The Convention on International Interests in Mobile Equipment ("Convention") and the Protocol to the Convention on International Interests in Mobile Equipment on Matters Specific to Aircraft Equipment ("Protocol") (usually referred to collectively as the "Cape Town Treaty" or "Cape Town Convention") went into force in the United States on March 1, 2006.  Depending on the specifics of any given aircraft transaction, the Cape Town Treaty greatly impacts the financing, buying, selling and leasing of "aircraft objects" as defined in the Cape Town Treaty.

 

"Aircraft object" in the Cape Town Treaty refers to the following:  (i)  an airframe type certified to transport at least (8) eight persons including crew, or goods in excess of 2750 kilograms, (ii) helicopters type certified to transport at least (5) persons including crew or goods in excess of 450 kilograms, or (iii) aircraft engines having at least 1750 lb of thrust or its equivalent in the case of jet propulsion aircraft engines, or in the case of turbine-powered or piston-powered aircraft engines, engines having at least 550 rated take-off shaft horsepower or its equivalent.  See Art. I of the Protocol.

 

Determining the applicability of the Cape Town Treaty requires more than confirming the size requirements of an aircraft object.  For example, the parties to a transaction will need to confirm whether the debtor or lessee in a security or lease transaction and the seller in a sale transaction are located in a "contracting state" (a country that has ratified the Cape Town Treaty and where it is currently in force).  The Cape Town Treaty provides that a seller or debtor/lessee are situated in any contracting state:  (a) under the law of which it is incorporated or formed; (b) where it has its registered office or statutory seat; (c) where it has its centre of administration; or (d) where it has its place of business.  See Art. 4 of the Convention.  Additionally, the parties may need to confirm the current state of registration of the airframe or helicopter to determine whether the Cape Town Treaty applies to the transaction.

 

 The Cape Town Treaty established an International Registry, located in Dublin, Ireland, which is an internet-driven, notice-filing system that operates 24 hours per day, seven days a week.  If the Cape Town Treaty applies to a given transaction, it is critical that the parties register their respective interests (for example, contract of sale, international interest, etc.) against the specific aircraft object, otherwise, the interests will not be perfected.  Because of the manner in which the United States implemented the Cape Town Treaty, filings with the FAA Aircraft Registry will be required in order to obtain the necessary unique authorization code to allow one to complete registrations on the International Registry against airframes and helicopters.  The parties will need to file with the FAA an AC Form 8050-135 along with the documents which give rise to the interests that will be registered in order to obtain the authorization code.  The actual registrations are completed by the parties (or their representatives, typically, a law firm or title company) after completion of application to the International Registry to become an approved user, and otherwise complying with the regulations and procedures of the International Registry.

 

The Cape Town Treaty creates additional requirements that parties to an aircraft transaction may need to comply with to ensure that their respective interests in aircraft objects are protected.  Please contact us should you have any questions about the applicability of the Cape Town Treaty to your transaction.