on the Cape Town Convention
and the Aircraft Protocol
The Legal Advisory Panel of the
Aviation Working Group
Published August 2023
Principles-Based Guide to the Official Commentary on the Cape Town Convention and the Aircraft Protocol
This Guide has been prepared by the Legal Advisory Panel of Aviation Working Group as an aid to practitioners, administrative officials, and courts in identifying relevant authority in the 5th edition of Official Commentary (Official Commentary) relating to the most frequently encountered questions from a transactional perspective arising in the application and interpretation of the Convention on International Interests in Mobile Equipment (Convention) and Protocol thereto on Matters Specific to Aircraft Objects (Protocol, and together with the Convention, CTC).
It does so by setting out a topical index to the Official Commentary in the form of main principles found in or underlying the texts, which are also summarized, and links such principles to specific paragraphs in the Official Commentary.
This Guide is intended as a practical companion text to help efficiently navigate the Official Commentary. It does not seek to modify or interpret the Official Commentary, which is the sole authoritative text for interpreting the CTC. It is recommended that all who use this Guide do so with a written or electronic copy of the Official Commentary in close proximity.
This Guide is intended as a practical companion text to help efficiently navigate the Official Commentary. It does not seek to modify or interpret the Official Commentary, which is the sole authoritative text for interpreting the CTC. It is recommended that all who use this Guide do so with a written or electronic copy of the Official Commentary in close proximity. |
While this Guide was produced with the approval of the author of the Official Commentary, Professor Sir Roy Goode, and its publishers, UNIDROIT, that does not imply endorsement of its content. Rather, the organization, determination of the principles, and summaries in this Guide are solely the work of the Legal Advisory Panel of Aviation Working Group. It is an open source, no cost document prepared for the benefit of the legal and aviation community.
Copyright © 2023
All rights reserved.
No part of this Guide may be transmitted or used in other documents or works without citation of this publication, attribution of this Guide to the Aviation Working Group, and express reference to this copyright and the disclaimer below. The foregoing shall not apply to, or limit or restrict, the transmission of the Guide as a whole including this copyright and disclaimer.
Although the Legal Advisory Panel, the Aviation Working Group and the various authors and contributors have made every effort to ensure the accuracy of content of this Guide, they cannot accept any legal responsibility whatsoever for consequences that may arise from errors or omissions or from its contents. All users of this Guide should consult the Official Commentary to reach legal conclusions or determine the accuracy of the principles or the summaries in this Guide. This Guide does not purport to be comprehensive or to render legal, tax or other advice. Parties should not rely on this Guide when engaging in any transaction or providing any advice in respect of the subject matter covered hereby. In no event shall the Legal Advisory Panel or the Aviation Working Group (or any member of either thereof) have any legal responsibility for, or duty or responsibility to provide any updates in respect of, the subject matter of or views expressed in this Guide.
This Guide, and the views set out herein, reflect a consensus of the Legal Advisory Panel to the Aviation Working Group. They do not, however, necessarily reflect the views of individual members or their firms, organisations, or associations on any particular point. This Guide has been produced in consultation with the Aviation Working Group, acting through its Secretary General, and is offered to assist those working on Cape Town Convention matters, but neither it nor the views expressed herein have any official status, are binding in any way, or should be relied upon as providing definitive guidance in actual transactions. Neither the Legal Advisory Panel nor the Aviation Working Group shall be deemed to have endorsed the views expressed in any other publication referred to herein, including the Official Commentary.
Contents:
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REF | SUMMARY OF KEY PRINCIPLE | REFERENCE FROM THE OFFICIAL COMMENTARY | CTC REFERENCES |
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1 | Section 1 – Preliminary Concepts and Points | ||
1.1 | Scope 1: Objects covered | ||
1.1.1 | Aircraft objects | ||
1.1.1.1 | Airframes, aircraft engines, and helicopters. Covered, and collectively defined as aircraft objects. | 2.2 and 3.6 (Main text) 3.8, 3.13, 5.4, 5.7, and 5.13 (Requirements to qualify); 4.31, 5.6, and 5.7 (Definitions) | c art 1(u); p arts I(2)(a)-(c), 1(2)(e), and I(2)(l) |
1.1.1.2 | Parts, components, and records.Aircraft objects (ref. 1.1.1.1) defined as including all parts and components and all data, manuals, and records. | 2.39 and 3.10 (Main text) 3.12 (Non coverage); 5.4, 5.7, and 5.13 (Inclusion of components and data / manuals) | p arts I(2)(a)-(b) and I(2)(h) |
1.1.2 | Aircraft, airframes, aircraft engines, and helicopters | ||
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1.1.2.1 | Treated as separate objects.Airframes, aircraft engines, and helicopterstreated as separate objects (ref. 1.1.1.1). | 2.38 and 3.6 (Main text) 3.9, 3.11, 3.72, 4.55, 5.3, 5.5, and 5.7 (Separate objects and international interests); 4.31 (Definition of object) | c art 1(u); p arts I(2)(a)-(c), 1(2)(e), and I(2)(l) |
1.1.2.2 | Treatment of helicopter engines. Aircraft enginesinstalled on a helicopterare components of that helicopter and when uninstalled such aircraft engines are separate aircraft objects. | 2.38 and 3.6 (Main text) 3.9, 3.11, 3.72, 4.55, 5.5, and 5.7 (Treatment of helicopter engines); 4.31 (Definition of object) | c art 1(u); p arts I(2)(b) and I(2)(l) |
1.1.2.3 | Registrations pertaining to helicopter engines. Common practice to register international interests(ref. 2.2.1) on aircraft enginesthat are intended for use on a helicopter (ref. 1.1.2.2) regardless of whether they were installed on the helicopter at the time of the agreement(ref. 1.2.2); a prospective international interest(ref. 2.2.3) may be registered, and becomes an international interest (with effect as of the date of registration, ref. 6.1.5.1) once the aircraft engine is removed. | 2.38 (Main text) 2.61, 3.11, and 5.5 (Prospective international interest) | p arts I(2)(b) and I(2)(l) |
1.2 | Scope 2: Application and connecting factors | ||
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1.2.1 | Sphere of application | ||
1.2.1.1 | Conditions of applicability. The five conditions to applicability of the CTC: (1) the parties have entered into an agreement (ref. 1.2.2); (2) the agreement relates to an aircraft object(ref. 1.1.1); (3) the aircraft object is uniquely identifiable; (4) the agreement complies with the relevant formalities required under the CTC (ref. 1.2.3); and (5) there is a connecting factor (ref. 1.2.4). | 2.31 (Main text) | c arts 2, 3, 4, and 7; p art I VII |
1.2.2 | Definition of ‘agreement’ | ||
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1.2.2.1 | Types of agreement. A security agreement, a title reservation agreementor a leasing agreement, as defined by the Convention, is required to constitute an international interest(ref. 2.2). | 2.44 (Main text) 2.48 (Forms of international interests); 4.7 (Definition of agreement); 4.27 (Definition of leasing agreement); 4.45 (Definition of security agreement); 4.48 (Definition of title reservation agreement) | c arts 1(q), 1(ii), and 1(ll) |
1.2.2.2 | Characterization and re-characterization of agreement. Whether a particular agreement is within the scope of the CTC is determined by the CTC’s autonomous definitions (refs. 1.1, 1.2.2.1, and 3); if it is, then an agreement’s characterization under applicable national law governs how the CTC applies to certain matters, such as the available default remedies (refs. 4.9 and 5). | 2.63 (Main text) 2.44 and 4.27 (Out of scope examples); 2.24, 2.64, 4.27, 4.48, and 4.56 (Re-characterization under applicable law) | c arts 2(2) and 2(4) |
1.2.3 | Formalities required for the constitution of an agreement | ||
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1.2.3.1 | Formalities.The four formalities for an agreementto fall within the CTC: (1) the agreement must be in writing; (2) the relevant chargor / lessor / conditional sellermust have the power to dispose of the aircraft object (ref. 1.2.3.2); (3) the aircraft object (ref. 1.1.1) must be identifiable; and (4) in respect of a security agreement, the obligations secured must be ascertainable. | 2.79 and 2.80 (Main text) 2.48 and 4.73 (Requirement to meet formalities); 2.65, 2.68, 2.88, 3.13, 3.23, and 5.36 (Identifiability); 2.81, 4.50, and 4.76 (Writing); 2.82 (Power to dispose); 2.89 and 4.79 (Obligations secured) | c art 7; p art VII |
1.2.3.2 | Power to dispose. A party holds a power to dispose for the purposes of the CTC if that power is conferred on it by applicable law or the CTC. A power to dispose is wider than a right to dispose and includes the ability of a transferor to transfer better title than it itself possesses. | 2.82 (Main text) 2.83 and 4.78 (Right to dispose); 4.78 (Power to dispose); 2.84 and 4.77 (Power to dispose wider than right to dispose) | c arts 7, 16, and 29(2) |
1.2.4 | Existence of a connecting factor | ||
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1.2.4.1 | (a)Connecting factors. Two alternative ‘connecting factors’ trigger the application of the CTC: (1) the situation of the debtor (connecting factor for aircraft engines, airframes, and helicopters); and (2) the State of registryof the airframe or helicopter (connecting factor for airframes and helicopters but not aircraft engines). | 2.33 and 3.17 (Main text) 4.62 (Alternative connecting factors) | c art 3; p arts I(2)(o) and IV(1) |
1.2.4.2 | Situation of debtor. The debtormust be situated in a Contracting State at the time of the conclusion of the agreement(ref. 1.2.2) that creates or provides for the international interest(ref. 2.2.1). | 2.31 and 2.33 (Main text) 2.34, 4.61, and 4.63 (Meeting the criteria); 2.36 (Re-location of debtor) | c arts 3 and 4 |
1.2.4.3 | Registration of airframe. The airframeor the helicopter(ref. 1.1.1.1) must be registered (or registration effected pursuant to an agreementto register) in an aircraft registerof a Contracting State which is the State of registryat the time the agreement (ref. 1.2.2) that creates or provides for the international interestis concluded. | 3.17 (Main text) 3.7 (Effect of re-registration); 5.26 (Further detail) | p arts I(2)(o)-((p) and IV(1) |
1.2.4.4 | Prospective international interests. The presence of a connecting factor is determined at the time when the event occurs that ripens the prospective international interest(ref. 2.2.3) into an international interest(ref. 2.2.1). | 2.33 (Main text) 4.34, 4.35, and 4.36 (Prospective international interest defined) | c art 1(x), (v), and (z) |
1.3 | System of declarations | ||
---|---|---|---|
1.3.1 | Declarations.Permit a Contracting State the discretion to vary the effect of the CTC (ref. 4.10.1). | 2.326 and 3.165 (Main text) 2.73, 4.350, and 4.351 (Declarations – general information); 2.328, 2.329, and 4.351 (Declarations by the EU); 4.168, 4.354, 4.381, and 4.382 (Maintenance of list of declarations); Appendices XI and XII | c arts 23, 39, 40, 48, 50, 52-55, and 62; p art VIII, X-XII, XIII, XIX, XXIV, XXXVII, XXIX, and XXX |
1.3.2 | Types of declarations. Five types: (1) opt-in declarations; (2) opt-out declarations; (3) declarations relating to a Contracting State’s own laws; (4) mandatory declarations; and (5) other declarations. | 2.327, 2.330 and 3.167 (Main text) 2.331 and 3.168 (Opt-in declarations); 2.332 and 3.169 (Opt-out declarations); 2.333 and 3.170 (Contracting State’s own laws); 2.334, 2.335, and 3.171 (Mandatory declarations); 2.336 (Other declarations); 2.337 and 3.172 (Effects of the declaration system); Appendices XI and XII | c arts 23, 39, 40, 48, 50, 52-55, and 62; p art VIII, X-XII, XIII, XIX, XXIV, XXXVII, XXIX, and XXX |
1.3.3 | Relevant declarations. Determining which Contracting State’s declaration is the ‘relevant declaration’ in respect of any particular issue depends upon the time at which, and the forum in which, the issue arises (refs 4.10.1, 4.10.4, 6.2.3.2, 7.1.4, and 7.2.4). | 2.327 and 3.166 (Main text) | c arts 23, 39, 40, 48, 50, 52-55, and 62; p art VIII, X-XII, XIII, XIX, XXIV, XXXVII, XXIX, and XXX |
1.3.4 | Binding on other Contracting States. A relevant declaration (ref. 1.3.3) must be respected by all other Contracting States and will also be respected by a non-Contracting State whose conflict of laws rules leads to the application of the law of a Contracting State (refs. 4.10.1, 7.2.4, 10.1.1, and 10.5.1). | 2.327 and 3.166 (Main text) 2.339, 2.340, and 3.174 (Binding on other Contracting States) | c arts 23, 39, 40, 48, 50, 52-55, and 62; p art VIII, X-XII, XIII, XIX, XXIV, XXXVII, XXIX, and XXX |
1.3.5 | Timing for declarations. Declarations may be replaced, modified, or withdrawn as permitted by the CTC with any such changes having a retrospective, and not a retroactive, effect. | 2.338 and 3.173 (Main text) 2.339, 2.340, 2.341, 3.174, 4.355, 4.356, 4.357, 4.358, and 4.359 (Subsequent declarations and withdrawals) | c arts 56, 57, 58, and 60; p arts XXXII, XXXIII, and XXXIV |
1.4 | Importance of commercial predictability | ||
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1.4.1 | Unified international regime. The CTC sets out a unified legal regime for the purposes of governing financing transactions for aircraft objects(ref. 1.1.1), with the objective of facilitating asset-based financing and leasing by providing creditors with certainty as to their proprietary rights and predictability in the application of remedies (refs. 3.1 and 3.2). | 2.4 and 2.6 (Main text) 2.23, 4.2, and 4.3 (Principle of predictability) | c Preamble and art 5(1); p Preamble |
1.5 | International Registry system | ||
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1.5.1 | Registration. The International Registrysystem enables a creditorto register with respect to an aircraft object(ref. 1.1.1): (1) an international interest(ref. 2.2.1) establishing priority over unregistered interestsand later registered interests(refs. 2.2.3, 5.5.1.3, 5.5.3.6, 6.2.1, 6.2.2, 7.1.3.1, 7.1.5, and 7.3.8); and (2) a sale(ref. 2.4), establishing the latest buyer as the person with superior rights over a buyer under an unregistered sale or an earlier registered sale (ref. 6.2.2.6). | 2.8, 2.27, and 4.129 (Main text) 2.48 (Definition of registered); 2.49, 3.57, 4.130, 4.131, and 4.143 (Not a title register); 4.26 (Definition of International Registry); 4.130 and 4.143 (Registration made against aircraft object) | c arts 1(bb), 1(cc), 1(mm), and 16(1) |
1.5.2 | Access to International Registry. The International Registrysystem is accessible at all times. Searches are open to the public, and searching parties need only comply with registry requirements for establishing an account. Parties registering interests in aircraft objects(ref. 1.1.1) must comply with rigorous account creation and identification requirements to gain access. | 3.59 and 4.177 (Main text) 2.192 (Principle of open access) | c arts 17, 18, 22, and 26; c art XX(4) |
1.5.3 | Entry points. A Contracting State may make a declaration under Article XIX of the Protocol establishing either an ‘authorized entry point’ or a ‘direct entry point’ through which registration information with respect to airframesor helicopters for which it is the State of registry must be transmitted to the International Registry. An entry point may not be made compulsory in respect of aircraft engines. | 3.65 (Main text) 2.192 (Regulations invalidate registrations not discharges); 3.66 (Types of designated entry points); 2.193, 2.194, and 3.70 (Registrations); 3.166 (Relevant declaring Contracting State); 3.66 and 3.69 (Aircraft engines) | c art 18(5); p art XIX |
2 | Section 2 – Key Property Interests Established by the CTC | ||
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2.1 | General | ||
2.1.1 | Distinct interests. One person may hold two or more distinct registrable interests in the same aircraft object(ref. 1.1.1), each of which would require its own registration in order to obtain protection as a registered interest(refs. 2.3.3, 5.5.1.3, 5.5.3.6, 6.2.1, 6.2.2, 7.1.3.1, 7.1.5, and 7.3.8). | 2.40 and 3.104 (Main text) 3.107 and 5.25 (Separate interests require separate registration) | c arts 1(cc), 16, 29, 30, 35, and 41; p arts III and V |
2.2 | International interests | ||
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2.2.1 | International interest. A sui generis interest in property (not derived from or dependent upon national law) that arises under or results from an agreement(refs. 1.2.2 and 1.2.3). An international interestmay be a sub-interest of another international interest, such as an interest under a sub-lease agreement, and may be held by multiple creditorsas fractional interests. | 2.40 and 2.48 (Main text) 2.49 (sui generis right); 4.24 (Definition of international interest; Fractional interests) | c art 2 |
2.2.2 | National interest / internal transaction. An interest registered under a national registration system which would be registrable as an international interestbut for the fact that it was created by an internal transactionconstitutes a national interestrather than an international interest if all parties to the agreement(ref. 1.2.2.1) are situated, and the aircraft object(ref. 1.1.1) is located, in the same Contracting State and that Contracting State has made a declaration under Convention Article 50 excluding the CTC’s application. A notice of a national interestcan be registeredin the International Registryin order to secure its priority in the same way as an international interest (ref. 6.1.4.3.2). | 2.40(3) and 2.48 (Main text) 2.304 and 4.330 (Declarations in respect of internal transactions); 4.23 and 2.304 (Definition of internal transaction); 4.24 and 4.30 (Notice of a national interest); 4.28 and 2.304 (Definition of national interest) | c arts 1 and 50(1) |
2.2.3 | Prospective international interests. An interest that, upon the occurrence of a stated event or the satisfaction of a formal condition to creation (ref. 1.2.3.1), will be constituted as an international interestin an identifiable aircraft object(refs. 1.1.1, 6.1.5.1, and 6.2.2.3). | 2.40(2) and 2.61 (Main text) 2.159, 2.195, and 2.256 (No fresh registration required); 4.35 (Definition of prospective international interest) | c arts 1, 18(3), 19(4), and 22(3) |
2.2.4 | Proceeds. The priorities established by the CTC for an international interest(ref. 6) extend to proceeds, which are limited to the money or non-money proceeds from the total or partial loss, confiscation, condemnation, or requisition of an aircraft object(ref. 1.1.1). | 2.51 (Main text) 2.62 and 4.59 (Extension to proceeds); 4.33 (Definition of proceeds) | c arts 1(o), 1(w), 2(5), and 29(6) |
2.3 | Non-consensual rights or interests | ||
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2.3.1 | General.Rights or interests that are created by applicable non-CTC law, not by agreement, are given effect under the CTC if the Contracting State in which the right or interest arises has made a declaration electing to either preserve (but not expand) its national law priority for such rights or interests without registration (ref. 2.3.2), or to replace its national law priority for such rights or interests with the CTC’s registration and priority scheme (ref. 2.3.3) (refs. 6.2.1, 6.2.2.4, and 6.2.3.2). The default remedies under the CTC do not apply to these interests, and the effect of the declaration is limited to the declaring Contracting State and any other State whose non-CTC conflict of law rules make the law of the declaring Contracting State applicable (refs. 4.2 and 7.3.9). | 2.40(4) and (5) (Main text) 2.234, 2.265, 2.267, 4.278, 4.279, 4.283, and 4.293 (Priority matters); 2.264, 4.279, and 4.283 (No expansion of preferred rights); 2.271 (Types of declarations made); 2.274 and 4.24 (Non-application of default remedies) | c arts 1(s), 39(1), and 40; p art XI(12) |
2.3.2 | Interests given priority without registration.A Contracting State may make a declaration under Convention Article 39(1) identifying (generally or specifically) the categories of non-consensual rights or interestswhich, under its national law, would be given priority without registration over interests that would be equivalent to international interests, and preserving such national law priority in that Contracting State. | 2.40(4) (Main text) 4.29 (Definition); 4.278 (Relevant declaration); 4.280, 4.281, 4.282, 4.284, 4.288, 4.289, 4.290, 4.291, and 4.292 (Examples of art. 39(1) rights) | c arts 1(o), 1(s), and 39(1) |
2.3.3 | Interests given priority through registration. A Contracting State may make a declaration under Convention Article 40 specifying the categories of non-consensual rights or interestsarising under its national law which are registrable under the CTC (registrable non-consensual rights or interests), thereby making the CTC’s scheme of registration priority for registered interestsand unregistered interestsapplicable to such interests in that Contracting State. | 2.40(5) (Main text) 4.293 (Relevant declaration; examples of art. 40 rights) | c arts 1(s), 1(cc), 1(dd), 1(mm), and 40 |
2.4 | Sales | ||
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2.4.1 | Sales. The Protocol extends the registration provisions of the CTC to outright sales(ref. 6.1.4.2) and prospective sales(ref. 6.1.5) of aircraft objects (ref. 1.1.1). Priority rules apply only if the sales are in competition with one another (ref. 6.2.2.6). Excluded are: (1) the default provisions of the CTC; and (2) the special priority rule contained in Convention Article 29(3) (protecting unregistered buyers) because the sale is registrable (refs 6.1.1.1, 6.1.4.2, 6.2.2.6, and 6.2.3.1). | 2.43, 2.49, and 4.295 (Main text) 3.1 (Means of giving public notice); 3.15, 3.16, 4.24, 4.295, 5.20, and 5.24 (Relevant articles) | c arts 1, 29(3), and 41; p art III and V |
2.4.2 | Sale is a sui generis interest. A saleis a sui generis interest; whether an interest constitutes a sale for the purposes of the CTC is a matter for the CTC, not national law (ref. 3.1). | 3.20 (Main text) 5.31 (No requirement for reference to lex situs) | c arts 1(g), 1(gg), and 5 |
2.4.3 | Meaning of ‘sale’. A transfer of ownership of an aircraft object (ref. 1.1.1) pursuant to a contract of sale, defined as excluding a security agreement, a title reservation agreement or a leasing agreementas defined by the CTC (ref. 1.2.2) and meeting certain formalities (ref. 2.4.5). The sale(not the contract of sale) is the interest recognized and capable of being registered under the CTC. | 2.276 (Main text) 2.52, 2.276, 3.16, 3.20, 3.21, 4.16, 4.43, and 5.23 (Meaning of sale and contract of sale); 5.21 (Distinction between sale and contract of sale) | c arts 1(g), 1(gg), and 41; p art III and V |
2.4.4 | Debtor, creditor and connecting factor for a sale. With respect to a sale, the debtoris the seller and the creditoris the buyer, and the alternative connecting factors are the situation of the debtor (the seller) or the State of registry for the airframeor helicopterbeing a Contracting State (ref. 1.2.4). | 5.22 (Main text) | c arts 1(i), 1(j), 1(gg), and 41; p art III and V |
2.4.5 | Formalities for a contract of sale. The formalities for a contract of saleare the same as those for an international interest (excluding the secured obligations requirement) (ref. 1.2.3). | 3.20 (Main text) 4.16 and 5.31 (Parallel formalities); 5.30 (Registration of sale, not contract of sale) | c arts 1(g) and 41; p art III and V |
2.4.6 | Prospective sales. A salewhich is intended to be made in the future upon the occurrence of a stated event, including exercise of a purchase option in a leasing agreement (refs 1.1.2.3, 1.2.4.4, 6.1.1.1, 6.1.5, and 6.2.2.3). | 2.276 (Main text) 3.21 and 3.108 (Registration of a prospective sale); 3.52, 4.36, and 5.23(Lessee option to purchase registrable as prospective sale); 4.36 (Definition of prospective sale) | c arts 1(gg) 1(z), and 41; p art III and V |
2.5 | Associated rights | ||
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2.5.1 | Meaning of associated rights. Rights to payment or other performance by a debtorunder an agreement, which under a security agreementare secured by, or under a title reservation agreementor a leasing agreementare otherwise associated with, the aircraft object(refs. 1.1.1, 1.2.2, and 8.3.1). Examples include rights to the repayment of a loan or the payment of the price under a security agreement or a title reservation agreement, the payment of rentals under a leasing agreement, or the performance of insurance and repair obligations with respect to an aircraft object. | 2.40(6) and 4.12 (Main text) | c arts 1(c), 1(q), 1(ii), and 1(ll) |
2.5.2 | Related agreements and further advances.Obligations under an agreementthat comprise associated rightsmay include obligations that arise under a separate instrument or agreement, as where the secured obligationsunder a security agreement encompass future advances, payments under a promissory note, or obligations under subsequent agreements (ref. 8.3.1, 8.3.3, and 8.3.12). | 2.242 (Main text) 4.12 (Obligations under other agreements) | c art (1(a), 1(c), 1(hh), and 1(ii) |
2.5.3 | Assignments of associated rights.Ref. 8.3. |
3 | Section 3 – Principles of Interpretation | ||
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3.1 | Autonomous interpretation | ||
3.1.1 | Autonomous meaning.The provisions of the CTC must be accorded an autonomous meaning that is uniform in all Contracting States and not affected by the national law canons of interpretation in any Contracting State. Contracting State courtsare instructed to avoid national law concepts in interpreting the CTC. | 2.24 (Main text) 2.71 and 4.68 (Avoid national law) | c art 5(1) |
3.1.2 | Importance of definitions. The CTC includes a substantial number of defined terms with special meanings, deviating from and superseding the meanings that may be given to corresponding terms under national law, and having a material effect on the interpretation of the CTC’s terms (refs. 1.1.2, 2.2.4, 2.4.2, 4.6, 4.7.1, 4.9.2, 5.5.3, 5.6, 7.1.1, 7.2.6, and 8.3.2). | 2.30(Main text) | c art 1; p art 1 |
3.2 | Hierarchy of interpretive rules and gap-filling principles | ||
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3.2.1 | Hierarchy.The CTC’s rules of interpretation establish a hierarchy and protocol for filling gaps in its coverage of issues as set out in the following sub-sections. | 2.24 (Main text) | c Preamble and arts 5(1)-(3) |
3.2.2 | Express terms govern. Matters addressed by the CTC are settled first by the express terms of the CTC, applying its definitions, the natural and ordinary meaning of its text, and considering its purposes. | 2.24 (Main text) | c Preamble and arts 5(1)-(2) |
3.2.3 | Gaps filled by general principles. Where the CTC does not expressly settle a matter or is silent, the first and primary source for gap-filling is the general principles on which the CTC is based as set out in the Preamble (predictability, party autonomy, and the protection and ready enforcement of the creditor rights and interests in equipment created by the CTC, all to promote asset-based financing and leasing) and supplementary means of interpretation (including the Official Commentary). | 2.24 and 2.71 (Main text) 2.25, 2.26, 2.27, 4.67, and 4.69 (CTC objectives and principles); 2.29 (Supplementary means of interpretation) | c Preamble and arts 5(1)-(2) |
3.2.4 | Applicable law is last resort. If a matter cannot be resolved based on the preceding rules, then as a last resort it must be resolved in conformity with applicable law (ref. 3.3.1). | 2.28 and 2.71 (Main text) 2.5 and 4.70 (Domestic law is last resort) | c Preamble and arts 5(1)-(3) |
3.3 | Role of and relationship to, applicable law | ||
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3.3.1 | Primary functions. ‘Applicable law’ (being the domestic rules of law that apply using the conflict of laws rules of the forum State, avoiding any issues of renvoi) serves two functions under the CTC: first, to address and govern the several matters under the CTC where the CTC expressly directs, such as the procedure for the enforcement of rights and remedies created by the CTC and the characterization of the agreement for purposes of determining the applicable remedies (refs. 1.2.2.2 and 4.9); and second, but only as a last resort, to address and govern matters that are not expressly settled by the CTC or on which it is silent, if the matter cannot be resolved by reference to its general principles and supplementary means of interpretation. | 2.71 (Main text) 2.28 and 4.70 (Domestic law as a last resort); 2.72 and 3.24 (Matters expressly left to applicable law); 2.73 (Residual rule applying domestic law) | c arts 2(4), 5(2)-(3), and 14 |
3.3.2 | CTC supersedes. The CTC supersedes otherwise applicable law whenever the two are in conflict (refs. 4.4.3, 4.5.2, 4.6.1, 4.6.4, 7.3.1, 8.2.1, 8.7.1, 9.1.1, and 10.2.1), regardless of whether the law in question was in effect before the CTC came into force or enacted subsequently. | 2.10 and 2.293 (Main text) 3.24 (CTC overrides applicable law on validity) | c arts 2, 5, 8-13, 29, 30, 34, 35, 54, and 55; p arts III, VI, IX, X, and XI |
3.3.3 | Applicable law procedure must support CTC rights. Where the CTC relies on applicable law to specify the procedure for the enforcement of a right or remedy created by the CTC, the applicable law procedure must be applied in a manner that will give substantive effect to that right or remedy (refs. 4.5.2 and 10.3.1). | 2.145 (Main text) 2.108 (Procedural law may not block non-judicial remedies) | c arts 5 and 14 |
3.3.4 | Applicable law procedure must not block CTC rights. A Contracting State may not impose conditions in its national law which are incompatible with the provisions of the CTC or are incompatible with the rights and remedies provided under the CTC (refs. 4.5.2 and 10.3.1). | 2.74 (Main text) 2.108 (Procedural law may not block non-judicial remedies) | c arts 5 and 14 |
3.4 | Relationship of the Convention to the Protocol | ||
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3.4.1 | Protocol prevails. The Convention and the Protocol are to be read together, and in the case of any conflict, the terms of the Protocol prevail. | 2.14–2.16 (Main text) | c arts 6 and 49(1) |
4 | Section 4 – Default Remedies (General) | ||
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4.1 | What constitutes a default? | ||
4.1.1 | Defined by agreement, if agreed, or if not, substantially deprives creditor. The events that constitute a ‘default’, or otherwise give rise to remedies under the CTC, are defined by the creditor and debtor in the relevant agreement (ref. 1.2.2), and if not defined by agreement, default means the occurrence of an event which substantially deprives the creditor of what it is entitled to expect under the agreement. | 2.102 (Main text) 2.95, 4.85, and 4.114 (Standard for default absent agreement) | c art 11 |
4.1.2 | Defaults not limited to breach. The events stipulated by the parties as triggering remedies may include matters, such as the insolvency of the debtor or a change in law, that do not constitute a breach of the agreement, but instead reflect the parties’ allocation of transaction risks. | 2.102, and 4.113 (Main text) 3.113, 4.85, and 5.80 (Party autonomy in defining default) | c art 11 |
4.2 | Remedies available to a creditor | ||
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4.2.1 | CTC remedies. The CTC confers certain specific remedies on the creditor, applicability of which may be subject to satisfying conditions (refs. 5 and 7.2). | 2.103, 2.106, and 2.121 (Main text) | c arts 8, 9, 10, and 13; p arts IX, X, and XI |
4.2.2 | Additional remedies (non-CTC remedies).The CTC preserves procedural and substantive remedies that are permitted to a creditor by applicable law (such as the right to payment of accrued sums, acceleration of liability for future sums, damages for breach of the agreement, interest, and specific performance of non-monetary obligations), including interim remedies and any agreed upon by the parties (‘additional remedies’), subject to compliance with any mandatory requirements of the CTC (refs. 4.3.1, 4.4.1, 4.6, 4.7.2, 4.11.1, 5.7.2, 5.7.3, and 8.4.2). | 2.122 and 4.115 (Main text) 2.106 (Parties free to agree additional remedies); 2.123 and 4.128 (Autonomy to cumulate and derogate); 2.124 and 2.125 (Additional remedies include substantive and procedural and interim relief) | c arts 9(3)-(4), 12, 13(4), 14, and 15; p arts IX and X(5) |
4.3 | Manner for exercising remedies | ||
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4.3.1 | Commercially reasonable manner is required. All remedies created by the CTC and additional remedies (ref. 4.2.2) must be exercised in a commercially reasonable manner, as defined by the CTC (ref. 4.6), which is a mandatory standard that cannot be derogated from. | 2.107 (Main text) 2.123 (Additional remedies); 3.48(1) (Replacement of Article 8(3)); 5.52 (Standard is mandatory) | c arts 8, 9, 10, and 12; p art IX(3) |
4.4 | Court authorization; mandatory Article 54(2) declaration | ||
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4.4.1 | Court authorization declaration required.Contracting States are required to make a declaration under Convention Article 54(2) to specify whether or not court authorization is required for the creditor to exercise the CTC remedies which do not by their terms require court authorization. | 4.343 (Main text) 2.334, 4.86, and 4.344 (Article 54(2) declaration is mandatory) | c arts 14 and 54(2) |
4.4.2 | Court authorization for CTC remedies not required absent declaration.Remedies created by the CTC which do not have terms requiring court authorization for their exercise, namely, terminate the agreement (ref. 5.1), take possession or control of the aircraft object (refs. 1.1.1 and 5.2), sell or grant a lease of the aircraft object (ref. 5.3), and collect or receive income or profits from use or management of the aircraft object (ref. 5.4), may be exercised without court authorization unless the Contracting State where such remedy is exercised has made a declaration under Convention Article 54(2) requiring court authorization in respect of such remedy or remedies. | 2.107 (Main text) 2.108, 2.109, and 4.343 (Declaration may condition all non-judicial remedies or none); 4.86, 4.109, 4.111, and 4.343 (Declaration required to condition exercise of non-judicial remedies) | c arts 8(1), 9(1), 10(a), and 54(2); p art IX, X(6)-(7). XXI, and XXX(2) |
4.4.3 | Declaration displaces conflicting national law.A declaration permitting the exercise of CTC remedies without court authorization supersedes any conflicting applicable law that would require leave of court for exercise of a corresponding national law remedy (ref. 3.3.2 and 10.2.1). | 2.107 (Main text) 2.108, 2.109, and 4.343 (Effect of Article 54(2) declaration); 2.144, 4.124, and 4.125 (Article 14 procedure is subject to CTC procedure and Article 54(2) declaration) | c arts 14 and 54(2) |
4.4.4 | Declaration has no effect on national law remedies.A declaration under Convention Article 54(2) is limited in effect to CTC remedies; a declaration that requires leave of court would not have any effect on the exercise of a non-CTC remedy that, under applicable law, is exercisable without court authorization. | 2.108 and 4.343 (Main text) | c arts 12, 13(4), 14, and 54(2) |
4.4.5 | Article XI, Alternative A declaration supersedes Article 54(2). In the case of insolvency proceedings (ref. 7.1.1) in a Contracting State, a declaration under Article Convention 54(2) by that Contracting State requiring leave of the court for the exercise of remedies is superseded by a declaration to apply the remedies established by Protocol Article XI, Alternative A (ref. 7.3.1.2), and does not restrict exercise of the remedies pursuant to Alternative A of the Protocol. | 2.107 (Main text) 4.124 (Alternative A declaration overrides Article 54(2) declaration) | c art 54(2); p arts XI and XXX(3) |
4.5 | Relationship with national procedural law | ||
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4.5.1 | Remedies exercised in conformity with procedural law at place of exercise. Any remedy created by the CTC, as well as any additional remedy (ref. 4.2.2), must be exercised in conformity with the procedure prescribed by the law of the place where the remedy is exercised and any additional procedural requirements established by the CTC, subject to any declaration made under Convention Article 54(2) which will override any inconsistent applicable law procedural requirements (ref. 4.4.3). | 2.107 (Main text) 2.144 (Article 14 is subject to CTC procedural rules); 4.124 (Remedies exercised under procedure of place of exercise) | c arts 5 and 14 |
4.5.2 | Applicable law procedure must support CTC. Procedural law must be applied in a manner that is compatible with the substantive provisions of the CTC, and may not be applied to undermine rights and remedies they create or the time periods for court or administrative agency actions they establish (refs. 3.3.3, 3.3.4, and 10.3.1). | 2.145 (Main text) 2.108 (Procedural law may not block non-judicial remedies) | c arts 5 and 14 |
4.5.3 | Adequate remedies under applicable law. Contracting States are obligated to ensure that they establish appropriate procedures and substantive remedies to give effect to the rights established by the CTC (refs. 7.3.10 and 10.3.1). | 2.107 (Main text) 2.26 (Contracting State obligation to provide adequate remedy for CTC rights); 2.145 (procedural law must be compatible with the CTC) | c arts 5 and 14; p art XI |
4.6 | Approach to commercial reasonableness | ||
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4.6.1 | Autonomous law standard displacing national law. Commercial reasonableness is based on an autonomous CTC interpretation, not on the concept of commercial reasonableness in any particular national legal system. The exercise of a remedy which meets the CTC test of reasonableness cannot be struck down because of a more stringent test under national law. | 2.112 (Main text) | c arts 5 and 8(3); p art IX(3) |
4.6.2 | Manner, not outcome, of exercise must be commercially reasonable.The manner of exercise of the remedy, not the outcome, must be commercially reasonable applying an objective test: whether the manner of exercise would be considered reasonable by a neutral observer familiar with the usages of the market. | 2.112 (Main text) 4.93 (Objective test) | c arts 5 and 8(3); p art IX(3) |
4.6.3 | Deference to agreement; manifestly unreasonable exception. Actions that conform to the agreement of the parties are regarded as commercially reasonable unless that contractual provision is found to be ‘manifestly unreasonable’.There is a strong presumption that a provision in an agreement which is in line with customary international practice is not manifestly unreasonable. | 5.53 (Main text) 2.107, 3.48(1), and 3.48(2) (Reasonable if conforming to agreement); 4.94 and 4.120 (Courts should be cautious before intervening) | c arts 5 and 8(3); p art IX(3) |
4.6.4 | Specific rights granted by CTC override commercial reasonableness. The general requirement of commercial reasonableness gives way to specific provisions restricting interference with the exercise of creditors’ remedies. Example: debtor’s duty to give possession as prescribed by paragraph 2 of Alternative A of Protocol Article XI is not qualified by commercial reasonableness, nor is the waiting period prescribed by a Contracting State’s declaration under Protocol Article XI(3) (ref. 7.3.3.3). | 3.48(1) (Main text) | c arts 5 and 8(3); p arts IX(3), X, and XI |
4.7 | Rights and recourse for debtor and interested persons | ||
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4.7.1 | Quiet possession and use | ||
4.7.1.1 | Scope of quiet possession rights.A debtor who is a conditional buyer or lessee (refs. 1.2.2.2 and 4.9.2) is entitled to quiet possession and use of an aircraft object (ref.1.1.1) on the terms of the agreement (ref. 1.2.2), as against: (1) its own creditor; (2) the holder of any interest that was not registered when the agreement with debtor was concluded; and (3) the holder of any interest to which the debtor’s interest is otherwise subordinate, to the extent that such holder has agreed to such quiet enjoyment, in each case unless such debtor is in default (ref. 4.1). A buyer is entitled to quiet possession and use of an aircraft object on the terms of the contract of sale (ref. 2.4.3) as against: (1) its own seller; and (2) the holder of any interest that was not registered when the sale was concluded (ref. 6.1.4.2). | 3.109 and 3.110 (Main text) 2.215, 2.216, 4.198, 4.212, 4.213, 5.80, 5.81, and 5.85 (Quiet enjoyment rights follow registration priorities); 3.113, and 5.80 (Quiet enjoyment right extinguished upon debtor default); 3.115 and 4.201 (discharge of registration extinguishes related quiet enjoyment right) | c arts 11, 29(4), and 29(5); p arts III, XIV, and XVI |
4.7.1.2 | Quiet possession through subordination agreement. Ref. 8.5.2. | ||
4.7.1.3 | Breach of quiet possession. While not specified in the CTC, the creditor’s seizure or attempted seizure of the aircraft object (ref. 1.1.1) in the absence of a default (ref. 4.1) by the debtor would constitute a breach of quiet possession (ref. 3.2.2), and the parties are free to agree upon the actions constituting such a breach. | 3.112 (Main text) 3.116 (Creditor compliance with agreement required); 5.82 (Acts constituting breach) | c art 5; p art XVI |
4.7.1.4 | Tort claims for breach. Tort claims under applicable law for breach of a debtor’s quiet possession are not displaced by the CTC. | 5.83 (Main text) 3.116 (Creditor compliance with agreement required); 4.86 (No displacement of applicable criminal or tort law) | p art XVI(2) |
4.7.2 | Redemption right | ||
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4.7.2.1 | Redemption right of debtor. Prior to the sale of an aircraft object (ref. 1.1.1) pursuant to Convention Article 8(1)(b) (ref. 5.3) or issuance of a court order vesting ownership of the aircraft object in the chargor pursuant to Convention Article 9(2) (ref. 5.7.3) the debtor may discharge the security interest by paying the full amount secured. | 2.119 (Main text) 4.101 (full payment includes damages) | c arts 8(1)(b), 9(2), and 9(4) |
4.7.3 | Subrogation right | ||
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4.7.3.1 | Subrogation right of interested person. Prior to the sale of an aircraft object pursuant to Convention Article 8(1)(b) (ref. 5.3) or issuance of a court order vesting ownership of the aircraft object in the chargor pursuant to Convention Article 9(2) (ref. 5.7.3) an interested person may be subrogated to the rights of the chargee by paying the full amount secured. | 2.119 (Main text) 4.102 and 4.107 (effect of subrogation) | c arts 8(1)(b), 9(2), 9(4), and 38(1) |
4.8 | Effect of registration on remedies; priorities | ||
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4.8.1 | Registration not required for enforcement. An international interest (ref. 2.2.1) must be validly constituted (ref. 1.2.3) in order for the CTC’s remedies to apply; registration of the interest is not required. | 2.100 (Main text) | c arts 2, 7, 8-15, and 29 |
4.8.2 | Registration affects scope of enforcement rights. Registration and the order of registration establishes a creditor’s priority (ref. 6.2.1.2), and in turn determines who is subject to the creditor’s exercise of remedies under the CTC. A creditor’s exercise of CTC remedies has effect with respect to, and may displace the interest of, its own debtor and any other person, including another creditor (and its debtor under the related international interest (ref. 2.2.1)), that has a lower priority; the enforcing creditor’s interest remains subject to any higher-ranking international interests. | 2.111 and 2.117 (Main text) 4.88 (Remedies of creditor/chargee may be asserted against its debtor or any other person with lower priority interest) | c arts 8-10, 12, 13, 29, 34, 35; p arts IX, X, XIV, and XV |
4.9 | Characterization of the agreement under applicable law | ||
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4.9.1 | Applicability of CTC turns on its autonomous definitions. The autonomous definitions of the CTC (ref. 3.1) determine whether or not an agreement (ref. 1.2.2) falls within its scope and is therefore one to which CTC remedies apply. | 2.63 (Main text) 4.56 (CTC definitions determine applicability) | c arts 1(q), 1(ii), 1(ll), 2(4), 5(3), 8-10, 12, 13, and 34; p art IX and X |
4.9.2 | Applicability of CTC remedies turns on applicable law characterization of agreement. The CTC differentiates between the remedies exercisable by a creditor under a security agreement and a creditor under a title reservation agreement or a leasing agreement, with characterization of the agreement being based on applicable law.An agreement that falls within the scope of the definition of leasing agreement under the CTC would, if re-characterized as a security agreement under applicable law, be entitled to exercise the remedies set out in Convention Articles 8 and 9 for a chargee, rather than the remedies set out in Convention Article 10 for a conditional seller or lessor.A consignment agreement characterized under applicable law as a security agreement would fall outside the CTC unless its terms fit within the CTC definitions because applicable law characterization cannot expand the scope of the CTC. | 2.63 and 2.64 (Main text) 2.100, 4.56, 4.58, 4.60, and 4.87 (Applicable law characterization governs remedies) | c arts 1(q), 1(ii), 1(ll), 2(4), 5(3), 8-10, 12, 13, and 34; p arts IX and X |
4.10 | Variation of available remedies by relevant declaration | ||
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4.10.1 | System of declarations. The CTC’s system of opt-in, opt-out and mandatory declarations substantially affects the availability of remedies to a creditor in any particular case, making it necessary to determine which Contracting State’s declarations comprise the relevant declarations (refs. 1.3.3 and 4.10.4) with respect to the remedy at issue as well as the substance of the declarations made by that Contracting State (ref. 1.3). | 2.327 (Main text) | c arts 52, 53, 54, 55, 56, 57, and 58; p arts XXIX, XXX, XXXI, XXXII, XXXIII, and XXXIV |
4.10.2 | Exercise of remedies without court authorization.Ref. 4.4.2. | ||
4.10.3 | Availability of advance judicial relief.Contracting States may, by declaration: (1) opt-out of advance judicial relief (ref. 5.6), in whole or in part; or (2) opt-in to supplement advance judicial relief authority by: (a) establishing a specific time period for granting speedy relief (ref. 5.6.6); (b) establishing a time period of five working days for compliance with a request for de-registration of the aircraft and export (refs. 5.5.2.2 and 10.6.3); (c) adding a sale remedy (ref. 5.6.1); and (d) granting the parties and other interested persons the authority to remove (in relation to one another) the court’s discretion to condition an order of advance relief on protective terms (ref. 5.6.5). | 2.129 (Main text) 5.58 (Article XXX(2) opt in to Article X) | c arts 13, 42, 43, and 55; p art VIII, IX, X, XXI, and XXX(2) |
4.10.4 | Determining the relevant declaration with respect to remedies.The relevant declaration (ref. 1.3.3) with respect to: (1) any judicial remedy, including advance judicial relief (ref. 5.6), is the declaration made by the Contracting State of the forum where the remedy is exercised; (2) any non-judicial remedy, is the declaration of the Contracting State where the aircraft object (ref. 1.1.1) is located at the time of exercise; and (3) a prohibition on a grant of a lease by a chargee is the declaration made by the Contracting State whose law is applicable to the issue in question under the conflict of laws rules of the forum. | 2.327 (Main text) 4.343 (Relevant declaration for non-judicial remedies) | c arts 8, 9, 10, 14, 42, 43, 54, and 55; p art IV(3), VIII, IX, X, XXI, and XXX(1)-(2) |
4.11 | Allocation of sums collected by a chargee | ||
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4.11.1 | Allocation of sums. Sums collected or received by a chargee on enforcement of a CTC remedy must be applied in discharge of the relevant secured obligations and in accordance with the priorities established by the CTC, with any surplus being paid over to the debtor (refs. 5.3.4 and 6.2). | 2.117 (Main text) 4.96, 4.97, and 4.98 (Sums collected on enforcement allocated by CTC priorities) | c arts 1(hh), 8(5)-(6), 29, and 39 |
4.12 | How remedies are affected by the agreement of the parties | ||
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Ref. 8.1. | |||
4.12.1 | Commercial reasonableness standard. A remedy exercised in conformity with a provision of the agreement is deemed to be exercised in a commercially reasonable manner unless the provision is manifestly unreasonable (ref. 4.6.3). | 5.53 (Main text) 3.48(1) (Reasonable if conforming to agreement); 4.94 and 4.120 (Courts should be cautious before intervening) | c art 8(3); p art IX(3) |
4.12.2 | Applicability of additional remedies under applicable law. The agreement of the parties determines whether additional remedies are applicable (ref. 4.2.2). | 2.122 and 4.115 (Main text) 2.124 (Additional remedies include substantive and procedural remedies) | c art 12 |
4.12.3 | Applicability of CTC remedies for a security agreement. The following CTC remedies with respect to a security agreement are available to the creditor without prior court approval only if agreed to at any time by the debtor: (1) taking possession or control (ref. 5.2); (2) selling or granting a lease (ref. 5.3); (3) collecting or receiving income or profits (ref. 5.4); and (4) vesting ownership and other relevant interests in the creditor toward satisfaction of secured obligations (ref. 5.7). | 2.103 and 2.105 (Main text) 4.88 (Agreement of debtor required) | c art 1(ii) and 8(1); p art X(3) |
4.12.4 | Vesting of ownership. Ownership and other interests may be vested in the creditor under a security agreement, in or toward satisfaction of secured obligations, without prior court approval only if agreed to by all interested persons after a default (ref. 4.1) has occurred (ref. 5.7). | 2.105 (Main text) 4.99 (Court approval or agreement of debtor after default required) | c arts 1(hh), 1(ii), and 9(1) |
4.12.5 | Advance judicial relief remedies. Provided that the relevant Contracting State has not opted out of advance judicial relief remedies in whole or in part (ref. 4.10.3), such remedies may be exercised by a creditor under any agreement only if agreed to at any time by the debtor, and the creditor, debtor and other interested persons may agree to remove court discretion to condition the grant of relief on protective terms (unless required under a Contracting State’s declaration under Protocol Article XXX(2)) (ref. 5.6). | 2.126 (Main text) 2.127 (Advance relief without court approval); 4.119 and 5.58 (Advance remedy of sale without court approval) | c arts 13 and 55; p arts X(3) and XXX(2) |
4.12.6 | De-registration of the aircraft and export remedies. The CTC remedies of de-registration of the aircraft and export of the aircraft object (ref. 1.1.1) from the Contracting State in which it is situated are available to the creditor only if agreed to at any time by the debtor (ref. 5.5). | 5.46 (Main text) | p art IX(1) |
4.12.7 | Termination and repossession remedies under title reservation or leasing agreement. The CTC remedies of termination and repossession for default under a title reservation agreement or leasing agreement (ref. 4.9) are available to a creditor without agreement by the debtor, but may require court approval if so declared by the relevant Contracting State under Convention Article 54(2); an Article 54(2) declaration requiring court approval would not impose such an approval requirement on a termination or repossession remedy arising under applicable law (refs. 4.4, 4.10, and 5.1). | 2.95 and 2.105 (Main text) 2.110 (Article 54(2) declaration does not apply to additional remedies) | c arts 1(q), 1(ll), and 10(a) |
5 | Section 5 – Default Remedies (Specific) | ||
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5.1 | Terminate agreement | ||
5.1.1 | CTC right for leasing agreement or title reservation agreement. The CTC grants the creditor under a leasing agreement or title reservation agreement (ref. 4.9) the right, following a default (ref. 4.1), to terminate the agreement without any requirement that the debtor has agreed to the remedy. The creditor may elect to exercise such remedy by seeking a court order authorizing it to do so, or proceed without such an authorization unless the Contracting State in which the remedy is being exercised has made a declaration under Convention Article 54(2) requiring court authorization (refs. 4.4 and 4.10). | 2.95 (Main text) 2.121 and 4.112 (Termination upon default); 2.105 and 4.109 (Debtor agreement); 2.121, 2.144, and 4.109 (Applicability of court approval requirement) | c arts 1(q), 1(ll), 10, and 54(2) |
5.1.2 | Non-CTC Termination. With or without a default an agreement (ref. 1.2.2) may terminate pursuant to its terms or under applicable law. | 2.95 (Main text) 2.101, 2.121, and 4.112 (Role of applicable law) | c arts 10 and 54(2) |
5.1.3 | Effect on international interest. Termination of an agreement (ref. 1.2.2) does not extinguish the related international interest (ref. 2.2.1) or the creditor’s right to maintain its registration. That occurs only when: (1) the agreement creating or providing for the international interest comes to an end (whether under the CTC or under applicable law); and (2) the creditor has been paid in full or has recovered possession or control of the aircraft object (ref. 1.1.1) and/or any proceeds (ref. 2.2.4) and has exhausted all other default remedies conferred on it by the CTC in relation to the aircraft object and/or any proceeds (ref. 6.2.4.3). | 2.95 (Main text) 2.96, 2.97, and 4.112 (Termination does not extinguish international interest) | c arts 8 – 12 and 25 |
5.2 | Take possession or control | ||
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5.2.1 | CTC right for any agreement.The CTC grants the creditor under a security agreement, a leasing agreement or a title reservation agreement (ref. 4.9) the right, following a default (ref. 4.1), to take possession or control of the aircraft object (ref. 1.1.1) provided, in the case of a security agreement (ref. 4.9), that the debtor has agreed to the remedy (ref. 4.12.3) and without requiring any such agreement in the case of a leasing agreement or title reservation agreement. The creditor may elect to exercise the remedy of taking possession or control by seeking a court order authorizing it to do so (which does not require agreement of the debtor) or proceed without such an authorization unless the Contracting State in which the remedy is being exercised has made a declaration under Convention Article 54(2) requiring court authorization (refs 4.4 and 4.10.4). | 2.95 and 2.103 (Main text) 2.107 and 4.86 (Applicability of court approval requirement); 2.114 (Scope of remedy); 2.121 and 4.109 (Leasing and title reservation agreement remedy); 4.88 (Security agreement remedy); 4.88, 4.92 and 4.109 (Debtor agreement) | c arts 1((q), 1(ll), 8(1)(a), 8(2), 10, and 54(2) |
5.3 | Sell or grant a lease | ||
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5.3.1 | CTC right for security agreement.The CTC grants the creditor under a security agreement (ref. 4.9) the right, following a default (ref. 4.1), to sell or grant a lease of the aircraft object (ref. 1.1.1) provided that the debtor has agreed to the remedy (ref. 4.12.3). The creditor may elect to exercise the remedy of selling or granting a lease by seeking a court order authorizing it to do so (which does not require agreement of the debtor) or proceed without such an authorization unless the Contracting State in which the remedy is being exercised has made a declaration under Convention Article 54(2) requiring court authorization (refs. 4.4 and 4.10.4). | 2.103 (Main text) 2.107 and 4.86 (Applicability of court approval requirement); 4.88 (Security agreement remedy); 4.88 and 4.92 (Debtor agreement) | c arts 8(1)(b) and 54(2) |
5.3.2 | Article 54(1) lease declaration.The creditor’s right to grant a lease of the aircraft object (ref. 1.1.1) is subject to the absence of a relevant declaration (refs. 1.3.3 and 4.10.4) under Convention Article 54(1) excluding that remedy and thereby preserving mandatory provisions of applicable law as to the ability to grant a lease in the relevant Contracting State. | 2.103 (Main text) 4.91 and 4.342 (Article 54(1) declaration scope) | c arts 8(1)(b) and 54(1) |
5.3.3 | Advance notice obligation. Prior to selling or granting a lease of an aircraft object (ref. 1.1.1), the creditor is obligated to give reasonable advance notice of the proposed sale or lease to interested persons, including any person holding an unregistered international interest who has given the creditor notice of its interest within a reasonable time prior to the proposed sale or lease. Written notice of ten or more working days prior to a sale or lease is sufficient to qualify for the ‘reasonable prior notice’ safe-haven established by Protocol Article IX(4); the parties are permitted to agree upon a longer notice period. | 2.115 (Main text) 2.40(5), 3.48(2) and 5.54 (Notice); 2.291 (Remedy for failure to give notice); 4.22 (Definition of interested persons) | c arts 1(m) and 8(1)(b), and 8(4); p arts IX(3)-(4) |
5.3.4 | Effect of sale. A sale by a chargee passes ownership of (or the chargor’s other interest in) the aircraft object (ref. 1.1.1) free of any other interest in the aircraft object that ranks below that of the chargee, applying the priorities determined under Convention Article 29 (ref. 6.2). | 4.103 (Main text) 4.108 (Sale remedy displaces lower ranking interests) | c arts 9(5) and 29 |
5.4 | Collect or receive income | ||
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5.4.1 | CTC right for security agreement.The CTC grants the creditor under a security agreement (ref. 4.9) the right, following a default (ref. 4.1), to collect or receive income or profits from the management or use of the aircraft object (ref. 1.1.1) provided that the debtor has agreed to the remedy (ref. 4.12.3). The creditor may elect to exercise the remedy of selling or granting a lease by seeking a court order authorizing it to do so (which does not require agreement of the debtor) or proceed without such an authorization unless the Contracting State in which the remedy is being exercised has made a declaration under Convention Article 54(2) requiring court authorization (refs. 4.4 and 4.10.4). | 2.103 (Main text) 2.107, 4.86 (Applicability of court approval requirement); 4.88 (Security agreement remedy); 4.88 and 4.92 (Debtor agreement) | c art 8(1)(c), 8(2), and 54(2) |
5.5 | De-registration of the aircraft and export and physical transfer | ||
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5.5.1 | General | ||
5.5.1.1 | Established by Protocol.The Protocol establishes two additional remedies that may be exercised by all creditors following a debtor’s default (ref. 4.1): (1) de-registration of the aircraft, which applies only to an aircraft because aircraft engines (ref. 1.1.2) have no nationality registration; and (2) export and physical transfer of the aircraft object (ref. 1.1.1) from the territory in which it is situated, which extends to both installed and uninstalled aircraft engines in which a creditor has an international interest (ref. 2.2.1). | 3.30, 3.31, and 3.32 (Main text) 2.106 (Remedies added by Protocol); 3.36, 5.46, and 5.47 (Aircraft and aircraft objects); 3.37 (Purpose of export remedy) | p arts I(2)(a), I(2)(c), I(2)(i), IX((1)-(2), and IX(6) |
5.5.1.2 | Where available. The de-registration and export remedies are available in every Contracting State by satisfying the conditions in the Protocol (ref. 5.5.1.3) and using applicable law procedures (ref. 4.5). The benefits of the mechanisms established by the CTC to support enforcement, judicially through Convention Article 13 and non-judicially through an IDERA (refs 5.5.2 and 5.5.3), are only available in those Contracting States that have made a relevant declaration (refs. 1.3.3 and 4.10.4) adopting those mechanisms (refs. 5.5.2.2 and 5.5.3.2). | 3.38 and 5.47 (Main text) | c 14; p arts IX((1)-(2), IX(5)-(6), X, XIII, and XXX(1)-(2) |
5.5.1.3 | Conditions to exercise.The de-registration of the aircraft and export and physical transfer of the aircraft object remedies are conditioned upon: (1) the agreement of the debtor (which may be in the agreement itself and in the case of an IDERA (ref. 5.5.3.1) is constituted by the debtor’s signature on the instrument); (2) the existence of a default (ref. 4.1.1), evidence of which must be adduced by the creditor in the case of the court route (ref. 5.5.2), but not the IDERA route (ref. 5.5.3); (3) the prior written consent by the holders of any higher ranking registered interests (ref. 6.2); and (4) in the case of an IDERA compliance with certain formalities (ref. 5.5.3.6). | 3.39 (Main text) 3.39(3) and 5.50 (Evidence of default not required for IDERA); 5.46 and 5.48 (Conditions); 3.38 and 5.47 (Requirement for declaration) | c arts 1(cc) and 1(mm); p arts I(2)(a), I(2)(c), I(2)(i), IX((1)-(2), IX(5)-(6), X, XIII, and XXX(1)-(2) |
5.5.1.4 | Concurrent or independent exercise. The de-registration of the aircraft and export and physical transfer of the aircraft object remedies may be exercised concurrently or independently from one another and may be exercised in different Contracting States as regards de-registration on the one hand and export on the other. | 5.46 (Main text) 3.34 and 5.55 (Export without de-registration); 3.34 (Exercise of remedies in separate Contracting States) | p arts I(2)(a), I(2)(c), I(2)(i), IX((1)-(2), IX(5)-(6), X, XIII, and XXX(1)-(2) |
5.5.1.5 | Duties imposed on administrative authorities. Ref. 10.6. | ||
5.5.1.6 | Effect of insolvency. Ref. 7.3.6. |
5.5.2 | De-registration and export via the court route | ||
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5.5.2.1 | Order for advance judicial relief.The court route provided by the Protocol requires the creditor to obtain an order for advance judicial relief (ref. 5.6) granting possession and control of the aircraft object (ref. 1.1.1), with such order being issued in either an advance judicial relief proceeding (the mistaken reference in Protocol Article X(6)(a) to Article IX(1) being intended instead as reference to an order of advance judicial relief under Convention Article 13(1)) before a court in the Contracting State which is the State of registry (refs. 1.2.4.3 and 9.2), or in a proceeding for equivalent relief before a foreign court (which need not be a Contracting State) whose jurisdiction is recognised by a court of the State of registry. | 3.40 (Main text) 5.47 and 5.49 (Order for advance relief required); 3.34 (Recognition of advance relief order) | c art 13; p arts I(2)(p), IX(1), IX(2), X(6)-(7), and XXX(2) |
5.5.2.2 | Required declaration.The court route provided by the Protocol requires the relevant Contracting State (refs. 1.3.3 and 4.10.4) to have made a declaration under Protocol Article XXX(2) (refs. 4.10.3 and 4.12.5). | 3.39(1) and 3.48(3) (Main text) 5.47 and 5.49 (Remedies available within 5 working days) | c art 13; p arts IX(1), IX(2), X(6)-(7), and XXX(2) |
5.5.2.3 | Administrative compliance is documentary.After a creditor gives notice that the relevant court order has been issued and the creditor is entitled to exercise the remedies of de-registration and export and physical transfer, the compliance process for the relevant administrative authorities is purely documentary (ref. 10.6). | 3.40 (Main text) | c art 13; p arts IX(1), IX(2), X(6)-(7), and XXX(2) |
5.5.3 | De-registration and export via the IDERA route | ||
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5.5.3.1 | General terms. The Protocol provides for an irrevocable de-registration and export request authorization (‘IDERA’) as a purely documentary means (without need for any judicial action, evidence of default or fact finding (ref. 5.5.3.6)) by which the debtor may issue an irrevocable instrument that: (1) delegates to an authorized party (ref. 5.5.3.4) the sole authority following a default (ref. 4.1) to de-register an aircraft and export and physically transfer an aircraft object (ref. 1.1.1) from the State of registry (ref. 1.2.4.3); (2) authorizes all relevant authorities in the Contracting State (being the registry authority and all other authorities whose approval is required to export and physically transport the aircraft object from its territory) to recognize the authorized party as having such authority, in all cases on written demand and without requiring any further consent or cooperation of the debtor; and (3) is recorded in the register of the registry authority. | 3.41 (Main text) | p arts I(2)(f), I(2)(i), I(2)(o), I(2)(p), IX(1)-(2), IX(5)-(6), XIII, XXX(1), and Annex |
5.5.3.2 | State of registry declaration required. An IDERA (ref. 5.5.3.1) may be constituted only if the State of registry (ref. 1.2.4.3) for an aircraft is a Contracting State that has made a declaration under Protocol Article XXX(1) applying Protocol Article XIII (ref. 1.3). | 3.41 and 5.73 (Main text) | p arts I(2)(a), I(2)(p), and XIII(1) |
5.5.3.3 | Requirements to constitute.To constitute an IDERA (ref. 5.5.3.1): (1) the debtor must execute an IDERA document in substantially the form of the Annex to the Protocol both identifying the airframe or helicopter (by manufacturer’s name, model number and serial number) and designating the authorized party (ref. 5.5.3.4); and (2) the IDERA must be submitted to the registry authority in the State of registry for recordation. | 3.42 (Main text) 5.50 (Actions required to constitute) | p arts I(2)(f), I(2)(o), I(2)(p), XIII, and Annex |
5.5.3.4 | Authorized party.Only the creditor constituted by the IDERA (ref. 5.5.3.1) as the ‘authorized party’, or a person it certifies as its ‘designee’, may exercise the rights conferred by the IDERA; there may be only one IDERA relating to an aircraft at any time. The authorized party’s rights are not assignable, but may be established in favor of the creditor’s assignee through designation as its designee or by constituting a replacement IDERA. | 3.41(a) (Main text) 3.44 and 5.8 (Designation required) | p arts I(2)(f) and XIII |
5.5.3.5 | Irrevocable nature. An IDERA (ref. 5.5.3.1) may be terminated only by the action of the authorized party (ref. 5.5.3.4), may not be revoked by the debtor (notwithstanding that otherwise applicable law grants the debtor the right to revoke instruments that are similar in nature and legal effect to an IDERA), and, following a default (ref. 4.1) confers on the authorized party (or its certified designee (ref. 5.5.3.4)), to the exclusion of the debtor, the sole authority to de-register the aircraft and export and physically transfer the aircraft object (ref. 1.1.1) from the territory of the relevant Contracting State. | 3.45 (Main text) 3.39(3) and 3.44 (Exclusive right to exercise remedy); 3.42 (Irrevocable) | p arts I(2)(f) and XIII |
5.5.3.6 | Formalities for exercise.To exercise an IDERA (ref. 5.5.3.1) the authorized party (ref. 5.5.3.4) or its certified designee (ref. 5.5.3.4) must: (1) submit its request for de-registration to the registry authority and its request for export and physical transfer to any other applicable authorities; (2) if required by the registry authority, certify that all registered interests with a higher CTC priority than that of the creditor (ref. 6.2) have been discharged or have consented to de-registration and export; and (3) in the case of an international interest held by a chargee, give reasonable prior written notice to all interested persons. The relevant authorities may not impose additional requirements, such as debtor consent or evidence of default (ref. 10.6). | 3.42 (Main text) 3.38 (No need for court order), 3.39(3) (No evidence of default); 3.41 and 5.50 (No additional requirements) | c art 1(m)(iii); p arts I(2)(f), I(2)(o), IX(5)-(6), and XIII |
5.5.3.7 | Pre-existing right or interest. Registration of an IDERA (ref. 5.5.3.1) in respect of a pre-existing right or interest (ref. 6.1.4.3.3) has no effect under the CTC but may have an effect under national law. | 3.35 (Main text) | c arts 1(v) and 60(1) |
5.6 | Relief pending final determination: advance judicial relief | ||
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5.6.1 | Remedies covered. The CTC establishes the following remedies (‘advance judicial relief’) for the creditor, any or all of which, if agreed to by the debtor, may be exercised on an expedited basis following a default (ref. 4.1) and prior to a final determination as to the merits of the creditor’s claim or consideration of the potential defenses: (1) preservation of the aircraft object and its value; (2) possession, control or custody of the aircraft object; (3) immobilization of the aircraft object; (4) lease or management of the aircraft object and its income; and (5) sale of the aircraft object and application of proceeds (where a declaration has been made by the relevant Contracting State permitting this). The remedies referred to in items (2), (4), and (5) overlap with remedies that a creditor may exercise without court authorization (refs. 5.2-5.4). The parties may agree to exclude all or any of the forms of advance judicial relief established by the CTC and may agree to additional forms of advance judicial relief (ref. 4.12.5). The creditor remains entitled to invoke any other form of interim relief available to it under applicable law (ref. 4.2.2). | 2.126 and 4.117 (Main text) 2.127 (Overlap of remedies); 2.132 (Agreement of debtor required); 2.138 (Parties may exclude or agree to additional forms of relief); 4.119, 3.48(3), and 5.58 (Inclusion of sale as a remedy); 4.121 (Applicable law relief remains available) | c arts 13, 42, 43, and 55; p arts X and XXX(2) |
5.6.2 | Constitutes autonomous law. The advance judicial relief remedies established by the CTC are sui generis CTC remedies, constituting autonomous law which is not affected by the availability of any supporting or corresponding interim law remedies under applicable law (ref. 3). | 2.132 (Main text) 4.117 (CTC remedy not affected by municipal law) | c arts 5, 13, and 55; p arts X and XXX(2) |
5.6.3 | Requirements for grant. To obtain advance judicial relief the creditor must show evidence of a default (ref. 4.1), but is not required to adjudicate its claim on the merits or address any purported defenses of the debtor. | 2.126 (Main text) 2.135, 2.136, 2.137, 4.117, and 5.58 (Standard of proof) | c arts 13 and 55; p arts X and XXX(2) |
5.6.4 | Court jurisdiction. Advance judicial relief is available by the creditor’s application to a relevant court (ref. 9.2), and is subject to exclusion (in whole or in part) by a relevant declaration (ref. 4.10). | 2.126 (Main text) 2.129, 2.277, 4.116, 4.117, and 4.347 (Subject to exclusion by declaration); 2.130, 2.277, 4.117, 4.123, and 4.303 (Court jurisdiction) | c arts 13, 42, 43 and 55; p arts X and XXX(2) |
5.6.5 | Court discretion. Before making the order for advance judicial relief, the court may require notice of the request for relief pending final determination to be given to interested persons. The court has discretion to impose conditions on its order for advance judicial relief, such as a creditor bond or undertaking, to protect the debtor and other interested persons against the risk that the creditor may breach its obligations to them or ultimately fail to prove its claim. Such court discretion may be excluded by the agreement of the parties (where a declaration has been made by the relevant Contracting State (refs. 4.10.3, 4.10.4 and 4.12.5) permitting this). The court has no discretion to withhold grant of the remedy to a creditor who meets the standard of proof or to suspend an order to allow a debtor time to comply (ref. 10.6). | 2.128 (Main text) 2.126 and 4.118 (Notice prior to order); 2.126, 2.129, 2.139, 4.122 and 5.59 (Parties may exclude court discretion); 2.128, 2.137, 4.117, and 4.118 (No discretion to withhold grant of remedy); 2.141, 4.118, and 4.123 (Scope of discretion under 13(2)) | c arts 13, 42, 43, and 55; p arts X and XXX(2) |
5.6.6 | Time period for grant. A ruling by the court on a creditor’s application for advance judicial relief must be provided within the time period specified in the relevant declaration (refs. 1.3.3, 4.10.4 and 10.6), or in absence of a declaration, within a time period that is consistent with the plain meaning of the term ‘speedy relief’, and that supports the purposes of the CTC (ref. 3). | 2.133 (Main text) 3.48(3), 4.117, and 5.58 (Meaning of speedy); 2.135 and 2.137 (Standard of proof must fit time limits) | c arts 5, 13, 42, 43, and 55; p arts X and XXX(2) |
5.7 | Vesting of aircraft object in satisfaction | ||
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5.7.1 | CTC right for security agreement. The CTC grants the creditor under a security agreement the right,following a default (ref. 4.1), to have ownership of (or any other interest of the chargor in) the aircraft object (ref. 1.1.1) covered by its security agreement (ref. 4.9) vest in the creditor in full or partial satisfaction of the secured obligations, either by obtaining the agreement following such default of all interested persons or an order of an applicable court (ref. 9.2). | 2.118 and 4.99 (Main text) | c art 9(1)-(2) |
5.7.2 | Agreement of interested persons. A creditor exercising the vesting remedy by agreement of interested persons must obtain agreement from the debtor, any person providing a suretyship or similar agreement supporting performance by the debtor and any person having rights in the aircraft object (including an unregistered international interest), whether or not the creditor has notice of such person’s interest. | 2.118 (Main text) 4.22 (Definition of interested persons) | c art 9(1) |
5.7.3 | Court order requirements. A court order vesting the ownership (or other interest of the chargor) in the chargee requires a finding that the sum of the debt secured is commensurate with the value of the aircraft object after taking into account payments to be made by the chargee to interested persons who hold interests that rank above that of the chargee applying the priorities determined under Convention Article 29 (ref. 6.2). | 4.100 (Main text) 4.104 and 4.105 (Sum of debt vs value plus payments) | c art 9(3) |
5.7.4 | Effect of vesting – deficiency / surplus. The chargor remains liable for the deficiency if the value of the aircraft object is less than the debt securing the charge, and conversely the creditor is accountable for any surplus. | 2.119 (Main text) 4.100 and 4.106 (Right to deficiency) | c art 9(1)-(2) |
5.7.5 | Effect of vesting – lower ranking interests. Vesting ownership (or other interest of the chargor) in the chargee passes such interest free of any other interest in the aircraft object that ranks below that of the chargee applying the priorities determined under Convention Article 29 (ref. 6.2). | 4.103 (Main text) | c arts 9(5) and 29 |
6 | Section 6 – Priority of Competing Interests | ||
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6.1 | Effect of Registration | ||
6.1.1 | General effect | ||
6.1.1.1 | Registrable interests. All interests created by the CTC (including an international interest, a prospective international interest, a sale, and a prospective sale) (refs. 2.2 and 2.4), and, where a relevant declaration (ref. 1.3.3) has been made, certain non-CTC interests (a pre-existing right or interest, a registrable non-consensual right or interest and a notice of a national interest) (refs. 2.3, 6.2.3.2, and 6.2.3.3), are registrable and when registered have legal effect under the CTC as registered interests. | 2.157 (Main text) 2.40(1) (International interest); 2.40(2) (Prospective international interest); 2.40(3) and 4.159 (National interest); 2.40(5) and 2.273 (Registrable non-consensual right or interest); 4.132 (Registrable interests); 4.133 (Assignments); 5.20 and 5.74 (Sale); 5.24 (Prospective sales) | c arts 1(n), (o), (r), (s), (t), (y), (z), (bb), (cc), (dd), (gg), 16(1), 20, 40, 50(2), and 60(3) |
6.1.1.2 | Priority for registrable interests. Registration of a registrable interest establishes its priority under the CTC (ref. 6.2), or in the case of a pre-existing right or interest (ref. 6.2.3.3) preserves its priority under applicable law, as of the moment it becomes searchable in the International Registry. | 2.149 and 2.202 (Main text) 2.40(3) and 4.159 (National interest); 2.40(5) and 2.273 (Registrable non-consensual right or interest); 2.325 (Pre-existing right or interest); 4.192 (Article 29 priority rules); 4.146 (Registration priority based on time it becomes searchable); 5.20 and 5.74 (Sale) | c arts 16(1), 20 29(1), 40, 50(2), and 60(3); p arts III and XIV |
6.1.1.3 | No CTC effect for non-registrable interests. Except as specified at ref. 6.1.1.1 in respect of registrable non-CTC interests, registration of a non-CTC interest has no legal effect under the CTC. | 2.168 (Main text) 2.74 and 2.197 (Registration may have legal effect under applicable law); 2.163 and 4.136 (No legal effect under CTC) | c arts 16(1) and 20 |
6.1.1.4 | Improper registration or refusal to discharge. The registration of a non-registrable interest, or failure to discharge the registration of an expired international interest (ref. 2.2.1) or a prospective international interest (ref. 2.2.3) after the debtor’s demand to do so, is improper where the registration adversely affects a non-consenting party (including the debtor in the case of an expired international interest or prospective international interest) and may result in liability under applicable law for clouding the title of another party (ref. 6.2.4.4). | 2.74 (Main text) 2.167, 2.169, 2.170, and 2.184 (Improper registration); 4.136 (Potential liability) | c arts 16(1) and 25 |
6.1.1.5 | Subordination. A registered subordination is binding on a transferee of the subordinating creditor; an unregistered subordination is binding only as between the parties and not on an assignee (ref. 8.5.1). | 2.220 (Main text) | c arts 16(1)(e) and 29(5) |
6.1.1.6 | Assignment of international interest. As between more than one competing assignments (or prospective assignments) of an international interest (ref. 4.1), the priority rules of the CTC (ref. 6.2) apply only if one of the assignments (or prospective assignments) is registered (ref. 8.3). | 2.255 (Main text) | c arts 1(b) and (x), 29(1), and 35(1) |
6.1.2 | Effect on validity of interest | ||
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6.1.2.1 | Effect on validity. The existence of a registration does not ensure that a valid interest was created or continues to exist, and the absence of a registration (or the discharge of a registration) does not affect the validity or continued existence of the interest. | 2.149 and 2.163 (Main text) 4.136 (Effect of discharge) | c arts 2, 7 and 20 |
6.1.3 | Effect in insolvency | ||
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6.1.3.1 | Effect. Registration protects the effectiveness of an international interest (ref. 2.2.1), a sale (ref. 2.4), a registrable non-consensual right or interest (ref. 2.3.3), and a notice of a national interest (ref. 2.2.2) in insolvency proceedings as a registered interest (ref. 7.1.3.1), but has no effect in insolvency proceedings with respect to a pre-existing right or interest whether or not it is registered. | 2.232, 4.217, and 4.218 (Main text) 2.273 (Registrable non-consensual right or interest); 2.309 and 2.324 (Pre-existing right or interest); 5.20 and 5.24 (Sale) | c arts 30, 40, and 50(2); p art III |
6.1.4 | Effect for particular interests | ||
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6.1.4.1 | International interests | ||
6.1.4.1.1 | Registration of international interests. Registration establishes priority under Convention Article 29 for an international interest (ref. 2.2.1) in all Contracting States, provided that the underlying interest was validly constituted under the CTC (ref. 1.2) and continues to exist (ref. 6.2.4.1). | 2.202 (Main text) 2.8, 2.48, and 4.192 (Registration establishes CTC priority); 2.205 (Priority rules apply in all Contracting States) | c arts 1(o), 16(1), 20(1), and 29 |
6.1.4.2 | Sales | ||
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6.1.4.2.1 | Registration of sales. Articles III and XIV of the Protocol extend the legal effect of registration under the CTC to the sale (ref. 2.4) of an aircraft object (ref. 1.1.1). | 2.43 and 2.276 (Main text) 5.20 (Extension and inapplicable provisions); 5.21 (Equivalent terms); 5.24 (Applicable provisions) | c arts 1(g) and (gg); p arts III and XIV |
6.1.4.3 | Registrable non-CTC interests | ||
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6.1.4.3.1 | Registrable non-consensual right or interest. If the Contracting State in which the interest arises has made the relevant declaration (ref. 1.3.3), registration of a registrable non-consensual right or interest establishes its priority under Convention Article 29 within that Contracting State provided that under applicable law the underlying interest was validly constituted and continues to exist; it does not trigger application of other aspects of the CTC, such as Convention Chapter III ‘Default Remedies’ or have effect under the CTC in other Contracting States. | 2.273 (Main text) 2.40(5) (Effect of registration); 4.40 (Definition of registrable non-consensual right or interest) | c arts 1(dd), 16(1) 20(5), 20(6), and 40, |
6.1.4.3.2 | Notice of a national interest. If the Contracting State in which the interest arises has made the relevant declaration (refs. 1.3.3 and 2.2.2), registration of a notice of a national interest establishes its priority under Convention Article 29 in all Contracting States provided that under applicable law the underlying interest was validly constituted and continues to exist; it does not trigger application of other aspects of the CTC, such as Convention Chapter III ‘Default Remedies’, other than Convention Article 9(1), permitting a chargee and all interested persons to agree upon vesting ownership in the chargee (ref. 5.7) applies. | 2.305 (Main text) 2.40(3), 4.30, and 4.159 (Effect of registration); 2.304 (Where interest arises); 2.306 (National interest priority effective in all Contracting States); 4.28 (Failure to effect national law registration); 4.331 (Reference to Article 8(4) misleading); 4.334 (Registration effect for successive and mixed transactions) | c arts 1(r), 1(t), 16(1), 20(5), 20(6), and 50 |
6.1.4.3.3 | Pre-existing right or interest. Any right or interest in an aircraft object (ref. 1.1.1) that arises or is created in a non-Contracting State or prior to the CTC taking effect in a Contracting State is a pre-existing right or interest that retains its pre-CTC priority in all Contracting States without registration unless the Contracting State in which it arises or is created has made a relevant declaration (ref. 1.3.3) requiring registration as condition to that interest retaining its national law priority vis-à-vis a registered interest (refs. 6.1.1.2 and 6.1.1.3). | 2.309 and 2.310 (Main text) 2.218 (Contracting and non-Contracting States); 2.311 (Preserves all national law interests), 2.312 (Forum rules determine applicable law); 2.313 (When CTC takes effect); 2.314 (Where debtor is situated); 2.315 and 2.224 (Declaration); 2.325 (Preserves applicable law priority); 4.32 (Definition of pre-existing right or interest) | c arts 1(v), 60(1), and (3) |
6.1.5 | Prospective interests | ||
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6.1.5.1 | Registration of prospective interests. Registration of a prospective international interest, a prospective sale and prospective assignment of an international interest establishes the priority of the actual interest retroactively as of the date of registration, with such priority becoming activated when the event or circumstance that triggers the creation of the actual interest occurs (ref. 2.2.3), and without any need for any further registration. Prior to the creation of the actual interest, the registration of the prospective interest has no effect under the CTC. | 2.40(2), 2.256, and 3.21 (Main text) 2.41(1) and 4.34 (Prospective assignment); 2.238 (Search certificates to include prospective assignments); 2.61, 2.159, 2.223, 4.35, 4.154, 4.155, 4.156, and 4.193 (Prospective international interest); 3.108 and 4.36 (Prospective sale) | c art 1(a), (b), (c), (o), (q), (ii), 16(1)(b), 20(1), 29(1), 31(1), 31(5), 32, 35, and 36 |
6.1.6 | Assignment and subrogation | ||
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6.1.6.1 | Scope of term. In respect of assignments, ref. 8.3.1. In respect of subrogation, ref. 8.4. | ||
6.1.6.2 | Registration.Where there are successive assignments/subrogations in respect of the same international interest (ref. 2.2.1), the assignments/subrogations are competing and the order of registration determines the priority between the competing assignees/subrogees. Where there are assignments/subrogations in respect of different international interests over the same aircraft object (ref. 1.1.1), the assignments/subrogations are not competing (instead they are assignments/subrogations of competing international interests) and each non-competing assignee/subrogee enjoys the same priority as its assignor/subrogor, regardless of whether or when the assignment/subrogation has been registered. | 2.209 (Main text) 2.253 and 4.229 (Competing assignments v competing international interests); 2.255 (Competing assignments); 4.233 (Unregistered international interest); 2.254, 4.234, and 4.241 (Competing international interests); 2.261 (Competing subrogations) | c arts 29(1), 31(1), 35(1), and 36 |
6.2 | Priority rules | ||
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6.2.1 | General rules | ||
6.2.1.1 | Registered interest has priority over unregistered interests. A registered interest (ref. 6.1.1.1) has priority over an unregistered interest, whether or not the latter is capable of registration (ref. 6.1.4). | 2.202 (Main text) 2.205 (Registered interest priority); 2.208 (Registered non-consensual right or interest); 3.99 (Buyer priority); 4.209 (Priority over non-consensual right or interest) | c arts 1(cc) and 29(1), (2), and (4); p art XIV |
6.2.1.2 | Order of registration determines priority of registered interests. Priority between competing registered interests (ref. 6.1.1.1) is based on the order of registration (ref. 1.5.1), with the interest that is registered first having the highest priority (ref. 6.1.4). | 2.202 (Main text) 2.205 (Registered interest priority); 2.208 (Registered non-consensual right or interest); 3.99 (Buyer priority); 4.193 and 4.208 (First to register successive charges); 4.213 (Order of registration) | c arts 1(cc) 1(mm), and 29(1), (2), and (4); p art XIV |
6.2.1.3 | Knowledge of unregistered interest and national law registration irrelevant. Priority for a registered interest (ref. 6.1.1.1) is not affected by the holder’s actual knowledge of competing interests or by the registration of such interests in a national law registry. | 2.210 (Main text) 4.194 and 4.210 (Knowledge and national law registration not relevant) | c arts 1(cc) and 29(1), (2), and (4); p art XIV |
6.2.1.4 | CTC priority overrides conflicting applicable law. The CTC priority rules override applicable law to the extent that applicable law imposes additional requirements for perfection or limitations on priority, including any national law doctrines that invalidate priority based on the holder’s actual or constructive knowledge of unregistered adverse claims. | 2.205 (Main text) 4.194 (National law registration irrelevant); 4.208 (First to register successive charges) | c arts 29(1), (2), and (4); p art XIV |
6.2.2 | Application to specific competing interests | ||
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6.2.2.1 | Debtor v its own creditor. A creditor has priority over its own debtor without registration, and a debtor may not gain priority over its own creditor by granting and registering an interest. | 2.221 (Main text) 4.195 (Priority of creditor over its own debtor) | |
6.2.2.2 | Lessee/conditional buyer v different creditor. A lessee/conditional buyer under a registered interest (ref. 6.1.1.1) is conferred the same priority as its creditor vis a vis a creditor under a different interest (registered or unregistered). | 2.215 (Main text) 2.216 (Sublessee); 4.198 (Debtor priority derived from its creditor) | c art 29(1), (2), and (4); p art XIV |
6.2.2.3 | Prospective interest v registered interest. A prospective interest (ref. 6.1.5) that is registered prior to another registered interest (ref. 6.1.1.1) will initially have no status or priority under the CTC, but when the event or circumstance that triggers its creation occurs will have priority over all interests that have a later date of registration. | 2.223 (Main text) 2.40(2), 2.61, and 4.154 (Priority established by time of registration); 4.155 (Prospective interest helicopter engine) | c art 16(1), 19(4), 29(1), (2), and (4); p art XIV |
6.2.2.4 | Unregistered interests. The CTC does not address priority as between two interests that are not registered, which is left to applicable law. | 4.205 (Main text) | c arts 1(bb), 29(1), (2), and (4); p art XIV |
6.2.2.5 | Unregistered prior conveyance. If a debtor with a power to dispose (ref. 1.2.3.2): (1) makes successive transfers of the same interest in an aircraft object (ref. 1.1.1) to different creditors, the creditor who registers first (ref. 1.5.1) has priority whether or not that creditor was the initial transferee; and (2) holds its interest in the aircraft object from a creditor under an unregistered interest, and grants and registers an interest to a second creditor, the second creditor’s registered interest (ref. 6.1.1.1) has priority over the initial creditor’s unregistered interest, and in the case of a sale (ref. 2.4), the initial creditor’s interest is extinguished. | 2.201 (Main text) 4.196 and 4.211 (Registered sale extinguishes unregistered interest); 2.205 (Registered interest priority); 4.212 (Sub-lease registered before head lease) | c arts 1(mm), 29(1), (2) and (4); p art XIV |
6.2.2.6 | Successive sales. The order of registration (ref. 1.5.1) of successive sales (ref. 2.4) of an aircraft object (ref. 1.1.1), from owner to buyer #1 and then from buyer #1 to buyer #2, has no bearing on priority because the interests acquired by the buyers are not in competition with one another (ref. 6.2.3.1); if owner were to sell to buyer #1 and then, while remaining in possession, wrongfully sell a second time to buyer #2, the interests of the two buyers would be in competition with one another and under the CTC priority rules the first of the two sales to be registered would have priority. | 3.102 (Main text) |
6.2.3 | When the first to register rule is inapplicable or modified | ||
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6.2.3.1 | Competing interests. The CTC priority rules are not relevant unless the interests in question are in competition with one another in relation to a particular aircraft object (ref. 1.1.1). | 3.97 (Main text) 2.208 (Competing interests); 3.100 (Sale and international interest registration compared) | |
6.2.3.2 | Non-consensual rights or interests. If the Contracting State in which the relevant interest arises so elects (by making the relevant Convention Article 39 declaration), it may preserve, but not expand, its national law priority for a non-consensual right or interest (ref. 2.3.2) over a registered international interest based on the priority its laws confer on a national law interest that is equivalent to an international interest. The priority preserved for a non-consensual right or interest is a national law priority, not a CTC priority, and applies outside the declaring Contracting State in another Contracting State only to the extent that such other Contracting State’s conflict of law rules apply the priority rules of the declaring Contracting State. | 2.264 (Main text) 2.222 (National law priority preserved by Article 39 declaration); 2.265 (Limited to declaring Contracting State) | c art 39(1)(a) |
6.2.3.3 | Registrable pre-existing right or interest. If a Contracting State so elects (by making the relevant Convention Article 60(3) declaration) it may condition preservation of the priority established by applicable law for a pre-existing right or interest that arises under an agreement upon registration of that interest (ref. 6.1.4.3.3), then its original priority may either be preserved by making the registration, or completely lost (as if it were an unregistered interest) by failing to do so within the declared time period, but the date of the registration is otherwise irrelevant to priority. | 2.224 (Main text) 2.315 and 4.193 (Preserves national law priority); 2.316 (Registration limited to agreement interests) | c arts 60(1) and (3) |
6.2.3.4 | Pre-existing right or interest. Ref. 6.1.4.3.3. | ||
6.2.3.5 | Assignments and subrogations. Ref. 6.1.6. | ||
6.2.3.6 | Variation by agreement: subordination. Ref. 8.5. | ||
6.2.3.7 | Debtor granted interests. Ref. 6.2.2.1. | ||
6.2.3.8 | Debtor priorities and rights. Ref. 4.7. |
6.2.4 | Discharging registrations | ||
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6.2.4.1 | Duration of effect. A registration (ref. 1.5.1) continues to have effect for CTC priority until it is discharged, the underlying interest comes to an end (ref. 6.1.2) or, if subject to a registered lapse date, such date occurs. | 2.176 (Main text) 2.177 (Underlying interest ends); 2.98 (Lapse); 4.136, 4.162, and 4.163 (Effective until discharge, termination of interest or lapse) | c art 21 |
6.2.4.2 | Person who may discharge. A registration (ref. 1.5.1) may be discharged by, or with the consent of, the person designated in the International Registry as the holder of the right to discharge the registration or by the Registrar, if ordered to do so by the Irish High Court. | 3.91 (Main text) 2.188, 2.189, 4.310, 4.312, and 4.313 (Discharge by the Registrar); 4.158 (Consent of assignee required) | c arts 1(ee), 16(3), 17(2), 20(3), 25, and 44 |
6.2.4.3 | When discharge is required. A registration (ref. 1.5.1) should be discharged in each of the following cases: (1) the debtor’s obligations under a security agreement (ref. 1.2.2), title reservation agreement (ref. 1.2.2) or registrable non-consensual right or interest (ref. 2.3.3) have been fully performed or otherwise discharged or the creditor has exhausted its remedies under the CTC in relation to the aircraft object (ref. 1.1.1) and its proceeds (ref. 2.2.4); (2) in the case of a leasing agreement (1.2.2), the lease term has elapsed or has been terminated and the lease obligations have been fully performed or otherwise discharged or the creditor has exhausted its remedies under the CTC in relation to the aircraft object and its proceeds; (3) the parties have agreed to discharge the registration; or (4) the registration should not have been made or has become incorrect. A prospective registration (ref. 6.1.5) must be discharged within five days following demand, if such demand is made before the creditor gives or is obligated to give value. | 2.181 and 2.182 (Main text) 2.97 (Creditor entitled to retain registration) | c art 25; p art XX(2) |
6.2.4.4 | Court order for discharge. Whenever a registration should be discharged (ref. 6.2.4.3), and the person holding the right to effect the discharge fails to act following demand, the debtor or other person burdened by the registration may seek an order from the Irish High Court requiring the holder of the wrongful registration to discharge it, and if such holder fails to do so, an order against the Registrar to effect the discharge (ref. 6.1.1.4). | 2.182 (Main text) 2.183 and 3.91 (Extension to sale); 2.184 (Rights of holder); 2.185, 2.188, 2.189, 4.136, and 4.173 (Irish High Court); 2.190 (Insolvency court); 4.174 (Article 42 courts) | c arts 1(ee), 25, and 44; p art XX(2) |
7 | Section 7 – Effects of and Rights Upon Insolvency | ||
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7.1 | General Principles of Insolvency under the CTC | ||
7.1.1 | Definition: insolvency proceedings | ||
7.1.1.1 | Defining criteria. A proceeding (regardless of applicable law characterization, ref. 3.1) falls within the definition of insolvency proceedings in the CTC if it is: (1) collective, in that it is concluded on behalf of creditors generally or such classes of creditors as collectively represent a significant part of the indebtedness; (2) judicial or administrative, including both proceedings before a judicial or administrative body and those initiated by application to a court or ultimately subject to the oversight of a court or administrative body; (3) subject to control or supervision by a court, including where the debtor retains possession of its assets and continues to conduct its business, while a court acts to facilitate a statutory process, or where the court’s approval is required in order to implement the terms of the debtor’s restructuring (or other financial relief) or liquidation; and (4) formulated in the context of a debtor’s financial distress for the purpose of giving the debtor financial relief or providing for the debtor’s liquidation. No other criteria apply to limit the scope of the definition of insolvency proceedings. | 3.125 (Main text) 4.21 (Scope of term) | c arts 1(l) and 5 |
7.1.1.2 | Proceedings encompassed. Insolvency proceedings encompasses traditional bankruptcy and insolvency proceedings as well as more limited proceedings through which a distressed debtor may seek to modify or rearrange certain of its obligations, described varyingly as ‘schemes of arrangement’, ‘voluntary arrangements’, ‘restructuring plans’ or some similar term. | 3.125 (Main text) | c art 1(l) |
7.1.1.3 | Proceedings not encompassed. Insolvency proceedings do not encompass court or administrative proceedings to address bi-lateral disputes between a debtor and a creditor, nor do they encompass contractual modifications or workout agreements that are consensually adopted by the debtor and creditor without use of a court or administrative authority supervised process. | 3.125 (Main text) | c art 1(l) |
7.1.2 | Relationship with national insolvency law | ||
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7.1.2.1 | No displacement of applicable law. The CTC does not displace applicable law with respect to insolvency proceedings; it prescribes, and in some respects limits, the effect that such proceedings may have on the interests created under the CTC (refs. 7.1.3 and 7.2). | 2.236 and 2.237 (Main text) 2.259 (Assignor); 4.220, 4.221 and 4.223 (Applicable law) | c arts 30(3) and 37 |
7.1.3 | Effect of insolvency proceedings on an international interest | ||
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7.1.3.1 | Validity rule for registered interests. A registered interest (ref. 6.1.1.1) and an assignment (ref. 8.3.1) is effective if registered (ref. 1.5.1) prior to the commencement of the insolvency proceedings notwithstanding any failure to satisfy national law perfection requirements for the corresponding interest under national law (refs. 6.1.3 and 7.1.5). | 2.232 (Main text) 2.205 and 4.217 (Registered interest); 2.258 (Assignment) | c arts 30(1), 37, and 50(2) |
7.1.3.2 | Applicable law rule for unregistered interests. An international interest (ref. 2.2.1) or assignment (ref. 8.3.1) that is not registered prior to the commencement of insolvency proceedings is effective if, under applicable law (applying the law of the insolvency forum’s conflicts rules), the corresponding national law interest is effective in insolvency without perfection or, if perfection under applicable law is required for effectiveness, the relevant national law perfection requirements have been satisfied (ref. 7.1.5). | 2.232 (Main text) 2.205 and 4.219 (Unregistered interest); 2.258 (Assignment) | c arts 30(2) and 37 |
7.1.3.3 | Uniform effect for international interest and assignments. An international interest (ref. 2.2.1) or assignment (ref. 8.3.1) constituted in any Contracting State and registered is ‘effective’ in the insolvency forum Contracting State, meaning that the international interest must be recognized by the insolvency proceedings and accorded a priority for amounts owed vis-à-vis the aircraft object (ref. 1.1.1) that is higher than unsecured creditors (ref. 7.1.4). | 2.232 (Main text) 2.205 and 4.219 (Contracting State priority rules); 2.258 (Assignment) | c arts 30(1) and (2) and 37 |
7.1.4 | Effect of the insolvency proceedings on priority of non-consensual right or interest | ||
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7.1.4.1 | Effect. The priority conferred on a non-consensual right or interest (ref. 2.3) by the declaration of a Contracting State (whether under Article 39 or Article 40) vis a vis an international interest is a national law priority that is not affected by insolvency proceedings which are opened in a Contracting State, with such priority being limited to the jurisdiction of the declaring Contracting State (unless the forum’s conflict of law rules apply the priority rules of the declaring Contracting State) and being enforceable only if the aircraft object (ref. 1.1.1) is located in that Contracting State. | 2.232 and 2.234 (Main text) 2.265, 2.268, 2.273, 4.278 and 4.293 (National law priority) | c arts 30(l)-(2), 39(1)(a)-(b), and 40 |
7.1.5 | Effect of applicable doctrines of avoidance under insolvency law | ||
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7.1.5.1 | Applicable law doctrines of avoidance partially preserved for registered interests; fully preserved for unregistered interests. A registered interest (ref. 6.1.1.1) is protected from applicable law doctrines aimed at avoiding interests except for doctrines that avoid preferences and transfers in fraud of creditors. An unregistered interest which is effective as a result of applying applicable law (ref. 7.1.3.2) remains susceptible to avoidance on any ground under the applicable insolvency law. | 2.233 and 2.235 (Main text) 2.258 (Assignments); 4.219 (Applicable law); 4.221 (Preferences and fraud); 4.223 (Avoidance examples) | c arts 30(2), 30(3)(a), and 37 |
7.1.5.2 | Applicable law defines preference and transfer in fraud. Applicable insolvency law governs to determine what constitutes a preference or a transfer in fraud and whether any other relevant avoidance doctrine or creditor defense to the same applies. | 2.235 (Main text) 2.258 (Assignments); 4.219 (Applicable law); 4.221 (Preferences and fraud); 4.223 (Avoidance examples) | c arts 30(3)(a) and 37 |
7.1.6 | Effect of applicable doctrines suspending enforcement rights | ||
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7.1.6.1 | Stay of enforcement rights. Unless Alternative A is applicable (refs. 7.2.1 and 7.3.1.1), the CTC preserves applicable law insolvency procedures that permit the stay or suspension of the enforcement rights of a creditor in respect of property under the control or supervision of an insolvency administrator. | 2.236 (Main text) 2.259 (Assignments); 4.222 and 4.224 (Stay of enforcement) | c arts 30(3)(b) and 37 |
7.1.7 | Commencement of insolvency proceedings | ||
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7.1.7.1 | Commencement. Applicable insolvency law determines when insolvency proceedings are deemed to have commenced, including those having retrospective effect (refs. 7.1.3.1 and 7.1.3.2). | 2.235 (Main text) 3.126, 4.13 and 4.221 (Applicable law) | c arts 1(d) and 30(3)(b) |
7.2 | Special Insolvency Regime Established by an Article XI (Alternative A) Declaration | ||
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7.2.1 | General statement | ||
7.2.1.1 | Alternative A purpose. The purpose of Article XI, Alternative A is to create hard rules for debtor compliance in an insolvency scenario, ensuring that within a specified and binding time-limit, the creditor either secures recovery of the aircraft object (ref. 1.1.1) or obtains the cure of all past defaults (ref. 4.1) and a commitment to perform future obligations. | 3.139 (Main text) 3.1 (Facilitate financing); 3.118 (Strengthen creditor remedies); 5.61 (Purpose) | p arts XI(1), Alternative A and XXX(3) |
7.2.1.2 | Alternative B not addressed in principles. Alternative B establishes rules that are subject to applicable national insolvency law and the discretion of the insolvency court. These principles focus upon Alternative A because the consequences of its application are far more significant than those of Alternative B and, to date, Alternative B has been adopted in only one Contracting State. | 5.62 (Main text) 5.68 and 5.69 (Alternative B); 3.19, 3.120 and 3.138 (Prevalence of Alternative A) | p arts XI(1), Alternative B and XXX(3) |
7.2.2 | Conditions for application | ||
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7.2.2.1 | Application to debtors. Unless the debtor and creditor have agreed to exclude Article XI in its entirety, Alternative A applies to a debtor in every Contracting State where the debtor is subject to insolvency proceedings if the following conditions are satisfied: (1) the Contracting State that constitutes the debtor’s primary insolvency jurisdiction has made the relevant declaration (refs. 1.3.3, 7.2.3 and 7.2.4) stating that it will apply Alternative A; (2) an insolvency-related event has occurred (whether in a Contracting State or, in respect of the second limb of the definition of insolvency-related event, in a Contracting State or elsewhere (ref. 7.2.6)); and (3) the debtor is holding an aircraft object (ref. 1.1.1) in, or subject to the insolvency laws of, the forum (regardless of whether the aircraft is registered in another Contracting State which has not made such a declaration or a non-Contracting State). | 3.119 (Main text) 3.136 (When applicable); 3.19, 3.136 and 5.27 (Agreement to exclude); 3.137 and 3.155 (PIJ declaration determines); 3.156 (Obligations in respect of aircraft objects only) | p arts I(2)(m), XI(1), XXX(3), and XXX(4) |
7.2.3 | Declared terms; domestic enactment when a declaration is precluded | ||
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7.2.3.1 | Adoption by declaration of debtor’s primary insolvency jurisdiction. A Contracting State may make Article XI applicable to debtors who have that Contracting State as their primary insolvency jurisdiction (ref. 7.2.4) by making a declaration under Article XXX(3). | 3.119 (Main text) 3.136 and 5.62 (Declaration in primary insolvency jurisdiction governs) | p arts XI(1), XI(A), and XXX(3) |
7.2.3.2 | Adoption by domestic law. If a Contracting State is precluded from making an Article XXX(3) declaration directly, as is the case for the member States of the EU, it may establish the same rights under domestic law, with the same recognition and international law effect in other Contracting States, by following the formalities established by the CTC (ref. 10.7). | 3.151 and 5.61 (Main text) | p arts XI(1), XI(A), XXX(3), and XXXVII(2)(iii) |
7.2.3.3 | Required terms of declaration. An Article XXX(3) declaration must adopt the Alternative selected in its entirety, without modification, and specify the following terms: (1) whether Alternative A or Alternative B is to apply; (2) whether the Alternative selected applies to only some or instead all the types of insolvency proceedings; and (3) the time period within which the debtor must either give possession of the aircraft object (ref. 1.1.1) to the creditor or cure all defaults (ref. 4.1). | 3.120 (Main text) 3.136 and 5.62 (No declarations); 3.136, 5.62, 5.123 (Requirements for declaration) | p arts XI(1), XI(A), and XXX(3) |
7.2.4 | Primary insolvency jurisdiction importance | ||
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7.2.4.1 | Choice of law rule applying Alternative A. Article XI’s reference to the debtor’s primary insolvency jurisdiction operates as a choice of law rule that serves to preclude a debtor from forum shopping and to provide predictability as to its application. If a debtor becomes subject to insolvency proceedings in a Contracting State other than its primary insolvency jurisdiction, that Contracting State is bound to apply the terms of Article XI as declared (or domestically enacted, ref. 7.2.3.2) by the primary insolvency jurisdiction, and must follow the terms of that declaration as to the Alternative elected, the type of insolvency proceedings covered and the waiting period (7.3.3) specified regardless of whether: (1) it has made such a declaration itself; (2) there are insolvency proceedings in the debtor’s primary insolvency jurisdiction; and/or (3) the courts of the Contracting State constituting the debtor’s primary insolvency jurisdiction as a matter of practice or precedent follow such terms. If the debtor’s primary insolvency jurisdiction is not a Contracting State, or is a Contracting State that has not made an Alternative A declaration, Alternative A is not applicable to the debtor no matter where it is subject to insolvency proceedings. | 3.119 and 3.130 (Main text) 3.129 (Choice of law rule); 3.136, 5.61 (Non-compliance by courts of primary insolvency jurisdiction); 3.136 (No declaration by primary insolvency jurisdiction); 3.155 (Anti-forum shopping) | p arts I(2)(n), XI(1), XI(A), XXX(3), and XXX(4) |
7.2.5 | Identifying the debtor’s primary insolvency jurisdiction | ||
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7.2.5.1 | Presumptive location and standard for overriding the presumption. A debtor’s primary insolvency jurisdiction is the Contracting State where its centre of main interests is situated, which is presumed to be its statutory seat, or if none, the place where it is incorporated or formed. That presumption may be rebutted, but is not lightly displaced and the party asserting a different location carries a substantial burden of proof applying the following test: whether a different Contracting State, as visible specifically to its creditors under the CTC (and not more generally), constitutes the main State in and from which the ordinary course activities and decision-making relating to the debtor’s overall business and operations with respect to aircraft objects (ref. 1.1.1) are conducted (i.e. the real seat rather than the statutory seat). | 3.123 and 5.15 (Main text) 3.133 (Relevant creditors); 3.134 (Test) | p arts I(2)(n), XI(1), XXX(3), and XXX(4) |
7.2.5.2 | Factors relevant to establishing centre of main interests. The primary factors relevant to establishing a debtor’s centre of main interests in a State that differs from the presumed State are the following: (1) the debtor management team with whom the creditors (with respect to interests created under the CTC) conduct business is situated in a State that is different from the presumed State; (2) the debtor’s primary base of operations for, and where decisions relating to, its aircraft objects (ref. 1.1.1) is located in a State that is different from the presumed State; and (3) the debtor derives its authority to operate its aircraft objects, and/or authority to operate its aircraft objects on particular routes, from a State that is different from the presumed State. | 3.131 (Main text) | p arts I(2)(n), XI(1), XXX(3), and XXX(4) |
7.2.5.3 | Factors not relevant to establishing centre of main interests. The following factors are not relevant to establishing a debtor’s centre of main interests: (1) the State where the creditors of the debtor reside and from which they act; (2) the terms of the agreement creating or providing for the relevant international interests, such as terms providing for payments in the currency of or to a bank account in a particular State, submission to the jurisdiction of the courts of a particular state for the resolution of disputes, or application of the laws of a particular State as the governing law of the agreement; and (3) the State where the agreement creating or providing for the relevant international interests is prepared and/or concluded. | 3.131 (Main text) 3.129 (Irrelevant creditors) | p arts I(2)(n), XI(1), XXX(3), and XXX(4) |
7.2.5.4 | Timing for determining centre of main interests. The debtor’s centre of main interests is determined for purposes of Article XI at the time an insolvency-related event occurs (ref. 7.2.6) by looking back from that date and evaluating the relevant factors (ref. 7.2.5.2) over the period leading up to the insolvency-related event. | 3.133 (Main text) 3.123, 3.134 and 5.15 (Timing) | p arts I(2)(n), XI(1), XXX(3), and XXX(4) |
7.2.5.5 | Change of centre of main interests. While a debtor may change its centre of main interests for any bona fide business purpose, a change made in the period preceding the occurrence of an insolvency-related event (ref. 7.2.6) for the purpose of obtaining an insolvency regime that is detrimental to the CTC creditors will be disregarded. | 3.134 (Main text) 3.123 (Change) | p arts I(2)(n), XI(1), XXX(3), and XXX(4) |
7.2.5.6 | Relevance of centre of main interests under non-CTC law. A debtor’s centre of main interests for the purposes of the CTC may differ from its centre of main interests for other purposes, such as application of a Contracting State’s insolvency law, which will typically consider the debtor’s interactions with all of its creditors. | 3.129 (Main text) 3.132 (CTC COMI may differ from insolvency law COMI) | p arts I(2)(n), XI(1), XXX(3), and XXX(4) |
7.2.6 | Insolvency-related event | ||
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7.2.6.1 | Definition. Insolvency-related event is comprised of two limbs: (1) the commencement of insolvency proceedings (ref. 7.1.1); and (2) when the following two conditions have been met: (a) the debtor has suspended payments to its creditors (generally, and not merely to a specific creditor or class of creditors) or declared its intention to do so; and (b) a law has been enacted or state action occurs that prevents or suspends the rights of such creditor to initiate insolvency proceedings against the debtor or exercise remedies under the CTC. A debtor’s application for court approval of a suspension of payments constitutes a declared intention. | 3.127 (Main text) 3.124 and 5.14 (Definition) | p arts I(2)(m) and XI(A) |
7.2.7 | Party responsible for performing Alternative A obligations | ||
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7.2.7.1 | Party responsible. The party responsible for performing Alternative A obligations is: (1) the debtor, if the aircraft object (ref. 1.1.1) remains in the possession of the debtor, and under applicable law the debtor retains the authority to perform such obligations (temporarily or otherwise), or applicable law confers authority on the debtor to administer its own reorganization or liquidation (thereby constituting an insolvency administrator within the meaning of the CTC); or (2) the person designated by applicable law as having authority to administer the debtor’s reorganization or liquidation, including authority to perform such obligations. Designation of a person with limited authority (such as accounting or other financial reporting) as an insolvency administrator under applicable law does not constitute such person as an insolvency administrator for purposes of Alternative A. | 3.140 (Main text) 2.236 and 4.20 (Insolvency administrator definition) | c arts 1(k), 5, and 30(3)(b); p art IX(A) |
7.2.8 | Insolvency Assistance | ||
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7.2.8.1 | Assistance. If a Contracting State has made a declaration under Article XXX(1), and an aircraft object (ref. 1.1.1) is situated in that Contracting State, then its courts must, in accordance with its laws, co-operate to the maximum extent possible with the courts and insolvency administrators of any other Contracting State in carrying out the provisions of Article XI. | 3.153 (Main text) 3.154 (Scope) | p art XII, XXX(1) |
7.3 | Significant effects of Article XI, Alternative A (declaration) | ||
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7.3.1 | Relationship to applicable law | ||
7.3.1.1 | Inconsistent law is displaced. National insolvency or other laws that may grant the court discretionary relief powers, institute a stay on enforcement, require leave of the court for enforcement of remedies or permit a non-consensual modification of the terms of the agreement are all overridden to the extent they conflict with a right granted to the creditor under Alternative A, overriding the preservation of the court’s powers under Article 30(3)(b) (ref. 7.1.2.1). | 3.145 (Main text) 5.66 (Inconsistent law) | p art XI(A) |
7.3.1.2 | Exercise of remedies without court authorization. A Contracting State’s declaration to apply Alternative A supersedes a declaration under Article 54(2) requiring leave of the court for the exercise of remedies (ref. 4.4.5). | 2.107 (Main text) 3.139 (Exclusion of Alternative A remedies from Article 54(2) declaration) | p art XI(A) |
7.3.1.3 | Applicable law termination right. Alternative A does not limit the exercise of the right of a debtor (or its insolvency administrator) to terminate an agreement if that right is available in insolvency under applicable law. | 3.145 (Main text) | p art XI(A)(11) |
7.3.2 | Scope of protections | ||
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7.3.2.1 | Scope. The reference to agreement in Alternative A is construed broadly, with the creditor rights protected under Alternative A encompassing all related agreements forming part of the overall transaction. | 3.139 (Main text) 2.242 (Scope of associated rights); 3.145 (Non-consensual modification); 5.64 (Cure and perform) | p arts XI(A)(7), (9), and (10) |
7.3.3 | Waiting period | ||
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7.3.3.1 | Defined. The debtor (or the insolvency administrator) is obligated to either cure all defaults (refs. 4.1 and 7.3.2) other than insolvency, and agree to perform future obligations under all relevant transaction documents in full, or give possession of the aircraft object (ref. 1.1.1) to the creditor, in each case by the first to occur of the end of the waiting period specified in the relevant Contracting State’s declaration (which commences on the occurrence of an insolvency-related event (ref. 7.2.6)) or the date that the creditor would otherwise be entitled to possession under applicable law in the absence of Alternative A. | 3.139 (Main text) 3.141 (Start of waiting period); 3.142 (Duration of waiting period); 5.64 (Defined) | p arts XI(A)(2),(3), (7), and XXX(3) |
7.3.3.2 | Effect of lapse. Once the waiting period elapses the creditor may exercise all remedies permitted by the CTC without further delay or limitation by applicable law that might otherwise restrict such enforcement actions (ref. 7.1.6). | 3.145 (Main text) 5.66 (Delay of remedies barred) | p arts XI(A)(2), (3), (9), and XXX(3) |
7.3.3.3 | Hard deadline. The waiting period specified in the Contracting State’s declaration is a ‘hard’ deadline, and is not subject to court discretion to extend or to any doctrines, such as commercial reasonableness (ref. 4.6.4), that might otherwise operate to allow a case-by-case modification of the waiting period. A default in the future performance obligation immediately triggers the debtor’s obligation to give the creditor possession of the aircraft object (ref. 1.1.1), without the imposition of a second waiting period. | 3.139 (Main text) 3.136, 5.61, 5.62 and 5.64 (Obligation to adhere to PIJ waiting period); 5.66 (Delay of remedies barred) | p arts XI(A)(2), (3), (7), (9), and XXX(3) |
7.3.3.4 | Modification rights of parties. The debtor and a creditor may consensually agree to opt out of Alternative A in its entirety (but not in part) as to the interests constituted or provided by an agreement (ref. 1.2.2), and once an insolvency-related event (ref. 7.2.6) has occurred, the debtor and the creditor may consensually agree to extend the waiting period or otherwise modify the applicable terms of the cure or the agreement (i.e. which obligations must be performed or other conditions that must be satisfied as part of the cure). | 5.27 (Main text) 3.136, 3.139 and 5.61 (Party modification rights) | p arts IV(3), XI(A)(2), (3), and (7) |
7.3.4 | Preservation and maintenance obligation; debtor use | ||
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7.3.4.1 | Debtor possession and duty during waiting period. A debtor may retain possession and continue to use an aircraft object (ref. 1.1.1) during the applicable waiting period (7.3.3), and is obligated to preserve it and maintain it and its value in accordance with the terms of the agreement (ref. 1.2.2) until the creditor has been given the opportunity to take possession of the aircraft object (ref. 1.1.1), whether or not it actually takes possession. Thereafter, the duty to take care of the aircraft object is governed by the applicable law. Remedies for breach of this and other duties under Article XI are determined by the agreement and applicable law (ref. 7.3.10). | 3.143 (Main text) 3.139 (Remedies for breach); 5.64 (Scope of duty); 5.65 (Termination of duty) | p arts XI(A)(5)(a) and 6 |
7.3.5 | Advance judicial relief | ||
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7.3.5.1 | Advance judicial relief during waiting period. During the waiting period (ref. 7.3.3), notwithstanding otherwise applicable law staying enforcement, the creditor may apply for advance judicial relief (ref. 5.6) under Article 13 (as modified if the relevant Contracting State has made a declaration under Article XXX(2), electing to adopt the terms of Protocol Article X) or other applicable law (ref. 5.6). | 3.143 (Main text) 3.144 and 5.64 (Jurisdiction) | c art 13; p arts X and XI(A)(5)(b) |
7.3.6 | Exercise of de-registration and export remedies | ||
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7.3.6.1 | De-registration and export. Once the creditor is entitled to possession of an aircraft object (ref. 1.1.1) under Alternative A, it may seek de-registration of the aircraft and export and physical delivery of the aircraft objects (ref. 5.5.1) by either the court route (ref. 5.5.2) or by exercise of an IDERA (ref. 5.5.3), and the registry authority and other relevant administrative authorities (ref. 10.6) are obligated to make those remedies available no later than five working days following notice. The relevant administrative authorities are obligated to expeditiously co-operate and assist the creditor in the exercise of such remedies (ref. 10.6). | 3.47 (Main text) 5.64 (Make remedies available); 5.66 (Delay of remedies barred) | p arts I(2)(i), IX(1), (2), (5) and (6), XI(A)(8), and (9) |
7.3.7 | Prohibition on non-consensual modifications | ||
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7.3.7.1 | Prohibition. The obligations of the debtor under an agreement (refs. 1.2.2 and 7.3.2) may not be modified by the court unless consent is given by the creditor (or relevant creditors) in accordance with the consent provisions as set out in the agreement, displacing otherwise applicable law doctrines that permit a non-consensual modification of the terms of a dissenting creditor’s agreement by a majority or supermajority creditor class vote. | 3.145 (Main text) 5.66 (Consent required) | p art XI(A)(10) |
7.3.8 | Prohibition on subordination of registered interests | ||
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7.3.8.1 | Displacement. With the exception of a non-consensual right or interest (ref. 2.3.2) that is identified in an Article 39(1) declaration, Alternative A displaces any otherwise applicable insolvency law doctrine that might permit the priority of a registered interest (refs. 6.1.1.1 and 6.2.1) to be subordinated in insolvency to some other category of claim. | 3.146 (Main text) 3.150 (National law priority for non-consensual right or interest holder) | c arts 1(i) and 1(cc); p art XI(A)(12) |
7.3.9 | Effect on non-consensual right or interest | ||
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7.3.9.1 | Protections not applicable. The protections afforded to creditors under Alternative A do not extend to the holder of a non-consensual right or interest (ref. 2.3), whether registered (as permitted by Article 40) or unregistered but protected by a declaration under Article 39. The effect and priority of a non-consensual right or interest vis a vis an international interest (ref. 2.2.1) are preserved under Alternative A as matters of national law; the CTC does not extend them beyond the jurisdiction of the Contracting State whose law gives rise to the relevant non-consensual right or interest (refs. 6.1.4.3 and 6.2.3.2). | 3.150 (Main text) 2.40(5) (Registrable non-consensual right or interest priority effect); 3.146 (Non-consensual right or interest priority effect) | c art 1(i) and 1(s); p art XI(A)(12); |
7.3.10 | Remedies for breach | ||
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7.3.10.1 | Remedies for breach not prescribed by the CTC. Remedies for breach of Article XI are not prescribed by the CTC and are left to the agreement and applicable law. If the debtor fails to give up possession of the aircraft object or fails to fulfil its other obligations under the Alternative A, the creditor may seek, and is entitled to obtain, a suitable remedy for the breach under applicable law (refs. 3.3 and 10.3.1), which may include Article 13 remedies (ref. 5.6). | 3.143 (Main text) 3.118 (Agreement and applicable law remedies apply); 2.26, 2.101 and 3.139 (Contacting State obligation to ensure adequate remedy) | p Art XI |
8 | Section 8 – Other Key Provisions Impacting Rights and Obligations | ||
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8.1 | Party autonomy on contract items | ||
8.1.1 | Party autonomy is an underlying principle. Party autonomy is an underlying principle of the CTC (ref. 3.2.3). In their relations with one another, the parties are free to derogate from, or vary, the provisions of the CTC and create their own rules and remedies, provided that they do not contravene any mandatory provisions of the CTC or mandatory rules of the forum (refs. 4.2, 4.5, and 4.12). | 2.25 (Main text) 2.23 (Key principle); 2.66, 2.146, 3.19, and 4.128 (Power to derogate) | c Preamble, arts 12 and 15; p art IV(3) |
8.2 | Representative capacity, including agency and trustees | ||
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8.2.1 | Representative capacity recognized. Every Contracting State is obligated to recognize the authority of a person duly appointed under applicable law (ref. 8.2.3) as a trustee, agent, or other representative to validly take actions, assert rights, and hold and assign interests under the CTC (ref. 8.2.2), overriding any otherwise applicable national law (ref. 3.3.2). | 3.83 (Main text) 2.46 and 4.19 (Debtor variations among representative capacities); 3.87 (Considerations for trusts and other representatives similar); 5.33 and 5.35 (Recognition of representatives by Contracting States) | p art VI |
8.2.2 | Scope of CTC actions permitted. The scope of actions that may be validly taken in a representative capacity under the CTC includes the power to conclude an agreement (ref. 1.2.2) or sale (ref. 2.4), effect registrations (ref. 1.5.1), and enforce remedies, and must be broadly construed to validate taking other analogous actions (ref. 3.1). | 3.83 (Main text) 5.33 (Broad interpretation) | c art 5; p art VI |
8.2.3 | Applicable law for validity of appointment. The validity of an appointment of a person in a representative capacity is determined under the law chosen by the parties in the instrument of appointment unless that choice circumvents a public policy of a State having a closer connection to the parties. | 3.83 (Main text) 3.84, and 5.33 (Applicable law) | p art VI |
8.2.4 | Scope of representative’s authority. The authority of a person acting in a representative capacity is determined by the terms of the appointment, applying the law chosen by the parties in the instrument of appointment; actions taken that exceed the authority of the representative may result in liability for the representative to the principal or beneficiary under applicable law, but have binding effect under the CTC. | 5.33 (Main text) 3.86 (Action in breach binding); 3.87 (Considerations for trusts and other representatives similar) | p art VI |
8.2.5 | Matters specific to trusts | ||
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8.2.5.1 | Trustee as debtor – general rule. Where a duly appointed trustee (ref. 8.2.3), who is vested with an interest in an aircraft object (ref. 1.1.1), enters into an agreement (ref. 1.2.2) as a debtor: (1) only the trustee (and not the beneficiary) may make or consent to registrations with respect to the aircraft object; and (2) the situation of the trustee (and not the beneficiary) determines: (a) the relevant connecting factor (ref. 1.2.4); (b) the debtor’s primary insolvency jurisdiction (ref. 7.2.5); and (c) whether an insolvency-related event (ref. 7.2.6) has occurred (ref. 8.2.1). | 3.83 (Main text) 2.46 and 4.19 (Debtor) | p art VI |
8.2.5.2 | Trustee as debtor – insolvency exception. Where relevant insolvency law looks through a trust to the party who established the trust, for purposes of Convention Article 30 and Protocol Article XI the situation of that party (and not the trust or trustee) determines: (1) the debtor’s primary insolvency jurisdiction (ref. 7.2.5); and (2) whether an insolvency-related event (ref. 7.2.6) has occurred. | 3.140 (Main text) 2.46 and 3.118 (Debtor); 3.83 and 5.34 (Insolvency) | c art 30; p arts VI and XI |
8.2.5.3 | Insulation of trust assets. The assets held by a trust or trustee are separate from the assets of the trustee and may not be reached by creditors of the trustee other than in respect of debts created in its trust capacity. | 3.83 (Main text) | p art VI |
8.2.5.4 | Trust entity as debtor or creditor. Where the applicable law establishing a trust (ref. 8.2.3) recognizes the trust as an entity with a legal personality distinct from the trustee, the trust, rather than the trustee, may enter into an agreement (ref. 1.2.2) under the CTC with the trust being regarded as the debtor or creditor, as applicable, and the trust being entitled to have all actions taken in its representative capacity (refs. 8.2.2 and 8.4) recognized in all Contracting States (ref. 8.2.1). | 3.84 (Main text) 2.46 (Debtor) | p art VI |
8.2.5.5 | Trust or trustee as creditor. Where a duly appointed trustee (ref. 8.2.3) enters into an agreement (ref. 1.2.2) as a creditor, the trustee is the holder of the interests constituted or provided for by the agreement and is entitled to make or consent to registrations of such interests (ref. 8.2.1). | 3.83 (Main text) | p art VI |
8.2.5.6 | Registration and enforcement rights of beneficiary. A beneficiary of a trust has no right to make or consent to the registration of an interest held by the trust (ref. 8.2.5.1). Whether the beneficiary of a trust holds a concurrent right with the trust or trustee to assert rights under the CTC is determined by the terms of the instrument establishing the trust and the rules of the forum where the rights are asserted. | 5.33 (Main text) 3.83 (Concurrent enforcement rights) | c art 14; p art VI |
8.2.5.7 | Interest of trust beneficiary – transfer/priority. The interest of a beneficiary in a trust falls outside the CTC, as does the transfer (outright or for security) of that interest, and is junior to an international interest granted by its trustee to a creditor. | 3.84 (Main text) 2.202 (Priority) | c art 29; p art VI |
8.2.5.8 | Substitution of trustee. If a trustee that is party to an agreement (ref. 1.2.2) which constitutes or provides for an international interest (ref. 2.2.1) is replaced by a successor trustee, the succession of trustees does not constitute the creation of a new international interest. Where the transfer occurs by operation of law, it falls outside the CTC. Where the transfer occurs by the agreement of the parties, in the case of an international interest held by the trustee, it constitutes an assignment (ref. 8.3.1) of an existing international interest. | 3.85 (Main text) 5.34 (Appointment of new trustee) | p art VI |
8.3 | Assignments and novations | ||
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8.3.1 | Scope of term. Assignment means a contract that passes to the assignee, for security or as a complete transfer without retention of a reversionary interest, some or all of the rights of the assignor to the payment or other performance obligations of a debtor under a security agreement, title reservation agreement, or a leasing agreement (all comprising an agreement (ref. 1.2.2) and encompassed in the term associated rights (ref. 2.5)), whether or not the contract also conveys the related international interest (ref. 2.2.1). An assignment that does not also convey the international interest falls outside the CTC and may not be registered. Assignment does not include a transaction in which the debtor (rather than the creditor) passes its rights and interests under an agreement to a transferee, nor does it apply to any transaction that passes the rights and interests of a creditor by operation of law or any means other than by contract. | 4.225 (Main text) 2.41 (Validity); 2.242 (Definition of assignment); 2.243 (Transfers by operation of law); 4.10 and 4.225 (Scope of CTC); 4.133 (Validity requires transfer of international interest); 4.249 (Validity requires transfer of some associated interests); 4.225 (Debtor transfer is not an assignment) | c art 1(a), (b), (c), (o), (q), (ii), 16(1)(b), 20(1), 29(1), 31(1), 31(5), 32, 35, and 36 |
8.3.2 | Distinction between assignment and novation. The terms of an agreement determine whether it constitutes an assignment, as defined by the CTC, or a ‘novation’, which the CTC does not define, applying the autonomous meanings given by the CTC and irrespective of any national law characterization (ref. 3.1.1). The contractual terms of an assignment that falls within the scope of the CTC convey the interests held by the transferor creditor under the agreement (including the international interest) to the transferee creditor (leaving the international interest in effect), while a novation terminates the interests of the transferor creditor (including the international interest it holds) and re-establishes corresponding interests in the transferee creditor (thereby creating a new international interest). | 2.54 (Main text) 2.53, 2.242, and 4.9 (Importance of distinction); 2.24, 2.53, 4.52, 4.53 (Applicable law characterization) | c arts 1(a), 1(b), 1(c), 5, 32, and 33 |
8.3.3 | Validity and Formalities. The substantive validity of an assignment of associated rightsis governed by applicable law. The formalities for creation of an assignment of associated rights that is within the scope of the CTC (ref. 8.3.1), transferring the international interest (ref. 2.2.1) to the assignee, track those for the creation of an international interest (ref. 1.2.3), requiring being in writing, identification of the associated rights (ref. 2.5) and, for a security assignment, enabling the secured obligations to be identified. | 2.245 and 2.251 (Main text) 2.247 (No CTC effect for assignment of non-CTC interest); 4.235 (Partial assignment); 4.247 (Specific requirements); 4.248 (Failure to comply) | c art 32(1) |
8.3.4 | Transfer of international interest. Unless the parties have agreed otherwise, an assignment of associated rights that satisfies the CTC’s formalities (ref. 8.3.3) will transfer the related international interest (ref. 2.2.1) and its rights and priorities to the assignee (refs. 6.1.1.6, 6.1.5, and 6.1.6). | 2.245 (Main text) 4.230 and 4.231 (Transfer of international interest); 4.234 and 4.241 (Rights and priorities) | c arts 31(1) and 32(1) |
8.3.5 | Unregistered international interest. If the CTC’s formalities have been satisfied (ref. 8.3.3), an assignee is entitled to have the assignment of an international interest (ref. 2.2.1) registered (but not a pre-existing right or interest (ref. 6.1.4.3) or other non-CTC interest (ref. 2.3)), whether or not the related international interest was registered. | 2.239 (Main text) 2.247 (Registration of assignment of non-CTC interest); 3.159 and 4.233 (Assignment of unregistered international interest) | c art 16(1)(b) |
8.3.6 | Debtor obligations to assignee. A debtor is bound by an assignment and obligated to render its payment and other performance obligations in favor of the assignee if the CTC’s formalities have been satisfied (see ref. 8.3.3), the debtor has consented to the assignment (which consent may be given in advance and need not identify the assignee), and the debtor has been given written notice of the assignment by the assignor (or another party authorized by the assignor). | 2.248 (Main text) 3.157 and 3.158 (Debtor consent); 4.251 (Conditions to obligation); 4.241 (Obligations to assignee) | c arts 31(1), 32(1), and 33(1); p art XV |
8.3.7 | Debtor defenses. A debtor may assert against an assignee any defenses or rights of set-off it may have under applicable law against the assignor unless it has waived them. The CTC validates a contractual waiver of defenses or right of set-off other than defenses arising from the fraud of the assignee. | 2.248 (Main text) 4.237 and 4.238 (defense waiver and fraud exception) | c arts 31(3) and (4) |
8.3.8 | Assignee rights against debtor. If the CTC’s formalities for creating a valid assignment (ref. 8.3.3) and binding the debtor to it (ref. 8.3.6) have been satisfied, whether or not the assignment is registered, the creditor is entitled exercise the rights and priorities of the assignor and enforce remedies against the debtor. | 2.239 (Main text) 2.240 and 3.158 (Enforcement rights) | c arts 31(1), 32, 33, and 34 |
8.3.9 | Assignee rights against assignor. An assignee under a security assignment (ref. 1.2.2) has the same CTC remedies against the assignor as those conferred on a creditor holding an international interest (ref. 2.2.1) under a security agreement, with such rights being subject to rights held by the assignor’s debtor (refs. 4.7, 5, 6.2.2.1, and 6.2.2.2). | 4.255 and 4.256 (Main text) 2.252 (Enforcement limitations on associated rights); 2.259 (Applicable law governs procedure); 4.257 (Rights of assignor’s debtor) | c art 34 |
8.3.10 | Prospective assignment. Ref. 6.1.5. | ||
8.3.11 | Insolvency of assignor. ConventionArticle 30 applies as if references to debtor were references to assignor (ref. 7.1). | 2.258 (Main text) 4.273 (Insolvency) | c arts 30 and 37 |
8.3.12 | Priorities. Refs. 6.1.1.6, 6.1.5, and 6.1.6. |
8.4 | Subrogation | ||
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8.4.1 | Acquisition of international interests. International interests (ref. 2.2.1) may be acquired by legal or contractual subrogation (refs. 8.4.2 and 8.4.3), and the subrogee may register that acquisition in the International Registry (ref. 1.5.1). | 2.260 (Main text) 2.41(3) (Legal or contractual subrogation) | c arts 1(m)(ii), (iii), 9(4), 16(1)(c), and 38 |
8.4.2 | CTC right of subrogation. ConventionArticle 9(4) confers a right of subrogation on an interested person, other than the debtor, who, after a default (ref. 4.1), discharges a security interest by payment of the relevant secured debt in full. | 2.119 (Main text) 4.102 and 4.107 (CTC rights) | c arts 1(m)(ii), (iii), 9(4), 16(1)(c), and 38 |
8.4.3 | Applicable law right of subrogation. The right to acquire interests (including international interests (ref. 2.2.1)) through subrogation under applicable law are unaffected by the CTC. | 2.260 and 4.274 (Main text) 2.41(3) (Applicable law example) | c art 38 |
8.4.4 | Priority and rights of a subrogee. Any subrogee will stand in the position of its subrogor (i.e. the original creditor) and acquires the same priority as that creditor in respect of other creditors (ref. 6.1.6.2). | 2.261 (Main text) 4.274 and 4.276 (Position of a subrogee) | c arts 38 and 50(3) |
8.5 | Subordination | ||
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8.5.1 | Subordination of interests. The priorities established by the CTC (including a lessee’s right of quiet enjoyment (ref. 4.7.1)) may be varied by the parties through a subordination agreement, which is binding on the assignee of the subordinated interest only if the subordination is registered (ref. 6.1.1.5). | 2.219 (Main text) 4.200 and 4.203 (Variation of priorities); 4.201 (Quiet enjoyment); 4.214 (Assignee only bound if registered) | c art 16(1)(e), 20(2) and 29(5) |
8.5.2 | Registration of subordination. A subordination may be registered with respect to an interest, whether or not it is a registered interest (ref. 6.1.1.1) or a non-CTC interest. Consent of the debtor under the interest is not required. | 2.220 (Main text) 4.200 (Consent of debtor not required) | c arts 16(1)(e), 20(2) and 29(5) |
8.6 | Amendments and extensions | ||
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8.6.1 | Amendments giving rise to a new international interest. An amendment that enlarges, replaces or supplements the then-existing international interest (ref. 2.2.1), or a pre-existing right or interest (ref. 6.1.4.3.3) in the case of an amendment made after the CTC has entered into force in the relevant Contracting State, will give rise to a new international interest that will need to be separately registered in order to preserve the priority of the creditor. Examples include amendments that: (1) change the characterization of the agreement (such as from a leasing agreement to a security agreement (refs. 1.2.2.2 and 4.9.2)); (2) add new aircraft objects (ref. 1.1.1) to the agreement, change the fractional interests in an aircraft object, add new parties as grantor or grantee, or increase the obligations secured by the aircraft object; (3) extend/renew the term of a lease; or (4) increase the rent in a lease that is characterized under applicable law as a security agreement. | 2.56 (Main text) 2.57 (Pre-existing right or interest); 4.25 (Effect of amendment) | c arts 2 and 7 |
8.6.2 | Amendments not giving rise to a new international interest. An amendment that does not change the terms of an agreement (ref. 1.2.2) in a way that enlarges, replaces or supplements the existing international interest (ref. 2.2.1) or a pre-existing right or interest (ref. 6.1.4.3.3) in the case of an amendment made after the CTC has entered into force in the relevant Contracting State, does not constitute a new international interest. Examples include amendments that: (1) change the name (but not the identity) of a party; (2) change the amount, mode or time of payment without causing a change in the amount of the obligations secured; (3) change terms as to repair or insurance of an aircraft object (ref. 1.1.1); (4) provide for further advances where the agreement already secures the same; and (5) change the interest rate on an existing advance. | 2.58 (Main text) 2.57 (Pre-existing right or interest); 4.25 (Effect of amendment) | c arts 2 and 7 |
8.6.3 | Effect on existing registration. The registration made in respect of the original interest remains effective following an amendment if the original interest still exists (ref. 6.1.2). | 2.56 (Main text) | c arts 2, 7, and 16 |
8.7 | Effect of the CTC on the doctrine of accession or similar doctrines | ||
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8.7.1 | Aircraft engines. Ownership of, or another right or interest in, an aircraft engine (refs. 1.1.1 and 1.1.2), is not affected by the installation (ref. 8.7.3) of that aircraft engine on, or removal from, any aircraft (including a helicopter (ref. 1.1.2.2)), even if, under applicable law ownership of the aircraft engine would otherwise have passed to the owner of the airframe (or helicopter) on which the aircraft engine is installed. |