UNIDRIOT Cape Town Convention: Isle of Man Implementation Update

The necessary secondary legislation for the implementation of the Cape Town Convention (CTC) on the Isle of Man was passed last year (the Aviation (Cape Town Convention) (No.2) Order 2016). Simon Murfitt explains the current status of the implementation of this important international treaty in respect of the Isle of Man and its potential application thereafter.

As per the terms of the CTC, the above 2016 Order did not bring the CTC into effect on the Isle of Man (IoM). A further delay of six months after receipt by UNIDROIT (as the depositary for the Convention and Protocol) of the UK’s notification of its ratification that the CTC is to be extended to the Isle of Man is also relevant. Such action by the UK is necessary as the IoM, as a matter of international public law, is a Crown Dependency. As a result, the IoM was unable to sign the CTC in its own right and must rely on the UK completing and depositing with UNIDRIOT a specific IoM ratification extension.

We understand that such deposit has now been confirmed after the relevant UK secondary legislation was lodged with the necessary UNIDRIOT authorities last week. As result, it is expected that the CTC will be implemented on the IoM as of 1 December 2017.

What are the practical benefits of the CTC?

The practical benefits of the implementation of the CTC are well known to aircraft owners, lenders and other interested parties. One major advantage is the ability to register certain liens and other interests in relation to aircraft and related engines with the relevant aircraft registration authority within the CTC framework. On the Isle of Man, the relevant aircraft registration authority is the Isle of Man Aircraft Registry (the “IoMAR”). One net result of such registrations is the granting of a new tool for those interested parties looking to better secure their interests in such IoM registered aircraft and engines.

Prior to this intended implementation date of 1 December 20017, it is useful to remember that, depending on the place of incorporation of the relevant aircraft debtor, the options for registration of charges against either that debtor or IoM registered aircraft, are limited.

Specifically, in respect of the registration of other interests in respect of aircraft, the following is currently possible

• registration of a mortgage or a similar interest in the mortgages register at the aircraft registry; and
• registration of charges against the registered owner at that owner’s companies’ registry (this will depend on the jurisdiction of incorporation of the registered owner).

Consequently, at the time of this release, it is not possible to register certain liens against the aircraft at the IoMAR and there is also no facility for similar IoMAR registration in respect of engines, leases, purchase contracts or other security interests that are found within the CTC.

Of course, there may well be other more practical steps that could be taken, as certain liens, while non-registerable, still can exist. Whether any of these are relevant depends of course on the specific details of each case.

Significant changes on the Isle of Man

As of 1 December 2017, the position on the IoM is due to alter significantly. This is because, in addition to the notification of the above implementation date, it has also been confirmed that the relevant UK secondary legalisation (again necessary due to the IoM Crown Dependency status) does contain the following CTC Article 39 declaration:

“Pursuant to Article 39(1) of the Convention, the Government of the United Kingdom of Great Britain and Northern Ireland declares

(a) all categories of non-consensual rights or interests which under law of the Isle of Man at the date of this declaration, or created after that date, have priority over an interest in an object equivalent to that of the holder of a registered international interest and shall to that extent have priority over a registered international interest, whether in or outside insolvency proceedings; and

(b) that nothing in the Convention shall affect the rights of the Isle of Man or any intergovernmental organization of which the United Kingdom of Great Britain and Northern Ireland is a Member State, or other private provider of public services in the Isle of Man to arrest or detain an airframe, aircraft engine or helicopter under the law of the Isle of Man for payment of amounts owed to such entity, organization or provider directly relating to those services in respect of that object or another object.

Pursuant to Article 39(4) of the Convention, the Government of the United Kingdom of Great Britain and Northern Ireland declares, that a right or interest in a category referred to in sub-paragraph (a) above, in the Isle of Man, shall have priority over an international interest registered prior to the date of deposit of the instrument extending the United Kingdom’s Ratification of the Convention to the Isle of Man.”

It is also understood that this declaration will be made effective under Article 17 of SI 2015 No 912 as applied to the Isle of Man. Specifically:

“17.—(1) The categories of non-consensual right and interest listed in paragraph (2)—(a) have priority over an interest in an aircraft object equivalent to that of the holder of a registered international interest, and(b) have priority over a registered international interest (whether in or outside insolvency proceedings).

(2) Those rights and interests are—(a) a possessory lien in respect of work done on the aircraft object (whether before or after the creation or registration of the international interest or equivalent interest) on the express or implied authority of any persons lawfully entitled to possession of the aircraft object; and(b) any right to detain the aircraft object under an enactment (including an Act of Tynwald).

(3) Nothing in these Regulations or the Cape Town Convention affects the right of a public authority to arrest or detain an aircraft object under the law of the Isle of Man for payment of amounts owed to a public authority directly relating to public services in respect of the aircraft object or another aircraft object.

(4) In paragraph (3) “public authority” means—(a) a public authority of the Isle of Man [. . .],(b) a public authority of another State,(c) an intergovernmental organisation, and(d) a private provider of public services in the Isle of Man or elsewhere.

(5) This regulation applies to categories of rights and interests whether created before or after the deposit by the United Kingdom of the declaration under Article 39 of the Cape Town Convention to which this regulation gives effect.

(6) A right or interest which has priority or is preserved by virtue of this regulation has priority irrespective of whether the relevant international interest was registered before or after—(a) any action taken by the United Kingdom in respect of the Cape Town Convention, or(b) the application to the Isle of Man of these Regulations.”

SI 2015 also contains the following definitions:

“non-consensual right or interest” means a right or interest conferred under the law of a Contracting State which has made a declaration under Article 39 of the Cape Town Convention to secure the performance of an obligation, including an obligation to a State, State entity or an intergovernmental or private organisation;

“aircraft objects” means airframes, aircraft engines and helicopters;

“airframes” means airframes (other than those used in military, customs or police services) that, when appropriate aircraft engines are installed thereon, are type certified by the competent aviation authority to transport—

(a) at least 8 persons including crew, or(b) goods in excess of 2750 kilograms, together with all installed, incorporated or attached accessories, parts and equipment (other than aircraft engines), and all data, manuals and records relating to them;”

The net effect of these two recent developments is not only a significant extension of those tools available to all interested commercial parties in IoM registered aircraft; these developments also represent a significant coming age for the IoM, the IoMAR and for all those parties active within the industry.

Should you require further information, please contact any member of the Keystone Aviation team.

Simon Murfitt is a senior aviation finance solicitor with over twenty years’ experience advising aircraft owners, charters, finance providers and other commercial parties in both the commercial and private aviation sector. This experience has been gained both in the UK and internationally including in Asia, the City of London and other European jurisdictions including the Isle of Man.