Cape Town Convention
AWG was a central participant in the development of the Convention on International Interests in Mobile Equipment and its Aircraft Protocol (the Cape Town Convention), a treaty designed to facilitate asset-based financing and leasing of aviation equipment, expand financing opportunities, and reduce costs – thereby providing substantial economic benefits. It does so by reducing a creditor's risk and by enhancing legal predictability in these transactions, including in the case of a debtor's insolvency or other default. The Cape Town Convention entered into force in 2006 and the final texts of the Convention and Protocol can be viewed on UNIDROIT'S website. The Cape Town Convention applies in countries (Contracting States) that have ratified or acceded to it (ratification).

RATIFICATION AND IMPLEMENTATION OF THE CAPE TOWN CONVENTION

A table showing the current status of those countries that have ratified the Cape Town Convention and its Aircraft Protocol is maintained by UNIDROIT, the legal depositary of these instruments.

AWG is committed to the global ratification of the Cape Town Convention. It consults with governments around the world on these matters, including on the declarations to be made and the relationship between the Cape Town Convention and national law.

By effective implementation, AWG means that qualifying declarations under the OECD Aircraft Sector Understanding have been made and that the Cape Town Convention has the force of law in Contracting States, and, to the extent of any conflict, prevails over other law in such States. AWG is undertaking a project on the global implementation of the Cape Town Convention. The result of that work, the Summary of National Implementation, has been updated as of October 2013. This summary will continue to be updated from time–to-time based on a review of further information received from counsel in ratifying countries. Any such information should be sent to CTC-implementation@freshfields.com. Readers of this document are referred to the disclaimer on the cover page, which must be reviewed prior to proceeding to the rest of the document.

AWG and its legal advisory panel assess whether Contracting States have made the qualifying declarations. While AWG also assesses whether Contracting States have otherwise effectively implemented the Cape Town Convention, AWG is not expressing herein a view as to effective implementation by those States.

AWG has prepared a comprehensive document (Implementation Resource Materials), which is regularly revised, relating to the ratification and implementation of the Cape Town Convention. This document provides a general overview and chapter-by-chapter summary, sets out the system of declarations and makes specific recommendations in relation to those declarations, and provides a model ratification text and model implementing legislation.

ECONOMIC ASSESSMENT OF THE CAPE TOWN CONVENTION

AWG has made significant efforts, including through its commissioning of third party experts, to assess and quantify the economic benefits of the Cape Town Convention.

In 1988, a first Economic Impact Assessment was prepared under the joint auspices of New York University and INSEAD (Paris). That document was commissioned by AWG, IATA, and ICAO, and helped guide the development of the treaty.

The Cape Town Academic Project will establish a platform and forum for further assessing the economic impact of the Cape Town Convention, developing materials that may include guidelines for applied assessment.

In 2009, AWG commissioned an updated independent study addressing the economic benefits of the Cape Town Convention. The new study was narrower in scope. It focused exclusively on airline benefits and strictly assumed application of the insolvency rule found in Protocol, Art. XI, Alternative A.

In December 2010, AWG commissioned an independent study assessing the economic benefits of the ratification of the Cape Town Convention in the United Kingdom AWG has submitted this study to the UK government.

These studies have confirmed the substantial and widely shared economic benefits of ratification and effective implementation of the Cape Town Convention. Such benefits are predicated on a Contracting State making a specific set of economically-oriented declarations, that is, the ASU qualifying declarations, and ensuring that the Cape Town Convention prevails over inconsistent national law.

DECLARATIONS UNDER THE CAPE TOWN CONVENTION

The Cape Town Convention is not a treaty that a country simply decides to ratify or not. Rather, a number of choices need to be made at the time of ratification. These choices – declarations – are an integral part of the treaty system.

Most importantly, certain declarations are specifically designed to reduce transaction risk, and, thus, produce economic benefits. These declarations have been identified in the OECD Aircraft Sector Understanding as qualifying declarations.

AWG encourages all countries to make such qualifying declarations. AWG has prepared a matrix of recommended declarations. AWG and its legal advisory panel also prepare charts summarising and comparing all declarations made, including on the critically important topic of insolvency, Protocol, article XI.

AWG also encourages all countries to ensure that any declaration under Convention Article 39 restricts preferred non-consensual liens / rights to those that are customary. In no event (as prevented by the treaty) may such a declaration purport to expand such liens / rights beyond those under current law. See Goode, Official Commentary at para 4.265.

INFORMATION ON RECENT RATIFICATIONS OR CHANGED DECLARATIONS

This page summarizes recent (within the last six months) developments ratifications of the Cape Town Convention or changes in existing declarations made by Contracting States

Important Note 1: For more complete and official information on relating to the ratification, see materials published by UNIDROIT When the relevant Contracting State has made a set of qualifying declarations under the 2011 ASU, such will be noted. AWG maintains a list of Contracting States that have made qualifying declarations.

Important Note 2: When the relevant Contracting State has made a set of qualifying declarations under the 2011 ASU, such will be noted. AWG maintains a list of Contracting States that have made qualifying declarations. AWG is not expressing a view on whether such States have effectively implemented the Cape Town Convention, which is a further condition to eligibility for the Cape Town discount under the 2011 ASU.


Canada: The Convention and its Aircraft Protocol will enter into force for Canada on 01.04.2013. Canada has made the qualifying declarations under the 2011 ASU.

A seminar focusing on the practicalities and opportunities relating to the Canadian Ratification will be held in Toronto in late April 2013. More details on the seminar and registration information can be viewed below.

 

Russia: The Convention and the Aircraft Protocol entered into force for Russia on 1 September 2011. On 7 December 2012, Russia made the qualifying declarations under the 2011 ASU.

 

Ukraine: The Convention and Aircaft Protocol entered into force for Ukraine on 1.11.2012. Ukraine has made the qualifying declarations under the 2011 ASU.

 

Turkey: The Convention and the Aircraft Protocol entered into force for Turkey on 1 December 2011. Turkey has made the qualifying declarations under the 2011 ASU.

Kazakhstan: Subsequent declarations to the Convention, and the Aircrft Protocol, entered into force for Kazakhstan on 1 October 2011. Kazakhstan has made the qualifying declarations under the 2011 ASU.


CAPE TOWN CONVENTION AND EUROPEAN UNION MEMBER STATES

The European Community ratified the Cape Town Convention in 2009. On that occasion the AWG issued a public statement.

That ratification action has resulted in the commencement of ratification processes in a number of EU Member States.

To date, Ireland, Luxembourg, Malta, and the Netherlands (but only in respect of certain offshore territories) have ratified the Cape Town Convention.

Competence between the EU and Member States is divided as regards the Cape Town Convention. Therefore, special care is required when EU Member States make declarations.

UNIDROIT has issued a seminar report on that matter. Annex III of the report summarises the key conclusions regarding declarations within the competence of Member States and the EU respectively. These conclusions are consistent with a special clause, article 4, in the ASU qualifying declarations.

AWG representatives have written a paper, ''Cape Town Treaty in the European Context: the Case for Alternative A, Article XI of the Aircraft Protocol'. In line with the above-mentioned competence rules, EU Member States would need to give effect to this article through national law.

AWG has intensified activities in support of ratification by EU Member States, focusing on declarations and the required changes to national law. One example is the set of comments submitted by AWG to the government of the United Kingdom in connection with its consultations (Call for Evidence) regarding ratification. The results of that consultation were overwhelmingly positive.

INTERNATIONAL REGISTRY ESTABLISHED BY THE CAPE TOWN CONVENTION

The Cape Town Convention established an International Registry (International Registry) in which interests in aircraft equipment must be registered in order to establish their priority. The International Registry is an integral part of the Cape Town Convention. Over half of the world's financing and leasing transactions for new aircraft equipment are registered in the International Registry.

AWG has prepared a series of schematics depicting the International Registry. Aviareto, the Registrar of the International Registry, has prepared an overview presentation on the International Registry. In addition to the overview, Aviareto has prepared a summary presentation on the International Registry as of its 10th anniversary.

AWG chairs the International Registry Advisory Board (IRAB) set up by Aviareto, the operator of the International Registry. AWG also serves as an observer to the Commission of Experts of the Supervisory Authority of the International Registry CESAIR, that provides advice to ICAO, the Supervisory Authority.

Supplementing the terms of the Cape Town Convention, use of the International Registry is subject to Regulations and Procedures issued by Supervisory Authority.

 

The fifth edition of the Regulations and Procedures was published on 6 June 2013. These new regulations will become effective with the release of the new software for the 5th edition, contemplated for early July 2013.


IRAB is currently concentrating its advice on the contemplated next generation of the International Registry (Generation II). These will be enhancements, introduced in three phases (2011, 2012, and 2013), permitting more efficiency by streamlining registrations on multiple aircraft objects and reflecting the dynamics of transaction closings.

CAPE TOWN CONVENTION AND EXPORT CREDIT

The OECD Aircraft Sector Understanding establishes the basic rules for the provision of export credit.

On 1 February 2011, the current version of the ASU (the 2011 ASU) entered into force. The 2011 ASU, like its predecessor 2007 version, permits a reduced fee or interest rate (as applicable) where the Cape Town Convention applies to a transaction.

More specifically, the 2001 ASU permits a Cape Town discount provided that a set of qualifying declarations has been made and the Cape Town Convention is effectively implemented in national law. The OECD maintains a list of countries that have been determined through OECD procedures to meet the foregoing standard. AWG believes select other countries should be added to this list and are consulting with relevant parties in that regard. UNIDROIT has assembled statistical data, which shows that a very high percentage of countries have made each of the key qualifying declarations.

Under the 2011 ASU, the maximum Cape Town discount is 10% off the otherwise applicable up front fee or per annum spread.

The Cape Town discount endorses the long-standing view of AWG that application of the Cape Town Convention reduces transaction risk, and, thus, should be reflected in the terms of credit.

AWG provides it views to the OECD on eligibility for the Cape Town discount under the 2011 ASU.

The Cape Town Convention and Contract Practices

AWG supervises the work of its Legal Advisory Panel on the relationship between the Cape Town Convention and contractual practices. By contractual practices, we mean contractual provisions, registration of interests, and legal opinion practice. The work of the Panel seeks to enhance informed and efficient contracting under the Cape Town Convention.

Building on prior publications, the Panel has published a comprehensive Practitioner's Guide designed to provide practical assistance to practitioners in working with the Cape Town Convention. It is updated as of November 2012. It will be updated again in Fall 2013 to reflect, among others things, the under development revisions to the Official Commentary.

Comments on the Practitioner's Guide – or on legal developments in any country relating, directly or indirectly, to the Cape Town Convention – should be sent to the AWG secretary general: jeffrey.wool@awg.aero (with the following in the subject line: 'Cape Town Convention – {insert country} / legal developments).

CAPE TOWN CONVENTION ACADEMIC PROJECT

Oxford University and the University of Washington have commenced a joint Cape Town Convention Academic Project, two elements being undertaken, in part, under the joint auspices of UNIDROIT and the Project. ICAO is cooperating in support of this project. AWG is the founding sponsor.

The purpose of the project is to facilitate the academic study and assessment of the Cape Town Convention with a view towards enhancing the understanding and effective implementation of the treaty and advancing its aims.

There are a number of activities through which the project will advance these objectives.

The first issue of the Cape Town Convention Journal was published in September 2012. The first Cape Town Convention Academic Conference was held 5 / 6 September 2012 in Oxford. Papers given by leading experts on particular aspect of the CTC at the first conference are now available.

 

On 26 February, the official Cape Town Academic Project website was launched and can now be consulted at www.ctcap.org. For an overview of the project's myriad features, including digitalised and searchable database of comprehensive documentation relating to the Cape Town Convention, please read the announcement issued by the project's joint sponsoring institutions, the University of Oxford Faculty of Law and the University of Washington School of Law.

The website will also make available information about the Project's annual conferences on the Convention ranging from registration to the posting of electronic versions of most of the papers presented at each conference. (The Project also publishes these papers in hard copy as The Cape Town Convention Journal.) The third annual conference will take place on 9-10 of September 2014.

UPCOMING AND RECENT CAPE TOWN CONVENTION EVENTS

Below is a list of upcoming and recent events addressing the Cape Town Convention with which AWG is connected:

Upcoming Events:

 

AWG is planning a European regional seminar on the Cape Town Convention and its Aircraft Protocol. It is designed to advance and assess ratifications and implementation of the Cape Town Convention in Europe. It will be held under the joint auspices of UNIDROIT and the Aviation Working Group. The seminar will take place in Warsaw on 16 September 2014.


Recent Events:


Country-specific events

 

A seminar on the Cape Town Convention and its Aircraft protocol 'Practicalities and Opportunities relating to Canadian Ratification' was held on 29 / 30 April 2013 under the auspices of the Aviation Working Group and in association with ATAC and the NACC. Blake, Cassels & Graydon LLP coordinated the seminar. A website has been set up for this event that includes an archive of presentations made at the event. It can be consulted at http://www.capetowntreatyforum.com/toronto/2013/.


Cape Town Convention (CTC) Seminar, Ankara, 3 October 2012. Understanding and Assessing the Application of the CTC in Turkey. The seminar was hosted by the Turkish DGCA with the technical support of the Aviation Working Group

 

Cape Town Convention (CTC) Seminar, Tokyo, Japan, 11 September 2012. Understanding and Assessing the Application of the CTC in Japan. The seminar was organised by the Society of Japanese Aerospace Companies with the technical support of AWG.

 

Region-specific events

 

A Middle East regional seminar on ratification and implementation in respect of the Cape Town Convention and its Aircraft Protocol was held on 14 November 2014 in Dubai. See event press release. The event was endorsed by the UAE General Civil Aviation Authority (GCAA) and sponsored by the Aviation Working Group. The event website, http://www.capetowntreatyforum.com/capetowndubai/index.cfm, is currently available where conference materials can be consulted.

 

Advanced Participatory Regional Seminar on Cape Town Convention & its Aircraft Protocol - Assessing and Advancing Ratification, Bangkok, 27 April 2012. A website featuring detailed material from the seminar has been set up: http://www.capetowntreatyforum.com/bangkok/2012/

 

Latin American Seminar on the Cape Town Convention & its Aircraft Protocol - Assessing and Advancing Ratification, São Paulo, 17 April 2012. A website featuring detailed material from the seminar has been set up: http://www.capetowntreatyforum.com/saopaulo/2012/