India’s Civil Aviation Ministry has opened a public consultation on the prospective wholesale adoption of the Cape Town Convention (CTC) into Indian law.
The draft Cape Town Convention Bill, published on the ministry’s website for a 30-day consultation on 8 October, proposes to make the country a full adopter of the CTC, which standardises transactions involving movable property.
India became a party to the CTC in 2008 and made subsequent amendments to its 1937 aircraft regulation to allow for the deregistration and export of aircraft in accordance with the convention. However, according to the ministry, full adoption would require amendments to a host of existing Indian statutes that conflict with the CTC.
The ministry cited a 10% discount on processing fees for loans to acquire aircraft offered by the OECD to countries adopting the CTC via specific implementing legislation.
“Further, an Act of Parliament would also provide greater confidence to the intending creditors resulting in reduction of the risk applicable to asset-based financing and leasing transactions,” the ministry added.
According to Nitin Sarin, managing partner at Sarin & Co in Chandigarh, the introduction of the bill would “give Indian carriers a level playing field with the rest of the world in as much as cost of credit is concerned.”
“At the moment, being a ‘dangerous’ jurisdiction, Indian carriers are paying a substantially higher amount in relation to their aircraft,” he said, adding that “it shows the intent of the Government of India to listen to the international financing and leasing community and would also attract much more investment into the aviation industry of India.”
The fact that India had yet to fully implement the CTC has meant “there was nothing available for a party to invoke apart from the general law of treaty obligations, thereby virtually debarring anyone from any speedy relief,” Sarin said.
There are several laws which currently conflict with the CTC, including the Airports Authority of India Act, which allows an airport to detain, attach, auction and sell an aircraft for unpaid parking; the Insolvency and Bankruptcy Code, which allows a maximum of 270 days of a moratorium in which an aircraft cannot be leased out to someone against whom bankruptcy proceedings have been initiated; and the Code of Civil Procedure and Specific Relief Act.
To account for this, the new bill contains a provision that accords primacy to the convention and its aviation protocol in case of conflict with any other law. The bill would also enable the Indian government to make further rules regarding the convention as it deems necessary.
“There has been a tremendous amount of effort which has been put in by the Aviation Working Group and the India Contact Group to reach this stage,” said Sarin. “There is also a massive amount of work left, there is no assurance that the bill will ever become a law, but baby steps are the way to go.”
There are currently 77 contracting states to the Cape Town Convention, according to the International Institute for the Unification of Private Law (UNIDROIT).
The treaty and protocol were signed under their full names (Convention on International Interests and Mobile Equipment; Protocol to the Convention on Matters Specific to Aircraft Equipment) in Cape Town, South Africa in 2001. This was overseen by UNIDROIT and the International Civil Aviation Organisation. The convention came into force in 2004, with the aviation protocol becoming effective in 2006.