The UK Government has recently released its consultation document on implementation of the Cape Town Treaty in the UK. The purpose of the consultation is to seek the views of airlines, helicopter, airframe and aircraft engine manufacturers, banks and financiers, operating lessors, insolvency practitioners and legal firms involved in aircraft finance on how the UK should implement the Cape Town Convention to achieve the greatest economic benefit for the UK.

Specifically, views are sought on areas such as the following:

  • Whether any non-consensual rights, such as liens for unpaid airport and air navigation charges, should take priority over interests registered with the International Registry
  • Whether any non-consensual rights can be registered and treated as international interests
  • Whether creditors can exercise extra-judicial remedies without leave of the court
  • Whether the term speedy relief should be defined
  • Additional relief on insolvency
  • The ability of creditors to de-register and export aircraft equipment
  • Whether the UK should make declarations in line with the OECD’s Aviation Sector Understanding (ASU)
  • An estimate of the costs to business of ratifying the treaty

The consultation closes on 11 August 2014 and the UK Government will update its impact assessment following the consultation. Consultation documents and details on how to respond can be found on the Government website:

http://tinyurl.com/gov-convention-aircraft 

Background

The ‘Cape Town Convention on International Interests in Mobile Equipment’, or ‘Cape Town Convention’ is an international treaty that aims to help asset-based aircraft finance transactions by creating an international harmonised system to administer the registration of international interests (like mortgages and leases) in helicopters, aircraft frames and aircraft engines over a certain size. It also provides a process for how disputes under the treaty are managed.

In July 2010, the Department for Business, Innovation and Skills (BIS) held a call for evidence asking for views on whether the UK should ratify the Cape Town Convention. The majority of respondents were in favour of ratification, expecting airlines and leasing companies to benefit from lower financing costs for aircraft equipment due to a reduction in the risk to financiers involved in aircraft finance transactions. BIS published a response to the call for evidence in December 2013, setting out the Government’s intention to proceed with ratification.  This call for consultation is the next step towards the UK’s ratification of the Cape Town Convention.