New Legislation
The Cape Town Convention was opened for signature in 2001. The Aircraft Protocol came into force in 2006. Together, they establish an international framework for the creation and registration of international interests in qualifying aircraft, engines and helicopters.
In 2009, pending ratification of the Convention by the United Kingdom, the Cayman Islands (a British overseas territory) passed the Cape Town Convention Law, 2009, allowing Cayman Islands entities to ‘opt-in’ to domestic legislation which sought to mirror the provisions of the Convention.
The United Kingdom opted to ratify the Convention and Protocol in 2014. The UK Cape Town Regulations are expected to come into effect this summer. Consequently, the Cayman Islands is now preparing to implement the Convention and Protocol.
The International Interests in Mobile Equipment (Cape Town Convention) Bill was passed on 17 April 2015 and could come into force in the Cayman Islands as early as August this year. This legislation will also repeal and replace the Cayman Islands Cape Town Convention Law, 2009.
Cape Town Declarations
As part of the Cayman Islands implementation process, the following key declarations will apply:
- Alternative A: The Cayman Islands will apply Article XI, Alternative A – i.e. the so-called creditor-friendly ‘hard’ version of the insolvency rules, akin to Section 1110 of the US Bankruptcy Code. Under this alternative, the debtor must deliver possession of the aircraft object to the creditor by the end of a specified waiting period. The Cayman Islands declarations specify that the waiting period for this purpose is 60 days.
- Interim Relief: Speedy interim relief will be available to a creditor who adduces evidence of a default within 10 working days of the application for relief being filed.
- Self Help: All remedies available to a creditor under the Convention that do not expressly require a court application will be exercisable without leave to the court or other court action.
Summary of Benefits
These developments will provide the following benefits to players in the international aviation market:
- Cape Town Discount: by virtue of the declarations made in the Cayman Islands implementing legislation, qualifying transactions will be eligible for discounted export credit agency financing.
- Airframe and Engine Registrations: creditors will be able to register international interests in airframes and engines separately.
- Certainty and Uniformity: the Cape Town Convention will further enhance the desirability of the Cayman Islands as a leading jurisdiction for aviation finance, by incorporating a registration-based system of internationally recognised interests and insolvency rules.
Further Information
This note is intended for general guidance only and should not be used as a substitute for specific legal advice on any particular transaction or set of circumstances.
Campbells can advise and assist on these matters. For further information, please contact one of the below or your usual contact:
