Aircraft Registration (Jersey) Law 2014: The International Interests in Aircraft Equipment (Cape Town Convention) Regulation: Law drafting instructions

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A decision made 5 November 2014:

Decision Reference: MD-E-2014-0110
Decision Summary Title :	Law Drafting Instruction for the creation of the International Interests in Aircraft Equipment (Cape Town Convention) Regulation		Date of Decision Summary:	04 November 2014
Decision Summary Author:	Strategic Policy Manager		Decision Summary: Public or Exempt?	Public
Type of Report: Oral or Written?	Written		Person Giving Oral Report:	n/a
Written Report Title :	Extension of the Cape Town Convention on international interests in mobile equipment and Protocol thereto on matters specific to aircraft equipment		Date of Written Report:	04 November 2014
Written Report Author:	Strategic Policy Manager		Written Report : Public or Exempt?	Public
Subject: Formal instructions to the Law Draftsman to commence law drafting substantive secondary legislation - The International Interests in Aircraft Equipment (Cape Town Convention) Regulation in support of the Aircraft Registration (Jersey) Law 2014.
Decision(s): The Minister made a policy decision to ratify the Cape Town Convention. This Ministerial Decision is to formally request the Law Draftsman to draft the requisite Regulation to enable the Cape Town Convention to come into effect in Jersey after ratification.
Reason(s) for Decision: The Cape Town Convention (“Cape Town Treaty”) aims to create a single harmonised international framework for the creation and registration of international interests against large, high-value, global mobile objects. It is intended to provide consistency and certainty as the international interest has to be recognised and enforced across all signatory countries. At this stage the ratification only extends to the Protocol relating to matters specific to Aircraft Equipment (aircraft and aircraft engines). For Jersey, the ratification of the Cape Town Treaty would: Raise the profile of the Jersey Aircraft Registry on the international stage; Give creditors further comfort, if required, when raising or lending finance for the purchase of aircraft or commercial aircraft engines that would be registered on the Jersey Aircraft Registry; and Financing to mortgagors may be loaned at a low interest rate.
Resource Implications: There are no resource implications in the law drafting of the requisite legislation.
Action required: The Law Draftsman to be requested to commence drafting the requisite legislation to enable the creation of the International Interests in Aircraft Equipment (Cape Town Convention) Regulation.
Signature:		Position: Minister for Economic Development
Date Signed:		Date of Decision (If different from Date Signed):

Aircraft Registration (Jersey) Law 2014: The International Interests in Aircraft Equipment (Cape Town Convention) Regulation: Law drafting instructions

Extension of the Cape Town Convention on international interests in mobile equipment and Protocol thereto on matters specific to aircraft equipment

November 2014

Introduction

‘The Cape Town Convention on International Interests in Mobile Equipment’, or “Cape Town Treaty”, is an international treaty intended to standardise transactions involving movable property. The treaty creates international standards for registration of contracts of sale (including dedicated registration agencies), security interests (liens), leases and conditional sales contracts, and various legal remedies for default in financing agreements, including repossession and the effect of particular states' bankruptcy laws.

In short, the treaty aims to create a single harmonised international legal framework for the creation and registration of international interests (such as mortgages and leases) in helicopters, airframes and aircraft engines over a certain size and engine capacity [1]. The treaty provides a framework to deal with any disputes arising under the treaty such as the ability of creditors to recover an aircraft object should there be default on repayments.

Three protocols to the convention are specific to three types of movable equipment: Aircraft Equipment (aircraft and aircraft engines; signed in 2001), railway equipment (signed in 2007) and space assets (signed in 2012).

The aircraft Protocol (officially: ‘Protocol to the Convention on International Interests in Mobile Equipment on matters specific to aircraft equipment’) was signed immediately with the treaty and the only protocol currently entered into force.

The International Registry of Mobile Assets established to record international property interests in the aircraft equipment covered by the treaty is located in Ireland. As of September 2014, the protocol has 47 contracting states.

Having signed up to the treaty, and following consultation with stakeholders, the UK Government intends to ratify the protocol on aircraft equipment at the end of 2014. In the process, the UK Government - the Department for Business, Innovation and Skills has extended an invitation to all of its Crown Dependencies and Overseas Territories, for them to ratify the treaty at the same time.

As will be clarified, there are significant benefits for Jersey to sign up to the treaty, not least the fact that opportunities to join the UK Government in ratifying a treaty like this is rare and if Jersey wished to sign up at a later stage, the time taken to do so would be much greater.

A consultation paper has been prepared and potential stakeholders identified to seek their opinion on the various provisions within the treaty to which they feel Jersey should sign up to as some of the options that the UK are making a declaration on, are not applicable to Jersey. Likewise, some provisions that Jersey may want to declare on are not being signed up by the UK Government. Owing to the tight timetable, the consultation will not have been completed prior to the commencement of law drafting the draft Regulation.

Benefits of ratifying the aircraft Protocol

The primary objective of the treaty is to seek to reduce the credit risk for lenders in respect of providing credit for aircraft objects. By reducing the risks for lenders, the Convention seeks to reduce the cost of credit, and promote the availability of credit within the industry.

In greater detail, the virtues of the Cape Town Treaty and its Aircraft Equipment Protocol for an aircraft financier are that it aims to:

bring speed, certainty and cost savings to the process of repossessing (and otherwise realising value from) aircraft and engines on an insolvency or other default where these assets are in a country whose legal system would otherwise give cause for concern
protect the parties’ title and security interests in aircraft and engines by:
- providing for the registration of international interests at a single, web-based International Registry that is open 24 hours a day, seven days a week;
- subjecting those interests to a simple priority regime whose main principles are;
- registered interests beat unregistered;
- earlier registrations beat later registrations; and
- the parties can vary priorities by registering subordination arrangements at the International Registry.

By ratifying the treaty, will raise Jersey’s profile in the international aviation industry. In addition, interests created and registered in Jersey, as well as being registered on the International Registry will be enforceable through the Royal Court of Jersey.

Recommendation

The Minister is recommended to instruct the Law Draftsman to draft up the requisite Regulation, under the Aircraft Registration (Jersey) Law 2014 that will enable Jersey to ratify the Cape Town Treaty and Protocol relating to Aircraft Objects.

[1] It applies to aircraft which can carry at least eight people or 2,750 kilograms of cargo, aircraft engines with thrust exceeding 1,750 pounds-force (7,800 N) or 550 horsepower (410 kW), and helicopters carrying 5 or more passengers.