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Cape Town Convention and its implementation in the United Kingdom

At long last, the United Kingdom has finally adopted the Cape Town Convention which came into force on 1st November 2015.

The implementation followed a lengthy consultation process which particularly focused on whether or not certain statutory non-consensual rights would be maintained.

The United Kingdom has adopted Alternative A in relation to the remedies on insolvency available under Article XI of the Protocol which gives creditors certainty as to their ability to recover their secured aircraft after the specific waiting period of 60 days and whilst preserving the key rights which the Protocol sets out.

The Government has also decided that there is no specified designated entry point, and agreed that the use of extra judicial remedies should be continued in the United Kingdom, and has declined to define the term "speedy" under the Convention as it relates to the provision of interim relief.

The adoption of the Convention has also helped in connection with the problems that exist as a result of the decision of the High Court in 2009 in the infamous Blue Sky case. As a result of this judgement, in order for a valid proprietary interest to be created over an aircraft in accordance with English law, the aircraft must be physically situated in England at the time of its creation or more esoterically, the domestic conflict laws of the state where the aircraft was situated at the time needed to recognise the validity of an English law proprietary interest.

The good news is that as far as aircraft objects that are covered by the Convention are concerned, the lex situs issues raised by Blue Sky in relation to the valid creation of such interests are now covered by the Convention and the Protocol. However, in relation to English law mortgages over aircraft objects that are not covered by the Convention, the question of validity will still arise and Blue Sky will still be relevant.

One of the interesting effects of the implementation in the United Kingdom of the Convention, is the way in which an Irrevocable Deregistration and Export Request Authorisation (IDERA) is registered with the United Kingdom Civil Aviation Authority. The United Kingdom Civil Aviation Authority has provided detailed rules and regulations in connection with the request and designation process of an IDERA in favour of a party that has been declared by the "registered owner" as the authorised party, which will be the only party with the right to de register and export the aircraft, including prescribed forms to be completed in lieu of the traditional IDERA letter. There are various steps that must be followed, together with payment of a fee of £100 per IDERA form registration.

One domestic question which has arisen is whether or not, in the light of the enabling legislation, there is still a requirement to undertake domestic Companies House registrations with respect to a mortgage or other registerable interest. However, most United Kingdom practitioners will still undertake Companies House registrations in addition to Convention registrations for a number of reasons i.e. in case a transaction or part of a transaction is out of the Cape Town system or it is doubtful whether Cape Town applies. Further, as Sir Roy Goode pointed out at the Cape Town academic seminar in Oxford last year, the Convention only covers proceeds of an International Interest in certain limited situations. Therefore, to protect the recovery of general proceeds, as a matter of English law, the mortgage or other registerable charge should also be registered, where appropriately, at Companies House. United Kingdom practitioners have also taken the view to still register mortgages with the United Kingdom Civil Aviation Authority in respect of United Kingdom registered aircraft until substantially all countries have ratified the Convention.

The most controversial issue is in connection with the retention of non-consensual rights by the United Kingdom Government, despite vigorous lobbying to the contrary, particularly in connection with the statutory detention rights arising for unpaid airport charges, unpaid navigation charges and unpaid amounts relating to EU emissions trading schemes. These rights are particularly controversial in that they apply not only to the aircraft over which the charges have been levied, but also the so called 'fleet lien' which allows airports or the United Kingdom Civil Aviation Authority, acting on behalf of Eurocontrol (the EU wide body responsible for provision of and the collection of charges for air navigation services), to continue to exercise those draconian rights. Similar fleet liens will still exist for unpaid airport charges and unpaid amounts under the EU emissions trading scheme.

For further information about the United Kingdom ratification of the Cape Town Convention and our services, please contact the authors