Volume 24, Number 9 • October 2005
LAW JOURNAL
NEWSLETTERS
Equipment Leasing
Newsletter ®
LJN’s
By David G. Mayer and Frank L.
Polk
The Cape Town Convention on
International
Interests
in
Mobile Equipment
(“Cape
Town” or “CT”) and the related
Aircraft
Protocol
(“Protocol”)
(www.unidroit.org/english/conven-
tions/mobile-equipment/main.htm)
continue to advance slowly toward
an expected effective date in 2006.
When the Protocol enters into force it
will affect virtually every commercial
and business aviation transaction in
the United States and many other
nations around the world. Although
Cape Town and the Protocol (collec-
tively, the “Treaty”) promise to facilitate
aircraft financing and provide new
financing opportunities, the Treaty
also poses numerous questions and
requires new approaches to docu-
menting and closing aviation transac-
tions.
The complexity of the Treaty
should not be understated, but nei-
ther should its potential value to avi-
ation finance. It creates a new and
simple registration system; yet its
deceptive simplicity may set a trap
for the unwary. To fully understand
and evaluate issues presented by the
Treaty, it is important to read the
Convention on International Interests
in Mobile Equipment and Protocol
Thereto on Matters Specific to Aircraft
Equipment, Official Commentary,
Professor Sir Roy Goode CBE, QC,
University of Oxford, Sept. 2002.
SCOPE AND IMPACT OF TREATY
The Treaty’s scope and impact
extends from commercial airlines to
general aviation, including corporate
aircraft and helicopters. Cape Town
is intended to expand the sources,
increase the amount and lower the
cost of financing available to airlines
and general aviation. In addition, it
establishes comprehensive laws in
each ratifying country (“Contracting
State”) that should facilitate buying,
selling, leasing and financing aircraft
and engines. For example, Cape
Town creates laws on perfection and
filing interests in aircraft as well as on
defaults, remedies, insolvency, prior-
ities, title and aircraft deregistration.