The Cape Town Convention Offers Registered International Interests Providing Maximal Security to American Lessees of Aircraft

This paper focuses on the acquisition of aircraft by United States-based airlines. At present in the U.S., airlines are faced with a fierce competition, and to commercially survive, they keep advertising that they operate modern and safe aircraft. Since the beginning of aviation, there does not exist a fully state-owned “flag carrier” in the U.S. On the contrary, the commercial airlines market has always been in the hands of private undertakings. Traditionally, the airlines themselves have arranged the acquisition of their fleets of aircraft. For this purpose, they have to obtain loans from private banks and other non-governmental financial institutions. A substantial amount of credit is annually extended to realize the acquisition of the costly aircraft. The credit is generally supplied through a “purchase-money loan” that is secured on the aircraft. This practice is called asset-based financing. In the U.S., the aircraft which are operated by the local airlines have generally been acquired by means of international finance and lease transactions. As the acquisition of aircraft is extremely capital-intensive, the financier or lessor must be able to successfully enforce its proprietary interests in the specific aircraft. This requirement is of particular significance in the event that an airline defaults or becomes insolvent. While the aforementioned need to safeguard the financiers and lessors is undisputed, this article firmly puts forward that also the lessees of aircraft must be adequately protected. The arguments contained in this contribution are substantiated by the local laws and international aviation finance and lease conventions which apply in the United States. With respect to the local situation currently existing in the U.S., this contribution focuses on the relevant articles of the Uniform Commercial Code (UCC). Moreover, it refers to the manner in which these provisions have been implemented in the substantive property law of the State of New York. It is noted that in several other countries, the local airlines may obtain similar proprietary rights from the lessors. These foreign legal regimes aim, inter alia, to facilitate the creation, validity, and enforcement of the secured rights of the lessees of aircraft. Nevertheless, not all of these instruments are successful in providing the aircraft lessees with adequate security

The Dutch Real Rights can be the Basis of International Interests under the Convention of Cape Town, just like their equivalent American Security Interests.

Abstract: The Convention on International Interests in Mobile Equipment (CIME) and the Aircraft Equipment Protocol (AEP) establishes the creation of an autonomous international interest. In the Netherlands, the property law status of aircraft was laid down in the Dutch Civil Code (DCC) with effect from 1996. Dutch air law provides for the possibility of granting an airline company a full right in rem in the acquisition or possession of an aircraft. The rights in rem of Dutch airlines originate in the laws of certain states of the United States pre-dating World War II. These proprietary interests were incorporated into the Geneva Convention under American influence. In turn they were transposed into Dutch domestic legislation to facilitate the financing of aircraft. Presently, in the United States these legal devices are covered by Article 9 of the Uniform Commercial Code. Furthermore, they fall within the sphere of application of the new regime of the CIME/AEP. In this article it is argued that the sphere of application of the CIME/AEP also extends to the Dutch real rights of the holder of an aircraft. Therefore, these Dutch rights can be the basis of an international interest.</jats:p

The Convention of Cape Town on International Interests in Mobile Equipment: The Solution of Specific European Property Law Problems

In November 2001 the Convention on Interests in Mobile Equipment (CIME) and the Aircraft Equipment Protocol (AEP) have been concluded. The CIME is a framework convention incorporating general provisions. The regime relates only to certain categories of mobile equipment, which are defined in separate protocols. The AEP is the first protocol that has been introduced. It relates exclusively to aircraft, aircraft engines and helicopters. The Railway Rolling Stock Protocol and Space Assets Protocol are to follow in due course. Furthermore, protocols for oilrigs, containers and trucks may follow. The CIME/AEP is an ambitious project from a legal point of view. This document contains uniform substantive provisions relating to property law. Furthermore, it introduces rules in respect of the enforcement and priority of interests in aircraft objects in case of and outside the bankruptcy of the debtor. Previous attempts at codifying these areas of the law at the international level have been unsuccessful. Particularly, the complexity and diversity of European property rights account for this fact. The creation of uniform law regarding security interests in movables requires by far the most drastic change in European national laws. The past has proved how extremely difficult it is to transcend the parochialism that exists in the property regimes of European states. The CIME/AEP provides for the creation of an international interest. Furthermore, the convention establishes an International Registry at which an international interest may be entered. Additionally the CIME/AEP regime lays down the remedies of the holder of an international interest. Following international registration, and depending on its priority status the holder can exercise its international interest in respect of the debtor in any contracting state. Finally, the CIME provides that a Regional Economic Integration Organisation also may sign it. Consequently, if the European Union accepts the convention, it has the rights and obligations of a contracting state.</jats:p