case for a commercial orientation to the proposed Unidroit Convention as applied to aircraft equipment, The

Law and Policy in International Business, Fall 1999 by Wool, Jeffrey

This trend is understandable in light of the general rationale for limiting party autonomy: concerns about substantive or procedural unfairness. Aircraft financing transactions are generally carried out among highly sophisticated parties represented by specialized international legal advisors. Also, governmental involvement in aircraft financing transactions is significant on both the debtor and creditor sides. A restriction on the ability of parties to enforce their contractual agreement is often a restriction on the ability of governments to effectuate financing programs.

The Convention/Aircraft Protocol embraces the concept of party autonomy in two important areas: contractual choice of law and agreement on the meaning of commercial reasonableness.

a. Article VIII of the Aircraft Protocol-Contractual Choice of Law

The parties to a transaction that the Convention/Aircraft Protocol covers may agree, wholly or in part, on the substantive law governing their contractual rights and obligations.89 Nothing requires the selected law to bear a relationship, reasonable or otherwise, to the underlying transaction or parties. This standard is consistent with recent treaties and the rules under many national legal systems.90

b. Article IX (3) of the Aircraft Protocol-Agreement on Commercial Reasonableness

All remedies that the Convention/Aircraft Protocol gives shall be exercised in a commercially reasonable manner.91 The most recent draft also contains a requirement that parties exercise these remedies by "lawful means."92 Recognizing the litigation implications of this general standard, and the sophisticated nature of parties to aircraft financing and leasing transactions, the Aircraft Protocol provides that an agreement between an obligor and an obligee as to what is commercially reasonable is conclusive.93

Party autonomy in this context, however, is limited by three provisions. First, an obligee may not take possession or control of an aircraft object "otherwise than by lawful means."94 Although this standard is indeterminate, it was felt that any attempt to provide more detail would meet with resistance from certain States. This phrase must be interpreted naxrowly95-a sub-clause states that the removal of an aircraft object from service shall not, in itself, be deemed unlawful.96 Second, in order to safeguard the interests of junior creditors and the obligor in the aircraft object, a chargee may not exercise the sale or re-lease remedies without giving interested persons prior written notice of at least ten working days.97 Third, no de-registration or export remedy may be exercised without the prior written consent of the holder of any higher-ranking registered interest.98 This provision is designed to ensure consistency with the relevant provision of the Geneva Convention.

IV. CONCLUSION

The purpose of this article was to make and defend the case for maintaining a commercial orientation with respect to the final instruments. Over the coming months, States should consider the means available to build further consensus, nationally and internationally, for this commercial approach. In this regard, particular consideration might be given to two such consensus-building vehicles.