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MAC Protocol Event: A Summary Report by Mudit Bhandari

The recent MAC Protocol event, co-hosted and promoted by UNCCA in conjunction with UNIDROIT and the International Law Committee of the ACT Law Society, successfully concluded on 29 August.

A report prepared by Mudit Bhandari, UNCCA intern, usefully summarises the event and the key discussions that took place. Please see the report below.

The ACT Law Society International Lawyers Committee and UNCCA hosted the first Australian national consultation regarding the Mining, Agriculture and Construction (MAC) Protocol to the Cape Town Convention on August 29th, 2018. Three leading experts in the field provided detailed information and discussed potential benefits and costs regarding the implementation of the MAC Protocol in Australia. This report offers a brief overview of each presentation.

William Brydie Watson is a legal officer at the International Institute for the Unification of Private Law (UNIDROIT). Mr Watson specialises in secured transactions, with expertise in the 2001 Cape Town Convention on the International Interests in Mobile Assets. His responsibility is towards the fourth protocol on matters specific to mining, agriculture and construction equipment, in relation to the Cape Town Convention. His presentation looked at the overview of the Convention and its economic advantage.

The Cape Town Convention creates an International Registry system for certain categories of equipment. The Protocol/Convention has a two-tier structure which allows a common core set of rules which are flexibly adapted to that specific market or collateral. The Cape Town Convention and Protocols provide for both debtors and creditors. It creates an opportunity to create an autonomous international interest over the equipment-including security agreements, sale with retention of title and leasing. In this area, the first to file-rule applies as the registered international interest is given priority from time of registration, including against interest in national law, and is enforceable in contracting states.

Furthermore, the MAC Protocol provides for economic benefits. Mr Watson referred to an independent MAC economic assessment that was produced by experienced British economists-part of the preliminary report released at second session of Committee of Governmental Experts in October 2017, through a competitive closed tender process. The report states that the buyers will have more exposed access to credit and borrowing terms will be better. These claims are achieved through lower interest rates, longer loan durations or high loan-to-loan ratios.

Bruce Whittaker is a senior consultant in the Finance team at Ashurst. Mr Whittaker has also been closely involved in the development of the draft MAC Protocol to the Cape Town Convention. Mr Whittaker presented the possible issues that the Cape Town Convention might have with the existing Personal Property Securities Act 2009 (PPSA) that Australia already has. The presentation provides for a possible solution at the end.

The five possible tractions provided by Mr Whittaker are different in their own ways.

First traction, is in relation to how the issues regarding number registry by manufacturers will be handled. To which, a possible solution being that, whilst registering a MAC equipment, more detail be added about the registered equipment, to ensure uniqueness.

Secondly, the PPSA contains priority rules that are more sophisticated, in comparison to The Cape Town Convention, which are more straight forward. It must be considered how the Cape Town Convention priority rules will fit into Australia and its PPSA rules which are more in-depth compared to those in the Convention.

Thirdly, the issue arises, regarding the ‘taking-free rules’. Take-free rules, is where under the circumstances where a buyer of an asset can acquire the product, free of any security interest from the seller who has previous grant over the asset. Overall, the PPSA contains a similar but differing take on this compared to the MAC Protocol. Therefore, there is general friction between the PPSA and the Protocol, that Mr Whittaker points out, being the main concern to the implementation of the Protocol in Australia.

The last two possible areas of friction arise from the financing of inventory and the general complexity of how the MAC Protocol will run alongside the PPSA rules.

It is to be noted that, the UNCITRAL Model Law on Secured Transactions published by the United Nations (2016), which is yet to be adopted-discusses the same concerns that Mr Whittaker has taken into consideration in his presentation.

A partial solution to all these problems is to construct an entry point to the MAC Protocol. This solution will not cover everything, but it can bring about a middle point to solving some of the potential areas of friction.

Ashna Taneja has conducted research at UNCITRAL’s Regional Centre for Asia and the Pacific (UNCITRAL RCAP) in South Korea, as well as UNIDROIT in Rome. The presentation Ms Taneja provided, looked at the benefits that the MAC Sectors will experience in Australia and a glimpse of the costs of implementation that would result from the Protocol.

The MAC industries are relatively strong in Australia. These sectors of the economy have a significant impact on Australian growth itself, as they make up a significant amount of Australia’s output. From 2016-2017 for the Gross Value-Added figures show that-mining took up 6.3%, agriculture, forestry and fishing took up 3% and construction amounted to 7.9%. Amounting to a total of 16.9% of Australia’s Gross Value Added. These figures provide for a significant impact on the Australian economy.

One of the potential benefits is associated with the effective enforcement of securities. Financiers can enforce securities in the event of default or insolvency immediately without referencing domestic rules. This makes it easier and cheaper in terms of regulatory compliance, particularly, for multi-national financiers. Additionally, the MAC Protocol will also provide for lower cost and credit through easier enforcement capabilities for financiers. Consequently, with the adoption of the MAC Protocol, an increase in competition in the finance industry will come about, leading to a decrease in the cost for finance for importers. There will be a signalling effect to businesses in adopting the Convention. Conversely, if Australia does not ratify there are two benefits that will affect Australia. The MAC Protocol will lower costs of enforcement of securities for overseas MAC equipment and, secondly, it will provide for a spill-over effect, which over time will make MAC equipment cheaper to access.

The possible friction with the MAC Protocol and the PPSA will need to be considered as a possible issue at hand. However, overall, Ms Taneja further highlighted that it is essential that Australia promotes this Protocol to its trading partners to maximise economic benefits. For those involved in the MAC industries or financing MAC equipment, it will significantly increase profits for both sides.


The MAC Protocol will create an international electronic registry that will allow creditors to protect their legal interests over high value MAC equipment, regardless of its location. The MAC Protocol provides uniform rules governing the creation, registration and priority of legal interests in MAC equipment, as well as facilitating expeditious and efficient enforcement of remedies in the event of a default or insolvency. Furthermore, a Diplomatic Conference will be held in 2019 where the MAC Protocol will be finalised. UNIDROIT invites Australia to send a delegation to the Diplomatic Conference in 2019 and consider signing and ratifying the MAC Protocol.

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