Lenders or creditors taking security in assets relating to Aircraft Objects (described further below) need to understand the framework of the International Registry of Mobile Assets (the “Registry”). Below is a brief outline of this framework and the security a lender may expect to receive in Aircraft Objects.

International Registry of Mobile Assets

The Registry is an asset-based international registry system that allows individuals and organizations to register and search financial interest in Aircraft Objects by their serial number. The IR operates under the legal framework of the November 16, 2001 Cape Town Convention and Protocol (the “Convention”). The Convention was adopted by Canada and a number its provinces, including Saskatchewan, and came into effect on April 1, 2013.  It is important to note that not all countries have signed onto the Convention and information contained in the Registry may be incomplete or non-existent when dealing with Aircraft Objects in a non-signatory state.

The main objective of the Convention is to facilitate the efficient financing and leasing of Aircraft Objects by creating a single international registry system whereby parties (current owners, perspective buyers, lenders, etc.) may confidently rely on the security interests registered against such Aircraft Objects. The international interests created by the IR are recognized by signatory states with respect to priority matters and such registrations in the Registry will have priority over similar registrations made in provincial registries, such as the Saskatchewan Personal Property Registry, even if such provincial registrations pre-date the date of registration in the Registry.  The Convention further provides secured lenders with a range of basic default remedies and speedy interim relief options in an effort to facilitate orderly and efficient enforcement of security.

Given the specific remedies offered by the Convention, lenders should consider tailoring security agreements, and potentially other security documents, to account for these enforcement remedies along with other matters specific to Aircraft Objects. It can also be helpful to explicitly provide for the Convention’s remedies in other agreements as well, such as a lease of Aircraft Objects, when such agreements may form part of the security to be granted by a debtor.

Not all assets used in the aviation industries are captured by the Convention. Aircraft Objects must meet certain size or power minimums. The following Aircraft Objects are captured by the Convention:

1. Airframe means airframes (other than those used in military, customs or police services) that, when appropriate aircraft engines are installed thereon, are type certified by the competent aviation authority to transport:

1. at least eight (8) persons including crew; or
2. goods in excess of 2750 kilograms, together with all installed, incorporated or attached accessories, parts and equipment (other than aircraft engines), and all data, manuals and records relating thereto,

2. Helicopters means heavier-than-air machines (other than those used in military, customs or police services) supported in flight chiefly by the reactions of the air on one or more power-driven rotors on substantially vertical axes and which are type certified by the competent aviation authority to transport:

1. at least five (5) persons including crew; or
2. goods in excess of 450 kilograms, together with all installed, incorporated or attached accessories, parts and equipment (including rotors), and all data, manuals and records relating thereto,

3. Aircraft Engines means aircraft engines (other than those used in military, customs or police services) powered by jet propulsion or turbine or piston technology and:

1. in the case of jet propulsion aircraft engines, have at least 1750 lb of thrust or its equivalent, and
2. in the case of turbine-powered or piston-powered aircraft engines, have at least 550 rated take-off shaft horsepower or its equivalent, together with all modules and other installed, incorporated or attached accessories, parts and equipment and all data, manuals and records relating thereto.

Individuals or organizations that wish to perform registrations, including lenders taking security against Aircraft Objects, in the IR will need to become Transaction User Entities (“TUE”). The TUE will need to further appoint an administrator that will be authorized to perform registrations on behalf of the TUE. While all registrations on behalf of the TUE will need to be performed by the administrator, an administrator can provide one-off authorizations to allow another entity to perform registrations on behalf of the TUE. This may be convenient in a transaction involving an owner of the Aircraft Objects, perspective purchaser of such objects and lender that are all represented by a different administrator.

Personal Property Security Registries

As stated above, registration in the Registry will defeat or have priority over registrations in provincial personal property registries where the Convention applies. However, it is common for lenders to continue to register security interests against debtors, including serial numbered goods such as Aircraft Objects, in provincial registries. While it can be somewhat cumbersome for a seller or vendor to deal with multiple jurisdictions for the same Aircraft Object, it is important to search all provincial registries in which these Aircrafts Objects are operating in as provincial registrations will govern priority in the absence of an international registration in the Registry.

IDERAs

An IDERA (Irrevocable De-Registration and Export Request Authorization) is another Convention based security mechanism that can provide additional security to a lender.  An IDERA can be filed with Transport Canada which will prevent anyone but the authorized holder (typically a lender) from deregistering the Aircraft (Airframes and Helicopters) with Transport Canada.  It provides lenders with the assurance that Transport Canada will cooperate with the holder if it requests the deregistration of the Aircraft.  In order the revoke the IDERA, the holder must provide written notice to Transport Canada of such revocation. To note, multiple IDERAs cannot be filed with Transport Canada on the same Aircraft.

Conclusion

The above is a very brief explanation on the framework of International Registry of Mobile Assets and the security a lender may expect to receive when taking a security interest in Aircraft Objects. Our legal team at Robertson Stromberg LLP would be happy to discuss these matters in further detail or any questions you may have with respect to secured lending involving Aircraft Objects.