International treaty on registration of interests in mining, agricultural and construction equipment signed by African countries

February 24, 2020

The Mining, Agriculture and Construction (MAC) Protocol (the so-called Pretoria Protocol) developed by the International Institute for the Unification of Private Law (UNIDROIT) is an international treaty that facilitates the financing of mining, agricultural and construction equipment. The Pretoria Protocol was adopted on 22 November 2019, with four countries signing up immediately – the Republic of Congo, the Republic of Gambia, the Republic of Paraguay and the Federal Republic of Nigeria.

The Pretoria Protocol is an extension of the 2001 Convention on International Interests in Mobile Equipment (“the Convention”), which successfully established an international regime for the financing of high-value mobile equipment, such as rail, aircraft and space equipment. The Pretoria Protocol has been established to extend the regime to the MAC industries, considered to be “areas of commercial activity of universal importance”1.

What are the aims of the Pretoria Protocol?

The Pretoria Protocol aims to increase global productivity by (a) providing enterprises engaged in MAC industries access to MAC equipment (at a lower cost) that would otherwise be out of reach; and (b) opening up markets to producers of MAC equipment that would otherwise remain closed to them – helping to optimise activity and profitability.

The Pretoria Protocol is expected to have a positive impact on GDP in both developed and developing countries. In monetary terms, UNIDROIT has predicted an impact of US$23 billion in the former and US$7 billion in the latter, and anticipates that stock levels of MAC equipment may increase by US$90billion over a ten-year period2. Its adoption opens up exports to new markets and allows for an increase in output by manufacturers, as well as increasing the confidence of financiers which lend to companies active in MAC sectors.

What does the Pretoria Protocol do?

Both the Convention and the Pretoria Protocol provide protection for “international interests” or “prospective international interests” in MAC equipment. These are, for example, security interests of secured creditors, seller’s rights under conditional sale agreements for MAC equipment and interests of lessors.

The Pretoria Protocol will establish an International Registry to enable creditors to register these international interests, and prioritises registered international interests over existing security interests under domestic law, provided that the debtor in question is located in a “Contracting State”. Registered interests will also take priority in insolvency proceedings. This registration will remove uncertainty regarding the recognition and enforcement of security interests in different jurisdictions for MAC equipment which moves cross-border during the tenor of a creditor’s interest.

What equipment is covered by the Pretoria Protocol?

The Annexes to the Pretoria Protocol contain details of the specified categories of MAC equipment to which the Pretoria Protocol will apply. Focusing on the mining industry specifically, examples of mining equipment protected by the Pretoria Protocol include: self-propelled bulldozers, road rollers, excavators, tractors and trailers, levellers, scrapers, snow-ploughs, pile-drivers and tunnelling machinery.

What next?

The countries which have signed the Pretoria Protocol will need to ratify and implement the Treaty. Further work will need to be done internationally to establish an electronic register and to decide how MAC equipment will be identified for registration. Other countries, have shown support for the Pretoria Protocol but have not yet signed. It is anticipated that more countries will sign up in the coming months.

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