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Home arrow Law arrow Implementing the Cape Town Convention and the Domestic Laws on Secured Transactions

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Some Concluding Remarks

The serious problem exists that the proprietary consensual interests in aircraft and engines which have legally been properly established in a certain jurisdiction, may not be enforceable in this state or other countries. For example, in the event that the Cape Town Convention (2001) does not apply to a certain dispute, the devastating English Blue Sky v. Mahan Air case (2010) has proved that a valid English mortgage in an English aircraft may not be enforceable in a local English Court. Therefore, the financier, lessor and operator of the aircraft may not be appropriately protected in England or abroad. Accordingly, it is crucial that the country of the flag of the aircraft has created a modern legal aviation finance and lease regime. It is even more significant that it has adopted the Cape Town Convention as to a large extent this treaty adequately protects the financial interests of all the stakeholders. More specifically, the treaty also adequately safeguards the secured interests of the operator-lessees, it affirms the international prevailing legal opinion that choice of law clauses merely have an effect between the parties to an agreement and it resolves the grave problem of the alleged application of the accession doctrine to engines. Nevertheless, for example India, the United States, the United Kingdom, Ireland and other several other Contracting States of the Convention and Protocol have made stakeholder-unfriendly Declarations permitting various non-consensual interests in aircraft. Because of these Declarations many liens have priority over the registered international interests. This means that the aviation property regimes in these countries do not adequately protect the rights of the financiers, lessors and operators. Therefore, the stakeholders are well-advised to structure their financial and lease transactions by means of Special Purpose Vehicles (SPV’s) in the Contracting States which did not make these negative Declarations. Keeping all this in mind, it is concluded that the Cape Town Convention provides for a modern and solid international substantive aviation finance and lease regime. The jurisdictions which have not yet adopted the instrument are encouraged to (re)consider their views very soon.

 
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