Cape Town Convention

  • Tracey Cheek posted an article
    The History Behind the International Registry see more

    NAFA member, Aircraft Guaranty Corporation, discusses the history of the International Registry. 

    The concept of multi-country international laws governing the financing of aircraft was the brainchild of Jeffrey Wool, who understood the global nature of airline financing and knew that more favorable international laws were needed to encourage investment in startup airlines. 

    Originally referred to as UNIDROIT, which is French for one law, he envisioned countries around the globe adopting a set of laws favorable to lenders that would encourage international financing of aircraft. 

    It would include a central international registry where rights and interests of international lenders would be registered in one place.

    The Concept of Global Financing

    Global financing for aircraft and airlines is of huge importance. You can read about this in ourblog, Why an Aircraft Should be Registered in Trust

    Starting a new airline is no small undertaking – with a long list of requirements needed to get a new airline off the ground, not the least of which is capital investment. Emerging markets are traditionally not affluent enough to provide start-ups with capital, so new airlines look to more prosperous economies for assistance. 

    The continuing increase in global air travel is overwhelming current supply chains, creating opportunities for new airlines to handle the demand. Start-ups around the world are adopting the low-cost carrier model, and opportunities to invest in these start-ups abound. Investors need to feel comfortable, however, with the business model of the airlines with which they are investing.

    Investors around the globe are more willing to invest in startup airlines if they can be assured that they have the right to repossess the assets of the new business if the burgeoning new airline doesn’t make it and can’t pay off their loan.

    The Cape Town Convention

    In response to this need, the Convention on International Interests in Mobile Equipment was held, creating a set of uniform laws to encourage the financing of aircraft, particularly for developing countries. The original convention was held on November 16, 2001 in Cape Town, South Africa, and has therefore become widely recognized as the Cape Town Convention. 

    Signing the treaty was only the first step, and only represented an intent to participate in the Convention. To fully participate in Cape Town, signatories to the Convention had to ratify the treaty. This meant that participating countries had to change or adopt certain laws to make them more favorable to lenders financing the airlines.

    To get Cape Town fully up and running, eight countries had to ratify the treaty. This took a while, so although the Convention was signed in 2001, not all of the provisions were fully up and running until March 1, 2006. 

    The original participating eight countries were Ethiopia, Ireland, Malaysia, Nigeria, Oman, Panama, Pakistan, and the United States. Today, the Convention has been signed by 77 different countries, and all but seven have fully ratified the treaty.

    So, What About the International Registry?

    The Cape Town Convention had a provision for creating an International Registry (IR), where the rights of all these international lenders could be filed for the world to see. The concept is much like the FAA, where all interests in the United States are filed in one place (Oklahoma City). 

    Unlike the FAA, however, the IR is an electronic-based registry that only gives notice of an international interest against an aircraft. In order to see the actual documents creating the interest, one must go beyond the IR to the country where the interest was created.

    The IR was originally designed to show only liens against aircraft. As the concept of the Convention grew, many people felt that ownership interests should be registered as well. Many wanted it to operate more like the FAA’s title-based registry, so that interested parties could get an understanding of the aircraft owner’s current identity, not just whether there were any liens against it. 

    Registration of Ownership Interests were therefore added to the scope of the treaty, and the IR now allows for notices of ownership interest called contract of sales.

    Is the International Registry in Cape Town, South Africa?

    While the treaty was signed in South Africa, the question of where to place the IR was a big one, and political. Many countries vied for the right to host the IR, but it came down to two main contenders: Canada and Ireland. 

    A lot of deliberation went into making the final decision, but in the end, Ireland was selected, and the IR was placed in Dublin where it is currently managed by a company named Aviareto.

    Now that we’ve given the history behind the Cape Town Convention and the creation of the International Registry, our clients may wonder about the need to register – please consult with Aircraft Guaranty Corporation to determine if you are eligible to register with the IR or not.

    This article was originally published by Aircraft Guaranty Corporation on August 28, 2019.

  • Tracey Cheek posted an article
    The International Registry: Protecting Your Aviation Assets see more

    NAFA member YYZlaw discusses the International Registry and ways to protect your aviation assets.

    Operating under the Cape Town Convention and Aircraft Protocol (CTC), the International Registry of Mobile Assets (IR) provides for the electronic registration and protection of ‘international interests’ in aircraft objects, namely airframes capable of transporting 8 or more passengers or goods in excess of 2750 kilograms, helicopters capable of transporting 5 or more passengers or goods in excess of 450 kilograms, and aircraft engines that have at least 1750 lb of thrust or its equivalent (jet propulsion) or have at least 550 rated take-off shaft horsepower or its equivalent (turbine-powered or piston-powered). As with any other valid security interest, international interests must be registered in order to be perfected (as against the interests of all third parties). The manufacturer’s name, the model designator, and the manufacturer’s serial number form the subject of each registration.

    While other national or provincial registries provide additional or alternate means of perfecting security interests in aircraft and engines (such as Ontario’s Personal Property Security Registration system (PPSA) or Quebec’s Register of Personal and Movable Real Rights (RPMRR)), the International Registry offers a unified and internationally recognized system. As such, it is intended to become the sole register for international interests in aircraft objects. Canada, similar to other contracting states to the CTC, still maintains a national aircraft registry: The Canadian Civil Aircraft Register, monitored by Transport Canada. However, this national registry serves only to record the custody and control of aircraft, and does not have any bearing on ownership.

    As the International Registry is monitored by the International Civil Aviation Organization and centralizes the recording of transactions, registration is considered best practice for purchasers, creditors, debtors, lessors, lessees, agents and others in protecting their financial and/or ownership interests in such an asset. Registration with the International Registry can even have a positive effect on resale values, by providing a clearer picture of the ownership and title history. In order to demonstrate the priority of interests, the IR produces Priority Search Certificates, which provide a complete history of registration upon searching against an aircraft or engine.

    YYZlaw has years of experience assisting clients with all facets and functions of the International Registry. We regularly assist clients with forming and maintaining Transacting User Entity accounts, filing or discharging registrations of international interests or contracts of sale, and obtaining priority search certificates to assist purchase, sale, lease or financing transactions of aircraft and engines. Our assistance and guidance provides clients with the satisfaction that their assets are secure and at optimum value.

    This article was originally published by YYZlaw on April 25, 2018.