Some tips on the Cape Town Convention & Mobile Protocol

The Cape Town Convention (“CTC”) and the Mobile Protocol (“MP”) (collectively “Convention”) are 2 legal instruments that were created to facilitate the financing of aircraft and aircraft engines. These instruments only are applicable if there is a financing of some sort involved including a lease arrangement. In case of a straight out sale-purchase of an aircraft without any financing or lease involved these instruments don’t play a role. To determine if these instruments are applicable you need to look at the transaction or the envisioned transaction. If the aircraft is going to be registered in a country that is a party to the Convention this is an indication that you could structure a Convention transaction, meaning that the financing of the aircraft can be reinforced by creating so-called International Interest, which is an international security interest right that is recorded in the International Registry (IR) In Ireland. Here is a list of the countries: http://www.unidroit.org/status-2001capetown.

Another thing to look at is for example in case of a lease is if one of the parties is established in a Convention country. For the Convention to be applicable you need at least 1 of the parties i.e. debtor or creditor to be established in a Convention country. Once you have classified the transaction under the Convention you can create the International Interests and that will give you the benefit of being able to enforce the International Interest in all those (70) countries. Note that some countries have chosen certain reservations when the accepted the Convention so that it is not one size fits all. In some of these countries you may also have the advantage of other conventions such as the Geneva Convention.

Besides the IR you can also file an IDERA, which stands for Irrevocable De-Registration and Export Request Authorization. This form is/can be filed at the time of registering the aircraft and gives the party who has registered the aircraft i.e. the owner or the lessee the option to grant a designated party, typically the financier an irrevocable authorization to de-register the aircraft. This empowers the financiers or the lessor to be able to de-register the aircraft at will/in case of a default and limits the ability of the lessee or the operator to de-register the aircraft without the consent of the financier.

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