Uniform Law on Secured Transactions and Insolvency: The Approach of the Cape Town Convention and of the UNCITRAL Legislative Guide on Secured Transactions

The contribution considers the topical issue of the relationship between secured transactions and insolvency laws in the light of two recent international instruments, the 2001 Cape Town Convention on international interests on mobile equipment and the (at the time) Draft UNCITRAL Legislative Guide on Secured Transactions. Both instruments, though differing in their scope of application and in their nature, pursue the primary goal of promoting secured credit through efficient and clear rules. Such a goal may be, however, in contrast with national insolvency law policies, especially when rescue of the defaulting debtor's economic activity is attempted. Thus, the international uniform rules should try to find an - admittedly difficult - balance between the need to foster reorganisation procedures and the goal of encouraging pre-commencement financing of enterprises. The contribution considers several aspects which are crucial to the relationship between the pre-commencement creditor rights and insolvency-related policies: avoidance of preferential transactions, priority of liens arising by operation of law, opportunity to limit all-encompassing security devices in favour of (certain) unsecured creditors, tension between creditors’ preferential satisfaction and rescue proceedings, treatment of title retention instruments in insolvency. After a thorough analysis of the uniform law provisions dealing with the above mentioned aspects, the conclusion is reached that both the UNCITRAL Legislative Guide and the Cape Town Convention offer a number of fruitful suggestions towards finding a balanced solution, while the Aircraft Protocol to the Cape Town Convention shows a marked preference for enhancing the secured creditor's position to the detriment of general insolvency policies.[...]