Cape Town Convention

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  • The Cape Town Convention on International Interests in Mobile Equipment, or Cape Town Treaty is an international treaty intended to standardize transactions involving movable property.
  • The treaty creates international standards for registration of contracts of sale (including dedicated registration agencies), security interests (liens), leases and conditional sales contracts, and various legal remedies for default in financing agreements, including repossession and the effect of particular states’ bankruptcy laws.
  • Three protocols to the convention are specific to three types of movable equipment: Aircraft Equipment (aircraft and aircraft engines; signed in 2001), railway rolling stock (signed in 2007) and space assets (signed in 2012).
  • The treaty resulted from a diplomatic conference held in Cape TownSouth Africa in 2001. The conference was attended by 68 countries and 14 international organizations. 53 countries signed the resolution proposing the treaty.
  • The treaty came into force on 1 April 2004, and has been ratified by 57 parties.
  • The Aircraft Protocol (which applies specifically to aircraft and aircraft engines) took effect on 1 March 2006 when it was ratified by 8 countries: EthiopiaIrelandMalaysiaNigeriaOmanPanamaPakistan, and the United States.
  • The Cape Town Convention/Protocol were adopted in Cape Town in November, 2001.
  • India became a party to the Convention/Protocol in July, 2008.
  • Recently a draft bill on this was released by  Ministry of Civil Aviation.

The Convention/Protocol primarily seeks to achieve efficient financing of high value mobile equipment, like airframes, helicopters and
engines, in order to make the operations cost effective and affordable. Objectives of the Convention/Protocol include:
 Creating an international interest in aircraft objects which will be recognised in allcontracting states;
 Establishing an electronic international registry for registration of international interests, and providing information related
to interests in a particular aircraft;
 Providing certain basic default remedies for creditors, to provide them with speedy interim relief; and Creating a legal regime which is applicable universally and administers justice to both parties in case of a dispute.

Need for the legislation:

  • Certain provisions of the Convention/ Protocol are in conflict with certain provisions of other laws such as the Civil Procedure Code, 2008, the Specific Relief Act, 1963, the Companies Act, 2013 and the Insolvency and Bankruptcy Code, 2016.
  • Further, international financial institutions are not giving due weightage to accession to the Convention/Protocol by any country unless it is accompanied by an implementing law.
  • For example, OECD provides 10% discount in the processing fee of a loan to acquire aircraft to airlines of any country that has enacted a law implementing the Convention/Protocol.

Read the bill here

Source:PRS India and Wikipedia