An electronic system for registering valid financial interests in aircraft.
The International Registry, more commonly referred to as the “IR,” was created pursuant to the Convention on International Interests in Mobile Equipment and the Protocol on Matters Specific to Aircraft Equipment which was concluded in Cape Town, South Africa on November 16, 2001. In practice the Convention and the Protocol are collectively referred to as the Cape Town Convention (CTC).
The purpose of the CTC is to create a system to reflect the priority of sale, lease, and security interests in qualifying aircraft and aircraft engines. Accordingly, the CTC directed the creation of the IR which established an electronic system for registering valid interests. The IR effectively serves as a notification mechanism for the protection of financial interests in qualifying aircraft assets across various countries and regional economic organizations that have ratified the CTC.
The CTC was ratified by the United States on August 9, 2004 and entered into force on April 1, 2006. Under United States law, the perfection of interests in qualifying aircraft equipment is a two-fold process which includes: (i) the filing of instruments with the FAA for recordation; and (ii) the registration of interests on the IR. The filing of instruments with the FAA for recordation does not create a sufficient form of perfection or priority, but rather such a filing is simply a precursor to the registration on the IR. If a registration is not made on the IR, a third party who registers an intervening, valid interest on the IR will take priority over any unregistered interest.
The applicability of the CTC with respect to international interests is dependent on: (A) whether the airframe, engine or helicopter is a piece of qualifying aircraft equipment for registration purposes, or an “aircraft object,” as defined under the CTC; and (B) where the debtor is situated, or for airframes and helicopters, the jurisdiction in which the airframe or helicopter is registered.
In order to be subject to the CTC, the international interest must relate to an “aircraft object,” which is defined to include the following: (1) airframes that are type certified to transport at least eight (8) persons including crew or goods in excess of 2,750 kilograms; (2) engines having at least 1,750 pounds of thrust if jet propulsion and at least 550 rated take-off horsepower if turbine-powered or piston-powered; and (3) helicopters that are type certified to transport at least five (5) persons including crew or goods in excess of 450 kilograms.
The second requirement is the presence of a sufficient connecting factor to determine whether the terms of and protections afforded by the CTC apply to the particular transaction. If there is no connecting factor, the CTC is inapplicable to the transaction and no interest can be registered on the IR. For qualifying aircraft objects, one of the following must be present to satisfy the connecting factor requirements: (1) The debtor is situated (e.g., incorporated, formed, registered or located as to its principal place of business) in a Contracting State to the CTC at the time the security agreement is entered into by the parties; and (2) For airframes and helicopters only, the State of registry is a Contracting State to the CTC.
On a daily basis, our law firm works with aircraft equipment and transactions covered by the CTC. If you have questions or would like more information on this subject, please contact us.