Ukraine has taken a major step towards implementation of the Convention on International Interests in Mobile Equipment (the "Cape Town Convention"). Law of Ukraine No. 4904-VI "On Ratification of the Convention on International Interests in Mobile Equipment and the Protocol to the Convention on International Interests in Mobile Equipment on Matters Specific to Aircraft Equipment" was adopted on 6 June 2012 and became effective on 15 July 2012.
The purpose of the Cape Town Convention is to create a unified international framework for the protection of the interests of creditors in mobile equipment. It is particularly important for the international aircraft market, which requires complex financial structuring and effective protection of aircraft lessors and owners. Unfortunately the current Ukrainian legal framework is far from the Cape Town Convention standards and creditors see Ukraine as a risky place to sell or lease aircraft. As a result, without the ratification of the Cape Town Convention, Ukrainian aircraft operators on the international aircraft market enjoy far less favorable conditions than their peers from members of the Cape Town Convention.
Following ratification of the Cape Town Convention, Ukraine will enhance protection of creditors with the following major protection mechanisms:
- registration of interests in aircraft in the International Registry of Mobile Assets;
- right to sell, lease, repossess, deregister and export aircraft and interests therein upon default by a obligor, and
- protection of an aircraft and its repossession by the owner or lessor in the event of insolvency of the Ukrainian counterparty.
Ukraine will become a party to the Cape Town Convention three months after depositing the ratification document with the International Institute for the Unification of Private Law (UNCITRAL). Also, Ukraine will have to adjust a number of its national laws and regulations to make them compliant with the Cape Town Convention.