ARE YOU IN OR OUT? The Impact of Declarations under the Cape Town Convention / Aircraft Protocol on Achieving Global Legal Uniformity of Aircraft Financing Law
By
Eric Lippé
Institute of Air and Space Law, McGill University, Montreal
(Submitted June 2009)
A thesis submitted to McGill University in partial fulfilment of the requirements of the degree of Master of Laws (LL.M.)
©Copyright Eric Lippé 2009
Abstract
ARE YOU IN OR OUT? The Impact of Declarations under the Cape Town Convention / Aircraft Protocol on Achieving Global Legal Uniformity of Aircraft Financing Law
Author: Eric Lippé
The Cape Town Convention and its Aircraft Protocol have begun a revolution in aircraft financing law. These international instruments propose to bring uniformity to a very disparate and uneven smorgasbord of laws and practices in the realm of aviation finance. These treaties are built on a system of authorized declarations where States can adapt the Convention and Protocol to their legal and social customs. Twenty-one (21) States have already ratified them and made their declarations. The purpose of this study is to determine whether the “opt-in opt-out” system has undermined the proposed uniformity. An overview of the text of the Convention and Protocol and an analysis of the current declarations made by Contracting States is utilized in order to reach the proposed objective. The results show that although the Cape Town Convention and Aircraft Protocol are still new instruments of international law, States have not created, either on a textual or results oriented basis, a uniform environment. This study is the first to analyse the actual declarations made by Ratifying States and their impact on global aviation financing law.
La Convention relative aux garanties internationales portant sur des matériels d’équipement mobiles (Le Cap, 2001) et son Protocole Aéronautique veulent révolutionner le financement d’aéronefs. Ces lois internationales ont comme but d’uniformiser les lois et les pratiques entourant le financement d’appareils aéronautiques. Ces traités complexes ont incorporé un régime de Déclarations dans lequel les États peuvent choisir les obligations qui lieront leurs citoyens. Cette étude vise à déterminer si la latitude ainsi accordée aux États Contractants d’adapter la Convention et le Protocole à leurs besoins juridiques et sociaux nuit à l’uniformité du droit. Afin d’atteindre cet objectif, cette étude évalue le texte des deux lois et analyse les Déclarations des vingt-et-un (21) États qui les ayant déjà ratifiés. Malgré le nombre peu élevé de ratification de la Convention et du Protocole, les États Contractants n’ont pas créé un environnement juridique propice à l’uniformité. Cette étude est la première à s’intéresser aux Déclarations présentés par les États et leurs effets sur le financement aérien international.
Acknowledgments
Je tiens à remercier tous les professeurs et le personnel de soutien de l’Institut de Droit Aérien et
Spatial et de la Faculté de droit de L’Université McGill et plus particulièrement mon superviseur,
Professeur Catherine Walsh. Je tiens également à remercier la Chambre des Notaires du Québec pour leur aide financière à la réalisation de cette œuvre.
Je n’aurais pu terminer cette aventure sans le support moral de Mélanie. Elle a toujours su ressourcer ma motivation lorsqu’elle était à plat. Je dédie ce texte à Virginie et Grégoire afin qu’ils n’oublient jamais qu’un rêve ne pourra prendre son envol qu’avec de la détermination, du travail et de la passion.
iii
TABLE OF CONTENT
INTRODUCTION 1
CHAPTER 1Examination of secured transactions on aircrafts before the Cape Town Convention:
The Geneva Convention 3
1.2 The evolution of the Cape Town Convention and Aircraft Protocol 5
1.2.1 Stakeholders’ perspective 5
1.2.1.1 Airlines’ perspective 6
1.2.1.2 Financier’s and Manufacturers’ perspective 9
1.2.1.3 Legal community’s perspective 11
1.2.2 High expectations 13
CHAPTER 2
2 Declarations under the Cape Town Convention and Aircraft Protocol 14
2.1 The Cape Town Convention 14
2.1.1 General principles and foundation 14
2.1.2 Declarations made Available under the Cape Town Convention 16
2.1.2.1 Opt-in Declarations 16
2.1.2.1.1 Article 39 16
iv 2.1.2.1.2 Article 40 21
2.1.2.1.3 Article 60 23
2.1.2.2 Opt-out Declarations 26
2.1.2.2.1 Article 8(1)(b) and Artcle 54(1) 26
2.1.2.2.2 Article 8(1), 9(1), 10 and Article 54(2) 27
2.1.2.2.3 Article 13 and Article 55 29
2.1.2.2.4 Article 50 30
2.1.2.2.5 Article 57 and Article 58 32
2.1.2.3 Compulsory Declarations 36
2.1.2.3.1 Articles 48(2) 36
2.2 The Aircraft Protocol 37
2.2.1 Introduction 37
2.2.2 Declarations under the Aircraft Protocol 38
2.2.2.1 Opt-in declarations 38
2.2.2.1.1 Article VIII 38
2.2.2.1.2 Article X 39
2.2.2.1.3 Article XI 40
2.2.2.1.4 Article XII 44
2.2.2.1.5 Article XIII 46
2.2.2.1.6 Article XXVII 47
2.2.2.1.7 Article XIX 47
2.2.2.2 Opt-Out Declarations 47
2.2.2.2.1 Article XXIV(2) 47
2.2.2.2.2 Article XXX(5) and Article XXI 48
v 2.2.2.3 Other Declarations 49
2.2.2.3.1 Article XXIX 49
CHAPTER 3
3 International Ratification of the Cape Town Convention and the Aircraft Protocol: A New Beginning 52
3.1 Legal analysis 52
3.1.1 Ratifications and Declarations 52
3.1.1.1 Current Declarations and Ratifications 52
3.1.1.2 A review of State Declarations by Enacting Convention Article 54
3.1.1.3 A review of State Declarations by Enacting Protocol Article 58
3.1.1.4 Preliminary observations 62
3.1.2 Review of Legal Doctrine 63
3.1.3 Review of Current Jurisprudence 69
3.2 Empirical analysis 69
vi CHAPTER 4
4 Declarations made under the Cape Town Convention and the Aircraft Protocol: Has Practicality Triumphed Over Functionality? 72
4.1 The Cape Town Convention and Aircraft Protocol: Uniformity or Conformity? 72
4.1.1 Uniformity of the text 74
4.1.2 Uniformity in economic advantages 80
4.1.2.1 Declarations Matrix of the Aviation Work Group 81
4.1.2.2 Sector Understanding on Export Credits for Civil Aircraft 85
CHAPTER 5 Conclusions 91
Bibliography 96
vii
LIST OF TABLES
Table 1: Passenger Airline Cost Index 7
Table 2: Declarations made by Contracting States 53
Table 3: Article 13 Cape Town Convention and Article X Protocol Speedy Interim Relief 59
Table 4: Paragraph XI (2) Alternative A- Waiting Period 61
Table 5: Conformity to the Aviation Work Group’s (AWG) Declarations Matrix 84
Table 6: Declarations Conformity to Aircraft Sector Understanding Guidelines 88
viii
ARE YOU IN OR OUT? The Impact of Declarations under the Cape Town Convention / Aircraft Protocol on Achieving Global Legal Uniformity of Aircraft Financing Law
“When the law is out of step with business, the law should endeavor to catch up. The proposed Unidroit [Cape Town] Convention does just that.” Thatcher A. Stone.
INTRODUCTION
The Convention on International Interests in Mobile Equipment (“the Cape Town Convention” or
“”the Convention”) seeks to achieve a global legal framework applicable to the financing of high- value moveable assets, notably railroad rolling stock, satellites, and aircraft frames and engines.
The Convention itself only creates a template onto which asset-specific protocols are grafted.
The first protocol to come into effect was the Aircraft Protocol.
The Convention and Aircraft Protocol have the following objectives: 1- to publicize rights affecting aircrafts and engines through the establishment of an international registry; 2 - to unify the regime governing the financing of these assets through recognition of the concept of an
1 “international interest”; and 3 - to facilitate seizure of these assets by financers on their debtors’ default both within and outside the context of national insolvency proceedings. Collectively, these objectives seek to dramatically reduce the cost of financing aircrafts by establishing a uniform global legal framework, a timely goal in view of the anticipated enormous increase in the volume of this credit market over the next several decades.
This thesis examines the likelihood that these instruments will achieve their objectives. A review of aviation stakeholders’ interests in and expected gains from these instruments is made, followed by a detailed analysis of the text of the declarations. Then, the declarations submitted by each of the 21 States that have thus far adopted the Convention and Protocol are examined to determine the extent to which they detract from uniformity. This is accompanied by a review of the literature to determine the extent to which commentators believe their own national laws can accommodate the legal framework contemplated by the Convention and Protocol. In addition, empirical research conducted by the author in order to acquire insight on these instruments and their promised financial benefits is then presented.
The last chapter of the thesis will serve to determine if the proposed objectives of the Convention and the expected uniformity can be achieved. The economic and financial objectives of the
Convention and Protocol will also used to make that determination.
2 1.1 Background: The Geneva Connection
The Convention on the International Reco gnition o f Rights in Aircraft (the “Geneva
Convention”) was signed on June 16th 1948 and remained the sole international aircraft financing instrument for over fifty years. Although it is almost as old as the Chicago Convention,1 it never achieved the same widespread level of recognition and ratification.2
The Geneva Convention was based on a system of reciprocal recognition of national laws, in other words, a conflict of laws approach.3 The divide between the common law and civil law secured financing traditions of the States that developed the Convention was seen as too deep to yield a uniform substantive instrument. Instead, the Convention obligated each Contracting State to respect and uphold aircraft financing transactions, including leases and sales with a retention of title, if validly created and recorded under the law of the aircraft’s State of registration provided that that State was also a Contracting State.4 Thus the Convention did not purport to create a new internationally uniform secured financing regime for aircraft. Its objective was merely to obligate Contracting States to recognize security rights created under the national law of other
States. The Convention was much criticized5 for its failure to promote international substantive
1 Convention on International Civil Aviation signed at Chicago on 7 December 1944 2 Tbe Geneva Convention has received 89 ratifications compared to the 190 ratifications to the Chicago Convention. It is of note that an important aviation financing State, the United Kingdom had signed the Geneva Convention, but has never ratified it. See ICAO website Treaty Collection, http://www.icao.int/icao/en/leb/Genev.pdf. 3 Donald Bunker, International Aircraft Financing (Montreal: IATA, 2006) vol. 1 at 614. 4 Giulia Mauri & Birgitta Van Itterbeek, "Belgian Aircraft Finance: New Perspectives Why Belgium should Ratify the Cape Town Convention on International Interests in Mobile Equipment and its Aircraft Specific Protocol" (2004) XXIX/3 Air & Space L. 208 at 212; S. J. McGairl, "The proposed UNIDROIT Convention: international law for asset finance (aircraft)" (1999) Rev. D.U. 439 at 443-445. 5 Thatcher A. Stone, “In Flight Between Geneva and Rome: Abandoning Choice of Law Systems for Substansive Legal Principles in International Aircraft Finance ” (1999) 20 U. Pa. J.Int’l. Econ. L. 487.; Ludwig Weber & Silvério Espinola, “ The Development of a New Convention Relating to International Interests in Mobile Equipment, in Particular Aircraft Equipment: A Joint ICAO-Unidroit Project” (1999) Rev. D.U. 463.
3 law uniformity and it is this criticism that made the adoption in 2001 of the Cape Town
Convention and Aircraft Protocol – the focus of this thesis - necessary and inevitable.
An integral part of the new regime reflected in these instruments is the establishment of an international registry6 for recording “international interests” in aircraft. The existence of a common “international interest” registry7 in itself is of great practical utility since any third party, whether a financer, an airline or a prospective buyer or lessee, and whether or not from a State that has ratified the Convention, has access to the information contained in the registry. In a business where access to reliable information reduces risk, access to detailed information on existing property and possessory rights in aircraft frames and engines alleviates at least some of the obstacles faced by aircraft financers.8
However, the central question to be addressed in this thesis is whether the lack of uniformity decried9 in the Geneva Conventio n context has been truly overcome by the Cape Town
Convention and Aircraft Protocol. Although these instruments replace the system of reciprocal national law recognition established by the Geneva Convention with a uniform substantive framework, they also entitle Contracting State to deposit declarations opting in or out of a significant number of the default obligations, including financers’ rights of enforcement. Have we traded a simple albeit unworkable conflict of laws regime for a sophisticated substantive
6 The international registry created by the Cape Town Convention can be consulted at:
4 instrument that still fails to achieve true uniformity to the extent that Contracting States take up the opportunity to preserve their national economic and political policies through the deposit of non-uniform declarations? Has the Cape Town Convention truly departed from the Geneva
Convention model or does the opportunity given to States to opt in or out of significant aspects mean that the same mistakes are being repeated to a significant extent? These are the central questions engaged by this thesis.
In order to better understand the declarations and the possible risk of non-uniformity they represent, it is necessary to first understand the somewhat diverse needs and desires of the various members of the aviation community whose views contributed to the drafting of the
Convention and Aircraft Protocol.
1.2 The Evolution of the Cape Town Convention and Aircraft Protocol 1.2.1 Stakeholder Perspectives
This section of the thesis explores the perspectives of the various aviation industry actors with a stake in the international reform of aircraft financing law. Although all stakeholders no doubt wished for a more legally oriented and predictable regime, one would not necessarily expect airlines and financers to agree on the optimal resolution of all aspects of aircraft financing law.
This preliminary exercise is necessary to eventually determine the extent to which the
Convention has accomplished or can accomplish the objectives sought by all concerned parties.
At this stage, it can be speculated that it was not only an inability of States to fully abandon their divergent national laws that motivated the drafters of this Convention away from a fully uniform
5 text and towards the “opt-in/opt-out declaration framework but also the sometimes irreconcilable perspectives of the various aviation stakeholders.10
1.2.1.1 Airlines’ perspective
Running an airline is not for the faint of heart! It is a capital intensive highly competitive business where the margin for profitability is very, very thin. Although recent years have produced marginal profits for at least some airlines11, the overwhelming historical trend suggests investors must beware. 12 The apparently glamorous business that is commercial aviation has yielded, in the United States of America at least, a cumulative negative financial result since its inception.13
Airlines must deal with an operational structure in which fixed costs (or constant costs) are their most important expenditure.14 Whether the fleet is flying or not, fixed costs translate into continuous operating costs. Moreover, the reality of airline scheduling is that the airlines must keep their aircraft flying,15 making their fixed fuel and labour expenditures relative to income extremely high in times of reduced demand. The following table16 illustrates this point:
10 A detailed examination of the benefits of the “soft approach” when creating international legislation such as The Cape Town Convention can be found at: Mark J. Sundahl, "The "Cape Town Approach": A New Method of Making International Law" (2006) 44 Colum. J. Transnat’l L. 339. The discussions leading up to the adoption of the Convention are detailed in: Unidroit "Acts and Prodeedings" in Diplomatic C onference t o Ad opt a M obile Equipment Convention and an Aircraft Protocol Acts and Prodeedings (2006), Cape Town. 11 Both Air Canada (see:
6
Passenger Airline Cost Index % of Operating Third Quarter 2007 Index (2000=100) Expenses (Source: DOT Form 41) LABOR per FTE 119.3 23.4 FUEL per gallon 284.5 26.5 AIRCRAFT RENTS & OWNERSHIP per operating seat 82.1 6.8 NON-AIRCRAFT RENTS & OWNERSHIP per enplanement 98.6 4.5 PROFESSIONAL SERVICES per ASM 113.8 8.3 FOOD & BEVERAGE per RPM 56.5 1.5 LANDING FEES per capacity ton landed 129.0 1.9 MAINTENANCE MATERIAL per aircraft block hour 58.9 1.5 AIRCRAFT INSURANCE as % of hull net book value 136.5 0.1 NON-AIRCRAFT INSURANCE per RPM 198.8 0.5 PASSENGER COMMISSIONS as % of passenger revenue 28.6 1.2 COMMUNICATION per enplanement 70.9 1.0 ADVERTISING & PROMOTION per RPM 61.8 0.7 UTILITIES & OFFICE SUPPLIES per FTE 96.2 0.6 TRANSPORT-RELATED per ASM 404.4 13.7 OTHER OPERATING per RTM 101.2 7.8 TOTAL OP. EXPENSES nmf 100.0
Although labor and fuel expenses are the principal fixed costs for an airline, aircraft lease and ownership payments account for almost seven percent (7%). In a business dependent on very thin marginal profits, every reduction in cost is critical. Consequently, airlines have a clear interest in supporting any international legal reform that by reducing legal risk and improving legal certainty can promote greater access to aircraft financing credit at lower cost.
The above table also shows that fuel expenses are the single highest cost for an airline. However, technological advances have enabled new aircraft to be far more fuel efficient, meaning that airlines can obtain enormous fuel savings, and project a more environmentally responsible image
7 to their customers, by rejuvenating their fleets.17 Although access to this new technology comes at a price - the cost of a Boeing 787-3 (the entry level Dreamliner) starts at 146 million dollars18 - this has not deterred airlines from ordering this “super-efficient airplane19” with 56 clients having ordered 857 Dreamliners to date.20
The connection between airline economic survival, fuel costs and aircraft financing costs has never been more apparent.21 To remain competitive, an airline must be able to efficiently finance the acquisition of the newest, most cost effective aircraft available on the market.
In supporting the final draft texts of the Cape Town Convention and Aircraft Protocol, the airlines – through their representative groups, the Aviation Work Group (AWG)22 and the
International Air Transport Association23 (IATA) declared that the Convention embodied “the fundamental principles underlying asset-based financing and leasing of aircraft equipment” and
17 The Boeing Corporation has claimed that their new product, the B-787 “Dreamliner” will use 20% less fuel than similarly sized jets airplanes see:
8 that this would be beneficial to “increase the availability and reduce the cost of aviation credit”.
24
1.2.1.2 Financers’ and Manufacturers’ perspective
The majority of aircraft financers and manufacturers combined forces - under the rubric of the
Aviation Working Group (the AWG)25 - to jointly contribute to the development of what was to become the Cape Town Convention and Aircraft Protocol at the request of Unidroit (the
International Institute for the Unification of Private Law), the project’s original sole sponsor.
The commonality of interest in international legal reform between aircraft manufacturers and aircraft financers is not surprising. Airlines rarely if ever have sufficient cash reserves to purchase aircraft outright. Manufacturers therefore depend on their customers having ready access to financing from lessors and lenders in order to remain in business. However, the collateral relied on by aircraft financers to secure their investment is incredibly expensive and remarkably mobile.
A new Boeing Dreamliner 787-9 has a reported flight envelope without refuelling of 15 750 kilometres26, roughly the distance between Montreal, Canada and Sydney, Australia (16 017 kilometres27). Although all financers naturally would prefer payment, they must take into account the need for repossession in the unhappy event that the customer defaults in payment.28
24 Unidroit "Acts and Prodeedings" in Diplomatic Conference to Adopt a Mobile Equipment Convention and an Aircraft Protocol Acts and Prodeedings (2006), DCME Doc No. 7, Cape Town, Unidroit at 92. 25 One of AWG’s principal stated objectives is: “to contribute to the development and acceptance of policies, laws, regulations and rules that (i) facilitate advanced international aviation financing and leasing or (ii) address inefficiencies in aviation financing or leasing or that constrain these transactions”. For a complete list of members, see:
28 Anthony Saunders & Ingo Walter, Proposed Unidroit Convention on International Interests in Mobile Equipment as Applicable to Aircraft Equipment through the Aircraft equipment Protocol: Economic Impact Assessment (1998) [unpublished archived at INSEAD and the New York University Salomon Center] at 5.
9 In the absence of an effective international enforcement regime, the highly mobile nature of aircraft collateral means that aircraft financers must factor in the risk that at the time of default the collateral is located in a State whose national laws make it prohibitively expensive or impossible to pursue repossession.
Aircraft financers must also take into account a second factor. This is the risk that competing claimants will have a superior claim to the aircraft or to the proceeds of its forced disposition upon default under applicable national law. While this is a risk for all financers, the internationally mobile character of aircraft collateral, combined with the enormous diversity of national law approaches to priority, greatly heightens the risk or an unpredictable loss of priority for aircraft financers.29
The authors of a preliminary study30 commissioned by the AWG, IATA and ICAO, concluded that a new internationally uniform legal framework for aircraft financing would dramatically reduce their legal risk and therefore the costs of financing by several billion dollars a year.31
However, the authors’ predictions were based on the assumption that the new international regime would: (1) guarantee superior rank to aircraft financers over competing claimants; (2) enable aircraft financers to promptly take control and dispose of their collateral upon default; and
29 Berend J.H. Crans, "Analysing the Merits of the Proposed Unidroit Convention on International Interests in Mobile Equipment and the Aircraft Equipment Protocol on the Basis of a Fictional Scenario" (2000) 25 Air & Space L. 51. 30 Anthony Saunders & Ingo Walter, Proposed Unidroit Convention on International Interests in Mobile Equipment as Applicable to Aircraft Equipment through the Aircraft equipment Protocol: Economic Impact Assessment (1998) [unpublished archived at INSEAD and the New York University Salomon Center]. 31 Ibid. at 32.
10 (3) ensure that the commencement of bankruptcy proceedings under national law against the customer did not prejudice the preceding objectives.32
In the course of this thesis and especially in the analysis of the Convention’s allowance for multiple declarations preserving non-uniform national law, these objectives will be the standards used to describe and evaluate the true effectiveness of the Convention and the Aircraft Protocol.
1.2.1.3 Legal community’s perspective
Legal reform proposals are inevitably subjected to critical analysis by the legal professionals who, after all, are ultimately expected to comprehend and be able to flexibly apply the new rules.
International reform proposals are even more likely to receive close attention considering their global reach.
The preparation and implementation of the Cape Town Convention has been the subject of numerous articles, theses and commentaries, attesting to its perceived significance.
Structurally, the adoption of a basic Convention framework, supplemented by flexible asset- specific protocols (for air, space and rail assets) has been hailed as a new and valuable innovation in the drafting of international instruments. 33 In relation to the Aircraft Protocol in particular, the
“opt-in/opt-out” declaration system is viewed as successful insofar as it ensured approval of both
32 Ibid. at 5-6. 33 See Mark J. Sundahl, "The "Cape Town Approach": A New Method of Making International Law" (2006) 44 Colum. J. Transnat’l L. 339.
11 the Convention and Protocol at the diplomatic conference in Cape Town,34 thereby enhancing the prospects for speedy global ratification.
With respect to the substantive content of the Convention and Protocol, reviews generally have ranged from the ecstatic35 to the favourable36.
Perhaps the best practical analysis was offered by Thatcher A. Stone37 whose overall assessment was based on the following three ideal outcomes from the perspective of the aircraft financer:
a) My financing agreements are valid and enforceable in all possibly relevant States;
b) My security interest in or claim to the aircraft is effective against, and has priority over,
the claims of competing third parties in the event that the payment obligations secured by
the aircraft cannot be recovered against the obligor personally ;
c) I have the right to claim the proceeds of insurance in the unpleasant event that the aircraft
is lost or destroyed.
In Stone’s view, an internationally uniform legal framework along the lines of that promised by the Cape Town Convention and Aircraft Protocol offers the only means of overcoming the “legal chaos and uncertainty”38 created by national law disparities on these three critical issues.
34 Ibid. at 353. 35 See Roy Goode. "The Cape Town Convention on International Interests in Mobile Equipment: a Driving Force for International Asset-Based Financing". (2002) 1 Rev. D.U. 5.and B. Patrick Honnebier. "The Convention on International Interests in Mobile Equipment and Aircraft Equipment Protocol Encourages European property law reform". (2004) 8 EdinLR. 118. 36 Ludwig Weber & S. Espinola. "The development of a new Convention relating to international interests in mobile equipment, in particular aircraft equipment: a joint ICAO-UNIDROIT project" (1999) Rev. D.U. 463. and Berend J.H. Crans. "Analysing the Merits of the Proposed Unidroit Convention on International Interests in Mobile Equipment and the Aircraft Equipment Protocol on the Basis of a Fictional Scenario" (2000) 25 Air & Space L.. Although some authors have questioned the future practical relevance of these instruments in the dynamic world of aviation financing, see Giulia Mauri. "'The Cape Town Convention on Interests in Mobile Equipment as Applied to Aircraft: Are Lenders Better Off Under the Geneva Convention?" (2005) 13 E.R.P.L. 641. 37 Thatcher A. Stone, "In flight between Geneva and Rome: Abandoning Choice of Law Systems for Substansive Legal Principles in International Aircraft Finance" (1999) 20 U. Pa. J.Int'l. Econ. L. 487 at 490.
12 1.2.2 High expectations
The enthusiasm surrounding the implementation of the Cape Town Convention and Aircraft
Protocol at the diplomatic conference in Cape Town that endorsed its adoption is reflected in the a statement given by African States in which they eagerly enumerate all foreseeable benefits deriving from these instruments including: lower interests rates, longer repayment terms, increased level of financing, lower fees and the elimination of sovereign guarantees.39
Expectations surrounding the implementation of the Cape Town Convention and Aircraft
Protocol were extremely high. The preliminary economic study, the unbridled enthusiasm of the
Cape Town delegates and the exuberant media coverage all reflect the perception that the
Convention and Protocol will provide legal support for aircraft financing in the 21st century and beyond. Also, the repercussions of aircraft financing extend beyond the scope of mere transportation as aviation is a catalyst for other major economic endeavours such as trade and tourism.40
Treaty euphoria cannot ensure that the perceived successes of the Cape Town Convention and
Aircraft Protocol are realized. These objectives must be supported by the text of these instruments. The analysis that follows attempts to analyse whether this is indeed the case.
38 Ibid. at 497. 39 Supra note 24, DCME Doc No. 25, at 136. 40 See The Air Transport Action Group, The economic and social benefits of air transport (2004), available at
13 2 Declarations under the Cape Town Convention and Aircraft Protocol 2.1 The Cape Town Convention
2.1.1 General principles and foundation
The Cape Town Convention was an international collaborative effort involving stakeholders interested in the three categories of mobile equipment within its intended scope; thus, not only was the aviation community involved but also the space and railway industries.41
The enormous funds required to purchase and maintain these types of equipment inevitably motivated lead specialists in all three fields to come together and attempt to draft a new international instrument better suited to the legal and financial complexities of the world economy. The views and objectives of the various stakeholders in the aviation sector were reviewed in section 1.2 of the thesis. These objectives clearly accord with the official stated objectives of the Convention:42
“● To provide for the creation of an international interest which will be recognized in all Contracting States ● To provide the creditor with a range of basic default remedies and, where there is evidence of default, a means of obtaining speedy interim relief pending final determination of its claim on the merits ● To establish an electronic international register for the registration of international interests which will give notice of their existence to third parties and enable the creditor to preserve its priority against subsequently registered interests and against unregistered interests and the debtor’s insolvency administrator ● To ensure through the relevant Protocol that the particular needs of the industry sector concerns are met ● By these means to give intending creditors greater confidence in the decision to grant credit, enhance the credit rating of equipment receivables and reduce borrowing costs to the advantage of all interested parties (the underlined sections are from the author)”
41 The Cape Town Convention must be interpreted with three different Protocols identifying the specific needs of aviation, space and railway mobile equipment. Not only are all these assets extremely mobile in nature but are quite expensive: cost of a new Boeing 737-600: 50-57 million dollars (see:
14
The Convention must be interpreted in the context of the relevant Protocol: air, space or rail. This thesis focuses only on the aviation sector. The Aircraft Protocol and its declarations will be analysed later in section 2.2 of this chapter.
Few would argue that a text free of the opportunity for States to deposit opt-in and opt-out declarations would have been best for global legal uniformity, thereby most fully accomplishing the objectives of the Convention and Protocol. However, it must be remembered that a State, under the Law of Treaties,43 may exclude or modify the legal effect of specific provisions of a treaty in their application in that State by making unilateral reservations at the time of ratification.44 The perceived advantage of the “declaration system” incorporated in the Cape
Town Convention is that it makes reservations invalid unless they are explicitly provided for in the text of the Convention45 as an official declaration. This is an attempt to achieve greater uniformity by limiting the array of reservations available to States. This is an important achievement since the classic reservations system still had some proponents who believed it to be better suited to a commercial environment.46 On the other hand, it will be shown that the permitted declarations, address the principal social and legal issues that would normally have been the object of reservations by States in any event.
43 Vienna Convention on the Law of Treaties done at Vienna on 23 May 1969. The Vienna Convention came into force on the 27th of January 1980 after its thirty-fifth (35) ratification (article 84 Vienna Convention). It is noted that the Cape Town Convention required only three ratifications to come into effect (article 49 Cape Town Convention) and the Aircraft Protocol required eight ratifications (article XXVIII Aircraft Protocol). 44 Article 2 (1)(d) Vienna Convention Law of treaties. 45 Article 56 (1) Convention on International Interests in Mobile Equipment. 46 Jeffrey Wool, "The case for a commercial orientation to the proposed Unidroit Convention as applied to aircraft equipment" (1999) 31 Law and Policy in International Business 79 at 86-89.
15 The Cape Town Convention creates a new legal right in or in relation to mobile equipment called an “international interest”47 and provides for the establishment of a new public registration system48 for recording “international interests”. It is not the purpose of this thesis to analyse in detail the theoretical and practical ramifications of these new legal institutions. They will be referred to when necessary to better comprehend the application of the declarations contained in both the Convention and the Aircraft Protocol.
An informal consolidated text of the Convention and Aircraft Protocol has been adopted to facilitate understanding of the practical effect of the interrelationship of these two instruments.
However, all references to specific articles in this thesis relate to the official binding separate texts.49
2.1.2 Declarations made available under the Cape Town Convention
This section will focus on an exposition and interpretation of the declarations available under the
Cape Town Convention. The actual official declarations made by Ratifying States up to the time of the writing of this thesis will be described in section 3.1.1.1.
2.1.2.1 Opt-in Declarations
2.1.2.1.1 Article 39
Article 39-Rights having priority without registration
1. A Contracting State may at any time, in a declaration made to the Depository of the Protocol, declare generally or specifically:
47 See Article 2 Cape Town Convention. 48 See Chapter IV (Articles 16 and 17) Cape Town Convention. 49 The consolidated text was created as a working tool only and is not legally binding upon Ratifying States. See B. Patrick Honnebier, "The Convention on International Interests in Mobile Equipment and Aircraft Equipment Protocol Encourages European property law reform" (2004) 8 EdinLR. 118 at 126.
16 (a) those categories of non-consensual rights or interests (other tha n a right or interest to which article 40 applies) which under that State’s law have pri ority over an interest in an object equivalent to that of the holder of a regi stered international interest and which shall have priority over a registered international interest whether in or outside bankruptcy proceedings; and
(b) that nothing in this convention shall affect the right of a State or St ate entity, intergovernmental org anization or othe r private provider of publi c se rvices to arre st or detain any o bject under the la ws of th at State for payment of a mounts o wed to such entity, organization or provider directly relating to those services in respect of that object or another object.
2. A declaration made under the precedin g paragraph may be exp ressed to cover categories that are created after the deposit of that declaration.
3. A non-consensual right or interest has priority over an international interest only and only if the forme r is o f a catego ry co vered by a decla ration deposited p rior to the registration of an international interest.
4 Notwithstanding the preceding paragraph, a Contracting State may at the time of ratification acceptance approval of, o r accession to t he Protocol, declare that a right or interest cove red by a d eclaration ma de und er sub-paragraph (a) of pa ragraph 1 shal l have priority over an international inte rest registered prior to the date of such ratification, acceptance, approval or accession.
Article 39 has two aspects. First, it enables a Ratifying State to deposit a declaration to preserve the legal effects of non-consensual rights and interests over aircraft recognized under that State’s law as having priority over the rights of a consensual aircraft financier.50 Second, it preserves the operation of rights of arrest and detention available under national law in respect of payments owing for services rendered to aircraft.
The Convention defines a non-consensual right and interest as “a right conferred under the law of a Contracting State which has made a declaration …to secure the performance of an obligation, including the obligation to a State, State entity or an intergovernmental or private organization.”51 Thus, the effect of making an article 39 declaration is clear. Although lessors and lenders will typically have advanced significant credit to enable an airline to purchase or
50 Although the Convention uses the specific word “object” to include air, space and rail objects, we will use the term aircraft as our study is specific to those particular objects. 51 Article 1(s) Cape Town Convention.
17 lease the aircraft, and will have registered in the international registry to preserve their interest, they will not have priority over unregistered rights and interests in aircraft created by operation of the national law of the declaring State in favour of particular classes of creditors, whether public or private. This is not groundbreaking in the sense that a State is always free in the pursuit of its own national policies to create rights in assets that have priority over rights arising under a private financing contract, a common purpose being to protect amounts owing to the State under its fiscal laws or for the provision of public services.
The practical effect of preserving rights of arrest or detention in respect of claims for public services rendered to aircraft means that an aircraft financer will lose his right to repossess the collateral in the event of its customer’s default unless and until the relevant claims have been paid. These protected claims could potentially include air navigation services fees and airport landing and general fees.52 The wording of this aspect of article 39(1)(b) clearly recognizes the universal trend towards privatization of air navigation services and airports by confirming that a
“private provider” may be responsible for providing “public services”. However, did the preservation of rights of arrest and detention for public services rendered to aircraft really require a declaration? Could not the same principle have been stated instead as a generally applicable rule? It seems Eurocontrol53 was at the origin of its inclusion in article 39 in the final text of the
Convention54 presumably in order to compel States to positively evaluate whether and to what extent these types of rights should be allowed to impede repossession by an aircraft financer.
52 Sir Roy Goode, Convention relative aux garanties internationales portant sur des matériels d'équipement mobiles et protocole y relatif portant sur les questions spécifiques aux matériels d'équipement aéronautiques: Commentaire officiel (Rome: Unidroit, 2002) at 147. 53 The European Organisation for Safety of Air Navigation (Eurocontrol) mission is to harmonise and integrate air navigation services in Europe, aiming at the creation of a uniform air traffic management (ATM) system for civil and military users.
18 Article 39(1)(b) entitles a declaring State to preserve its rights of arrest and detention under national law over any aircraft (“other object”) in the debtor’s fleet not just the particular aircraft that was the recipient of the unpaid public services. Thus, an aircraft financer could see its collateral (a specific aircraft or group of aircrafts) arrested or detained in respect of a claim for the provision of public services to another aircraft or group of aircrafts financed by some other financer. In focussing on the identity of the debtor and not the particular aircraft, this provision is at odds with the asset-based guarantee approach embraced by the Convention for consensual financers as exemplified by the fact that the international registry for registering international interests in aircraft is organized by reference to specific airframes and engines 55 and not fleets controlled by one operator or owner.
States no doubt wished to preserve the right to take a non-asset based approach on this issue under national law in order to ensure that public services could be extended to an airline’s fleet on a credit account basis. If rights of arrest or detention were instead asset based, a State would have to require that public services be fully paid up for each aircraft before allowing its departure since the relevant airline might well substitute a different aircraft on future visits (shuffling of aircraft on routes being fairly typical in the commercial airline business). In any event, this aspect of article 39 is not apt to prove overly prejudicial to aircraft financers since they can obtain release by paying the outstanding fees which will be minimal relative to the value of the aircraft, particularly since airports typically require airlines to keep their accounts in good order in order to retain landing privileges.
55 Supra note 7.
19 However, the right of States to preserve the super-priority of non-consensual rights and interests under national law has the potential for greater prejudice to aircraft financers particularly since there is no restriction on the types of claims – private or public and whether relating to the airline operator or the aircraft - that may be protected by this device. Considering the importance of commercial aviation, its derivative economic benefits, and the relative fragility of the industry,56 it is to be hoped that States will consider forfeiting or at least limiting the extension of non- consensual rights and interests to aircrafts against which an international interest has been registered.
Article 39(4) permits a Ratifying State to declare, at the time of ratification, that the non- consensual rights and interests set out in its declaration have priority even over prior-registered international interests. No doubt this concession was necessary to encourage ratification.
However, at least in the early stages of ratification of the Convention, aircraft financers do face the risk that later ratifications may reduce the priority they thought they would have at the time of registration. On the other hand, they already face this risk since the convention does not disturb the operation of non-consensual interests recognized under the national law of non-ratifying
States. Consequently, the application of this article does not put them in any worse position.
Article 39(1) permits a State to deposit a declaration at any time. Thus, even if a State initially ratifies without making a declaration, it may subsequently declare that its non-consensual rights and interests will have priority over registered international interests. However, in this latter case, the declaration does not operate retroactively. Under paragraph (3), the super-priority of the non-
56 Supra note 12.
20 consensual interest is preserved only if the declaration is made before the international interest is registered.
In summary, it seems that article 39 was a necessary concession to the desire of many States to preserve their national policies on the privileging of certain classes of claimants – most notably, the State itself – over private aircraft financers. This concession reduces uniformity – since the existence and scope of each declaration will be State specific. It also involves transaction costs for aircraft financers since it will be necessary to scrutinize all declarations made by all
Contracting States where a debtor airline may potentially operate in order to assess the risk of a loss of priority or of arrest or detention of the aircraft. Moreover, the policy of preserving super priority for non-consensual interests seems to be a regressive step internationally since it seems that under the Geneva Convention, Contracting States had accepted that rights protected under that Convention would have priority over non-consensual rights and interest arising under national law.57
2.1.2.1.2 Article 40
Article 40-Registrable non-consensual rights and interest
A Contracting State may at any time in a decla ration deposited with the Depository of the Protocol list the catego ries of n on-consensual rights o r i nterests which sh all be registrable u nder thi s convention a s regards any categ ory of object as if t he rig ht or interest we re an internati onal inte rest and shall be re gulated accordingly. Such a declaration may be modified from time to time.
Like article 39, article 40 permits a Contracting State to deposit a declaration respecting non- consensual rights or interests under national law. Professor Goode lists as possible examples, national laws that give judgment creditors a non-consensual interest in the assets of a debtor upon
57 S. J. McGairl, "The proposed UNIDROIT Convention: international law for asset finance (aircraft)" (1999) Rev. D.U. at 461.
21 recovery of a judgment for the payment of money and the right of retention of a repairer.58
However, unlike article 39, the effect of the declaration is merely to make these rights registrable under the Convention so as to bring them within its overall regulatory scope to the same extent as if they were in fact international interests. Thus, this type of non-consensual right enjoys only the priority rank and other privileges of an ordinary international interest, meaning that they must be registered to be effective against competing international interests and their priority will follow the order of registration.
It would be highly beneficial in order to obtain the desired objectives of the Convention if all
States were to include in declarations under article 40 of the Convention all the types of non- consensual interests and rights of arrest and detention contemplated by article 39. The objectives of this Convention are to enhance legal certainty and reduce financing costs by guaranteeing registered international interests priority over competing later-registered interests and to enable aircraft financers to promptly action take control and possession of the aircraft upon default of their debtor. These objectives are undermined to the extent that lessors and lenders must deal with the risk of secret (because unregistered) rights affecting the airframe and engines that may reduce their priority or prevent the prompt exercise of rights of possession. Eliminating declarations under Article 3959 and opting only for registrable rights under Article 40 of the
Convention would remove that risk. However, the quid pro quo for States is that they would have to relinquish the power to preserve the super-priority of their claims under article 39. To the extent these claims are the types that arise only after a debtor has entered into a financially troubled state (for example, unpaid landing and airport fees, unpaid taxes), article 40 does not
58 Supra note 52 at 150. 59 H. Wassgren, "Rights of financiers in aircraft: a Finnish perspective on the 2001 Cape Town instruments" (2004) Rev. D.U. 557 at 568.
22 offer a realistic equivalent since the claimant would inevitably be subordinated to the prior registered international interests. So the real question facing States may be whether they see the promotion of access by airlines to financing as of greater economic benefit than preserving preferential rights to payment for the State itself and other local creditors.
2.1.2.1.3 Article 60
Article 60- Transitional Provisions
1. Unless otherwise de clared by a Contra cting State at any time, the co nvention does not apply to a pre -existing right or inte rest, which retains the p riority it enjoyed unde r the applicable law before the effective date of this Convention.
2. For the purposes of article 1 (v) and of determining priority under this Convention:
(a) “effective date of this Con vention” means in rel ation to a debtor the time whe n this convention enters into force or the time when the State in which the debtor is situated becomes a Contracting State whichever is the later and
(b) The debtor is situated in a State where it has its ce ntre of admin istration or if it has no centre of administration, its place of business or, if it has no place of bu siness, its habitual residence
3. A Contractin g State may in its de claration und er paragraph 1 specify a dat e, not earlier than three years after the date on which the declaration becomes effective, when this Convention and the P rotocol will become applicable, for the purpose of determining priority, including the protection of a ny existing priority, to pre -existing rights or interests arising un der an agreeme nt made at a time when t he debto r wa s situate d in a State referred to in sub-paragraph (b) of the preceding paragraph but only to the extent and in the manner specified in its declaration.
The purpose of Article 60 is to regulate the transitional application of the Convention to the pre- existing rights of aircraft financers under national laws. The general rule stated in paragraph 1 is that “a pre-existing right or interest” is not affected by the Convention and Protocol60 unless otherwise declared by a Contracting State “at any time.” The expression “pre-existing right or interest” is defined in article 1 (v) as: “ a right or interest of any kind in or over an [aircraft]
60 Supra note 52 at 177.
23 object created or arising before the effective date of this Convention as defined by Article
60(2)(a).” Article 60(2) defines the expression “Effective date of this Convention” as the later of the time when the Convention comes into force61 and the time when the State in which the debtor is situated ratifies the Convention. The location of the debtor is defined, in turn, in article
60(2)(b) as the State in which the debtor has its centre of administration. If the debtor does not have a centre of administration, then the debtor is considered situated in the State where it has its place of business, and in the absence of a place of business, the State in which it has its habitual residence. The Convention does not define the expression “centre of administration.” After almost 50 years of aviation ownership deregulation under national laws motivated in part by bilateral air transport agreements62, airlines have been reorganizing and merging into complex yet apparently unilaterally controlled entities.63. It may be difficult to identify the actual centre of administration of an airline debtor in these complex mega union carrier arrangements. However, the same corporate group phenomenon is prevalent in other global businesses and there is a developing jurisprudence on the meaning of “centre of administration” in the international context under the European Insolvency Regulation and the UNCITRAL Model Law on Cross-
Border Insolvency, both of which adopt the same criterion64. No doubt this jurisprudence can and will be drawn on in interpreting the Cape Town Convention65.
61 April 1st 2004 see Article 49 of the Convention. 62 Paul Stephen Dempsey, Public International Air Law (Montreal: McGill University Institute of Air and Space Law, 2008) at 517-578. 63 On May 5th 2004, Air France gained majority control of the Dutch airline KLM and created the Air France-KLM Group. See John Tagliabue , “Air France and KLM to Merge, Becoming Europe's No. 1 Airline” New York Times (1 October 2003) online
24 Under article 60(3), a Contracting State may by declaration specify a future date, no earlier than three years after the declaration, when the Convention and Protocol will become applicable for the purpose of determining the priority of pre-existing rights or interests. The inclusion of the words “including the protection of any existing priority” suggest that a State’s declaration may provide for the continuance, in whole or in part, of the priority status under national law of any pre-existing interest preserved by article 60(1) .66 Since the text of article 60(3) uses the word
“may” Contracting States can probably expand the scope of declarations made under article 60(1) to other aspects of pre-existing rights.
The drafting complexity of article 60 is only surpassed by the practical and legal problems these rules are likely to produce. In any secured transaction, the advance determination of what competing rights may affect the collateral and their relative priority ranking is critical in assessing legal risk. A lender bases its decision to advance credit on a reliable report that no prior ranking rights exist. At the very least, and with knowledge of the existence of prior ranking rights, the lender will authorize disbursement only if it is satisfied that the risk is reasonable and acceptable considering the nature and value of the collateral.67
In assessing legal risk, secured creditors will solicit the judgment of and request a written opinion from legal counsel on the validity and ranking of their rights. The more straightforward the priority opinion, the more likely that financing will take place. Conversely, a legal opinion heavily qualified by exclusions or limitations owing to the lack of clarity or precision of the applicable legal provisions will weigh against financing.
66 Supra note 52 at 180. 67 See The Legal Advisory Panel of the Aviation Work Group, Contract Practices Under the Cape Town Convention. (Chicago: Uniform Law Foundation, 2004) at 4-8.
25
Until the Convention and Protocol gain widespread acceptance and ratification, the complexity of the article 60 transitional rules will have a negative impact on financing.
2.1.2.2 Opt-out Declarations
2.1.2.2.1 Article 8(1)(b )and Article 54 (1)
National secured transactions laws typically empower a secured creditor to dispose of the collateral by sale upon the debtor’s default. A right of lease is unusual since the payments will go to reduce the secured obligation only over what may be a lengthy period of time yet the debtor will be unable to redeem the collateral by full payment after the secured creditor leases the collateral. However, in view of the prevalence of leasing in the aircraft industry, and the fact that the Convention accommodates the remedy of re-lease where the financer is a lessor, article
8(1)(b) of the Convention includes leasing the aircraft among the enforcement remedies available to a financer who is a conventional financial lending institution holding a charge over an aircraft:
Article 8-Remedies of chargee
1. In the event of default as provided in Article 11, the chargee may, to the extent that the chargor ha s at any time so agree d and su bject to any decl aration that may be made by a Contracting State under Article 54, exercise any one or more of the following remedies:
(b) sell or grant a lease of any such object;
However, this article must be read in conjunction with article 54 of the Convention:
Article 54-Declarations regarding remedies
1. A Contra cting State may, at the time of ratification, acceptan ce, approval of or accession to the Protocol , decl are tha t while the charg ed obje ct is situated within, or controlled from its territory the chargee shall not grant a lease of the object in that territory
26
Article 54 permits a Contracting State to deny a chargee68 the remedy of lease while the object is within that State’s territory. Although this detracts from the uniform application of the remedial regime of the Convention, it is an important concession to national law in view of the large number of States for whom the re-lease remedy contemplated by article 8 would be a radical departure from traditional secured financing norms. On the other hand, it can be argued that this involves putting substance over form, since, as noted above, there is no equivalent opt-out where the financing transaction takes the form of a lease.
2.1.2.2.2 Article 8(1), 9(1), 10 and article 54(2)
Article 8-Remedies of chargee
1. In the event of default as provided in Article 11, the chargee may, to the extent that the chargor ha s at any time so agree d and su bject to any decl aration that may be made by a Contracting State under Article 54, exercise any one or more of the following remedies:
(a) take possession or control of any object to it;
(b) sell or grant a lease of any such object69;
(c) collect or receive any inco me or p rofits arising from the manag ement or u se of any such object
Article 9-Vesting of object in satisfaction; redemption
1. At any time after defa ult as provided in Articl e 11, the chargee and all the interested persons may agree that o wnership of(or any other int erest of the charg or in) any obje ct covered by th e se curity interest shall vest in the cha rgee in o r towa rds satisfaction of the secured obligations.
Article 10-Remedies of conditional seller or lessor
In the event of default under a title reservat ion agreement or under a leasing agreement as provided in article 11, the conditional seller or the lessor, as the case may be, may:
68 A creditor under a security agreement, a conditional seller under a title reservation agreement or a lessor under a leasing agreement, article 1(i) of the Convention. 69 See comments above section 2.1.2.2.1; article 54(1) permits states to deny the right of a chargee to grant a lease.
27 (a) subject to any declaration that may be made by a Contracting State under Article 54, terminate the agreem ent and ta ke po ssession or control of an y obje ct to which th e agreement relates; or
(b) apply for a court order authorizing or directing either of these acts.
Article 54-Declarations regarding remedies
2. A Contractin g State shall , at the time of ratificatio n, accepta nce, approval of, or accession to the Protocol, decla re whether or not a ny remedy a vailable to the cre ditor under any provision of this Convention which is not there expressed to require application to the court may be exercised only with leave of court.
Article 54 requires a Contracting State at the time of ratification to declare whether the remedies at the disposal of creditors under articles 8 to 10 of the Convention may be exercised unilaterally or require prior leave of the courts.
The ability of creditors to expeditiously exercise their remedies on the debtor’s default is critical to ensure that the basic objectives of the Convention are met. Economic efficiency requires that remedies be quickly exercised so that the asset can be redirected to more profitable ventures.70
Requiring the intervention of the courts may undermine the objective of the Convention to promote efficient realization of the collateral. Unless a State has established an extraordinarily efficient hearing process for financers, the time, and expense of court proceedings, and the risks of judicial discretion in the face of debtor objections, may present a barrier to financing to which a creditor would rather not be exposed. It will be interesting, in the third chapter of the thesis
(which describes the content of the declarations deposited by Ratifying States), to examine what decisions have been made by Ratifying States on the necessity for court intervention.
70 Supra note 28 at 6.
28
2.1.2.2.3 Article 13(1) and Article 55
Article 13-Relief pending final determination
1. Subject to any declaration that it may make under article 55, a Contracting State shall ensure that a creditor who adduces evidence of default by the debtor may, pending final determination of its claim and to the extent t he debtor has at any time so ag reed, obtain from a court speedy relief in the form of such one o r more of the followin g orders as the creditor requests:
(a) preservation of the object and its value; (b) possession, control or custody of the object; (c) immobilization of the object; and (d) lease or, except where covered by sub-paragraph (a) to (c) management of t he object and the income therefrom.
Article 55-Declarations regarding relief pending final determination
A Contracting State may, at the time of ratification, acceptance, approval of, or accession to the Protocol, declare that it will not apply the provisions of Article 13, or article 43, or both, wholly or in part. The declaration shall specify under which conditions the relevant Article will be applied, in case it will be applied partly, or oth erwise which other forms of interim relief will be applied.71
Unlike the provisions of articles 8, 9, and 10 discussed in the preceding section72, the intervention of the courts is expressly contemplated by article 13. In particular, article 13 entitles a financer to apply to a court for speedy interim relief to avoid deterioration or the outright loss of the collateral.73
Article 13 is closely associated with the principles of the Convention.74 Efficient interim relief is a fundamental component of the effectiveness of the enforcement regime of the Convention.
71 Although article 43 is also mentioned in the text of article 55, it is not reproduced above and will not be analysed here as it pertains only to the jurisdiction of the competent courts on remedial issues. 72 See section 2.1.2.2.2 73 Supra note 52 at 83. 74 See above section 2.1.1
29 Article 55 entitles States at the time of ratification to declare that it will not apply article 13
“wholly or in part.” Article 55 does not, however, entitle a State to deny interim relief. Rather, it is aimed at enabling a State to substitute interim relief measures that better accord with its internal legal system. Thus, article 55 requires a State to specify in its declaration what alternative forms of interim relief are available under national law, and, if the State declares that article 13 is partially retained, to specify the circumstances in which it will be applied.
2.1.2.2.4 Article 50
Article 50-Internal transactions
1. A Contra cting State may, at the time of ratification, accepta nce, ap proval, or accession to the Protocol, declare that this Convention shall n ot apply to a transactio n which is an internal transaction in relation to that State with regard to all types of objects or some of them.
2. Notwithstanding the prece ding pa ragraph, the provi sions of Articles 8 (4), 9 (1), 16, Chapter V, Article 29 and any provisions of this Convention relating to registered interests shall apply to an internal transaction.
3. Where notice of a national interest has been registered in the Inte rnational Registry, the priority of the holder of that interest under Article 29 shall not be affected by the fact that such int erest has become vested in another person by a ssignment or subrogation under the applicable law.
Important to the understanding of article 50 are the definitions of “internal transaction” and
“national interest” in paragraphs (n) and (r) of article 1 of the Convention:
“(n) “internal transactio n” mean s a t ransaction of a type listed i n Article 2 (2)(a) to (c) where the centre of the m ain interests of all parties to such tran saction is situated, and the relevant object located (as specified in the Protocol), in the same Contracting State at the time of the con clusion of the contra ct and where the i nterest creat ed by the transaction has been registered in a national registry in that Contracting State which has made a declaration under Article 50(1)”75./
(r) “national interest” means an interest held by a creditor in an object and created by an internal transaction covered by a declaration under Article 50(1);
75 Article 1(n) of the Convention.
30 Although inherently international in origin and scope, the Convention and Protocols could possibly be applied by a State to govern purely internal transactions76 of the kind contemplated by the above definition. This could open interesting possibilities for domestic law reform where the existing national legal regime is deficient or non existent as it pertains to asset based financing or where a proper registry does not exist. Article 50(2) nonetheless permits Ratifying
States to limit the application of the Convention to international transactions by declaring that it will not apply the Convention to internal transactions either entirely or with regard to some objects.
The scope of the exclusion contemplated by article 50(2) is subject to two important limitations.
First, whatever a State may declare, pursuant to article 50(2) even an interest arising under an internal transaction may be the object of an inscription at the International Registry and is subject to the registration and priority articles of the Convention.77 Second, pursuant to article 50(3), a
“national interest” created under an internal transaction if registered under the Convention cannot be defeated by a competing interest acquired by assignment or subrogation under applicable national law.
In addition, Professor Goode notes that the practical effects of a declaration under Article 50 are limited since space, rail and aviation assets, and the parties involved in these transactions, are so mobile and international in nature that litigation will seldom be bound to take place exclusively in the State forum78 in which the internal transaction is centred. Giulia Mauri further observes
76 Supra note 52 at 164.
77 See Articles 8(4), 9(1), 16, 18 to 26 (Chapter V) and Article 29 Cape Town Convention. 78 Supra note 52 at 164-165.
31 that an aircraft that is the object of an internal transaction may later be the subject of an international transaction with a different party as a result of a change in the location of the aircraft or the parties creating new interpretive difficulties.79
2.1.2.2.5 Article 57 and Article 58
Article 57-Subsequent declarations
1. A State Party may make a subsequent declaration, other t han a d eclaration authorised u nder a rticle 60, at any time after the date on whi ch this Convention ha s entered into force for it, by notifying the Depositary to that effect.
2. Any su ch subsequent de claration shall take effe ct on the first day of the month following the expiration of six months after the date of receipt of the notification by the Depositary. Where a lon ger period for that decla ration to take effect is spe cified in the notification, it shall take ef fect upon the expiration of such longer period after recei pt of the notification by the Depositary.
3. Notwithstanding the previous paragraphs, this Convention shall continue to apply, as if no such subsequent declaration h as been made, in respe ct of all rights a nd interests arising to the effective date of any such declaration.
Article 58-Withdrawal of declarations
1. Any State Party having made a d eclaration u nder this Conve ntion, other t han a declaration a uthorised under A rticle 6 0, may withd raw it at any time by noti fying the Depositary. Such withdrawal is to tak e effect on the first day of th e month following the expiration of six months after the date of receipt of the notification by the Depositary. 2. Notwithstanding the previous paragraph, this Convention shall continue to apply, as if no such withdrawal of d eclaration had been m ade, in re spect of all right s and interests arising prior to the effective date of any such withdrawal.
Articles 57 and 58 empower States, at their discretion, to modify or revoke declarations made under the Convention with the sole exception of a declaration under article 60.80 Once a
Contracting State has made a declaration under article 60, it is impossible to modify or retract
79 Supra note 9 at 651. 80 See Chapter 2.1.2.1.3.
32 that specific declaration since that would affect the rank of pre-existing rights created before the entry into force of the Convention.
Articles 57 and 58 establish a mandatory six month delay period for the modification or the withdrawal, as the case may be, to take effect. In the case of a modification the declaration under article 57 may provide for a longer period.81
That States may make modifications or even withdrawals is understandable. A shift in legal or political policy in a Contracting State may force a realignment of its international position.
Creditors82 are protected against any prejudice that might be caused by a subsequent change in policy since articles 57 and 58 respectively protect “all rights and interests arising prior to the effective date of any such declaration83” or “any such withdrawal.”84
In interpreting this caveat, a question that must be answered is when does a right or interest arise?
The official French version of the Convention uses the wording “droits et garanties nés” in both articles. The expression “Être né” (to be born) does not seem to cause any different interpretation problems. Article 7 of the Convention lists the formalities required to constitute an international interest:
The agreement must
a) be in writing;85 b) relate to an object of which the chargor, conditional seller or lessor has power to dispose;
81 See Article 57 Paragraph 2 Cape Town Convention. 82 Definition of “creditor” see Article 1(i) Cape Town Convention. 83 See Article 57 Paragraph 3 Cape Town Convention. 84 See Article 58 Paragraph 2 Cape Town Convention. 85 See definition of “writing” at Article 1 (nn) of the Cape Town Convention.
33 c) enable the object to be identified in conformity with the Protocol; d) enable the secured obligations to be determined
Thus the international interest is born or constituted at the time of acceptance and signing by both parties of the security agreement.86 As is the case in most national legal systems, registration of the international interest is not a condition of the creation of the international interest but rather a means of preserving its effectiveness against and priority and ranking over competing creditors and other third party claimants.87 Assuming a financer satisfies all the article 7 criteria, it is doubtful that the determination of the time of constitution or creation of the international interest will cause legal difficulties.
Does the expression “rights or interests” also include the enforcement rights of the holder of an international interest under the Convention? If so, when do these default rights arise? Articles 8,
9 and 10 of Chapter III of the Convention (entitled “Default remedies”) all make reference to default as the event which triggers a financer’s enforcement rights. Article 11 addresses the meaning of default:
Article 11-Meaning of default
1. The debto r and the cred itor may at any time agree in writing as to events tha t constitute a default or otherwise give rise to rights and remedies specified in Articles 8 to 10 and 13.[emphasis supplied] 2. Where the debtor and the creditor have not so agreed, “default” for the p urposes of Articles 8 to 10 and 13 means a default which substantially deprives the creditor of what it is entitled to expect under the agreement.
Thus enforcement rights arising at the time of the occurrence of an event which the parties have agreed constitutes a default or otherwise gives rise to the exercise of default remedies. It is usual
86 See also Article 3 Cape Town Convention: Only the debtor must be situated in a Contracting State at the time of the conclusion of the agreement. 87 Supra note 52 at 90.
34 practice for financing agreements to specify every imaginable default scenario from the obvious
(default in the payment of the secured obligation) to less specific general obligations (truthfulness of information given by the debtor). However, in the rare event that the agreement of the parties does not provide for what constitutes a default event, article 11 provides that “a default which substantially deprives the creditor of what it is entitled to expect…” triggers the financer’s default remedies.
Thus, although the “international interest” will be born immediately upon satisfaction of the article 7 criteria, the holder’s enforcement rights or remedies only arise once the debtor has defaulted on his obligations. Could this interpretation weaken the effectiveness of the Convention and its underlying principles? Let us imagine the following scenario:
Airline Z located in a Contracting State A has signed an agreement creating an international interest with Creditor X. At the time of ratification, State A had made declarations pursuant to Article 54 permitting the exercise of creditors’ rights or remedies without the necessity for the court intervention. Two years after the creation of the interest and before any default by Airline Z, Contracting State A modifies its declaration and now requires, after the six month entry into force period, the intervention of the courts. Ten months after the modification made by State A, Airline Z stops making its payments to Creditor X.
Must Creditor X now obtain permission of the courts to take possession of the aircraft notwithstanding that, at the time of signing of the agreement, State A did not require Creditor X to submit its remedies for the approval of the court. Would the creditor have given the same conditions or have even participated in the financing had it known the future intentions of the
Contracting State?
35 There are two possible solutions for the creditor. The first is to concede that the event of default was generated after the effective date of the Convention and the Creditor must therefore submit his remedies to the court. The second is to interpret the words “rights and interests arising prior to the effective date” of a withdrawal or modification as covering enforcement rights that attach to an international interest upon its creation pursuant to article 7, whether or not an event of default has yet occurred. This is the most sensible interpretation in light of the certainty and predictability objectives of the Convention, especially since a creditor could in any event protect itself by the simple device of including in the financing agreement, as an event of default, a modification or withdrawal of declarations made by the debtor’s Contracting State.
2.1.2.3 Compulsory Declarations
2.1.2.3.1 Articles 48(2)
Article 48 — Regional Economic Integration Organisations
(…) 2. The Regi onal E conomic Inte gration O rganisation shall, at the time of sig nature, acceptance, approval o r accession, make a declaration to the Depositary specifying the matters gov erned by thi s Convention in respect of whi ch competen ce has been transferred t o that Orga nisation by it s Membe r States. The Regi onal Economic Integration O rganisation shall prom ptly notify the Dep ositary of any chang es to the distribution of com petence, incl uding new tr ansfers of competence, spe cified in the declaration under this paragraph.
It is expected that the first declaration under article 48(2) will emanate from The European
Union. Ireland has already unilaterally ratified both the Convention and Protocol. Its participation as the host State of the International registry may have had some influence on that decision,88
Article 48(2) reflects the incremental ongoing reallocation of legal competence to the European
Union in international law making and the resultant need to clarify on an ongoing basis which
88 LK Sheilds Solicitors, “Irish aviation industry in full flight”, Int'l Fin. L. Rev. 79, November2005, Volume 24; Issue 11.
36 legal issues now belong to the Union and which still remain within the competence of individual member States. Other regional economic unions may be moving in similar directions and the
Montreal Convention of 1999 (Rules for International Carriage by Air) likewise recognises the need to accommodate the shifting international reality in a flexible and generic fashion.89
2.2 Declarations under the Aircraft Protocol
2.2.1 Introduction
The Cape Town Convention is structured as a legal template onto which additional Protocols90 can be grafted91 so as to accommodate the idiosyncrasies of different asset groups.92 The
Convention has no legal effect without the Protocols.93 The Convention and the Protocols must be interpreted as one piece of legislation with the provisions of the Protocols prevailing in the case of contradiction.94
For the purposes of this thesis, only the Aircraft Protocol will be analysed. The Aircraft Protocol was the only protocol submitted for adoption at the Cape Town Diplomatic Conference95 and it was the first to achieve entry into force on March 1st 2006.
89 The European Community acceded to the Montreal Convention of 1999 on the 28th of June 2004, online:
37 The Protocol also adheres to the “opt-in opt-out” philosophy of the Convention and allows States to tailor the Protocol to its internal political and legal systems by declaration. Before examining
Contracting States’ actual declarations under the Protocol, the interpretation and possible consequences of each of these declarations will first be addressed in the abstract.
Articles XXX to XXXIV set the basic legal principles for the application and interpretation of the declaration system contemplated by the Protocol. As in the case of the Convention96, only those declarations specifically mentioned in the Protocol may be the object of an official declaration97, thus limiting the possible array of reservations that can be made by Contracting States. Although not described in detail in this chapter, Articles XXX to XXXIV will be referred to when necessary to better comprehend the articles authorizing declarations under the Protocol.
2.2.2 Declarations under the Aircraft Protocol
2.2.2.1 Opt-in declarations
2.2.2.1.1 Article VIII
Article VIII-Choice of law
1. This article applies only where a Contacting State has made a declaration pursuant to Article XXX (1).
2. The parties to an ag reement, or contra ct of sale, o r a related guarantee contract or subordination agreement may agree on the law which is to govern their contractual rights and obligations, wholly or in part.
3. Unless otherwise agreed, the reference in the preceding paragraph to the law chosen by the parties is to the domestic rules of law of the designated State or, where that States comprises several territorial units, to the domestic law of the designated territorial unit.
96 See above section 2.1.1 at 15. 97 See Article XXXII Aircraft Protocol.
38 The purpose of the Article is to encourage commercial predictability98 in line with the basic objectives of the Convention by permitting the parties to a financing agreement to select the national law applicable to their relations. A choice of law clause is a common practice in aviation financing.99 As Professor Goode points out, however, the parties’ choice of law may only apply to the contractual aspects of their agreement and cannot determine or modify the application or execution of real rights in the collateral.100
2.2.2.1.2 Article X
Article X-Modification of Provisions regarding relief pending final determination
1. This Articl e a pplies only where a Contracting State has ma de a declaration u nder Article XXX(2) and to the extent stated in such declaration.
2. For the pu rposes of A rticle 13 (1) of the Conventi on, “spe edy” in the context of obtaining reli ef means such number of work ing days from the date of filing of the application for relief as is specified in a declaration made by a Contracting State in which the application is made.
3. Article 1 3(1) of the Co nvention ap plies with the foll owing bein g added imme diately after sub-paragraph (d): “(e) if at any time the debtor and the creditor spe cifically agree, sale and ap plication of proceeds therefrom”, and Article 43(2) applies with the insertion after the words “Article 13(1)(d)” of the words “and (e)”.
4. Ownership or any othe r interest of the debtor passing on a sale under the preceding paragraph is free from any other i nterest over which the creditor’s international interest has priority under the provisions of Article 29 of the Convention.
5. The creditor and the debt or or any oth er in terested person m ay agree in writi ng to exclude the application of Article 13(2) of the Convention.
6. With regard to the remedies in Article IX(1): (a) they shall be made avail able by the registry auth ority and othe r administrative authorities, as applicable in a Contracting State no later than five work ing days after the creditor notifies such authorities that th e relief specified in Article IX(1) is grant ed or, in the case of relief granted by a foreign court, recognised by a court of that Contracting
98 Supra note 52 at 204. 99 Supra note 3 at 197, 297, 366. 100 Supra note 55 at 205.
39 State, and that the credito r is entitled to pro cure those remedies in accordance with the Convention, and (b) the applicabl e authoritie s shall exped itiously co -operate with and assi st the creditor in the exercise of such remedies in conformity with the applicable aviation safety laws and regulations.
7. Paragraph 2 an d 6 sh all n ot affect any a pplicable aviation safety laws an d regulations.
Article X of the Protocol is essential to the application of the principles of Article 13 of the
Convention.101 Under paragraph 2, the meaning of “speedy” interim relief in Article 13 may be made the object of a declaration by a Contracting State. This is quite important as the parties
(especially the creditor) will wish to know in advance exactly how “speedy” the relief proceedings and execution thereof will be. It will be interesting to examine the actual declarations made by Ratifying States in Chapter 3 of the thesis and verify exactly how quickly they are willing to proceed in providing rapid interim relief.
2.2.2.1.3 Article XI
Article XI-Remedies on insolvency
1. This article applies only where a Contracting State that is the primary insolvency jurisdiction has made a declaration pursuant to Article XXX(3).
Alternative A
2. Upon the occurrence of an insolvency-related event, the insolvency administrator or the debto r, as appli cable shall, subj ect to paragraph 7, give full posse ssion of the aircraft object to the creditor no later than the earlier of:
(c) the end of the waiting period; and (d) The date on whi ch the creditor would be entitles to possession of the ai rcraft if this Article did not apply. 3. For the purposes of this Article, the “waiting period” shall be the p eriod specified in a declaration of the Contracting State which is the primary insolvency jurisdiction
4. References in this Article to the “insolve ncy administrator” shall be to that person in its official, not in its personal capacity.
5. Unless and until the credit or is given th e oppo rtunity to take po ssession u nder paragraph 2:
101 See above section 2.1.2.2.3.
40 (a) the insolve ncy administrator or the debtor, as a pplicable, shall preserve the aircraft object and maintain it and its value in accordance with the agreement; and (b) the creditor shall be entitled to apply for any other forms of interim relief available under the applicable law. 6. Sub-paragraph (a) of the p receding paragraph shall not preclude the use of th e aircraft object under arrangements designed to preserve the ai rcraft object and maintain it and its value.
7. The insolvency administrator or the debtor, as applicable, may retain possession of the aircraft object where, by the time specified in paragraph 2, it has cured all defaults other than a default constituted by the opening of insolvency proceedings and has agreed to perform all future o bligations under the agreement. A second waiting period shall not apply in respect of a default in the performance of such future obligations. 8. With regard to the remedies in Article IX(1):
(a) they sha ll be made available by the registry authority a nd the admi nistrative authorities in Contracting State, as a pplicable, no lat er than five working days after the date on which cre ditor notifies such authoritie s that it is entitled to pro cure tho se remedies in accordance with the Convention; and
(b) the applicable authorities shall expeditiously co-operate with and assist the creditor in the exercise of such remedies in conformity with the applicable aviation safety laws a nd regulations.
9. No exercise of remedies permitted by the Co nvention or thi s Protocol m ay b e prevented or delayed after the date specified in paragraph 2.
10. No o bligations of the de btor u nder the agreement may be m odified with out th e consent of the creditor.
11. Nothing in th e preceding paragraph shall be construed to affect the authority, if any, of the insolvency administrator under the applicable law to terminate the agreement.
12. No rights or interests, except for non-consensual rights or interests of a categ ory covered by a de claration pursu ant to Article 39(1), sh all h ave prio rity in i nsolvency proceedings over registered interests.
13. The Convention a s mo dified by Articl e IX of this Protocol shal l apply to th e exercise of any remedies under this Article.
Alternative B
2. 2. Upon th e occu rrence of an in solvency-related event, the insolven cy administrator or th e de btor, a s a pplicable, upon th e re quest of the credito r, shall give notice to the credito r within the time specif ied in a de claration of a Contracting State pursuant to Article XXX(3) whether it will:
(a) cu re all defaults othe r than a def ault constituted by the o pening of in solvency proceedings and agree to perform all future obligations, under the agreement and related transaction documents; or
(b) give th e cre ditor the oppo rtunity to ta ke po ssession of the aircraft object, in accordance with the applicable law.
41
3. The a pplicable law referred to in sub-paragraph (b) of the p receding paragraph may permit the court to req uire the takin g of any additional step o r the provi sion of any additional guarantee.
4. The creditor shall provide evidence of its claims and proof that its international interest has been registered.
5. If the inso lvency admi nistrator or th e debt or, as applicable, d oes not give notice i n conformity wi th paragraph 2, or when the insolvency administ rator o r the d ebtor h as declared that it will give the creditor t he opportunity to take possession of the aircraft object but fails to do so, the cou rt ma y permit the cre ditor to ta ke po ssession of the aircraft object upon such terms as the court may order and may require the taking of any additional step or the provision of any additional guarantee.
6. The aircraft object shall not be sold pending a decision by a court regarding the claim and the international interest.
Article XI is at the core of the basic principles that guided the drafters of the Convention and
Protocol. As already stated,102 commercial aviation has never historically been a very profitable venture. Even Government owned airlines are crumbling today under the burden of enormous debt and rising fuel costs.103 Bankruptcy is an ever-present possibility.
Most bankruptcy laws provide for a cessation (a stay) of creditor recourses during the reorganization process. For a creditor, the possibility of having assets seized or frozen, contracts and agreements modified and payments cancelled under the authority of bankruptcy protection is not an economically favourable prospect. On the other hand, it has been said that the mere existence of an effective and predictable insolvency law is enough to alleviate creditor concerns and permit readily available and low cost asset-based financing.104 It is undoubtedly under these
102 See above note 12. 103 Alitalia, Italy’s national airline is apparently on the verge of bankruptcy losing 1.6 million dollars a day. See
42 assumptions that the Convention and Protocol were conceived. If so, debtors located in
Contracting States making declarations under Article XI, and adopting alternative A in insolvency proceedings, should benefit from lower financing costs and altogether better conditions.
It is not the intent of this study to dissect the two alternatives, or engage in an in-depth comparative analysis of the two possibilities. Suffice it to say that Alternative A of Article XI reflects the approach adopted by section 1110 of the United States Bankruptcy Code105 under which secured creditors may repossess the encumbered assets even after bankruptcy proceedings have begun and notwithstanding any stay in enforcement actions.106 This approach best respects the foundational objectives of the Convention and Protocol.107 In contrast, Alternative B (often referred to as “the soft alternative”) does not permit repossession unless ordered at the discretion of the courts.
It has been argued that the general impact for States regardless of whether they elect Alternative
A or B will be beneficial since a creditor will not have to be concerned with the specific national bankruptcy rules of a State but only with the provisions set out in Article XI.108
Article XI allows for many possible declarations by Contracting States including:109
1-Application or exclusion of Article XI to insolvency proceedings; 2-Application of Alternative A or Alternative B to insolvency proceedings;
105 Supra note 57 at 454. 106 Charles W. Mooney, "Insolvency Law as credit Enhancement: Insolvency-related Provisions of the Cape Town Convention and the Aircraft Equipment Protocol" (2004) 13 Int. Insolv. Rev. 27 at 37. 107 See comments section 2.1.1 at 14-15. 108 Supra note 52 at 653. 109 Supra note 52 at 214.
43 3-Application of Article XI to all or certain categories of insolvency proceedings.
In the context of getting better financing conditions, it seems probable that States with a less than satisfactory insolvency regime will opt for Alternative A. The actual official declarations made by Ratifying States will be analysed later in section 3.1.1.1 of the thesis.
2.2.2.1.4 Article XII
Article XII — Insolvency assistance
1. This Article applie s only whe re a Co ntracting Sta te ha s m ade a d eclaration pursuant to Article XXX(1).
2. The courts of a Contracting State in which an aircraft object is sit uated shall, in accordance with the l aw of the Contracting State, co -operate to the maxim um extent possible with foreign co urts and foreign insolvency admi nistrators in carrying out th e provisions of Article XI.
Article XII includes an interesting principle of international cooperation in case of bankruptcy proceedings where the aircraft is located outside the debtor’s or even the creditor’s own jurisdictions. Aircrafts are extremely mobile110 and will most probably be, at the time of the bankruptcy, carrying out their normal international routes and liaisons. The purpose of this
Article is to create a global web of reciprocal assistance permitting the creditor to seek the cooperation and support of the courts in a third party Contracting State.111 The level of assistance is not defined but seems to be somewhat limited by the inclusion in paragraph 2 of the words “in accordance with the law of the Contracting State (third party State)”. The assistance offered a creditor will most likely be defined by each Contracting State’s declarations under Article XI112
(Alternative A or B).
110 See above note 26. 111 A third party State is a Contracting State under the Protocol where an aircraft is physically located, without being the debtor’s or creditor’s jurisdictions under the Convention and Protocol. 112 See above section 2.2.2.1.3.
44
Nonetheless, article XII creates an international bankruptcy assistance regime, under which other
Contracting States must offer “maximum” cooperation to a creditor seeking relief, interim or otherwise. It would seem to be in line with the objectives of the Convention that all Contracting
States adopt such a declaration.
2.2.2.1.5 Article XIII
Article XIII -De-registration and export request authorisation 1. This Article applie s only whe re a Co ntracting Sta te ha s m ade a d eclaration pursuant to Article XXX(1).
2. Where the d ebtor ha s issued an irrevo cable de-regi stration a nd export req uest authorization substantially in the fo rm annexed to thi s Protocol a nd has submitted such authorisation for re cordation to the registry a uthority, that authori sation shall be so recorded.
3. The person in whose favour the authorisation has been issued (the “authorised party”) or its certified designee shall be the sole p erson entitled to exercise the remedies specified i n Article IX(1) and m ay do so only in accordance wit h the a uthorisation and applicable aviation safety laws and re gulations. Such authori sation may not be revoke d by the debtor without the consent in writing of the authorised party. The registry authority shall remove an authorisation from the registry at the request of the authorised party.
4. The registry authority and other administrative authorities in Contracting States shall expeditiously co-operate with and assist the authorised party in the exercise of the remedies specified in Article IX.
The importance of deregistration finds its origin in the Chicago Convention.113 Article 18 of the
Chicago Convention provides that an aircraft may never be registered in two different States at the same time.114 An aircraft must be deregistered in a State before being registered in another
113 Convention on International Civil Aviation, signed in Chicago on 7th of December 1944. 114 See Donald H. Bunker, International Aircraft Financing (Montreal: IATA, 2006) vol. 1at 541-550; Giulia Mauri, "'The Cape Town Convention on Interests in Mobile Equipment as Applied to Aircraft: Are Lenders Better Off Under the Geneva Convention?" (2005) 13 E.R.P.L. 641 at 650; Jeffrey Wool, "The case for a commercial
45 State. Accordingly, the “authorised party” (in this context, the creditor or its representatives115) wishing to take possession of an aircraft and reallocate that asset to another venture in a different
State must first deregister that aircraft. The right of de-registration and physical transfer of the aircraft are specifically granted to the creditor under article IX (1)(2) of the Protocol whether or not they are exercised during bankruptcy proceedings.
Article XII establishes a general principle of cooperation where the registration State is also a
Contracting State (paragraph 4).
The specific principles set forth in this article all relate to the speedy and efficient recourses of the creditor against the encumbered asset. In the absence of the Protocol, deregistration authorization is usually provided for contractually by an irrevocable power of attorney.116 The goal of the Protocol is to provide uniform legal authority for this already existing practice. The practical advantages to the creditor are obvious and in principle all States should declare their intention to apply Article XIII, thereby furthering the kind of efficient financing environment central to the objectives of the Convention and Protocol.
2.2.2.1.6 Article XXVII Article XXVII (…) 2. The Regional Economic Integration Organisation shall, at the time of sig nature, acceptance, approval o r accession, make a declaration to the Depositary specifying the matters governed by this Protocol in respect of which com petence has been transferred to that Org anisation by its Membe r St ates. T he Region al Econo mic Integration Organisation shall p romptly notify the Depositary of any chang es to the distribution of competence, including new transfers of competence, specified in the declaration under this paragraph. orientation to the proposed Unidroit Convention as applied to aircraft equipment" (1999) 31 Law & Pol’y in Int’l Bus. 79 at 95. 115 Supra note 52 at 220. 116 See model Deregistration Power of Attorney (Dry Lease), Donald Bunker, International Aircraft Financing (Montreal: IATA, 2006) Vol. 2 Specific Documents at 228.
46
(…)
The comments given earlier concerning Article 48(2) of the Convention also apply to this Article.117
2.2.2.1.7 Article XIX
Article XIX
1. Subject to paragraph 2, a Contracting State may at a ny time de signate an entity or entities in its territory as the entry p oint o r e ntry points throug h which the re shall or may be transmitted to the International Registry information required for registration other than registration of a notice of a national interest or a right or interest under Article 40 in either case arising under the laws of another State.
2. A designation made under the preceding paragraph may permit, but not compel, use of a designated entry point or entry points for information required for registrations in respect of aircraft engines.
Article XIX is practical in nature as it enables a Contracting State to designate national access points (physical or electronic) to the International Registry for the purposes of registering rights created under the Convention and Protocol. The Aviation Working Group has recommended that
States making a declaration under this Article should specify minimal yet clear conditions for using national access points and refrain from charging an additional registration fee.118
2.2.2.2 Opt-Out Declarations
2.2.2.2.1 Article XXIV
Article XXIV - Relationship with the Convention for the Unification of Certain Rules Relating to the Precautionary Attachment of Aircraft
1. The Convention shall, for a Contracting State that is a Party to the Convention for the Unificatio n of Certai n Rules Relating to the Prec autionary Attachment of Airc raft, signed at Rome on 29 M ay 1933, supersede that Convention as it relates to aircraft, as defined in this Protocol.
117 See section 2.1.2.3.1. 118 Aviation Work Group, Annex 1- Declarations Matrix and Economically-Based Recommendations, online:
47
2. A Contracting State Party to the a bove Convention may de clare, at the time of ratification, a cceptance, a pproval of, or acce ssion to this Protocol , that it will not apply this Article.
Although Articles XXIII and XXV of the Protocol state that the Cape Town Convention supersedes the application of both the Geneva Convention and the Unidroit Convention on
International Financial Leasing, Article XXIV permits States to give priority to the Convention for the Unification of Certain Rules Relating to the Precautionary Attachment of Aircraft. 119 The purpose of the latter Convention is to limit the rights of seizure of an aircraft of a creditor or owner.120 Making this declaration would have an impact on a State’s designation as a qualifying
State under the OECD’s Sector U nderstanding on Exports Credits for Civil Aircraft 121 (see section 4.1.1.2.2).
2.2.2.2.2 Article XXX(5) and Article XXI
Article XXX — Declarations relating to certain provisions
5. A Contracting State may, at the time of ratification, acceptance, approval of, or accession to this Proto col, decla re th at it will not apply the p rovisions of A rticle XXI, wholly or in part. The declaration shall specify under which conditions the relevant Article will be applied, in case it will be appli ed partly, or otherwise whi ch other forms of interim relief will be applied.
Article XXI -Modification of jurisdiction provisions
For th e pu rposes of A rticle 43 of the Conve ntion and subject to Article 4 2 of the Convention, a cou rt of a Contractin g State al so h as juri sdiction whe re the object is a helicopter, or an airframe pertaining to an aircraft, for which that State is the State of registry.
119 For a brief explanation of the Rome Convention’s rules, see S. J. McGairl, "The proposed UNIDROIT Convention: international law for asset finance (aircraft)" (1999) Rev. D.U. 439 at 440. 120 Supra note 52 at 236. 121 OECD, Sector Understanding on Export Credits for Civil Aircraft, TAD/PG(2007)28/FINAL (21-Dec-2007) online:
48 Article XXX (5) in combination with Article XXI provides concurrent jurisdiction to the courts of the Contracting State where the aircraft frame or helicopter is registered under the Chicago
Convention.122
Concurrent jurisdiction is intended to promote efficient execution of the rights created under the
Convention and Protocol. However, the parties to an agreement do retain the right to agree to the exclusive jurisdiction of a Contracting State’s courts if they so desire.123
2.2.2.3 Other Declarations
2.2.2.3.1 Article XXIX
Article XXIX
1. If a Contracti ng State has territorial u nits in which d ifferent syste ms of law are applicable in rel ation to the m atters d ealt with in this P rotocol, it may, at t he time of ratification, acceptance, approval or accession, declare that thi s Protocol is to extend to all its te rritorial units or only to one or more of the m and may m odify its de claration by submitting another declaration at any time.
2. Any such d eclaration shall state expr essly the territori al units to which th is Protocol applies.
3. If a Contra cting State has not made any decla ration unde r pa ragraph 1, this Protocol shall apply to all territorial units of that State.
4. Where a Contracting State extends thi s Protocol to one or more of its territo rial units, declarations permitted under this Protocol may be made in respect of each such territorial unit, and the declarations made in respect of one territorial unit may be different from those made in respect of another territorial unit.
5. If by virtue of a decla ration under paragraph 1, this Protocol ext ends to one or more territorial units of a Contracting State: a) the debtor is con sidered to be situated in a Contracting State only if it i s incorporated or formed under a law in force in a territorial unit to which the Convention and this Protocol apply or if it has its registered office or statutory seat, centre of administration, place of business o r habitual residence in a t erritorial u nit to whi ch th e Co nvention and thi s Protocol
122 Article 17 of the Convention on international civil aviation (Nationality of aircraft). Although the Protocol also applies to engines (See Articles I(b)(c), Article IV and V of the Aircraft Protocol), engines cannot be registered under the Chicago Convention rules. 123 See Articles 42, 43 and 44 of the Cape Town Convention.
49 apply; (b) any reference to the location of the object in a Contracting State refers to the location of the object in a territorial unit to which the Convention and this Protocol apply; and (c) any reference to the administrative authorities in that Contracting State shall be construed as referring to the administrative authorities having jurisdiction in a territorial unit to which the Convention and this Protocol apply and any reference to the national register or to the registry authority in that Contracting State shall be construed as referring to the aircraft register in force or to the registry authority having jurisdiction in the territorial unit or units to which the Convention and this Protocol apply.
This Article enables a federally-organized State to ratify the Convention and Protocol even when the subject matter of the Convention lies within the exclusive legislative competence of the individual territorial units that make up that State. The State must specify in its declaration whether the Convention extends to all its territorial units or only to some. The possibility for partial implementation envisaged by Article XXIX enables a State to ratify the Convention and
Protocol even when not all of its territorial units are willing to participate. 124
It would of course be best for the uniformity and effectiveness of the Protocol if States refrained from partial implementation. International aircraft financing presents enough challenges as it is without the introduction of mini Contracting States. The Aviation Working Group therefore recommends these types of declaration only if they are required by the constitutional principles of a Contracting State. A good example where this is the case is Canada. Although the federal government has the exclusive authority to adopt and ratify international conventions, implementation requires the passage of legislation at the individual provincial levels with respect to matters within exclusive provincial authority under the Constitution Act 1867.125 Since secured financing is primarily a matter of provincial authority, the Convention and Protocol
124 Paul J. Davidson, “Uniformity in International Law: The Constitutional Obstacle” (1987-1988) 11 Dalhousie L.J. 690. 125 Edward McWhinney, “Canadian Federalism, and the Foreign Affairs and Treaty Power. The Impact of Québec’s “Quiet Revolution”” (1969) 7 CAN. Y.B. Int’l L. 3 at 5.
50 cannot take full effect throughout Canada unless and until each province has passed the relevant implementing legislation.
Although Canada has deposited declarations providing for only partial implementation under other international conventions containing the same type of clause (owing to the unwillingness of all provinces to sign on), it is unlikely that it would do so in the case of the Cape Town
Convention and Aircraft Protocol in view of the inherently international nature of the subject matter. However, fully national implementation is unlikely to create a difficulty as uniform implementing legislation has been prepared for passage at both the federal and provincial levels and already has been enacted by some provinces (though it will not of course be declared in force until Canada has ratified and the requisite legislation is in place everywhere).
51 3 International Ratification of the Cape Town Convention and the Aircraft Protocol: A New Beginning 3.1 Legal analysis
3.1.1 Ratifications and Declarations
3.1.1.1 Current Declarations and Ratifications
It is an important part of this thesis to analyse and compare the actual declarations made by
Contracting States in order to reach a conclusion regarding their real impact on uniformity.
Twenty-one States126 had ratified the Convention and the Protocol at the time of the writing of this thesis. This is a relatively low number considering the allegedly positive impact of these instruments on aviation financing. Of the countries comprising the G8, only the United States of
America has ratified.
In contrast to the approach taken in the preceding chapter, the chapter will review the declarations actually deposited under both the Convention and the Aircraft Protocol together as contemplated by article 6 of the Convention. Table 2 below indicates the number of Ratifying
States that have made declarations under each Article of the Convention and Protocol.
Observations will be made, as necessary, regarding each specific Article and the specific States having made the relevant declarations.
126 Listed in alphabetical order: Afghanistan, Albania, Angola Cape Verde, Columbia, Ethiopia, India, Indonesia, Ireland, Kenya, Malaysia, Mexico, Mongolia, Nigeria, Oman, Pakistan, Panama, Senegal, South Africa, United Arab Emirates and the United States of America
52
Table 2: Declarations made by Contracting States
DECLARATIONS MADE UNDER THE CAPE NUMBER OF CONTRACTING STATES TOWN CONVENTION AND AIRCRAFT HAVING MADE A DECLARATION PROTOCOL (ARTICLES) UNDER THAT ARTICLE Article 39(1)(a) Cape Town Convention 21
Article 39(1)(b) Cape Town Convention 16
Article 39(4) Cape Town Convention 2
Article 40 Cape Town Convention 14
Article 50 Cape Town Convention 2
Article 52 Cape Town Convention 6
Article 53 Cape Town Convention 14
Article 54(2) Cape Town Convention 21
Article 55 Cape Town Convention 0
Article 60 Cape Town Convention 1
Article VIII Aircraft Protocol 21
Article X Aircraft Protocol 17
Article XII Aircraft Protocol 20
Article XIII Aircraft Protocol 19
Article XI Aircraft Protocol-Alternative A 17
Article XI Aircraft Protocol-Alternative B 1
Article XIX Aircraft Protocol 4
53 Article XXI Aircraft Protocol 0
Article XIX Aircraft Protocol 3
Article XXIV Aircraft Protocol 0
3.1.1.2 A review of State Declarations by Enacting Convention Article
i) Article 39(1)(a) Convention
Article 39(1)(a) of the Convention has received universal acceptance by Contracting States, all of which have registered declarations to protect non-consensual rights or interests arising under their national laws.127 Unpaid employee wages (15 declarations) and rights of detention in favour of repairers in possession of the object (14 declarations) are the most frequently protected categories. Two additional States protect the rights of bailees on goods in their possession but this may be just another way of expressing repairer’s rights of detention. Other categories include: taxes and unpaid charges owed to the State (8 declarations), claims relating to salvage rights
(Pakistan) and seizure of aircraft related to customs or criminal violations (Panama).
Five Contracting States (Albania, Ireland, Mexico, South Africa and the United States of
America) opted for a very general formulation. These States simply declared that all categories of non-consensual right or interest, declared as such under their national law, have, and will have in the future, priority over a registered international interest. The meaning and scope of these declarations can only be determined by examining each State’s legislation. It would be preferable if States refrained, as much as possible, from making these types of vague and generic
127 See Article 1(s) Cape Town Convention.
54 declarations as they add considerable transaction costs for prospective financers and preclude a transparent assessment of the extent of uniformity, or lack of uniformity, among declarations.
In an apparent effort to persuade potential creditors and holders of international interests of the creditor-friendly nature of its national law, Panama stated that its declarations did “not pose an unacceptable risk to the holders of registered rights.”
ii) Article 39(1)(b) Convention
Sixteen (16) Ratifying States stipulated in generic terms that the Convention does not prevent a
State or State entity or any private provider from arresting or detaining an aircraft for amounts owed to the State or State entity in relation to public services rendered.
iii) Article 40 Convention
Article 40 has been the subject of declarations by 14 Contracting States covering the following categories of non-consensual rights and interests:
-Rights pertaining to a court order following legal judgment: 14 declarations -Liens or other rights of a State entity relating to taxes or other charges: 13 Declarations -Liens in favour of airline employees for unpaid wages: 5 declarations -Liens of a salvor for unpaid charges, liens of a person providing towage services and liens of a bailee on an aircraft object: 1 Declaration (Nigeria) -All other non consensual rights or interests which under the law of that State could have priority over the rights of secured creditors: 2 declarations (Oman and United Arab Emirates)
A special mention must be made here concerning liens in favour of airline employees for unpaid wages and liens of an authority of a State relating to taxes and unpaid charges. Several States128 have included these categories of non-consensual rights and interests in both their Article
128 India, Indonesia, Malaysia, Oman and U.A.E.
55 39(1)(a) and Article 40 declarations. However, the Article 39(1)(a) rights are limited to liens arising since the time of the declared default whereas the Article 40 rights are limited to liens arising prior to that same declared default. While this does not help to simplify these already complex declarations, there is a logical explanation for the approach. Article 39 non-consensual rights and interests exist without the need for registration, therefore safeguarding the holders of those rights against a loss of priority to prior registered international interests. Article 40 non- consensual rights and interests are registrable and must therefore compete with other registered international interests on a first to register ranking basis.
iv) Article 50 Convention
Only two (2) Ratifying States (Panama and Mexico) have opted to exclude the application of the
Convention to internal transactions by a declaration made under Article 50. This is not surprising as the practical value of this exclusion will be very limited.129
Article 52 Convention
Of the six (6) Ratifying States (Afghanistan, India, Oman, Pakistan, United Arab Emirates,
Sénégal) that have made a declaration under Article 52, none have confined the application of the
Convention to specified territorial units only, thus ensuring the application of the Convention throughout their territorial limits. States made these declarations to confirm that of the
Convention applies thru all its provinces, territories or emirates notwithstanding its internal political organization.
129 See above section 2.1.2.2.4.
56 Article 53 Convention
The opportunity to designate the appropriate courts for the purposes of Article 1130 and Chapter
XII (Jurisdiction) of the Convention has been widely accepted and has been the object of fourteen
(14) declarations.
Seven (7) of the declaring States simply stated that “the competent courts” of that State would have jurisdiction under these articles and the Convention. Some States designated specific courts: the High Courts (India, Kenya, Nigeria and Pakistan) and the Primary Courts (Afghanistan and
United Arab Emirates).
Only Panama opted to describe, in detail, the authorized entities under this Article. Its declaration was not limited to traditional courts but also included administrative courts, the civil aviation authority, advisory bodies under banking and insurance statutes, and arbitral tribunals.
v) Article 54(2) Convention
As already discussed131, Article 54(2) requires all States to declare whether court intervention is necessary for the execution of remedies under Articles 8, 9 and 10 of the Convention. Almost every Ratifying State (19 declarations) opted against the necessity for court intervention. Only two (2) States (Columbia and United Arab Emirates) declared that these remedies can be exercised only with leave of the courts.
130 See Article 1(h) Definition of the word “court” under the Cape Town Convention. 131 See above section 2.1.2.2.2.
57 Article 55 Convention
No State has made a declaration under Article 55 to the extent it permits a State to wholly or partially exclude interim relief measures under article 13. However, one (1) State (Ethiopia) deemed it fit to declare that it was not making a declaration under Article 55!
Article 60 Convention
The only State to make a declaration under Article 60 was Mexico. However, its declaration simply reiterated the basic principle under that Article that the Convention does not apply to a pre-existing right and interest which retains its pre-ratification priority. Its declaration did not specify a departure from that principle even though the article contemplates that this would be the only reason for depositing a declaration.
3.1.1.3 A Review of State Declarations by Enacting Protocol Article
Article VII Protocol
The opt-in choice of law provision contemplated by Article VII has received unanimous acceptance from all 21 Contracting States.
Article X Protocol
Article X relates directly to the application of Article 13 of the Convention which has received no exclusionary declaration under Article 55. Eighteen (18) States (Albania, Mexico and the United
States made no declaration under Article X) have made a declaration to adopt Article X and consequently Article 13 of the Convention. Accordingly, Article X of the Protocol and article 13 of the Convention must be applied only to these “declaring” Contracting States. As Article XXX
58 (2) specifies, Ratifying States may adopt the provisions of Article X “wholly or in part”. All but one State has adopted the application of Article X in its entirety. The exception is Ireland which declared it would apply only the third paragraph of article X (Article X (3)) leaving unspecified the number of days necessary to get satisfaction of the interim remedies contemplated by Article
13.
Article X(2) requires participating States to specify the maximum number of days required to execute the interim remedies set forth in Article 13(1)(a) - (d). Article X(3) of the Protocol adds an additional interim remedy to Article 13 (known as Article 13(e)) in the form of sale of the asset and application of the proceeds of sale in satisfaction of the secured obligation.
The following table (Table 3) indicates the different maximum time periods declared by States to execute the various interim remedies and the number of States that opted for each period:
Table 3-Article 13 Cape Town Convention and Article X Aircraft Protocol Speedy interim relief
5 days 10 days 20 days 30 days
Article 13(a) 1 14 1
Article 13(b) 1 14 1
Article 13(c) 1 14 1
Article 13(d) 2 14
Article 13(e) 1 14
Note: The number of days indicated in the table is irrespective of their qualification as calendar days or working days. Although 18 States made a declaration under Article X (See Table 2), Ireland only adopted Article X(3) of the Aircraft Protocol, meaning that only 17 States defined the expression “speedy remedy”. Also, Panama declared it
59 would only apply Article X and specified the number of days for the application of the relief measures in Article 13(1)(a)-(c) as seven (7) working days and Article 13 (1)(d) as twenty (20) working days (not included in the table). It did not declare a time period under Article 13(1)(e).
Article XI Protocol
As table 2 indicates, almost all Contracting States adopted the philosophy and principles established by Alternative A132 of Article XI of the Aircraft Protocol (the “bankruptcy article”).
Only Mexico opted for Alternative B (the “soft alternative”).
All States that made a declaration (whether in favour of Alternative A or B) under Article XI stated that it applied to all types of bankruptcy proceedings133.
Albania, Ireland and the United States of America have not made a declaration under Article
XXX(3) and Article XI.
The following Table (Table 4) indicates the number of days declared by Contracting States under
Paragraph XI(3)(Alternative A) to constitute the “waiting period” provided for in Paragraph
XI(2) (Alternative A).
132 See above Section 2.2.2.1.3. 133 Article XXX(/3) of the Aircraft Protoc ol allowed Contracting States to specify the types of insolvency proceedings to which it would apply Alternative A or Alternative B.
60
Table 4: Paragraph XI(2) Alternative A-Waiting Period
Number of days declared for the Contracting States waiting period 30 4 (Ethiopia, Nigeria, Sénégal, South Africa) 40 1 (Malaysia)
60 11
2 calendar months 1 (India)
Note: The number of days i s indicated irrespective of their quali fication as calendar days or working days.
Article XII and XIII Protocol
Almost all Contracting States adopted the international cooperation principles contemplated by
Articles XII and XIII. The exception is Mexico although Columbia only adopted the principle contained in Article XII, and not also Article XIII.
Article XIX Protocol
Designated national entry points to the International Registry have been identified by Mexico, the
United Arab Emirates and the United States.
61 Article XXI Protocol
The additional jurisdiction provision of the Aircraft Protocol has not been adopted by any of the twenty-one (21) Ratifying States.
Article XXIV
At this time, no Contracting State has made a declaration under this Article. Only 31 States have ever ratified the Convention for the Unifica tion of Certain Rule s Relating to the Precautiona ry
Attachment of Aircra ft although these include several States that have ratified the Cape Town
Convention and Protocol (Angola, Nigeria and Senegal).
3.1.1.4 Preliminary observations
At first glance, the declarations deposited by the relatively few States that had ratified the
Convention at the time of writing have already produced significant levels of difference in the application of the Convention and Aircraft Protocol.
Although the choice of declarations made by Ratifying States is seemingly uniform (non- consensual rights and interests; interim relief, deregistration assistance, bankruptcy provisions), the content of each declaration has been tailored to each States’ own requirements.
For example, although all Contracting States elected to preserve their “non-consensual rights and interests” (Article 39(1)(a)), the scope varies as does the generality of the formulation . Similarly, while the speedy interim relief and bankruptcy provisions (Alternative A) have been widely
62 accepted by States (see table 2), there is no uniform treatment in regards to the time period requirements elected by individual States (see tables 3 and 4).
In addition, determining the content and meaning of the declarations as deposited with the official
Depository134 is time consuming and quite confusing. Although the number of declarations that have been made is small,135 States have adopted widely divergent formulations and approaches making the process of comparison quite arduous. Indeed, no State has yet deposited a declaration identical or closely similar (Convention and Protocol) to that of another State. For all intents and purposes, there are 21 varying versions of the Convention and Aircraft Protocol with respect only to the issues addressed by the declarations.
3.1.2 Review of Legal Doctrine
Considering the limited number of States that have ratified the Convention and Protocol to this point, it seemed important to take into account other State’s intentions and perspectives regarding eventual implementation of these instruments and possible “opt-in opt-out” declarations. In order to accomplish this objective, available government policy papers and legal doctrine were analysed to try and establish if any clear trend could be discerned.
134 See Unidroit’s web pages: < http://www.unidroit.org/english/implement/i-2001-convention.pdf> and http://www.unidroit.org/english/implement/i-2001-aircraftprotocol.pdf>. Under each of these documents, the reader can consult Contracting States’ Declarations under the Convention and Protocol. 135 Article 56(1) of the Cape Town Convention and Article XXXII of the Aircraft Protocol limit Declarations to those specifically mentioned in these articles, eliminating other reservations.
63 Although the best insight into such matters would undoubtedly be official State or Government policy documents, availability was scarce. However, the Convention and Protocol have generated a considerable body of legal literature often authored from a State-specific perspective.
These texts may be divided into two distinct categories:
a) One group of authors takes the general position that the Convention and Protocol are not
compatible with local laws and must therefore be modified (by way of a declaration) to
adapt to national legislation;136
b) A second group of authors takes the general position that the Convention and Protocol are
a stepping stone or precursor for national and local law reform in matters relating to
moveable asset financing and leasing principles.137
Most of the authors in both groups compare their internal legal system to what they perceive, in most cases, to be radically new concepts of law introduced by the Convention and Protocol. This leaves no doubt that a significant number of jurisdictions do not presently have a body of law
136 Kenneth Basch & Adriano Pugliesi Leite, "Aircraft Repossession in Brazil--Cape Town Contrasts" (2005) 6-8 Airfinance Journal Supplemental Guide To Aviation Lawyers; Rogelio N. Maciel, "The Cape Town Convention on International Interests in Mobile Equipment and its Protocol on Matters Specific to Aircraft Equipment: An Argentine Perspective" (2004) xxix/3 Air & Space L. 219; Uniform Law Conference of Canada, Report (on the ratification of the Cape Town Convention and Aircraft Protocol) (22 August 2001), Toronto, last modified on the 28 February 2002 (30 pages); Nicholas Humphrey & Vernon Nase, "The Cape Town Perspective 2001: An Australian Perspective" (2006) Vol. XXXI/1 Air & Space L. 5. 137 Rogelio N. Maciel, "The Cape Town Convention on International Interests in Mobile Equipment and its Protocol on Matters Specific to Aircraft Equipment: An Argentine Perspective" (2004) xxix/3 Air & Space L. 219; Giulia Mauri & Birgitta Van Itterbeek, "Belgian Aircraft Finance: New Perspectives Why Belgium should Ratify the Cape Town Convention on International Interests in Mobile Equipment and its Aircraft Specific Protocol" (2004) Vol. XXIX/3 Air & Space L. 208; H. Wassgren, "Rights of financiers in aircraft: a Finnish perspective on the 2001 Cape Town instruments" (2004) Rev. D.U. 557; B. Patrick Honnebier, "The Convention on International Interests in Mobile Equipment and Aircraft Equipment Protocol Encourages European property law reform" (2004) 8 EdinLR. 118 ; Australian Government-Transport Regional Development and Local Government Australian Government Department of Infrastructure. (2008) "The Cape Town Convention Consultation Paper", online:< http://www.infrastructure.gov.au/aviation/international/pdf/Cape_Town_consultation_paper.pdf>.
64 sufficient to support the legal principles of asset based financing. For example, the Finnish legal system does not recognize a financial lease138 commonly used in aviation financing139 as a distinct legal concept and does not recognise the irrevocable power of attorney used in the deregistration of aircraft at the civil aviation authority. Constitutional objections to the ratification of the Convention have been raised under the Argentinean legal regime.140
Not surprisingly, the content of the declarations proposed by authors are usually designed to bring the Convention and Protocol into line with their internal legal systems.
Recommendations concerning Articles 39 and 40 (non-consensual rights and interests) follow the pattern actually adopted by the Ratifying States to this point: a list of State specific rights.141 The
Uniform Law Conference of Canada142 took the position that declarations under Article 39 should seek to limit these rights to a minimum in order to avoid secret liens143 and in order to enhance the reliability of the international registry system for financiers. A similar view was put forward for Belgium where it was argued that no Article 39 declarations should be made and that in order to promote the transparency and predictability of the registry system, only registrable rights and interests should be declared under Article 40.144 Unfortunately, as we have seen,
138 H. Wassgren, "Rights of financiers in aircraft: a Finnish perspective on the 2001 Cape Town instruments" (2004) Rev. D.U. 557 at 564. 139 For a detailed overview of the aviation operating lease, see: Donald H. Bunker. International Aircraft Financing (Montreal: IATA, 2006) vol. 1 at 194. 140 Rogelio N. Maciel, "The Cape Town Convention on International Interests in Mobile Equipment and its Protocol on Matters Specific to Aircraft Equipment: An Argentine Perspective" (2004) xxix/3 Air & Space L. 219 at 223. 141 See above section 3.1.1.1 at 54-56. 142 The Uniform Law Conference of Canada was founded in 1918 to harmonize the laws of the provinces and territories of Canada, and where appropriate the federal laws as well. 143 Uniform Law Conference of Canada, Report (on the ratification of the Cape Town Convention and Aircraft Protocol) (22 August 2001), Toronto, last modified on the 28 February 2002 at 24 (paragraph 108). 144 Giulia Mauri & Birgitta Van Itterbeek, "Belgian Aircraft Finance: New Perspectives Why Belgium should Ratify the Cape Town Convention on International Interests in Mobile Equipment and its Aircraft Specific Protocol" (2004) Vol. XXIX/3 Air & Space L. 208 at 215.
65 Ratifying States have not adhered to this advice and have instead deposited article 39 declarations listing numerous non- registrable rights and interests (See section 3.1.1.1).
The other declarations most discussed in the literature are the bankruptcy options (Article XI
Aircraft Protocol; see section 2.2.2.1.3) and the issue of whether court approval of remedies should be required under Article 54(2) of the Convention (see Section 2.1.2.2.2).
In the case of the bankruptcy alternatives (A “hard” or B “soft”), it seems only Argentina would opt for the less creditor friendly Alternative B option 145 (the author speaks of compatibility with national laws) whereas most authors have acknowledged the advantages of Alternative A146 for their legal systems.
Recommendations by authors from civil law States with respect to Article 54(2) were almost unanimously in favour of judicial intervention based on the perceived incompatibility between the civil law tradition and common law self-help remedies.147
If a preliminary conclusion can be drawn from the literature, it is that there are numerous incompatibilities between many of the world’s national legal regimes and the legal regime
145 Supra note 140 at 223. 145 Ibid. at 226. 146 Uniform Law Conference of Canada, Report (on the ratification of the Cape Town Convention and Aircraft Protocol) (22 August 2001), Toronto, last modified on the 28 February 2002 at 17 and H. Wassgren, "Rights of financiers in aircraft: a Finnish perspective on the 2001 Cape Town instruments" (2004) Rev. D.U. 557 at 567. 147 Rogelio N. Maciel, "The Cape Town Convention on International Interests in Mobile Equipment and its Protocol on Matters Specific to Aircraft Equipment: An Argentine Perspective" (2004) xxix/3 Air & Space L. 219 at 224; H. Wassgren, "Rights of financiers in aircraft: a Finnish perspective on the 2001 Cape Town instruments" (2004) Rev. D.U. 557 at 566; Giulia Mauri & Birgitta Van Itterbeek, "Belgian Aircraft Finance: New Perspectives Why Belgium should Ratify the Cape Town Convention on International Interests in Mobile Equipment and its Aircraft Specific Protocol" (2004) Vol. XXIX/3 Air & Space L. 208 at 215.
66 contemplated by the Convention and Aircraft Protocol. The limited number of articles and comments cited here are sufficient to demonstrate numerous differences in legal, political and ideological views regarding the regulation of asset-based financing and secured transactions on such basic issues as bankruptcy registration and the enforcement of secured transactions. The importance of a uniform international law is apparent. As noted in the Introduction to this thesis, under the conflict of laws approach taken by the Geneva Convention, the intertwining effect of multiple jurisdictions and legal systems made for a dizzying array of possibilities and uncertainties. The Cape Town Convention’s ultimate goal should be to dissipate or entirely eliminate these uncertainties.
As discussed above, the views expressed in the literature regarding future Ratifying States’ declarations show a trend: national laws will prevail over the more innovative Convention and
Protocol opt in or opt out default rules. It must be noted, however, that the authors cited here represent individual opinions and views on the probable outcome of States’ discussions and deliberations concerning the application of the Convention and the content of possible State declarations. Only after a State has officially ratified the Convention will the view of that State truly be known.
However, if the existing declarations made by Contracting States are any guide, the future will continue to produce a highly varied and heterogonous set of individual State declarations.
Out of this disarray comes a call for uniformity in light of the highly specialized and important nature of commercial aviation. Claiming this Convention to be the “most innovative property law ever,” Professor Honnebier sees the special nature of these contracts and of the interested parties
67 as a catalyst for property law reform in Europe.148 Taking a seemingly different position than
Contracting States have adopted, Professor Honnebier urges States to adapt their internal regimes to the innovative concepts created by the Convention and Aircraft Protocol. In his view, the sophistication of the parties and their respective legal and financial advisors coupled with the contractual liberty provided for in the Convention should suffice for global uniform acceptance without the need for States to protect a weaker party.149
A Finnish author similarly emphasizes the exceptional character of aviation financing contracts and of the aircraft themselves (and aircraft engines), arguing that their “sui generis” nature warrants special treatment.150
Considering the costs involved in aircraft financing transactions151 and the global impact of commercial aviation, should aircraft transactions be shielded from normal less creditor friendly national laws? Is civil aviation so distinct in its character that it must be held to a different standard, a less stringent creditor friendly regime of rapid repossession and minimal court intervention? Considering the objectives152 of the Convention and the actual text of this instrument and the Aircraft Protocol, it is difficult to disagree with specialized global treatment.
If this is correct, the declarations made by Contracting States should not be used to minimize the intended unifying impact of the Convention and Protocol.
148 B. Patrick Honnebier, "The Convention on International Interests in Mobile Equipment and Aircraft Equipment Protocol Encourages European property law reform" (2004) 8 EdinLR. 118. 149 Ibid. at 121-122. 150 H. Wassgren, "Rights of financiers in aircraft: a Finnish perspective on the 2001 Cape Town instruments" (2004) Rev. D.U. 557 at 568. 151 In 2005, Air Canada made aircraft orders to Boeing for an amount totalling six billion dollars. See “Air Canada selects Boeing 777s and 787 Dreamliners” (25 April 2005), online: Boeing news release
68 3.1.3 Review of Current Jurisprudence
The Cape Town Convention and Aircraft Protocol have not yet been the object of judicial interpretation or arbitral decision.153 This is not surprising in light of the very recent status of these instruments.
3.2 Empirical analysis
The author undertook empirical qualitative research to determine the aviation community’s: (1) level of awareness of the Convention, Protocol and declarations; (2) level of satisfaction with these instruments; (3) views on whether further modifications in financing law or practices were needed to sustain the objectives of the Convention and purpose. The author’s goal in conducting this research was to support the observations already obtained in sections 3.1.1 (Ratifications and
Declarations) and 3.1.2 (Review of Legal Doctrine).
It was considered important to conduct this research in order to uncover the expectations of the aviation community regarding the Convention and Protocol. Also, the relative inexperience of the aviation community with the interpretation, function and practical application of the Convention gave the participants the opportunity to reflect on these new laws on the basis of their personal opinions and past professional experience.
The author solicited prospective participants thru the use of an electronic message detailing the purpose of the study and joining a copy of the questionnaire. The prospective participants were chosen from fields relevant to aviation including: aircraft manufacturing, government officials,
153 Unidroit has created a detailed case law research tool for the Cape Town Convention :
69 airline management and legal counsel and private practice legal advisors. Any person with an interest in the Convention and Aircraft Protocol could also participate.
When a participant gave his accord to participate in the study, the author conducted both scheduled in-person and telephone interviews. The interviews were used to collect the detailed views of participants on these questions and any supplementary questions that flowed out of the discussion. The information obtained will not be presented on an individual participant basis but rather will describe participants’ general perceptions of and views on the Convention and
Protocol.
Based on the research interviews, it is evident that perceptions as to the Convention’s main goal or purpose differ from one participant to the next. Participants were asked to rank in numerical order of importance (from 1 to 6) the following objectives of the Convention:
a) creation of a legally uniform international interest on aircraft (new right) b) creation of an international registry of aircraft rights c) greater creditor security (lessors, banks, financiers) d) readily available and cheaper financing for aircraft e) easier seizure and enforcement rights on the debtor’s default f) easier seizure and enforcement rights in case of the debtor’s bankruptcy
The participants recognised the close relation among all these objectives but were nonetheless able to rank them in order of importance. Although emphasizing that all the objectives were inherently related, they almost never gave the same answer as to the most important objective and rarely agreed on the ranking of the remaining objectives. Of equal note, no participant suggested the addition of any further objectives beyond those included in the list submitted to them. Thus, the Convention, although aimed at uniformity, means different things to different people. The significance of the different objectives tended to vary from one participant to another based on his or her position in the aviation community. Representatives of airlines were more interested in
70 the cost savings while manufacturers’ employees had a preference for greater creditor security.
Government officials were more interested in the creation of the international interest and the registry. This is probably not surprising as has been already established in the first section of this thesis.
On the declaration system that is the focus of this thesis, participants overwhelmingly viewed this as the weakest part of the Convention and Protocol framework. They believed that the existence of so many distinct opt-in and opt-out possibilities for Ratifying States will make the application of these instruments more difficult and possibly reduce their significance in aviation financing.
The participants believed that the declarations system could undermine the uniformity so crucial to the objectives of this Convention.
That having been said, the participants had what can best be described as an attitude of cautious optimism towards the Convention and Protocol: expressing belief in its virtues but still waiting and watching for a larger number of States to ratify, make declarations and for airlines, lessors and other financiers to conclude contracts under the new and apparently better framework. It seems that the majority of interviewees have yet to be convinced of the overwhelming significance of the Convention and Protocol in aviation financing.
71
4 Declarations made under the Convention and Protocol: Has Practicality Triumphed Over Functionality?
4.1 Uniformity or Conformity?
The one thing, at least for now, that all interested parties agree upon is that the Cape Town
Convention and Aircraft Protocol are extremely detailed and complex pieces of legislation.154
This would still be the case even if the drafters had adopted a traditional approach to reservations in lieu of the system of opt-in and opt-out declarations analysed in the preceding chapters. The interpretation and application of the texts of the Convention and Protocol by themselves will undoubtedly provide fuel for legal commentary and jurisprudence for years to come. This prospect may undermine the fundamental goal of creating uniformity in aviation financing law.
Although the preambles to the Convention and the Protocol may not use the term “uniformity”,
Chapter 1 of the thesis established that uniformity was the predominant inspiration for the creation of the Convention and Protocol. To illustrate this point, consider that the principal substantive concepts and institutions of these instruments - the “international interest”, the international registry and the registration-based priority regime - cannot be excluded or modified by declaration. The equal application of these substantive elements to all Contracting States was considered essential and undoubtedly produces uniformity at least at the textual level.
However, given the freedom of Contracting States to customize other elements of the Convention to their internal legal regime via declarations, is it possible that uniformity is not as paramount as
154 Jeffrey Wool, "The case for a commercial orientation to the proposed Unidroit Convention as applied to aircraft equipment" (1999) 31 Law and Policy in International Business at 89-90.
72 many believe? Exactly what level of uniformity do the Convention and Protocol need to accomplish? What is uniformity (of law)?
This thesis began with the assumption that global uniformity was essential to the success of the
Cape Town Convention and Aircraft Protocol. The thesis then analysed the declarations permitted by these instruments and their probable practical impact on global uniformity. It was presumed that the higher the level of uniformity in the content of the declarations deposited or likely to be deposited by Contracting States, the higher the level of success of the Convention and Protocol in promoting more readily available and cheaper aircraft financing.
It proved difficult to definitively establish during the course of the research for this thesis the extent to which global legal uniformity is a predominant factor in the evaluation of financial risk.
But assuming it at least plays a significant role, what level of uniformity is required for the
Convention and Protocol to accomplish their objectives? To answer that question, a more detailed evaluation of the concept of uniformity is required.
The concept of uniformity has been thoroughly researched by Camilla Baasch Andersen.155 In her work, she attempts to develop a clear understanding of the term « uniformity » and to present the reader with a working definition.
After examining the legal scholarship on the subject,156 she offers the following intermediary definition:
155 Camilla Baasch Andersen, "Defining Uniformity in Law". (2007) Unif. L. Rev. 5.
73
« [Uniformity] is the result of specific instruments, of whatever origin or form, which deliberately aim to create similar effects. »157
Based on that definition, do the Convention and Protocol create “similar effects”? Putting aside the impact of the declarations for the moment, these instruments - creating an international interest158 and submitting these new rights to an international registry and a mandatory registration based priority regime clearly satisfy the criterion.
In assessing whether the Convention and Protocol, even in combination with the declarations, still achieve uniformity at the level of “similar effects” the following elements of uniformity will be considered: 1- Uniformity of the text; 2-Uniformity in the objectives of the Convention and
Protocol and 3-Uniformity in practical application to aircraft financing;
4.1.1 Uniformity of the text
At the beginning of this thesis, the author made the working assumption that the Convention and
Protocol would have been better instruments had their provisions not been subject to qualification and exclusion by declarations.159 The assertion that an identical text has more chances of creating similar results is founded in the principle of uniformity itself. Of course, even where legal texts are identical, the effects may not be identical or even similar owing to interpretive differences among courts and commentators in different States.160 However, the goal here is to obtain similar results and not identical results. That view is more respectful of the definition given earlier and
156 Ibid. at 12-15. The author discusses the merits of the current terminology including legal convergence, legal diffusion, harmonisation and the concept of soft-hard laws. 157 Ibid. at 17. 158 Article 1(o) and Article 2 of the Cape Town Convention. 159 See above at 15. 160 Supra note 156 at 47-48; See also The challenges faced by the judiciary in the interpretation of international laws have been examined by Michael P. Van Alstine, "Dynamic Treaty Interpretation" (1998) 146 U. Pa. L. Rev. 687.
74 less enthralled with an unrealistic utopian legal regime of preciseness and exactitude. Is it then possible for different versions of a text to obtain similar results?
To illustrate that point, a comparison with what may be the most uniform international law in aviation in terms of State adherence is useful: The Chicago Convention.161 The Chicago
Convention is the reference point in the domain of safety and security in all realms of international civil aviation. Its stronghold on such important fields is made possible by Article 37 of the Chicago Convention and the subsequent elaboration by ICAO162 of the Annexes. These annexes represent the Standards and Recommended Practices or “SARP’S” necessary to ensuring global aviation safety.
Although the Convention text is relatively brief,163 its eighteen (18) annexes164 represent thousands of pages, mostly containing highly technical aviation-related specifications and procedures. Although Article 38 allows States to declare that it is “impractical to comply to comply in all respects with any such international standard or procedure,”the level of participation and conformity in the Annexes is extremely high. Of course, one might say that this
161 Convention on International Civil Aviation signed at Chicago on 7 December 1944.
162 ICAO or the International Civil Aviation Organisation is a United Nations specialized agency and works to achieve its vision of safe, secure and sustainable development of civil aviation through cooperation amongst its member States.
163 The Chicago Convention has 96 articles and is completed with the addition of 2 Protocols: the Air Transit Agreement and the Air Transport agreement. 164 The Annexes cover the following subjects :Annex 1-Personal licensing; Annex 2-Rules of the Air; Annex 3 Meteorological Service for International Air Navigation; Annex 4-Aeronautical Charts; Annex 5- Units of Measurements to be used in Air and Ground Operations; Annex 6-Operation of Aircraft; Annex 7-Aircraft Nationality and Registration Marks; Annex 8-Airworhtiness of Aircraft; Annex 9- Facilitation; Annex 10- Aeronautical Communications; Annex 11-Air Traffic Services; Annex 12-Search and Rescue; Annex 13-Aircraft Accident and Incident Investigation; Annex 14-Aerodromes; Annex 15-Aeronautical Information Services; Annex 16- Environnemental Protection; Annex 17-Security : Safeguarding International Civil Aviation Against Acts of Unlawful Interference; Annex 18- The Safe Transport of Dangerous Goods by Air.
75 collaboration is not entirely voluntary as the United States and the European Community have created blacklists of countries165 and airlines166 forbidden to fly aircraft within their territories for having a less than satisfactory adhesion to the Standards created in the Annexes. And most recently, ICAO has made available to the representatives of Contracting States the results of audits performed on States in regards to the USOAP (Universal Safety Oversight Audit
Programme).167
Even though the Chicago Convention is a public international law treaty concerned with globally shared safety concerns, it shows that uniformity in text is possible.
It seems important now to establish why States were given latitude in the application of fundamental principles relating to the Convention and Protocol and the impact of this on the application of the Convention and Protocol. For the purposes of this analysis, it is necessary to examine those articles of the Convention and Protocol which are mandatory in the sense that they are not open to reservation by Contracting States via a declaration or any other technique. For the
Cape Town Convention, the critical mandatory articles include: the definitions (article 1), the concept of an international interest (articles 2 and 7), the international registry (articles 16 to 26) and the associated priority rules (articles 31 to 38). For the Aircraft Protocol, the critical mandatory articles include: the definitions (article I) and the sphere of application (Article II to
IV).
165 Paul Stephen Dempsey, Public International Air Law. (Montreal: McGill University Institute of Air and Space Law, 2008) at 90. The U.S. established the IASA (International Aviation Safety Assessment Program) in 1991 in order to grade States on their level of compliance with SARPs. 166 Ibid. at 96-101. The E.U. has blacklisted airlines from Countries including: Afghanistan, Congo, Liberia, Swaziland and Thailand. 167 The USOAP audit teams determines the State's level of implementation of safety-relevant ICAO Standards and Recommended Practices (SARPs), associated procedures, guidance material and practices. See ICAO’s web site :
76
In attempting to predict the level of real practical uniformity likely to be achieved by these instruments, it may be useful to differentiate “core articles” - articles that represent the heart and soul of the Convention - from “secondary or incidental articles” - articles that are important to the functioning of the Convention but are not as critical to its success. This classification is helpful in order to determine how many “core articles” are subject to the declarations and are therefore subject to interpretation and modification by individual States.
Differentiating the “Core Articles” from “Secondary Articles” is a task rife with subjectivity. The results of the author’s empirical research have demonstrated that the Convention and Protocol will have different meaning for different participants. Legal doctrine has not identified a clear overwhelming trend in the perception and usefulness of the Convention. What do aviation stakeholders want: better protection granted in bankruptcy proceedings, cheaper financing, speedy interim relief, international cooperation? There seems to be a slew of different answers.
In order to better resolve this issue and in keeping with the main purpose of the Convention and
Protocol, it is thought that the “Core Articles” are those closely linked to the primary objectives of these instruments (See section 2.1.1).
Based on the review done in the first chapter, the main legal objectives of this Convention and
Protocol are:
1-Cration of an international interest; 2-Creation of an international registry (where newly created the international interests can be registered in this registry); 3-Recognition of and execution of speedy relief and interim relief in order to safeguard the rights of the creditor;
77 4-Protection of the rights of the creditor under bankruptcy proceedings;
The “Core Articles” of the Convention and Protocol must adhere to these objectives. With those criteria in mind, a list of these important articles comprise the following:
-Article 1, Article 2 and Article 7 Convention: Definition and creation of the international interests;
-Article 8 and Article 54 (2) Convention: declarations regarding remedies (with or without court intervention);
-Article 13 and Article 55 Convention: declarations regarding relief pending final determination;
-Chapters IV to VIII Convention: International registry and rules;
-Article X Protocol: Determination of speedy interim relief;
-Artcle XI Protocol: Remedies on insolvency (Alternative A or Alternative B);
Only two of these groups of articles (the international interest (Articles 1, 2 and 7 Convention) and the international registry and its registration rules (Chapters IV to VIII Convention)) are not the object of a declaration under the Convention or the Protocol. It would seem that most of the self-defined “Core Articles” are inherently subject to modifications under the declaration system.
The originality and vast diversity of declarations already made by Contracting States (while only
21 States have adhered to the Convention and Protocol) can only be a warning of things to come: enormous variants of the text with possible uneven interpretation and treatment of the
Convention and Protocol.
It is believed that the latitude extended to Ratifying States to modify these provisions will eventually cause a breakdown in, not only the textual uniformity, but also uniformity as it pertains to legal effects and consequences. It is true that uniformity in the text cannot guarantee
78 uniformity in the application.168 However, where courts should rely on international case law and interpretation to analyse their findings and make their decisions, a uniform body of legislation would not be a detriment. A State makes declarations in order to achieve specific objectives. The cluster of State specific declarations forms a rationale suitable only to that particular State. One can only speculate as to the difficulties justices will encounter when trying not only to interpret the texts but also the specific intent and purpose behind a State’s choice of declarations.
It has been said, speaking of the Vienna Convention of 1980169: “… it has had to be recognised that exceptions have to be accepted in any such convention and from the fact that the negotiation and drafting of any such convention is already an ambitious enough task without attempting more.”170 It would appear these wise words were meant to describe the Cape Town Convention and Aircraft Protocol. Drawing from them, the Convention and Protocol are meant to be a compromise, not a panacea for all aircraft financing woes. It would be left to the patient to decide what medicine he really needs and how much he is willing to take! That being said, is uniformity essential to the effectiveness of the Convention and Protocol?
In view of that question, and in search of a more tangible conclusion, the focus of this analysis will turn to more identifiable and practical markers of effectiveness of the Convention in regards to the apparent lack of textual uniformity.
168 Supra note 155 at 43. 169 United Nations Convention on Contracts for the International sale of Goods (1980). 170 J. S. Hobhouse, "International Conventions and Commercial Law: The Pursuit of Uniformity" (1990) 106 Law Q. Rev. 530 at 532.
79 4.1.2 Uniformity in economic advantages
If the text was apparently never intended to be uniform, then the evaluation of uniformity must and should be based on another basis for comparison and evaluation. As already stated, international court decisions and jurisprudence will not bear an influence for quite some time. It is then proposed to evaluate the Ratifying States’ current status of uniformity, not between themselves and their text, but individually in regards to a set of objective fixed conditions or parameters. What should these parameters be? It has been put forward that uniform laws are not defined by their origins but by the similar results which they aim to achieve.171 Then these parameters should take into consideration and be aligned with the expected and foreseeable results and gains the Convention and Protocol wished to accomplish.
Notwithstanding the beneficial legal results envisaged by the drafters, it is believed that the economic and financial gains172 foreseen by the international community are crucial in order to identify these objective parameters. If any, the main purpose of the Convention and Protocol was economic in nature and scope. It is doubtful that all this effort in international cooperation, in the context of a commercial law treaty, would have been possible without the expected economical gains for the invested parties.
In this context, it is proposed to use already established conditions or prerequisites in order to meet our objective of comparing economic results. These established conditions or parameters
171 Supra note 155 at 17. 172 See Anthony Saunders & Ingo Walter, Proposed Unidroit Convention on International Interests in Mobile Equipment as Applicable to Aircraft Equipment through the Aircraft equipment Protocol: Economic Impact Assessment (1998) [unpublished archived at INSEAD and the New York University Salomon Center].
80 will be drawn from the perspectives of the Aviation Working Group and the Organisation for
Economic Co-operation and Development (OECD).
4.1.2.1 Declarations Guidelines of the Aviation Work Group
The Aviation Working Group (AWG) owes its existence to the Cape Town Convention and
Aircraft Protocol.173 It continues today to tackle issues relating to the implementation and interpretation of these treaties.174 Since the AWG’s membership comprises the leading aircraft manufacturers and aircraft leasing companies, its insight on expected results, legal or financial, is of important value.
The document entitled “Annex 1-Declarations Matr ix and Economically-Based
Recommendations175 serves as a reference guide for States to use in order to contemplate the economic advantages of the Convention over their internal policy considerations. It exposes in great detail the declarations Ratifying States must make to benefit from enhanced economic benefits. The Declaration Matrix lists the following recommended declarations:
1-Article 39(1)(a) Convention : A declaration can be made but should be limited; The key declaration mentions unpaid wages and liens in favour of repairers; Also these non registered rights should be limited to claims arising following a declared default;
173 See above section 1.2.1.2. 174 The AWG advisory group has been the leader in the practical applications of this Convention. It has already published the volume “Contract practices under the cape Town Convention” and is in the process of publishing a second volume. Also, the AWG sponsors conferences on the development of practices surrounding the Cape Town Convention, see American Foundation For International Uniform Law “The Cape Town Convention after 2.5 years- participatory seminar on advanced contracts, registration and transaction practices” (Conference sponsored by the AWG and its Legal Advisory Panel delivered at Fordham Law School, November 11 2008) [unpublished]. 175 Available on AWG’s web site:
81 2-Article 40 Convention: A declaration should be made using a specific list; rights mentioned are: Rights pertaining to a legal judgment, Liens or other rights of the Government and any other rights not covered by Article 39(1)(a) However, the AWG suggests a declaration should be made under this Article replacing all Article 39(1)(a) non registered-rights;176
3-Article 54(2) Convention: A declaration should be made stating that leave of court or any other court action is not required;
4-Article VIII Protocol: A declaration should be made applying Article VIII;
5-Article X Protocol: A declaration should be made applying the Article X in its entirety; Article 13(1)(a)-(c) delays should not exceed 10 calendar days; Article 13(1)(d)-(e) delays should not exceed 30 calendar days;
6-Article XI Protocol: A declaration should be made applying Alternative A (hard alternative) to all types of insolvency and the waiting period specified in Article XI(3) should be 60 calendar days;
7-Article XII Protocol: A declaration should be made applying Article XII;
8-Article XIII Protocol: A declaration should be made applying Article XIII;
The preceding analysis of the current State declarations compared to AWG’s recommended economic declarations should provide some indications as to how many States have prepared the terrain for similar economic results.
It is initially observed that the AWG’s recommendations concerning Article 39(1)(a) non- consensual rights and interests and Article 40 (registrable non-consensual rights and interests) have not been observed by States. For reasons already mentioned,177 States will not incorporate non-consensual rights and interests totally within the scope of Article 40. Also, while the AWG has recommended minimal or limited rights to be included under article 39(1)(a), the reality is
176 See above commentary section 2.1.2.1.2. 177 See above section 2.1.2.1.2 at 23.
82 quite different.178 Nonetheless, some States have adhered to the exact text recommended by the
AWG (Article 39(1)(a)) namely: Islamic republic of Afghanistan, Republic of Angola, Republic of Cape Verde, Mongolia, Republic of Nigeria, Islamic Republic of Pakistan, Republic of
Senegal. Considering the minimal adhesion to AWG guidelines and the enormous disparities in drafting, it is thought best to exclude Article 39(1)(a) and Article 40 declarations from this analysis.
The remaining recommended declarations will be used in order to compare States and ascertain whether they have reached a uniform economic reality. In order to ensure accuracy and efficiently compare results, it is proposed to use a point system where every State’s declaration respecting the AWG’s matrix will receive one (1) point. Since time is of the essence under the
Convention, the conformity of the declaration vis-à-vis a specified delay was deemed highly important and given the same value as the core declaration. Considering the six model declarations and three options regarding delays (Article X (2 delay options) and Article XI (1 delay option), the maximum score will be 9. A determination had to be made whether to make all declarations equal or to add a bonus for certain more important declarations. As the AWG’s did not specify an order of importance and since the favourable economic benefits seem to derive from having incorporated all these declarations, the adopted system provides the most accurate basis for comparison.
Here are the results in alphabetical order:
178 See above section 3.1.1.1.
83
TABLE 5: Conformity to the Aviation Work Group’s (AWG) declarations Matrix
Total Ratifying States awarded Points Afghanistan 9 Albania 4 Angola 7 Cape Verde 9 Columbia 6 Ethiopia 9 India 7 Indonesia 9 Ireland 4 Kenya 9 Malaysia 7 Mexico 2 Mongolia 6 Nigeria 9
Oman 9 Pakistan 9 Panama 7 Senegal 9 South Africa 9 U. A. E. 8 U.S.A. 4
Note: The use of working days vs. calendar days was deemed important in the evaluation of the final results
Ten (10) States have conformed entirely to the proposed AWG declarations Matrix (maximum total points of 9). That number represents less than half the current Ratifying States (21). These
States should, based on the value given to the declarations by creditors, receive an identical or at
84 least similar economical treatment. It is important not to forget the preceding commentary179 regarding the complexities of aviation financing. It would be naïve to believe a creditor’s evaluation would be solely based on the declarations.180 However, if the Convention and Protocol are meant to have an impact on the global scheme of aviation financing, the declarations cannot be brushed aside. The previous determination of the existence of “Core Articles” to this
Convention and Protocol and the realisation that most are subject to declarations accentuates this point.181
The problem with this exercise is that it cannot be measured in terms of real economic gains, interest rates and rebates. It establishes a States’ willingness to eventually benefit from these instruments. The final determination of actual benefits resides in numerous evaluations (financial and legal) made by the creditor on numerous levels: political stability of the State, solvability of the airline, debt ratios, etc. It is meant to be a general appreciation of prospective advantages based on learned commentary, expertise and opinion. The next evaluation attempts to uncover tangible benefits deriving from the Convention and Protocol.
4.1.2.2 Sector Understanding on Export Credits for Civil Aircraft
In an industry where the cost of aircrafts is quite restrictive and the competition is fierce, governmental support and assistance has become almost inevitable. Consequently, States have
179 See Anthony Saunders, et al., Innovation in International Law and Global Finance: Estimating the Financial Impact of the Cape Town Convention (2006) [unpublished] at 82. 180 For a detailed explanation of the factors involved in aviation financing and risk evaluation, See Donald H. Bunker International Aircraft Financing (Montreal: IATA, 2006) vol. 1 at 264-352. 181 See above at 78-80.
85 developed programs to promote and finance their manufacturers’ products on a global scale through the intermediary of their export credit agencies.182
When the sale of large civil aircraft are involved and in order to maintain a competitive environment between aircraft manufacturing States and limit the use of subsidies, the
Organization for Economic Co-operation and Development183 (OECD) has developed specific guidelines for the export credit agencies. These guidelines are known as the Sector
Understanding on Export Credits for Civil Aircraft 184 (hereinafter referred to as the
”Understanding”) and although they are a self-declared Gentlemen’s Agreement,185 a breach of the Understanding’s policies would allow a member to file a claim under WTO’s Dispute
Settlement Understanding (DSU).186
The OECD recognized the importance the Convention and Protocol would have on aviation sales and reduced financing costs, by including in the Understanding, measures allowing export credit agencies to reduce costs to airlines located in States that have ratified these instruments. The
United States’ EX-IM bank187 has been in the forefront in advertising a reduction in its exposure fee188 by one-third189 for all qualifying States. Already, airlines from The Sultanate of Oman190,
182 Supra note 3 at 321. 183 The OECD uses its wealth of information on a broad range of topics to help governments foster prosperity and fight poverty through economic growth and financial stability, online:
86 The Republic of Nigeria191 and The Democratic Republic of Ethiopia192 have benefited from this rebate in the exposure fee.
The privileges awarded by export credit agencies193 are reserved to States that have made qualifying declarations under the Convention and Protocol. The qualifying declarations are listed in Annex 1 (Qualifying declarations) of the Understanding and are resumed as follows:
a) A Contracting Party to the Convention and Protocol must make the following declarations:
1) Article XI Protocol: Alternative A with a maximum delay of 60 calendar days; 2) Article XIII Protocol must be applied; 3) Article VIII Protocol must be applied: 4) Article 54(2) Convention must authorize remedies without court action 5) Article 13(1)(a)-(c) Convention delays should be not more than 10 calendar days; 6) Article 13(1)(d)-(e) Convention delays should be not more than 30 calendar days;
b) A Contracting Party to the Convention and Protocol must not make the following declarations:
7) Article 55 Convention: A State shall not opt out of Article 13 or Article 43 of the Convention; 8) Article XXIV Protocol: A State shall not opt out of this Article (Rome Convention); 9) Article 54(1) Convention: A State shall not prevent lease as a remedy;
A verification of the current declarations is necessary to determine which Ratifying States can benefit from the savings received through the “Cape Town Convention discount194”:
190 “Ex-Im Bank Finances Boeing 737-800 Aircraft to Oman Air” PR NEWSWIRE (28 March 2005). 191« Airlines Acquire 15 New Aircraft” allAfrica.com (2 October 2007). 192 « Ethiopian Airlines buying commercial aircraft” African Review of Business and Technology (16 February 2004) 4. 193 The participants to the Understanding are Australia, Brazil, Canada, the European Community, Japan, Korea, New Zealand, Norway, Switzerland and the United States. 194 This is the name under which the Sector Understanding qualifies the possible savings.
87
Table 6: Declarations’ Conformity to Aircraft Sector Understanding Guidelines
States XI XIII VIII 54(2) 13(a)- 13(d)- 55 XXIV 54(1) (c) (e) Afghanistan x x x x x x x x x Albania x x x x x x Angola x x x x x x x Cape Verde x x x x x x x x x Columbia x x x x x Ethiopia x x x x x x x x x India x x x x x x x Indonesia x x x x x x x x x Ireland x x x x x x Kenya x x x x x x x x x Malaysia x x x x x x x Mexico x x x x x
Mongolia x x x x x x Nigeria x x x x x x x x x Oman x x x x x x x x x Pakistan x x x x x x x x x Panama x x x x x x x Senegal x x x x x x x x x South Africa x x x x x x x x x U. A. E. x x x x x x x x U.S.A. x x x x x x Note: States that have complied with the specified condition are marked with “x”. The use of working days vs. calendar days was deemed important in the evaluation of the final results.
Ten (10) Contracting States have satisfied all the prerequisites and have qualified for possible export credit discounts. These States are the same as those listed in Table 5: Confor mity to th e
88 Aviation Work Group’s (AWG) Declarations Matrix as having a perfect score (9). Although the criteria used in both comparisons were similar (The declarations) they were not identical and Iit would have been foreseeable that the results of these comparisons would thus be different.
However, the “AWG comparison” and the “Sector Understanding comparison” have provided identical results.
A particular note must be made of the language used by certain States when declaring delay periods under article 13(1)(a)-(e) of the Convention and Article XI of the Protocol. In many instances, their declarations were disqualified because of the use of the words “working days” instead of the prescribed Sector Understanding’s “calendar days”. A calendar day leaves no room for interpretation.195 However, the meaning of a “working day196” may depend entirely on the culture, customs and tradition in any given area in the world. Although this interpretation is very strict, it better represents the goals and ideals of the Convention. Have States deliberately used the wording “working days” being mindful of the possible problems in interpretation and application or was it an oversight on their part? When examining the declarations made by
Angola, the terms used to quantify a delay in respect of Article XI (bankruptcy alternative) was a
“calendar day”. That same State used the terms “working day” when declaring under Article 13
(speedy remedy). The Contracting State of India incorporated the same textual dichotomy within the text of their declarations. Under these circumstances, a mistake or lapse in attention is less likely. Article 22 of the Understanding provides that the OECD Secretariat shall maintain a list of
195 Calendar: a system by which the beginning, length, and subdivisions of the year are fixed. The Oxford American Dictionary of Current English, Oxford University Press, 1999, "calendar", online: 6 September 2008
89 qualifying States respecting the above mentioned criteria. The Participants197 to the
Understanding may only grant the Cape Town Convention discount to those qualifying States. At the time of writing, this list of qualifying States was unfortunately unavailable for consultation thus rendering difficult the confirmation of this strict interpretation.
An observation must also be made of the declarations made by Panama; Under Article 13(1)(a)-
(c) and 13(1)(d), it has declared seven (7) working days for the former and twenty (20) working days for the latter. Under the strict interpretation given earlier, those delays did not qualify as sufficiently respecting the Understanding’s criteria.
197 According to the Understanding (Article 3) the Participants are: Australia, Brazil, the European Community, Japan, Korea, New Zealand, Norway, Switzerland, and the United States.
90 5. Conclusions
The initial focus of this thesis was aimed at identifying and controlling those factors (notably the declarations) that may have an impact on the uniformity of the Cape Town Convention and
Aircraft Protocol. That initial examination of the declarations subsequently was transformed into an analytical comparative study of the Convention’s purposes and prospective economic gains.
What has been learned from this?
If uniformity of results is the key objective, less than half of the Ratifying States (10) have created a potentially uniform body of results, economically at least. That is not an impressive result considering the first States to ratify the Convention and Protocol must have wanted to obtain rapid gains from its ratification process.
Both comparisons to the AWG guidelines and the Sector Understanding on Export Credits for
Civil Aircraft have produced identical results. The following States have apparently made the correct declarations: Afghanistan, Cape Verde, Ethiopia, India, Indonesia, Nigeria, Oman,
Pakistan, Senegal and South Africa. These Ratifying States have wholly accepted these instruments and have taken the plunge. Those States can expect immediate gains from the Cape
Town Convention. The financial gains are already a practical reality.198
It is the author’s impression that the current Ratifying States have either opted-in to the
Convention and Protocol or opted-out, regardless of what declarations they have made. Those that have opted-in have made all the necessary efforts to benefit from the envisaged benefits.
198 These States may benefit from discounts awarded by export credit agencies. See section 4.1.2.2.
91 Those that have opted-out have yet to really accept or recognize the Convention’s full potential.
An important observation must be made. Considering the text of the declarations made by
Contracting States and their resemblance to either the AWG or Sector Understandings’ guidelines, States have made an informed and conscious choice to adopt and respect these conditions. There is nothing random or accidental about their declarations. These States have made a clear choice to incorporate all the necessary legislation to achieve the proposed economic gains.
Other less committed States have adopted the Convention and Protocol with a clear sense of reserve and prudence. It is not believed these results will prevent other Contracting States from benefiting from better contractual conditions. The analysis done under the conditions of the
Sector Understating only relate to governmentally supported benefits and aid (export credits). It is only one of the many variables involved.199 Also, both the comparisons done under the AWG guidelines and Sector Understanding indicate that all States, have made important declarations very much aligned with the purposes of the Convention and Protocol. It may only be predicted what effects their conservatism may have on the internal judicial interpretation of these texts.
The relative repercussions of these results must also be measured against the only G8 Country to have ratified the Convention and Protocol: The United States of America. The AWG guidelines analysis gave the U.S.A. a result of 6 (See Table 5). Also, it cannot be considered a qualifying
State under the Sector Understanding’s guidelines (see Table 6). Will U.S. airlines have less beneficial conditions and terms when purchasing aircrafts from international manufacturers
199 See above at 85; see also note 181.
92 (Bombardier Aerospace, Airbus, ATR Regional Aircraft) than airlines operating from these qualifying States? Considering the economic strength200 and world influence of the U.S.A. coupled with a highly creditor friendly bankruptcy system201 (without having made a declaration under Article XI Protocol), the direct influence and advantages of having ratified the Convention and Protocol for the United States of America and their choice of declarations will not be as beneficial as for other less privileged States or Developing Countries.
It is apparent that a States’ political willingness to modify their internal legal regime to respect the Convention and Protocol is crucial. Adopting these instruments is only the first step, making them compatible with the aforementioned conditions and criteria is even more tangible evidence of a State’s resolve to align its legal institutions with modern financing principles. Airlines located in States that are reluctant to conform to these guidelines may never benefit from their true advantages. When speaking in terms of uniformity or uniformity of results, this reluctance to adapt could limit the Convention’s and Protocol’s global impact. When international institutions such as Unidroit develop modern legal templates, States should strive to temper their political and legal agendas to these new realities of law. When speaking of the importance of the
Convention and Protocol and its impact, McGairl said:
“Given that the aircraft industry is convinced of the benefits, how would entering in to the Convention and Aircraft Protocol actually damage our national interests, in view of their very limited scope”202
Although speaking of the ratification of these instruments in general, the same view can easily apply to the declarations.
200 David T. Beers, The Future of sovereign Credit Ratings (16 October 2007) online Standards and Poors:
93
Will there be uniformity when all the world’s nations have adopted these instruments? When all their declarations are identical? When all airlines are benefiting from advantageous economic benefits deriving from the Convention? It could be concluded that uniformity is created by the mere universal adoption of the Cape Town Convention and the eventual creation of Cape Town
Practices applied seamlessly by legal professionals ie. a practical code of rules deriving from experience, trial and error.203
Aviation stakeholders’ perceptions204 and the results achieved by the empirical research205 of the author have demonstrated that the purpose of the Convention and Protocol is different for all involved. If a comprehensive perception or definition of the expected results cannot be identified, the creation or mere existence of uniformity becomes unclear. For now, the only true measure of success may lie within the negotiation of every individual deal, contract and arrangement. Within these negotiations, parties will use all terms, conditions and laws at their disposal to arrive at a common accord. Hopefully, the Convention and Protocol will have a positive impact on the outcome of this process. It becomes easier to contemplate the expected gains of the Convention when focusing in such a narrow fashion.
During the preparation of this thesis, the lines between uniformity and success have been blurred.
Must an international convention be uniform to be successful? To what degree of uniformity would we owe this success? The declarations have added a supplementary degree of disparity to
203 The AWG has already begun this work: See The Legal Advisory Panel of the Aviation Work Group. Contract Practices Under the Cape Town Convention. (Chicago: Uniform Law Foundation, 2004). 204 See above Section 1.2.1. 205 See above Section 3.2.
94 the text of these instruments. It is believed that this diversity will be detrimental to the expected end result: creation of an effective and uniform international asset-based regime of aircraft financing. Contracting States have clearly demonstrated, through the use of their declaration privileges, their intentions towards the Cape Town Convention and Aircraft Protocol.
The true measure of uniformity (or success) may only be truly known when States will have globally adopted these texts, made their declarations and aircraft operators and lessors contracted under the Cape Town Convention and Aircraft Protocol. Again, the desired uniformity resides in the willingness of States to adapt their legislation to these instruments. In view of this thesis’ results, airlines and aircraft operators wishing to obtain comprehensive benefits must lobby their respective governments so they may make declarations aligned with the ideals of the Cape Town
Convention and Aircraft Protocol.
95 BIBLIOGRAPHY
LEGISLATION
Sector Understanding on Export Credits for Civil Aircraft , TAD/PG(2007)28/FINAL (21-Dec- 2007). Convention on International Civil Aviation signed at Chicago on 7 December 1944. United Nations Convention on Contracts for the International sale of Goods (1980). Convention on International Interests in Mobile Equipment (Cape Town, 2001). Protocol to the Convention on International Interests in Mobile Equipment on Matters Specific to Aircraft Equipment (Cape Town, 2001).
SECONDARY MATERIAL: CONFERENCES
American Foundation For International Uniform Law. “The Cape Town Convention after 2.5 years-participatory seminar on advanced contracts, registration and transaction practices” (Conference sponsored by the AWG and its Legal Advisory Panel delivered at Fordham Law School, November 11 2008) [unpublished].
SECONDARY MATERIAL: MONOGRAPHS
Goode, Sir Roy. Convention relative aux garanties intern ationales portant sur des matériels d'équipement mobiles et protoco le y re latif po rtant sur le s ques tions spéc ifiques aux matériels d'équipement aéronautiques: Commentaire officiel (Rome: Unidroit, 2002). Bunker, Donald. International Aircraft Financing (Montreal: IATA, 2006) vol. 1 Bunker, Donald. International Aircraft F inancing (Montreal: IATA, 2006) Vol. 2 Specific Documents. Dempsey, Paul Stephen, Public International A ir Law (Montreal: McGill University Institute of Air and Space Law, 2008). Dempsey, Paul & Lawrence Gesell, Airline Management Strategies for the 21 st Century, 2nd ed. (Chandler: Coast Aire Publications, 2006) The Legal Advisory Panel of the Aviation Work Group. Contract Practices Under the Cape Town Convention. (Chicago: Uniform Law Foundation, 2004). Unidroit "Acts and Prodeedings" in Diplomatic Conference to Adopt a Mobile Equipment Convention and an Aircraft Protocol Acts and Prodeedings (2006), Cape Town.
SECONDARY MATERIAL: ARTICLES
Van Alstine, Michael P. "Dynamic Treaty Interpretation" (1998) 146 U. Pa. L. Rev. 687. Baasch Andersen, Camilla. "Defining Uniformity in Law" (2007) Unif. L. Rev. 5. Basch, Kenneth & Adriano Pugliesi Leite. "Aircraft Repossession in Brazil--Cape Town Contrasts" (2005) 6-8 Airfinance Journal Supplemental Guide To Aviation Lawyers.
96 Bomhof, Scott A. & Adam F. Slavens. “Shiting Gears in Cross-border Insolvencies: From Comity to Comi”, (2008) 24 Banking & Finance Law Review, 1. Crans, Berend J.H. "Analysing the Merits of the Proposed Unidroit Convention on International Interests in Mobile Equipment and the Aircraft Equipment Protocol on the Basis of a Fictional Scenario" (2000) 25 Air & Space L. 51. Davidson, Paul J. “Uniformity in International Law: The Constitutional Obstacle” (1987-1988) 11 Dalhousie L.J. 690. Goode, Roy. "The Cape Town Convention on International Interests in Mobile Equipment: a Driving Force for International Asset-Based Financing" (2002) 1 Rev. D.U. 5. Hobhouse, J. S. "International Conventions and Commercial Law: The Pursuit of Uniformity" (1990) 106 Law Q. Rev. 530. Honnebier, B. Patrick. "The Convention on International Interests in Mobile Equipment and Aircraft Equipment Protocol Encourages European property law reform" (2004) 8 EdinLR. 118. Humphrey, Nicholas & Vernon Nase. "The Cape Town Perspective 2001: An Australian Perspective" (2006) Vol. XXXI/1 Air & Space L. 5. Maciel, Rogelio N. "The Cape Town Convention on International Interests in Mobile Equipment and its Protocol on Matters Specific to Aircraft Equipment: An Argentine Perspective" (2004) xxix/3 Air & Space L. 219. Mauri, Giulia “The Cape Town Convention in Mobile Equipment as Applied to Aircraft: Are Lenders Better Off Under the Geneva Convention?” (2005) 13 E.R.P.L. 641 at 643. Mauri, Giulia & Birgitta Van Itterbeek. "Belgian Aircraft Finance: New Perspectives Why Belgium should Ratify the Cape Town Convention on International Interests in Mobile Equipment and its Aircraft Specific Protocol"(2004) XXIX/3 Air & Space L. 208. McGairl, S. J. "The proposed UNIDROIT Convention: international law for asset finance (aircraft)" (1999) Rev. D.U. 439. Mooney, Charles W. "Insolvency Law as credit Enhancement: Insolvency-related Provisions of the Cape Town Convention and the Aircraft Equipment Protocol" (2004) 13 Int. Insolv. Rev. 27. McWhinney, Edward “Canadian Federalism, and the Foreign Affairs and Treaty Power. The Impact of Québec’s “Quiet Revolution”” (1969) 7 CAN. Y.B. Int’l L. 3. Stone, Thatcher A. “In Flight Between Geneva and Rome: Abandoning Choice of Law Systems for Substansive Legal Principles in International Aircraft Finance ” (1999) 20 U. Pa. J.Int’l. Econ. L. 487. Sundahl, Mark J. "The "Cape Town Approach": A New Method of Making International Law" (2006) 44 Colum. J. Transnat’l L. 339. Wassgren, H. "Rights of financiers in aircraft: a Finnish perspective on the 2001 Cape Town instruments" (2004) Rev. D.U. 557. Weber, Ludwig & Silvério Espinola, “ The Development of a New Convention Relating to International Interests in Mobile Equipment, in Particular Aircraft Equipment: A Joint ICAO-Unidroit Project” (1999) Rev. D.U. 463. Wilson, Scott “Beginners guide to the International Registry” (2006) 289 Airfinance Journal 38. Wool, Jeffrey. "The case for a commercial orientation to the proposed Unidroit Convention as applied to aircraft equipment" (1999) 31 Law and Policy in International Business 79.
97
SECONDARY MATERIAL: NEWSPAPERS AND MEDIA RELEASES
«Airlines Acquire 15 New Aircraft” allAfrica.com (2 October 2007). Beauchamp, Dominique. « Le prix du carburant ralentit Transat » Les Affair es (7 au 13 juin 2008) 47; Benhamou, Laurence. « Baisse de régime chez United pour résister à la hausse du pétrole » La Presse [de Montréal ] (5 juin 2008) Affaires 7; Cloutier, Jean-François. « Le pétrole a raison de Zoom Airlines » La Presse [de Montréal ] (29 août 2008) Affaires 1. «Ethiopian Airlines buying commercial aircraft” African Review of Business and Technology (16 February 2004) 4. Ex-Im Bank Finances Boeing 737-800 Aircraft to Oman Air” PR NEWSWIRE (28 March 2005). Export-Import Bank of the United States, Media Release "Ex-Im extends offer of reduced exposure fee through December 2010 for buyers in countries implementing the Cape Town Treaty” (September 27 2007). Tison, Marie. « L’envol du prix du carburant préoccupe Air Canada » La Presse [de Montréa l ] (22 mai 2008) Affaires 1; Tison, Marie. « Les société aériennes font l’éloge de la lenteur » La Presse [de Mo ntréal ] (20 mai 2008) Affaires 4; Tison, Marie. « Air Canada fustige la taxe sur le carbone» La Presse [de Montréal ] (20 juin 2008) Affaires 5.
SECONDARY MATERIAL: REPORTS
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