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CONVENTION ON INTERNATIONAL FINANCIAL LEASING
UNIDROIT CONVENTION
ON INTERNATIONAL FINANCIAL LEASING
(OTTAWA, 28 MAY 1988)
THE STATES PARTIES TO THIS CONVENTION,
RECOGNISING the
importance of removing certain legal impediments to the international
financial leasing of equipment, while maintaining a fair balance of
interests between the different parties to the transaction,
AWARE of the need
to make international financial leasing more available,
CONSCIOUS of the
fact that the rules of law governing the traditional contract of hire
need to be adapted to the distinctive triangular relationship created
by the financial leasing transaction,
RECOGNISING therefore
the desirability of formulating certain uniform rules relating primarily
to the civil and commercial law aspects of international financial leasing,
HAVE AGREED as
follows:
CHAPTER
I - SPHERE OF APPLICATION AND GENERAL PROVISIONS
Article
1
1. - This Convention
governs a financial leasing transaction as described in paragraph 2
in which one party (the lessor),
(a) on the specifications
of another party (the lessee), enters into an agreement (the supply
agreement) with a third party (the supplier) under which the lessor
acquires plant, capital goods or other equipment (the equipment) on
terms approved by the lessee so far as they concern its interests, and
(b) enters into
an agreement (the leasing agreement) with the lessee, granting to the
lessee the right to use the equipment in return for the payment of rentals.
2. - The financial
leasing transaction referred to in the previous paragraph is a transaction
which includes the following characteristics:
(a) the lessee
specifies the equipment and selects the supplier without relying primarily
on the skill and judgment of the lessor;
(b) the equipment
is acquired by the lessor in connection with a leasing agreement which,
to the knowledge of the supplier, either has been made or is to be made
between the lessor and the lessee; and
(c) the rentals
payable under the leasing agreement are calculated so as to take into
account in particular the amortisation of the whole or a substantial
part of the cost of the equipment.
3. - This Convention
applies whether or not the lessee has or subsequently acquires the option
to buy the equipment or to hold it on lease for a further period, and
whether or not for a nominal price or rental.
4. - This Convention
applies to financial leasing transactions in relation to all equipment
save that which is to be used primarily for the lessee's personal, family
or household purposes.
Article
2
In the case of
one or more sub-leasing transactions involving the same equipment, this
Convention applies to each transaction which is a financial leasing
transaction and is otherwise subject to this Convention as if the person
from whom the first lessor (as defined in paragraph 1 of the previous
article) acquired the equipment were the supplier and as if the agreement
under which the equipment was so acquired were the supply agreement.
Article
3
1. - This Convention
applies when the lessor and the lessee have their places of business
in different States and:
(a) those States
and the State in which the supplier has its place of business are Contracting
States; or
(b) both the supply
agreement and the leasing agreement are governed by the law of a Contracting
State
.
2. - A reference
in this Convention to a party's place of business shall, if it has more
than one place of business, mean the place of business which has the
closest relationship to the relevant agreement and its performance,
having regard to the circumstances known to or contemplated by the parties
at any time before or at the conclusion of that agreement.
Article
4
1. - The provisions
of this Convention shall not cease to apply merely because the equipment
has become a fixture to or incorporated in land.
2. - Any question
whether or not the equipment has become a fixture to or incorporated
in land, and if so the effect on the rights inter se of the
lessor and a person having real rights in the land, shall be determined
by the law of the State where the land is situated.
Article
5
1. - The application
of this Convention may be excluded only if each of the parties to the
supply agreement and each of the parties to the leasing agreement agree
to exclude it.
2. - Where the
application of this Convention has not been excluded in accordance with
the previous paragraph, the parties may, in their relations with each
other, derogate from or vary the effect of any of its provisions except
as stated in Articles 8(3) and 13(3)(b) and (4).
Article
6
1. - In the interpretation
of this Convention, regard is to be had to its object and purpose as
set forth in the preamble, to its international character and to the
need to promote uniformity in its application and the observance of
good faith in international trade.
2. - Questions
concerning matters governed by this Convention which are not expressly
settled in it are to be settled in conformity with the general principles
on which it is based or, in the absence of such principles, in conformity
with the law applicable by virtue of the rules of private international
law.
CHAPTER
II - RIGHTS AND DUTIES OF THE PARTIES
Article
7
1. - (a) The lessor's
real rights in the equipment shall be valid against the lessee's trustee
in bankruptcy and creditors, including creditors who have obtained an
attachment or execution.
(b) For the purposes
of this paragraph "trustee in bankruptcy" includes a liquidator,
administrator or other person appointed to administer the lessee's estate
for the benefit of the general body of creditors.
2. - Where by
the applicable law the lessor's real rights in the equipment are valid
against a person referred to in the previous paragraph only on compliance
with rules as to public notice, those rights shall be valid against
that person only if there has been compliance with such rules.
3. - For the purposes
of the previous paragraph the applicable law is the law of the State
which, at the time when a person referred to in paragraph 1 becomes
entitled to invoke the rules referred to in the previous paragraph,
is :
(a) in the case
of a registered ship, the State in which it is registered in the name
of the owner (for the purposes of this sub-paragraph a bareboat charterer
is deemed not to be the owner);
(b) in the case
of an aircraft which is registered pursuant to the Convention on International
Civil Aviation done at Chicago
on 7
December 1944 , the State
in which it is so registered;
(c) in the case
of other equipment of a kind normally moved from one State to another,
including an aircraft engine, the State in which the lessee has its
principal place of business;
(d) in the case
of all other equipment, the State in which the equipment is situated.
4. - Paragraph
2 shall not affect the provisions of any other treaty under which the
lessor's real rights in the equipment are required to be recognised.
5. - This article
shall not affect the priority of any creditor having:
(a) a consensual
or non-consensual lien or security interest in the equipment arising
otherwise than by virtue of an attachment or execution, or
(b) any right
of arrest, detention or disposition conferred specifically in relation
to ships or aircraft under the law applicable by virtue of the rules
of private international law.
Article
8
1. - (a) Except
as otherwise provided by this Convention or stated in the leasing agreement,
the lessor shall not incur any liability to the lessee in respect of
the equipment save to the extent that the lessee has suffered loss as
the result of its reliance on the lessor's skill and judgment and of
the lessor's intervention in the selection of the supplier or the specifications
of the equipment.
(b) The lessor
shall not, in its capacity of lessor, be liable to third parties for
death, personal injury or damage to property caused by the equipment.
(c) The above
provisions of this paragraph shall not govern any liability of the lessor
in any other capacity, for example as owner.
2. - The lessor
warrants that the lessee's quiet possession will not be disturbed by
a person who has a superior title or right, or who claims a superior
title or right and acts under the authority of a court, where such title,
right or claim is not derived from an act or omission of the lessee.
3. - The parties
may not derogate from or vary the effect of the provisions of the previous
paragraph in so far as the superior title, right or claim is derived
from an intentional or grossly negligent act or omission of the lessor.
4. - The provisions
of paragraphs 2 and 3 shall not affect any broader warranty of quiet
possession by the lessor
which is mandatory
under the law applicable by virtue of the rules of private international
law.
Article
9
1. - The lessee
shall take proper care of the equipment, use it in a reasonable manner
and keep it in the condition in which it was delivered, subject to fair
wear and tear and to any modification of the equipment agreed by the
parties.
2. - When the
leasing agreement comes to an end the lessee, unless exercising a right
to buy the equipment or to hold the equipment on lease for a further
period, shall return the equipment to the lessor in the condition specified
in the previous paragraph.
Article
10
1. - The duties
of the supplier under the supply agreement shall also be owed to the
lessee as if it were a party to that agreement and as if the equipment
were to be supplied directly to the lessee. However, the supplier shall
not be liable to both the lessor and the lessee in respect of the same
damage.
2. - Nothing in
this article shall entitle the lessee to terminate or rescind the supply
agreement without the consent of the lessor.
Article
11
The lessee's rights
derived from the supply agreement under this Convention shall not be
affected by a variation of any term of the supply agreement previously
approved by the lessee unless it consented to that variation.
Article
12
1. - Where the
equipment is not delivered or is delivered late or fails to conform
to the supply agreement:
(a) the lessee
has the right as against the lessor to reject the equipment or to terminate
the leasing agreement; and
(b) the lessor
has the right to remedy its failure to tender equipment in conformity
with the supply agreement,
as if the lessee
had agreed to buy the equipment from the lessor under the same terms
as those of the supply agreement.
2. - A right conferred
by the previous paragraph shall be exercisable in the same manner and
shall be lost in the same circumstances as if the lessee had agreed
to buy the equipment from the lessor under the same terms as those of
the supply agreement.
3. - The lessee
shall be entitled to withhold rentals payable under the leasing agreement
until the lessor has remedied its failure to tender equipment in conformity
with the supply agreement or the lessee has lost the right to reject
the equipment.
4. - Where the
lessee has exercised a right to terminate the leasing agreement, the
lessee shall be entitled to recover any rentals and other sums paid
in advance, less a reasonable sum for any benefit the lessee has derived
from the equipment.
5. - The lessee
shall have no other claim against the lessor for non-delivery, delay
in delivery or delivery of non-conforming equipment except to the extent
to which this results from the act or omission of the lessor.
6. - Nothing in
this article shall affect the lessee's rights against the supplier under
Article 10.
Article
13
1. - In the event
of default by the lessee, the lessor may recover accrued unpaid rentals,
together with interest and damages.
2. - Where the
lessee's default is substantial, then subject to paragraph 5 the lessor
may also require accelerated payment of the value of the future rentals,
where the leasing agreement so provides, or may terminate the leasing
agreement and after such termination:
(a) recover possession
of the equipment; and
(b) recover such
damages as will place the lessor in the position in which it would have
been had the lessee performed the leasing agreement in accordance with
its terms.
3. - (a) The leasing
agreement may provide for the manner in which the damages recoverable
under paragraph 2 (b) are to be computed.
(b) Such provision
shall be enforceable between the parties unless it would result in damages
substantially in excess of those provided for under paragraph 2 (b).
The parties may not derogate from or vary the effect of the provisions
of the present sub-paragraph.
4. - Where the
lessor has terminated the leasing agreement, it shall not be entitled
to enforce a term of that agreement providing for acceleration of payment
of future rentals, but the value of such rentals may be taken into account
in computing damages under paragraphs 2(b) and 3. The parties may not
derogate from or vary the effect of the provisions of the present paragraph.
5. - The lessor
shall not be entitled to exercise its right of acceleration or its right
of termination under paragraph 2 unless it has by notice given the lessee
a reasonable opportunity of remedying the default so far as the same
may be remedied.
6. - The lessor
shall not be entitled to recover damages to the extent that it has failed
to take all reasonable steps to mitigate its loss.
Article
14
1. - The lessor
may transfer or otherwise deal with all or any of its rights in the
equipment or under the leasing agreement. Such a transfer shall not
relieve the lessor of any of its duties under the leasing agreement
or alter either the nature of the leasing agreement or its legal treatment
as provided in this Convention.
2. - The lessee
may transfer the right to the use of the equipment or any other rights
under the leasing agreement only with the consent of the lessor and
subject to the rights of third parties.
CHAPTER
III - FINAL PROVISIONS
Article
15
1. - This Convention
is open for signature at the concluding meeting of the Diplomatic Conference
for the Adoption of the Draft Unidroit Conventions on International
Factoring and International Financial Leasing and will remain open for
signature by all States at Ottawa until 31 December 1990.
2. - This Convention
is subject to ratification, acceptance or approval by States which have
signed it.
3. - This Convention
is open for accession by all States which are not signatory States as
from the date it is open for signature.
4. - Ratification,
acceptance, approval or accession is effected by the deposit of a formal
instrument to that effect with the depositary.
Article
16
1. - This convention
enters into force on the first day of the month following the expiration
of six months after the date of deposit of the third instrument of ratification,
acceptance, approval or accession.
2. - For each
State that ratifies, accepts, approves, or accedes to this Convention
after the deposit of the third instrument of ratification, acceptance,
approval or accession, this Convention enters into force in respect
of that State on the first day of the month following the expiration
of six months after the date of the deposit of its instrument of ratification,
acceptance, approval or accession.
Article
17
This Convention
does not prevail over any treaty which has already been or may be entered
into; in particular it shall not affect any liability imposed on any
person by existing or future treaties.
Article
18
1. - If a Contracting
State has two or more territorial units in which different systems of
law are applicable in relation to the matters dealt with in this Convention,
it may, at the time of signature, ratification, acceptance, approval
or accession, declare that this Convention is to extend to all its territorial
units or only to one or more of them, and may substitute its declaration
by another declaration at any time.
2. - These declarations
are to be notified to the depositary and are to state expressly the
territorial units to which the Convention extends.
3. - If, by virtue
of a declaration under this article, this Convention extends to one
or more but not all of the territorial units of a Contracting State,
and if the place of business of a party is located in that State, this
place of business, for the purposes of this Convention, is considered
not to be in a Contracting State, unless it is in a territorial unit
to which the Convention extends.
4. - If a Contracting
State
makes no declaration under
paragraph 1, the Convention is to extend to all territorial units of
that State.
Article
19
1. - Two or more
Contracting States which have the same or closely related legal rules
on matters governed by this Convention may at any time declare that
the Convention is not to apply where the supplier, the lessor and the
lessee have their places of business in those States. Such declarations
may be made jointly or by reciprocal unilateral declarations.
2. - A Contracting
State which has the same or closely related legal rules on matters governed
by this Convention as one or more non-Contracting States may at any
time declare that the Convention is not to apply where the supplier,
the lessor and the lessee have their places of business in those States.
3. - If a State
which is the object of a declaration under the previous paragraph subsequently
becomes a Contracting State, the declaration made will, as from the
date on which the Convention enters into force in respect of the new
Contracting State, have the affect of a declaration made under paragraph
1, provided that the new Contracting State joins in such declaration
or makes a reciprocal unilateral declaration.
Article
20
A Contracting
State
may declare at the time of
signature, ratification, acceptance, approval or accession that it will
substitute its domestic law for Article 8(3) if its domestic law does
not permit the lessor to exclude its liability for its default or negligence.
Article
21
1. - Declarations
made under this Convention at the time of signature are subject to confirmation
upon ratification, acceptance or approval.
2. - Declarations
and confirmations of declarations are to be in writing and to be formally
notified to the depositary.
3. - A declaration
takes effect simultaneously with the entry into force of this Convention
in respect of the State concerned. However, a declaration of which the
depositary receives formal notification after such entry into force
takes effect on the first day of the month following the expiration
of six months after the date of its receipt by the depositary. Reciprocal
unilateral declarations under Article 19 take effect on the first day
of the month following the expiration of six months after the receipt
of the latest declaration by the depositary.
4. - Any State
which makes a declaration under this Convention may withdraw it at any
time by a formal notification in writing addressed to the depositary.
Such withdrawal is to take effect on the first day of the month following
the expiration of six months after the date of the receipt of the notification
by the depositary.
5. - A withdrawal
of a declaration made under Article 19 renders inoperative in relation
to the withdrawing State, as from the date on which the withdrawal takes
effect, any joint or reciprocal unilateral declaration made by another
State under that article.
Article
22
No reservations
are permitted except those expressly authorised in this Convention.
Article
23
This Convention
applies to a financial leasing transaction when the leasing agreement
and the supply agreement are both concluded on or after the date on
which the Convention enters into force in respect of the Contracting
States referred to in Article 3(1)(a), or of the Contracting State or
States referred to in paragraph 1(b) of that article.
Article
24
1. - This Convention
may be denounced by any Contracting State at any time after the date
on which it enters into force for that State.
2. - Denunciation
is effected by the deposit of an instrument to that effect with the
depositary.
3. - A denunciation
takes effect on the first day of the month following the expiration
of six months after the deposit of the instrument of denunciation with
the depositary. Where a longer period for the denunciation to take effect
is specified in the instrument of denunciation it takes effect upon
the expiration of such longer period after its deposit with the depositary.
Article
25
1. - This Convention
shall be deposited with the Government of Canada.
2. - The Government
of Canada shall:
• inform
all States which have signed or acceded to this Convention and the President
of the International Institute for the Unification of Private Law (Unidroit)
of:
(i) each new signature
or deposit of an instrument of ratification, acceptance, approval or
accession, together with the date thereof;
(ii) each declaration
made under Articles 18, 19 and 20;
(iii) the withdrawal
of any declaration made under Article 21 (4);
(iv) the date
of entry into force of this Convention;
(v) the deposit
of an instrument of denunciation of this Convention together with the
date of its deposit and the date on which it takes effect;
(b) transmit certified
true copies of this Convention to all signatory States, to all States
acceding to the Convention and to the President of the International
Institute for the Unification of Private Law (Unidroit).
IN WITNESS WHEREOF
the undersigned plenipotentiaries, being duly authorised by their respective
Governments, have signed this Convention.
DONE at Ottawa
, this twenty-eighth day of
May, one thousand nine hundred and eighty-eight, in a single original,
of which the English and French texts are equally authentic.
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