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Department Of Infrastructure And Regional Development Release Draft Rules For Cape Town Convention

Department Of Infrastructure And Regional Development Release Draft Rules For Cape Town Convention

The legislation gives effect to the Cape Town Convention that Australia became a signatory to in 2001. The Convention creates an international system for the registration of security interests in aircraft, including some engines.

By legislating the convention and making the necessary declarations, Australian airlines & aircraft operators are expected to receive a fee discount from export credit rating agencies under an international understanding made by the Organisation for Economic Co-operation and Development (OECD). This has the potential of significantly reducing finance costs for Airlines & Aircraft operators, and is welcomed by the aviation industry. In addition to the reduced finance costs, the legislation provides greater security for aircraft financiers and lessors as well as a streamlined remedy for the repossession and exportation of an aircraft.

The main purpose of the legislative rules is to give effect to the Irrevocable Deregistration Request and Export Request Authorisation process, more commonly known as the “IDERA”.

Importantly, the Rules apply only to Protocol objects, which include:

  • Aircraft that carry 8 or more passengers or cargo/goods greater than 2750kgs;
  • Helicopters that carry 5 or more passengers or cargo / goods in excess of 450kgs.

Under the draft rules, a system is created whereby the “registration holder” of an aircraft provides an irrevocable authority to Civil Aviation Safety of Authority (CASA), allowing the “authorised party” (ie the financier / lessor) to request CASA to deregister the aircraft (which would prevent its removal from the jurisdiction). It also provides that the authorised party may give a Certified Designee Confirmation Letter (CDCL) to a third party, which allows the Designee to act as the Authorised Party’s local agent in respect of the IDERA. The CDCL must also be registered with CASA.

Once an IDERA is registered by CASA, it cannot be removed unless the Authorised Party gives written consent. If a CDCL has also been registered by CASA, the Designee must also provide written consent to its removal.

Under Rule 8 of the draft rules, an Authorised Party (or as the case may be when a CDCL is registered, the Designee) may request CASA to de-register the aircraft, after verifying their entitlement arising from their security interest. Once a deregistration  request is received by CASA, CASA will deregister the aircraft within 5 working days (or sooner) and assist the Authorised Party / Designee in the export and physical transfer of the aircraft.

Outline of the Rules

Part 1: Definition

Part 2:  Registration & Cancellation of IDERA’s & CDCL. Deregistration Requests from Authorised Party and Designee

Part 3: Administrative Procedures

Schedule 1 – Template IDERA

Schedule 2  – Template CDCL

Schedule 3 – Fees

The consultation paper for the proposed Rules is athttp://www.infrastructure.gov.au/aviation/international/consultation_cape_town.aspx

The proposed rules will significantly affect aircraft finance and leasing transactions. Financiers and lessors will need to amend their standard terms to incorporate the IDERA and CDCL requirements, including the default provisions.

An issue identified by Carneys Lawyers, is proposed Rule 8(3)(b) requiring  CASA to “expeditiously co-operate with and assist the authorised party of the designee in the export and physical transfer of the protocol object from Australia”. It remains to be seen what exactly CASA will do to comply with this requirement.

Carneys Lawyers Aviation Law Team are continuing to review the proposed Rules and will be working closely with their clients to identify the impact they have their operations, and to voice any concerns and suggestions to the Department. Aircraft financiers, lessors and aircraft operators are encouraged to contact Shane Wallace at Carneys (swallace@carneys.com.au) for a discussion about how the Rules will affect their operations. Submissions on the proposed rules are due by 26 August 2014. Once finalised, it is expected the Rules will commence in about November or December 2014.

Shane Wallace, Associate

Aviation Team

swallace@carneys.com.au

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