-traps in aircraft finance" 1992 Air
and Space Law (ASL) 46; BJ H Crans, "Enforcement of security interests in spare aircraft engines" 1996
ASL 14.

9 Article I(a-d) Geneva Convention.

10 The Netherlands is the only European state that has incorporated these real rights into its Civil Code.

Vol18 2004
Vol 8 2004

ANALYSIS
ANALYSIS

European Union. The CIME/AEP is certainly regarded as the most important regulation ever to
be made in the area of international financial aviation law. The key objective of the new regime
is to facilitate the asset-based financing and leasing of aircraft objects, to increase their
availability and to reduce their costs. The CIME/AEP contain a set of uniform substantive
provisions relating to property law. Furthermore, these instruments introduce rules in respect of
the recognition, enforcement and priority status of interests in aircraft objects. For this purpose,
the CIME/AEP provide for the creation of an autonomous international interest which has a
proprietary character. The Convention has a pragmatic approach in relation to the establishment
of such an interest. The definition of an international interest accommodates both the traditional
Civil Law and the functional North American Common Law systems of property law. The
unique international interest encompasses the following national legal devices: a) security
agreements; b) title reservation agreements; and c) various forms of leasing agreements and the
equivalents thereof. As mentioned above, these are the methods of finance which are used most
often in respect of aircraft objects. Furthermore, the Convention establishes an International
Registry at which an international interest may be registered. Following international
registration, and depending on its priority status, the holder can exercise its international
interest against any party in any contracting state. This rule applies both when the debtor is
insolvent and when it is not.
In addition, the regime of the CIME and its Protocols lays down in detail the extensive
remedies of the holder of an international interest in the event that the other party defaults.
These important remedies only relate to the parties interse." However, the CIME/AEP regime
draws an important distinction12 between the remedies which may be granted by the parties to
the chargee, the person entitled under a security agreement, on the one hand, and the remedies
which are available to a conditionalseller or lessor,on the other.13 The CIME/AEP incorporates
this distinction since extensive remedies can be made available to the holder of an international
interest. In many Common Law and Civil Law countries these remedies are available to a conditional seller or lessor by law, or may be granted to them, as they are the owners of the aircraft.
However, in the majority of Civil Law countries the same remedies are not available to a chargee
and cannot be granted to it by the parties. For these reasons, under the CIME/AEP the abovementioned special rights are available to the chargee only where the chargor has agreed to such
remedies.' 4 In this respect, too, the CIME/AEP regime proceeds from the freedom of the
parties to contract. The parties may agree between themselves' 5 on the remedies set out in the
CIME/AEP which they regard as desirable in respect of their specific legal relationship.' 6 The
11 Articles IX(3) AEP and 7(2) CIME.
12 This relevant distinction in the CIME/AEP regime is not universally understood. See in particular I

Davies, "'Thenew lex mercatoria: international interests in mobile equipment" (2003) 52 ICLQ 170 at

13
14
15
16

172; B J H Crans, "The UNIDROIT Convention on International Interests and the Aircraft Equipment
Protocol: some critical observations" 1998 ASL 256.
Articles IX AEP and 10 CIME.
Articles IX AEP and 8 CIME.
B P Honnebier, "The Convention of Cape Town", note 1 above.
For instance, the property law of the Netherlands provides for the creation of the rights in rein (security
interests/liens/charges) to acquire or possess aircraft which can be vested in Dutch airline companies
(arts 8:1308 and 8:1309 Dutch Civil Code). In turn, these full real rights can be the basis of an international interest under the CIME/AEP (art 2(2)(a) CIME). This means that, for example, the owner of
an aircraft (chargor) may grant the special remedies to a Dutch airline (chargee) under a security
agreement (articles IX AEP and 8 CIME). See B P Honnebier, "The new international regimen proposed
by UNIDROIT as a means of safeguarding rights in rem of the holder of an aircraft under Netherlands
law" 2001(1) Uniform Law Review/Revue de Droit Uniforme, available at <www.unidroit.org>(under
leading articles).

THE EDINBURGH LAW REVIEW

Vol 8 2004

new regime reflects the fact that the market in aircraft is characterised by the extremely high
standard of the sophisticated market participants - for example, many airlines are owned (to a
large extent) by the state or have other affiliations with it. Furthermore, the parties to aircraft
transactions are experienced in negotiating and concluding such transactions. Besides, the
parties concerned traditionally commission highly qualified financial and legal experts to
represent them when concluding these complicated transactions. For that reason, some kind of
"mandatory consumer-related law" to protect (national) airline companies is non-existent in
current international air law, 7 and the same is true for the CIME/AEP. The creation of
inequality is disadvantageous for a market in which only equal parties come together. This holds
true both for the law and the economy. Consequently, it is legitimate for the CIME/AEP to
expect that the parties will lay down their mutual rights and obligations in agreements which are
tailor-made to suit them. It is not realistic to prophesy that the CIME/AEP, allegedly having
their roots in American law, will lead to harsher bargains dictated by a class of financiers not
known for its propensity to under-reach where over-reaching is not forbidden by law. It is just as
naive to predict that the "marginal airline debtor", who must borrow where it can on whatever
terms offered, will become an expertly shorn lamb for whom the wind will not be tempered."8
Obviously, which remedies the holders of an international interest will in fact be able to stipulate
depends entirely on the economic and financial leverage of the parties in a specific situation. For
instance, currently it is definitely a buyers' market as far as the acquisition and lease of aircraft
objects is concerned.
As pointed out earlier, the principle objective of the CIME/AEP is to facilitate the financing
of aircraft objects and to reduce their costs. For that purpose it establishes the above-mentioned
comprehensive legal framework to protect security and leasing interests in such objects. As a
decrease in legal risk will lead to a decrease in overall expense, in the future the financing of
mobile equipment will also become less costly in the European Union. A global economic study
on the matter at hand shows that the CIME/AEP will generate, on a conservative basis, billions
of dollars in savings on a yearly basis. The new regime will attract significant, long-lasting microeconomic and macro-economic benefits. The beneficial impact of the CIME/AEP on the cost of
obtaining aircraft financing will be shared not only among the financiers and manufacturers, but
also among airline companies,' 9 their shareholders, employees and passengers.'0 The first
practical effect of the CIME/AEP is the recent announcement by the Export-Import Bank (ExIm Bank) that it will reduce its "exposure fee" on export financing for US large commercial
aircraft. Buyers of such aircraft in any European state that has adopted and implemented the
CIME/AEP will receive a one-third reduction in the bank's fee." With this substantial reduction
17 The Geneva Convention (1948) also acknowledges the freedom of the parties to contract.
18 G Gilmore, "The secured transactions article of the Commercial Code" (1951) 16 Law and
Contemporary Problems 28.
19 For example, Air Canada advised the Canadian government to adopt Alternative A of the "Remedies on
Insolvency" provision (art XI AEP). Some have characterised this Alternative as "pro-creditor". Air
Canada, however, concludes that it will lower the cost of borrowing, expand sources of funding and
potentially make credit available to facilitate a reorganisation. Air Canada's Memorandum to Industry
Canada, 27 Feb 2003.
20 A Saunders and I Walter, Institut Europ~en d'Administration des Affaires (INSEAD) and New York
University's Salomon Center, "The proposed Convention: an economic impact assessment", 1998, available at <http://awg.aerolpubliccontent/pdf/EIA.pdf>;A Saunders and I Walter, "The economic implications of international secured transactions: a case study" 1999 University of PennsylvaniaJournal of
InternationalEconomic Law 310 and 351.
21 See the News Release of the Export-Import Bank of the United States, 31 Jan 2003, at <http://www.exim.
gov/pressrelease.cfrnr6F76B4BA-1032-5BOF-BDC2F28463DF4239/>.

Vo618 2004

ANALYSIS

in costs the Ex-Im Bank is encouraging European and other countries to adopt the kind of legal
framework that will enable their airlines to upgrade and expand their fleets by reducing the risk
in cross-border asset-based financing and leasing sof aircraft.
(5) The CIME/AEP as a potential stepping-stone towards uniform security interests
in Europe
Although, as discussed above, in Europe the law of property in relation to aircraft financing
is still a national affair, significant changes are expected in the future. The Convention of Cape
Town and the Aircraft Equipment Protocol provide explicitly that a Regional Economic Integration Organisation (REIO) may accede to these documents. In 2003 the European Commission22
has put the acceptance of the CIME and the AEP on its agenda. The European Commission has
come to the conclusion that the Convention and Aircraft Equipment Protocol will be advantageous to the financiers, airline companies and consumers of the member states. Currently, it is
co-ordinating with the fifteen member states with a view to the signing and conclusion of specific
Articles of the Convention and Protocol. These provisions concern jurisdiction, recognition and
enforcement of judgments and insolvency matters. 3 The great importance of the Commission's
project lies in the fact that the European Commission has concluded that the Convention and
Aircraft Equipment Protocol will be advantageous to the financiers, airline companies and
consumers of the member states." It endorses the view that the CIME/AEP will provide for the
needed solid uniform European property regime which will make the financing of aircraft objects
more available and less costly.23 b This has persuaded the European Commission to instigate the
necessary procedure. When a REIO accepts the CIME/AEP it has the rights and obligations of
a Contracting State, to the extent that the REIO has competence over the matters governed by
the Convention. Some of the member states, however, questioned the European Union's
competence to conclude international agreements particularly in relation to the substantive
insolvency provisions of the CIME/AEP. Nevertheless, the European Commission and these
states recently ended this dispute and the Commission was able to push its proposal to accept
the Convention and Protocol forward to the Council of the European Union to obtain its
required approval. Consequently, the European Union's ratification of specific articles of these
instruments will likely take place in the near future (although the acceptance of the CIME/AEP
by the European Union will not have consequences for Denmark). This will be the first step
towards the much-needed uniform European property regime for the financing of aircraft
objects. Furthermore, this phenomenon will encourage the individual member states to ratify
the other Articles of the Convention and Protocol.
The adoption of the CIME/AEP by the European Union and the member states will have the
following consequences. After the introduction of the CIME/AEP the currently closed property
law systems of Scotland and the continental European Civil Law countries will be extended. In
22 "Two proposals concerning signature and conclusion of the Convention adopted by the European
Commission on 3 March 2003" 2003 Bulletin EU, Transport (22/22). See also Explanatory Memorandum
15904/1/02, JUSTCIV 207, 14 Feb 2003.
23 The member states have transferred power to the Community for the matters covered by Council Regulations (EC) No 44/2001, 22 Dec 2000 On Jurisdiction and the Recognition and Enforcement of Judgments in Civil and Commercial Matters, and (EC) No 1346/2000,29 May 2000 on Insolvency Proceedings.
This includes matters covered by the following provisions: Arts I(d), (h), (k) and (1), 13, 30, 37, 53 and 55,
and Ch XII of the Convention. Also Arts 1(2)(m) and (n), X,XI, XII, XXI, XXII and XXX of the Protocol.
23a The European Council also has authorised the Commission to open negotiations for the adoption of the
Railway Rolling Stock Protocol. Justice and Home Affairs, Doc 6162/03 (Presse 42), 27-28 Feb 2003.
23b For the European Commission's position on aerospace in general and on civil aviation in particular, see
A CoherentFrameworkforAerospace-A Response to the STAR 21 Report, COM (2003) 600,13 Oct 2003.

THE EDINBURGH LAW REVIEWV

Vol 8 2004

the future two different levels of proprietary regimes will govern a security agreement, a title
reservation agreement and a lease agreement. On the one hand, these legal devices will be
covered by the international regime of the CIME/AEP which will only relate to aircraft objects
and, on the other, by the applicable national proprietary regime concerning all other objects.
Furthermore, the adoption of the CIME/AEP will establish the very much-needed European
uniform regime for the creation, enforcement, registration and priority of an autonomous
international interest. This new regime will provide for a dogmatic as well as a conceptual
change in the rigid Scottish and continental European approach to the creation and effects of
real rights. Moreover, the regime of the CIME/AEP can be used as a stepping-stone towards the
unification of any other European security interests.
Finally, some courts that are directly located in or indirectly connected to the European
Union already apply the new regime of the CIME/AEP. For example, in 2002 a Court of Appeal
in the Netherlands decided that the general Dutch property law doctrine of accession
(Natrekking)does not apply to aircraft engines. Engines are not considered parts of the airframe
to which they are attached and they can be the objects of separate security interests.2 This year
the Court of First Instance of the self-governing South American state of Aruba, which is an
autonomous part of the Kingdom of the Netherlands and has its own air law, ruled in the same
direction as the Dutch Court of Appeal.25 These important rulings have been influenced by, and
are entirely in line
with, the CIME/AEP. Under the new regime engines
are regarded as distinct
....
26aircraft objects which can be financed and registered separately. However, both decisions are
completely in conflict with the controversial Dutch view that in all circumstances the ownership
of an engine passes to the owner of an airframe as soon as it is attached to it. It has been
suggested that: "From the moment of installation, an engine loses its separate existence and
becomes a component part of the aircraft, after which it is not possible to create a security right
on the engine." For that reason, this view contends that the regime of the CIME/AEP infringes
Dutch property law.27 The following statement concerning the proprietary status of engines in
Civil Law jurisdictions in general stresses a similar point of view: "The application [of the CIME/
AEP regime] to aircraft engines is not compatible with the Civil Law concept that component
parts of an aircraft cannot be made subject to a security right if such a component part is
considered an integral and indispensable part of that other object." 2s All the above-mentioned
assumptions are incorrect, however. In the Netherlands the substantive property law governing
aircraft and engines is regarded as a lex specialis. Most other European Civil Law states concur
in that respect. These objects occupy an exceptional position in the property law systems of these
states, both in dogmatic and conceptual terms. The general rules of property law are not fully
applicable. Under the present special rules of air law, engines are not generally considered as
24 Article 8:3a of the Dutch Civil Code. This article was motivated by the text and objective of article XVI
of the Geneva Convention (1948). See note 29 below.
25 AAR Aircraft & Engine Group v Aerowings, Gerechtshof, Den Bosch, the Netherlands, 15 Aug 2002.
See also Volvo Aero Leasing v AVIA Air, Kort Ceding, Gerecht in Eerste Aanleg van Aruba, 25 June,
2003, no 121. Also the UNIDROIT Convention on International Financial Leasing (Convention of Ottawa,
1999) recognises that aircraft engines are currently leased and registered separately from the airframes
(art 7(3) CIFL).
26 Article I(2)(c) AEP.
27 B J H Crans, "Enforcement of security interests in spare aircraft engines" 1996(3) ASL 147: this author
erroneously argues that art XVI of the Geneva Convention (1948) provides for a proprietary "accretion
rule" in relation to aircraft engines. However, the Convention, which is merely a recognition treaty, does
not contain any uniform substantive property law. See also B J H Crans, "The merits of the proposed
UNIDROIT Convention on International Interests in Mobile Equipment and the Aircraft Equipment
Protocol" 2000(2) ASL 51; A I M van Mierlo, "Dutch security rights in aircraft" 1992(3) ASL 112.
28 I Davies, "The new lex mercatoria", note 12 above.

Vol 8 2004

ANALYSIS

integral and indispensable parts of the airframe. The reason for this is that most engines are not
intended for permanent use on a specific airframe.9 On the contrary, most frequently engines
are temporarily or coincidentally used, leased or exchanged based on engine-pooling arrangements and engine interchange agreements. In these cases the owner of the airframe and the
owner of the engines are not the same person. Consequently, these engines are not intended for
permanent use on a specific airframe. Besides, currently engines can easily be attached to, or
detached from, an airframe without damaging the airframe or the engines. For these reasons, in
Belgium, France, Germany, Italy, the Netherlands, Switzerland and many other European civil
law states most engines are not considered to be integral or indispensable parts of the aircrafte.
C. THE OFFICIAL COMMENTARY ON THE CIME/AEP
Professor Sir Roy Goode has written the Official Commentary on the CIME/AEP, 3 ' a task
undertaken pursuant to Resolution No 5 adopted at the Diplomatic Conference. He was the
Chairman of the Drafting Committee in Cape Town and prepared the Official Commentary in
close collaboration with the Joint Secretariat of UNIDROIT and ICAO. Furthermore, Professor
Goode worked in co-operation with the Chairpersons of various legal Committees that
participated in the realisation of the CIME/AEP and duly examined the many comments
received from states and observers on drafts presented to them.
The Official Commentary is structured around an introduction and five separate parts. Part
I provides a brief history of the CIME/AEP. Part II contains an overview of the key-objectives,
the two-instrument approach, the principles and contents of the CIME. This chapter focuses on
the reasons for the creation of this instrument and its most revolutionary form. Part III provides
an overview of the AEP and discusses its purpose and its contents. As noted above, the
provisions of the CIME are not equipment-specific and they are controlled by special Protocols.
The AEP demonstrates the essence of the Convention/Protocol structure. On the one hand it
attunes the Convention to meet the demands of the aviation industry, while, on the other, it does
not interfere with its fundamental principles. For example, this instrument contains two
alternative sets of insolvency provisions designed to adjust the general insolvency provisions of
the Convention if a Contracting State has made a specific declaration to this effect. The AEP
provides the Contracting States with a choice between a "hard" insolvency regime and a "soft"
29 Article XVI of the Geneva Convention (1948) requires for the international recognition of a security
interest, which is vested in an aircraft including its engines, that the engines are intended for (permanent) use on the (specific) aircraft. It presumes that the owner of the aircraft is also owner of the
engines that are attached to it, which, to a large extent, was the general situation at the time that the
Convention came into existence.
30 See for example 0 Riese, "Die Tagung der Unterausschiisse der CITEJA in Paris" 1931 Archivfiir
Luftrecht 191; 0 Riese, Luftrecht (1934) 260; H Schlegel, Eigentumnserwerb und rechtsgeschaftliche
Belastung von Luftfahrzeugen im InternaionalenPrivatrecht(1938); Mde Juglart, Traitnedl~mentairede
droit aren (1952) 136; B Hofstetter, L' hypothique adrienne (1950) 217; M Rijks, Het Verdrag van
Genve (1952) 8; G Elbing, Sind Triebwerke wesentliche bestandteile von Flugzeugen?, Zeitschriftftir
Luft- und Weltraumrecht (1995) 387; J F Baur and R Sttirmer, Sachenrecht (1999) 13; V Sagaert, "De
UNIDROIT-Conventie: een laatste strohalm voor de Belgische luchtvaartindustrie" 2001-2 Rechtskundig
Weekblad 1367; V Sagaert, De UNIDROIT-Conventie betreffende internationalezakelijke rechten op
roerenduitrustingsnaterieel,Commentaar,Voorrechten en hypotheken, Commentaarmet overzicht van
rechtspraaken rechtsleer(2002) 1.For German relevant jurisprudence, see OberlandesgerichtHamburg
(1931); Archivfir Luftrecht (1931) 105.
31 Published and distributed by the International Institute for the Unification of Private Law
(UNIDROIT) in Sept 2002. For more details of the Official Commentary see B P Honnebier, book
review, forthcoming in 2003(6) ASL.

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regime. 2 Parts IV and V of the Official Commentary contain an analysis of the provisions of the
CIME and AEP respectively. In a logical step they focus on the applicability, aspects, objectives
and conditions of these instruments. Furthermore, these chapters provide an extensive
commentary as to the form and substance of all their articles. To clarify issues that may be
difficult to comprehend, illustrations and alternative illustrations are provided.
The Official Commentary does not deal with the forthcoming Protocols, which have not yet
been realised, for railway rolling stock and space assets Nevertheless, it gives several illustrations
of the effects of the Convention with regard to the financing of such assets. For instance, in
relation to "The effects of an international interest as against third parties", it gives eleven
comments and nine illustrations which include the position of the owner of an aircraft, a charge
on a railway wagon, and the lease of a satellite.
Furthermore, the Formal Commentary includes twelve Annexes. For example, Annex I, II
and III provide the English texts of the CIME, AEP and the Final Act of the Diplomatic
Conference respectively. Annex IV contains the consolidated text of the CIME/AEP. Its purpose
is to facilitate the application and implementation of the CIME and AEP in a user-friendly
manner. The reason for this is that the Convention and Protocol must be read and interpreted
together as a single instrument. 3 This document therefore addresses the combined effect of the
regime of the CIME/AEP with regard to aircraft objects. The consolidated text is designed as a
useful working tool for those involved in aviation finance. It has been drafted by the Joint
Secretariat of UNIDROIT and ICAO with great care to ensure complete conformity with the
objective and text of the CIME/AEP. The consolidated text may be cited in contracts relating to
the financing of aircraft objects. However, it is not a Convention in itself and it is not subject to
acceptance procedures by states. The only legally binding instruments are the CIME and AEP.
If any discrepancies exist between these instruments on the one hand, and the consolidated text
on the other, the former have priority.
The Convention and Protocol contain new, extremely complicated, and detailed terms and
provisions. There is therefore a need for a working tool that interprets and clarifies these
instruments. The Official Commentary, containing numerous comments and illustrations, has
been written for that purpose. Professor Goode has provided a highly useful, neutral and
unbiased source that has been prepared most diligently to ensure complete conformity with the
reasoning and ideas of the Diplomatic Conference. Consequently, the Official Commentary is
very interesting, instructive and essential for both legal academics and practising lawyers who
are interested in international aviation finance.
B Patrick Honnebier
Associate Professorof Law
University of Utrecht

32 Articles 30(3) Convention, XI and XXX(3) AEP.

33 Article 6(1) CIME.