The Personal Property Securities Act 2009 (Cth) (PPSA) has a wide reach in relation to personal property and extends its operation to aircraft and aircraft engines.

However aircraft are ambulatory by nature and often attract complex jurisdictional and cross-border issues. On 16 November 2001 the Cape Town Convention on International Interests in Mobile Equipment 2001 (Convention) was signed by several member states to set out a legal framework for the acquisition and use of high end mobile equipment. On March 2006 the Protocol on Matters Specific to Aircraft Equipment (Protocol) came into effect by extending the application of the Convention to include contracts of sale of aircraft equipment (together the Treaty). Australia was not one of the signatories to the Convention nor did it later ratify the Treaty.

The Department of Infrastructure and Transport has recognised the expanding growth of the aviation industry in Australia with the 16 December 2009 release of its White Paper on Aviation and recently sought submissions from stakeholders as to the approach the Australian government should take to avoid duplication of legislation in light of the Treaty and the PPSA.

 PPSA or the Treaty?

We take the view that the Treaty should prevail. Our approach is based on the following considerations:

  • the PPSA will govern security interests in all aircraft falling within the Treaty definition1 and will include smaller aircraft if they have nationality and registration marks assigned to them under the Chicago Convention.2 The Treaty on the other hand covers aircraft over a certain weight and aircraft engines with a minimum thrust (together aircraft equipment).

Accession to the Treaty and amending the PPSA for the purpose of allowing the Treaty to prevail to the extent of any inconsistencies would have the advantage of:

  • covering the field in aircraft regulation; the Treaty would apply to larger aircraft equipment and the PPSA would regulate aircraft objects outside its scope. (Financiers, both domestic and international, would find comfort in the protection of their interests and reduction of risk), and
  • aircraft operators having access to fee discounts from export credit agencies through Australia’s participation in the Sector Understanding on Export Credits for Civil Aircraft (ASU) for Treaty aircraft objects. (Ratification of the Treaty would also extend the access to fee discounts to smaller aircraft not caught within the Treaty. This would have a flow on effect of reducing financing costs to all debtors in the industry.)

 Allowing the PPSA to regulate the law in relation to aircraft would require a substantial rewrite of the PPSA. It would of course be possible to amend the PPSA and include extensive remedies to enable financiers to recover assets and facilitate repossessions. However any rewrite must recognise that, as the PPSA has far reaching application in relation to personal property, a substantial amount of work has already been undertaken by industry and significant costs incurred to install policies and procedures, set up computer systems, rewrite documentation and provide training based on its present drafting or present form and its implementation in October 2011. Further changes are already mooted for May 2011 and this must be a cause of concern to industry participants.

New Zealand recently acceded to the Treaty. Ten years ago it introduced its own Personal Property Securities Act 1999 (NZPPSA) (on which the PPSA is, to a large extent, based) but Parliament took the step of creating an exception to the NZPPSA for aircraft by passing the Civil Aviation (Cape Town Convention and Other Matters) Amendment Act 2010 (the Act). From 1 November 2010 the Treaty prevails over any other New Zealand law, including the NZPPSA.

In New Zealand’s case, by introducing the Act, minimal amendment was required to the NZPPSA.

  • possible harmonisation of the Australian and New Zealand PPS regimes. The Ministry of Economic Development in New Zealand is currently consulting interested parties to establish a single trans Tasman register by the end of 2014. As New Zealand has acceded to the Treaty it seems incumbent on the Australian government to take the same approach to enable harmonisation to take place.

 Where to next?

The Department of Infrastructure and Transport has received all submissions from interested parties and will be shortly submitting its own recommendations to the government. As the implementation of the PPSA has now been deferred to October 2011 we expect the government to consider its options over the ensuing months and release its position before the PPSA implementation date.