The Implementation of the Cape Town Convention

The Implementation of the Cape Town ConventionA key feature of the Act is that whilst broadening the scope of granting security over Aircraft, the Act intends to simultaneously transpose the provisions of the Cape Town Convention on International Interests in Mobile Equipment and the Aircraft Protocol thereto.

Investment in aircraft has previously been hindered by the variety of approaches by local legal systems to security and title reservation rights, which either do not protect lenders in the event of default or are unpredictable. The Convention endeavors to reduce creditors’ uncertainty by providing reliable and readily enforceable rights in aircraft. Accordingly, creditors will be able to reduce the interest rates charged to compensate for the risk they would otherwise be exposed to. This will lead to greater amounts of financing being made available to airlines on more attractive terms.

The Convention establishes an international interest which is recognized in all contracting states. It also gives shape to an electronic international register for the registration of international interests. The registry reduces creditor uncertainty allowing the creditor to be sure of the priority of the interest in question.