Introduction
EU declarations pursuant to treaty
Effect of EU declarations on United Kingdom's ability to make certain declarations
UK implementation
Next steps


Introduction

The government recently published revised draft legislation(1) designating the Cape Town Convention on International Interests in Mobile Equipment and Protocol thereto on Matters Specific to Aircraft Equipment as an 'EU Treaty', which will allow the United Kingdom to pass legislation to implement the treaty into national law. It also published a consultation on June 16 2014 seeking views from stakeholders as to how the treaty should be implemented in the United Kingdom.

This update summarises the declarations made by the European Union when it acceded to the treaty and their effect on the declarations that the United Kingdom will be able to make when it implements the treaty, and provides an update on the status of the United Kingdom's implementation of the treaty.

EU declarations pursuant to treaty

The European Union acceded to the treaty on April 28 2009, which became effective on August 1 2009. At the time of its accession, the European Union made certain declarations – pursuant to Articles 48(2) and 55 of the convention and Articles XXVII(2) and XXX(5) of the protocol – as a 'regional economic integration organisation'(2) with regard to various matters which the EU member states had transferred to the exclusive competence of the European Union (for further details please see "Another hurdle cleared on path to ratification: the Cape Town Convention and Protocol"). These included matters which concerned the following issues:

  • the EU Brussels Regulation (44/2001);(3)
  • the EU Insolvency Regulation (1346/2000);(4)
  • the EU Rome I Regulation (593/2008);(5)
  • where the debtor is domiciled in an EU member state, the application by member states subject to the Brussels Regulation of Article 13 (relief pending final determination) and Article 43 (jurisdiction under Article 13) of the treaty for interim relief only in accordance with the Brussels Regulation, as interpreted by the European Court of Justice;(6) and
  • Article XXI of the protocol (modification of jurisdiction provisions), which does not apply within the European Union as the Brussels Regulation applies to this matter for EU member states bound by the regulation or any other agreement designed to extend its effects.(7)

The European Union's declarations also noted that:

  • member states will retain their competence concerning the rules of substantive law as regards insolvency; and
  • the European Union will not make a declaration pursuant to Article XXX(1) concerning the application of Article VIII;(8) nor will it make any of the declarations permitted under Articles XXX(2) and (3) concerning the application of Articles X(9) and XI,(10) respectively.

The European Union also reserved its rights to amend its declarations, expressly stating that its exercise of the competences transferred to it by its member states was a process of continuous development.

Effect of EU declarations on United Kingdom's ability to make certain declarations

Given the European Union's exclusive competence over the areas in which it has already made declarations under the treaty, the United Kingdom's ability to make declarations under the following articles of the protocol is affected (although its ability to make declarations under other provisions of the treaty is not):

  • Article VIII (choice of law) – the United Kingdom cannot make a declaration under this article or amend its national law to the extent that it relates to this issue, since Rome I applies.
  • Article X (modification of provisions regarding relief pending final determination) and Article XI (remedies on insolvency) – the United Kingdom cannot make declarations under these articles, but may amend its national law to produce the same substantive outcome as if declarations had been made under these articles.
  • Article XXI (modification of jurisdiction provisions) – the United Kingdom cannot make a declaration under this article or amend its national law to the extent that it relates to this issue, since the Brussels Regulation applies.

UK implementation

The government has published revised draft legislation designating the treaty as an EU treaty for the purposes of Section 1(2) of the European Communities Act 1972. Pursuant to Section 2 of the European Communities Act, this designation allows Parliament to pass national legislation to implement the treaty (to the extent within the United Kingdom's competence).

In contrast to the position in relation to EU legislation such as the Brussels Regulation, the Insolvency Regulation and Rome I – which have direct and binding effect in the United Kingdom without the need for further enactment by the UK Parliament – EU legislation which does not have direct and binding effect in the United Kingdom requires the passage of secondary legislation by Parliament in order to become effective in national law and to allow the UK courts to interpret and apply it.

The government also published a consultation to gather views as to how the United Kingdom should implement those provisions of the treaty which fall outside of the European Union's competence and within the competence of the United Kingdom. The consultation closed on August 11 2014.

Next steps

The government has indicated that it intends to implement the treaty by way of a single statutory instrument during 2014, although changes to existing legislation are likely to be needed. It has committed to publishing a response to the consultation within three months of its closure, in which the government will detail how it intends to implement the treaty and the timetable for ratification.

For further information on this topic please contact Natalie Chung at Vedder Price by telephone (+44 20 3440 4680), fax (+44 20 3440 4681) or email (nchung@vedderprice.com). The Vedder Price website can be accessed at www.vedderprice.com.

Endnotes

(1) The European Union (Definition of Treaties) (Convention on International Interests in Mobile Equipment and Protocol thereto on Matters Specific to Aircraft Equipment) Order 2014.

(2) Article 48(1) of the convention defines a 'regional economic integration organisation' as an organisation "which is constituted by sovereign States and which has competence over certain matters governed by [the Convention]".

(3) The Brussels Regulation provides a harmonised framework for determining the allocation of jurisdiction over disputes and the recognition and reciprocal enforcement of judgments within the European Union – the basic principle being that jurisdiction is to be exercised by the EU member state in which the defendant is domiciled, regardless of its nationality, with certain exceptions (including where the parties have made an express contractual choice). The Brussels Regulation has since been recast pursuant to EU Regulation 1215/2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters, which will enter into force on January 10 2015.

(4) The Insolvency Regulation provides common rules for determining conflict of law issues for insolvency proceedings with respect to EU-based debtors that have operations in more than one member state – the key criterion being the determination of where the debtor has its centre of main interests, which should be the place where the insolvency proceedings over the debtor are commenced.

(5) Rome I sets out rules determining the applicable law of contracts in civil and commercial matters.

(6) Article 13 of the treaty contains certain speedy court remedies which are available to a creditor upon default by a debtor pending final determination of the creditor's claim in either the same or another jurisdiction. Article 43 sets out the rules determining the jurisdictions in which a creditor can apply for these speedy court remedies. Article 31 of the Brussels Regulation permits application to be made to a court of an EU member state for provisional relief, even if the courts of another member state have jurisdiction as to substantive law and there is a large body of case law relating to the interpretation of that provision.

(7) Article XXI amends Article 43 of the treaty by adding the state of registration of an airframe or helicopter as a jurisdiction in which an application for speedy relief can be made. This provision does not apply within the European Union, as the Brussels Regulation applies.

(8) Article VIII gives effect to the contractual choice of law made by parties.

(9) Article X amends Articles 13 and 43 of the treaty by adding a number of opt-ins, including:

  • allowing a contracting state to specify the number of days within which a court must grant speedy relief;
  • extending speedy relief to cover the sale of an object and application of sale proceeds, and allowing relief to be sought in a jurisdiction either chosen by the parties or where the debtor is situated; and
  • allowing the debtor and creditor to exclude in writing the application of Article 13(2), which permits a court to impose additional terms when granting an order for speedy relief.

(10) Article XI sets out the two insolvency regimes, Alternative A and Alternative B.