The Law of England and Wales on Secured Transactions as Compared with the Cape Town Convention
English law occupies a dominant position in aircraft financing. Understandably, it is the preferred choice of law in transactions which involve aircraft in the UK. Yet, its influence is far-reaching, since it is one of the most desirable choices of law in financial transactions which involve non-UK registered aircraft that may have little or no link to England.
The reasons for such extraterritorial application have been summarised in a report prepared by the Law Society of England and Wales that aims to promote English commercial law and the jurisdiction of English courts in international commercial transactions. The report was not prepared with aircraft finance in mind, but its observations are of immediate relevance to our paper. In a nutshell, it argues that “at the specialised Commercial Court, a staggering 80 % of cases involve a foreign claimant or defendant”. This preference is arguably the result of .English commercial law provid[ing] predictability of outcome, legal certainty and fairness. It is clear and is built upon well-founded principles, such as the ability to require exact performance and the absence of any general duty of good faith”. These characteristics would not have been sufficient to attract the attention of commercial people worldwide had it not been for the ability of English law to adapt to the evolving needs of international commerce. The report attributes this ability to the flexibility of judge-made law and the doctrine of precedence as distinguished from what the report describes as the rigidity of statute-based laws. Yet, this distinction does not tell the entire story, since the prevalence of the common law is eroded by the influence of EU law (until Brexit is concluded at least) and the on-going harmonisation of private international law.
It is arguable that the flexibility of English law is predominantly the result of the judiciary’s ability to interpret statutes or create common law in a manner that is relevant for the on-going evolution of commerce. The example of the Marine Insurance Act 1906, which still serves the marine insurance industry despite its minor amendments since its entry into force more than 100 years ago, is a testament to the pragmatism of English commercial judges.
In that respect, the question whether to ratify the Cape Town Convention posed the following conundrum to the drafters of English law: does this new instrument of international law serve the needs of the aviation industry in such a holistic manner that is worth replacing English law on aircraft finance? The advocates of the preCape Town system were arguing that English law is a tested and internationally popular choice. Any change will mess with a perfectly good system and will undermine the influence of London as a finance and dispute-resolution centre. The advocates of change were arguing that English law on aircraft finance is not as user-friendly and transparent as the Cape Town Convention. It is a scattered amalgam of common law and statutory provisions that have served the industry well so far. Yet, it does not provide the same degree of certainty with the Cape Town Convention, especially vis-a-vis the registration and the ascertainment of priorities of interests.
After a long consultation period the British Government decided to ratify the Cape Town Convention as it “would benefit the UK economy by creating a harmonised legal framework to register interests against helicopters, aircraft frames and aircraft engines”. The International Interests in Aircraft Equipment (Cape Town Convention) Regulations 2015 implement the Cape Town Convention into English law. The Regulations at large follow the text of the Cape Town Convention with minor textual amendments in regs. 16 and 31.
It is the aim of this report to look into the relevant provisions of English law through the prism of the Cape Town Convention. It is the belief of this author that the Cape Town Convention will remedy a good number of the drawbacks of English law. Using the international popularity of English law on aircraft finance as a reason to halt the implementation of the Cape Town Convention in English law was misleading for two reasons: (i) it overlooked its structural deficiencies by essentially arguing that there is no room for improvement; and (ii) it undermined the commercial needs of the UK aviation industry, especially of aircraft operators.
A note of caution to the readers: this report does not purport to “reinvent the wheel” which explains the large number of notes. Inevitably, its originality has been compromised for the sake of providing an accurate and all-embracing account of English law by reference to a wide range of materials while respecting the limits imposed by the editor.
-  The Law Society of England and Wales, “England and Wales: the jurisdiction of choice. DisputeResolution” (2007).
-  Ibid., p. 5 per the RT Hon Jack Straw MP, Secretary of State for Justice and Lord Chancellor (ashe then was).
-  Ibid, p. 8.
-  The Consumer Insurance (Disclosure and Representations) Act 2012 and the Insurance Act 2015are the most important amendments of the Marine Insurance Act 1906 since its enactment.
-  Department for Business Innovation and Skills, Convention on International Interests in MobileEquipment and Protocol thereto on Matters Specific to Aircraft Equipment. Government Responseto the Call for Evidence (2013), at [3.19].
-  SI 2015/912.