Executive Summary

The Irish High Court currently has exclusive jurisdiction to make orders against the Registrar (as defined below) pursuant to the Convention and the Protocol (both as defined below).

The recent judgment of Mr Justice McDonald in Unicredit Global Leasing Export Gmbh v Business Aviation Limited and Aviareto Limited1 is a welcome reminder that the Irish Courts will not tolerate misleading registrations on the International Registry for International Interests in Mobile Equipment (the "Registry").

The judgment of Mr Justice McDonald sets out the reasoning for the granting of orders which he had made two weeks previously.

Background

The Registry was established pursuant to the Convention on International Interests in Mobile Equipment done at Cape Town on 16th November 2001 (the "Cape Town Convention") and the Protocol to the Convention on International Interests in Mobile Equipment on Matters Specific to Aircraft Equipment (the "Protocol"). The Registry is at the centre of the Cape Town Convention and the Protocol priority system and is maintained by the second respondent (the "Registrar") in Dublin.

The Registry provides for the electronic registration and protection of registered interests which are recognised by all states which have ratified or acceded to the Convention and the Protocol, with priority being determined on a "first to file" basis. Registered interests have priority over unregistered interests. Registration is considered to be an essential step for owners, creditors, lessors and others in protecting their financial interest in aircraft objects.

The Registrar's function is not to verify or validate any specific registration made. Its role is purely administrative. The Registry's system of priority is premised upon the bona fides of those undertaking the transactions.

While most registrations made on the Registry are effected consensually with the input of the parties to the underlying transaction which creates the registrable interest, certain rights or interests can be registered unilaterally and are known as registrable non-consensual rights or interests ("RNCRIs")2. It is for each contracting state to declare the categories of RNCRI that may be registrable.

Proceedings

The applicant issued the proceedings seeking the removal of three RNCRIs that had been registered against an aircraft which it owned (the "Aircraft") and two of its engines (the "Engines"). The RNCRIs were registered unilaterally by the first respondent on foot of an alleged debt said to be owed by the applicant to the first respondent.

The applicant sought an order directing that the first respondent procure the removal of the RNCRIs and sought an order directing the Registrar to remove the RNCRIs if, within 48 hours of an order being made directing the first respondent to procure the removal of the RNCRIs, the first respondent failed to comply with said order. The applicant further sought a declaration that the first respondent, its servants, officers or agents be restrained from making any further registrations against the Aircraft and or the Engines.

The applicant submitted three grounds on which it contested the validity of the RNCRIs registered against the Aircraft and the Engines, the primary ground being its contention that the Convention did not apply in circumstances where it argued that there was no connecting factor to the Convention that would permit such a registration.

There are two factors which will attract the application of the Convention, (1) where the relevant "debtor" is situated in a contracting state to the Convention, or (2) where the relevant aircraft is registered in a contracting state. A "debtor" is defined in the Convention as "a chargor under a security agreement, a conditional buyer under a title reservation agreement, a lessee under a leasing agreement or a person whose interest in an object is burdened by a registrable non-consensual right or interest...".

The Convention states that a debtor is situated in any contracting state:-

a. under which the law of which it is incorporated or formed;

b. where it has its registered office or statutory seat;

c. where it has its centre of administration; or

d. where it has its place of business

In the instant case, applying the above criteria, the Court stated that it was "very clear that (the applicant) is situated in Austria for the purposes of the Convention". Austria is not a contracting state to the Convention. In the circumstances the Convention could only be applicable if the Aircraft is registered in a contacting state.

In registering the RNCRIs, the first respondent claimed that the Aircraft was registered in the United Arab Emirates, a contracting state to the Convention. The Court noted that this was manifestly incorrect - the Aircraft was registered on the register of aircrafts maintained by the LBA in Germany. Germany is not a contracting state to the Convention.

The Court noted that there was plainly no connecting factor to the Convention in the instant case and that there was nothing in the terms of the Convention or the Protocol that would permit the Convention to be invoked against the Aircraft or the Engines. The Court cited with approval the earlier decision of the Irish High Court in Belair Holdings v Etole Holdings Ltd3 which held that the non-applicability of the Convention is a sufficient ground, in itself, to order the first respondent to remove or discharge the registration in question. The Court ordered the first respondent to procure the discharge of the registration of the RNCRIs and made an order directing the Registrar to procure the removal of the registration of the RNCRIs in the event that the first respondent had not done so within 48 hours of the making of the order.

The Court noted that there was a proper basis to conclude that registration was made abusively and that there were good grounds to make the order restraining the first respondent from making further registrations against the Aircraft and / or the Engines. However, the Court noted that it had not heard submissions on behalf of the Registrar on this issue and would hold off making any such order until such time as the Registrar had the opportunity to make any submissions that it wished.

Comment

In delivering his judgment, Mr Justice McDonald noted that the integrity of the Registry is of fundamental importance, that interested parties should be able to rely on the Register as an accurate reflection of the registrable rights or interests affecting an aircraft and that misleading registrations should be removed at the earliest possible time.

The importance of maintaining the accuracy of the Register is reflected in the fact that Mr Justice McDonald made his orders on the day that the application was heard, prior to delivering his rationale for same. In so doing, Mr Justice McDonald ensured that Register was amended to reflect the true position as quickly as possible.

The proceedings serve as pertinent reminder that the Irish Courts will take swift and decisive action to ensure that the system of registration pursuant to the Convention and the Protocol is not readily abused.