Most Read Contributor in New Zealand, September 2016
The Cape Town Convention
The Convention on International Interests in Mobile Equipment
and the associated Protocol on International Interests in Mobile
Equipment Specific to Aircraft Equipment was adopted at a
conference in Cape Town and is restricted to:
airframes which can carry at least 8 people or goods in excess
helicopters which can carry at least 5 people or goods in
excess of 450kg, and
engines of over a certain size.
It was brought into force in New Zealand on 1 November 2010 via
the Civil Aviation (Cape Town Convention and Other Matters)
Amendment Act 2010. This Act also amended a number of other New
Zealand Acts including: the Companies Act 1993, the
Property Law Act 2007, the Insolvency Act 2006,
the Receiverships Act 1993 and the Personal Property
Securities Act 1999 (PPSA)).
Priority of security over smaller aircraft and engines will
continue to be governed in New Zealand by the PPSA.
The International Registry, which is physically operated in
Dublin, gives financiers greater certainty of priority and title
than when different jurisdictions had their own separate registers.
It is available online and electronically.
A security interest registered on the International Registry
will take precedence over all other interests in a property that
are registered later in time or not registered at all. The
owner/lessee and the financier must both be registered as users of
the International Registry and must both consent to the initial
registration and to any subsequent variations.
Previously security interests in New Zealand aircraft and other
mobile equipment were registered solely on the Personal Property
Securities Register (PPSR). The PPSA is now
subject to the Cape Town Convention, so registration on the PPSR
will be subordinate to registration on the International Registry.
Nevertheless, we would imagine that most financiers will wish to
register financing statements on both registers to ensure that
third parties searching the PPSR will be on notice of the existence
of the security interest.
It is important to note that the recording of a security
interest on the International Registry affects only priorities of
security interests in the relevant aircraft or other equipment. The
intrinsic validity or enforceability of the security interest will
be governed by the laws applicable to the security document. This
is also the position under the PPSA in relation to personal
Even if a security interest has a registration under the PPSA,
the priorities of the parties will be governed by the time of
registration on the International Registry. If there is no
international registration then the PPSA priority rules would
As the Cape Town Convention does not apply retrospectively,
security interests granted prior to 1 November 2010 will continue
to be governed by the PPSA and are not capable of being registered
on the International Registry.
The Cape Town Convention sets out standard remedies a financier
may exercise if the debtor defaults. These include taking
possession or control of the property charged, selling or granting
a lease of the property, and collecting or receiving any income or
profits arising from the management or use of such property. All
these powers must be exercised in a "commercially reasonable
manner". The Protocol enables creditors to have the aircraft
de-registered and exported to another jurisdiction.
The adoption of the Cape Town Convention is on balance a
positive move for aircraft financiers and borrowers in New
Although the International Registry is less user-friendly than
the PPSR, and registration costs will be higher than under the
PPSA, we consider that the benefit of certainty should outweigh
The information in this article is for informative purposes
only and should not be relied on as legal advice. Please contact
Chapman Tripp for advice tailored to your situation.
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