Convention on International Interests in Mobile Equipment

Under the co-sponsorship of UNIDROIT and I.C.A.O., a preliminary draft Convention on International Interests in Mobile Equipment and a preliminary draft Protocol on Matters Specific to Aircraft Equipment has been prepared. The purpose of the Convention is to provide for the creation and effect of a new international interest in mobile equipment. The Convention's approach is quite novel in that it purports to create an international interest based upon the convention itself. The Convention is intended to be supplemented by Protocols, each of is intended to provide equipment-specific rules necessary to adapt the rules of the Convention to fit the special pattern of financing for different categories of equipment. To date, two sessions of governmental experts were held in Rome and Montreal. Korean delegations attended the two sessions. One of the members of the Korean delegation published a report on the first session. He expressed his objection to the so called self-help remedy contemplated by the current preliminary draft of the Convention which enables the holder of a security interest to repossess and dispose of the subject of the security interest by private sale rather than public auction on the occurrence of an event of default of the debtor. His view is based upon his understanding that under Korean law, the only remedy available to the holder of a security interest in mobile equipment, such as an airplane, is to apply to the competent court for a public auction. In my view, his understanding is not quite correct and is inconsistent with the current practice in Korea. Under Korean law, the parties' agreement for private sale is in principle valid unless there is an interested party who has acquired a security interest after the creation of the prior security interest or a creditor who has caused the subject of the security interest to be attached by a competent court. In this article, I discuss the current Korean law and practice relating to the enforcement of security interests by private sale in more detail.