Napier Park Global Capital joins AWG

Napier Park Global Capital joins AWG

Second research fellow selected for AWG research fellow program

The Aviation Working Group selects its second research fellow for the recently launched AWG research fellows program, Saachi Juneja.  Ms. Juneja graduated from West Bengal National University of Juridical Sciences (Arts and Law) and the University of California, Berkeley (Masters in Law). She has completed certificate work at McGill University (Air and Space Law) and is currently undertaking work there on entrepreneurship. Ms. Juneja will conduct her research on environment-related legal rules, practices, and disclosures which impact, or may develop to impact, lessors and financiers of airlines in Brazil, China, and India, and, more broadly, the framework for assessing, and the potential impact of, green and sustainable financings of aircraft equipment in these countries.

ESG review and assessment group

The Aviation Working Group is reviewing and assessing the potential impact on aircraft financing and leasing of rapidly developing ESG-related regulations, disclosure requirements, and government policies. That work, building on AWG’s prior ESG activities (AWG carbon calculator and submissions on principles relating to green financing), includes consideration of potential industry practices in light of, and seeking consistency relating to, such regulations, requirements, and policies.

AWG has retained Watson Farley & Williams and Clifford Chance to provide support for this work.

Statement on guiding principles in structured financings with shared security

In light of and response to recent events, AWG issues a statement on guiding principles which it recommends in order to provide greater predictability for financiers and investors in situations where multiple classes of debt share in a single security interest over aircraft equipment and related collateral and remedies are being exercised. This statement of principles has been prepared by AWG as an elective guidance tool.

AWG retained Clifford Chance to provide support for work on this statement.

Cross-border application of article XI of the Aircraft Protocol where airline’s centre of main interest is in an EU member state

On 11 May 2021, the Cape Town Convention Academic Project published an exchange of letters with Sir Roy Goode on the cross border application of Article XI of the Aircraft Protocol where the airline’s centre of main interest is in a Member State of the European Union

Expert opinion issued on CTC restructuring plans and schemes of arrangements in the insolvency context

An expert opinion has been obtained concluding that schemes of arrangement proceedings in the insolvency context are 'insolvency proceedings' for purposes of the Cape Town Convention. Thus, modification of a CTC creditor's rights without its consent is not permitted in such proceedings - where the debtor's main place of business is in a CTC state which declared or incorporated Alternative A (remedies on insolvency). The foregoing is without prejudice to actions taken in connection with a CTC compliant scheme, which includes providing each CTC creditor with a termination option. The expert opinion may only be used in full, as it must be read as a whole.

AWG announces the launch of the AWG Carbon Calculator

AWG has released the AWG carbon calculator on 31 March 2021, and has prepared a press release and a short video introducing the AWG carbon calculator

AWG submits letter on principles applicable to EU taxonomy on green financing

AWG has submitted a letter to the EU Commission on principles for the EU taxonomy on green financing applicable to aviation financing and leasing.

MAB judgement and the Cape Town Convention

As all MAB scheme creditors agreed to it, the High Court of Justice for England and Wales decision of 23 February 2021 did not address the issue of whether a part 26 scheme in the insolvency context is a Cape Town Convention ‘insolvency proceeding’ (thus preventing cram-down). The court action is consistent with the request made in AWG's letter to the court dated 21 February 2021.

The judge noted, at para 49, that he is ‘content to leave resolution of the issue of whether a scheme under Part 26 A 2006 falls within the definition of an ‘insolvency-related even’ under the Aircraft Protocol or the 2015 Regulations to a case in which it matters.’ And that, at para 48, stated that: ‘… the Scheme purported to bind the non-assenting creditor, and I believe that the court should be concerned whether it was right to give its sanction to a scheme which might be thought to breach an international convention to which the UK is a party.’

The item may be addressed in a future case, and, for use in such case, AWG is securing a powerful opinion to the effect that such Part 26 schemes are in fact Cape Town Convention insolvency proceedings.

Court rulings on schemes of arrangement as ‘insolvency proceedings’

Two important court judgements have endorsed the concept that a scheme of arrangements in the insolvency context is an ‘insolvency proceeding’. This aligns with AWG’s long-standing interpretation.

The High Court of Malaysia stated that a proposed scheme of arrangement by Air Asia X Berhad is an ‘insolvency proceeding’ for purposes of the Cape Town Convention.

The High Court of England and Wales has characterized the Part 26A restructuring plan involving Gategroup Guarantee Limited as an ‘insolvency proceeding’ for purposes of the Lugano Convention. While this was not a Cape Town Conventiuon case, its reasoning should be highly persuasive in the CTC context.

These rulings support the approach set out in Annotation 1 of the Cape Town Convention Academic Project on restructuring arrangements.

AWG commences work on cross-border transferability practitioners’ guide

Building on 10 years of work with the industry, regulators, and international organizations, AWG will commence work (feasibility and content) on a practitioners’ guide on the cross-border transferability of aircraft (guide).  The guide would bring together, develop, advance, and seek to secure recognition of, best practices when changing aircraft nationality (XBT), including in fleet changes in the context of C-19 return to service. It would also address calendar age-based restrictions relating to changes of nationality. The reference standard for such best practices would be rules and guidance issued or given by ICAO, FAA, and EASA. The guide would refer to such standards and rules and differences between them. It would also, over time, add country-specific annotations to its transfer document checklist for many other aviation countries around the world and would summarize requirements, interpretations, and lessons learned in such countries.

The guide would be designed for use by industry in XBT activities, especially day-to-day transfers and regulatory interfaces.

AWG has retained Blake, Cassels & Graydon to provide support over the next year for its work on the guide.

Statement on airline restructuring principles

In response to the disruption to air transport caused by COVID 19, AWG issues a statement on guiding principles which it recommends to materially enhance the prospects for a successful airline restructuring. That statement has been prepared by AWG as an elective guidance tool.

Accelerated development of the trusted communication facility

AWG is pleased to announce the accelerated development of the trusted communication facility (TCF). Attached is the joint statement on TCF released by AWG and Aviareto.

The TCF will be an online platform to support the aviation industry as it recovers from the COVID-19 pandemic. In particular, the TCF system will enable faster, more efficient and cheaper return to service for aircraft while maintaining highest levels of safety. It will be centred on documentation relating to airworthiness requirements.

The TCF will permit regulators and industry participants to exchange, digitally sign and execute electronic documents to facilitate the return to service of aircraft.

New edition of the practitioner’s guide to the Cape Town Convention and Aircraft Protocol

On 12 October 2020, the legal advisory panel of AWG released the 2020 new edition of the practitioner’s guide to the Cape Town Convention and Aircraft Protocol 

Cross-border insolvencies and the Cape Town Convention

Clarity provided on select aspects of the relationship between cross-border insolvencies and Cape Town Convention through annotation 2 to the Official Commentary issued by the CTC academic project

Voluntary reorganizations and the Cape Town Convention

Clarity provided on relationship between voluntary reorganizations and Cape Town Convention through annotation 1 to the Official Commentary issued by the CTC academic project

COVID 19 related action

AWG, in consultation with other affected parties, has since March 2020 taken a range of actions to assist the air transport sector, including airlines, the aviation leasing and financing industry, and the public, in addressing the economic impacts of the spread of COVID 19