Guidance on the Application of the Cape Town Convention To Bermuda
Effective 1 January 2018, the Cape Town Convention and the related Protocol (Convention) came into force pursuant to the Bermuda International Interests in Mobile Equipment (Cape Town Convention) Act 2016. The Convention is an international legal framework (recognised in all Contracting States). It enables interested parties to protect and recover their mobile assets with greater certainty and ease by creating an international registry.
Bermuda is entitled to recognition as a territorial unit of a state that is a party to the Convention (Contracting State) via declarations deposited by the United Kingdom on behalf of itself and Bermuda with the International Institute for the Unification of Private Law – UNIDROIT. The Convention’s extension to Bermuda will, for example, allow lenders who provide finance to Bermuda companies to protect their interests in any relevant aircraft asset in accordance with the Convention by way of registration of that interest on the international registry (IR).
In accordance with the Convention, an international interest may be registered on the IR if either (a) the aircraft is in a registered Contracting State or (b) the debtor is situated in a Contracting State. Therefore, the interests of a Bermuda entity under applicable transaction documentation or a Bermuda registered aircraft can be registered as an international interest on the IR.
In relation to the Bermuda Aircraft Registry, the main impact of the convention is the ability of the Registered Owner to request an “Irrevocable De-registration and Export Request Authorisation” (IDERA) over an eligible aircraft. Once an IDERA is recorded, the party that has been declared by the registered owner as the “Authorised Party” or a “Certified Designee” will be the only parties with the right to de-register and export the aircraft.
Only one IDERA can be recorded in relation to an aircraft at any one time.
“Authorised Party” an entity or person in favour of whom an IDERA has been issued.
“Certified Designee” an entity or person named in a Designation as the certified designee under a IDERA.
“Registered Owner” the person in whose name the aircraft is registered in accordance with the AN(OT)O 2014 (as amended).
“Designation” a designation made by the authorised party using the form detailed in the IDERA designation process.
“Convention” Convention on International Interests in Mobile Equipment (Cape Town Convention).
Recording an IDERA
For an IDERA to be recorded with the BCAA, the following prerequisites must be satisfied:
It must be made in relation to an “International Interest” which was created on or after 1st January 2018 and is registered at the International Registry of Mobile Assets.
It must not be made in connection with a pre-existing right or interest, which retains the priority it enjoyed under the law of Bermuda before 1st January 2018 (The effective date of the regulations).
It must be made in relation to an aircraft that is covered by the convention and protocol; aircraft (other than helicopters) which can carry at least 8 persons or goods in excess of 2,750 kg, and helicopters carrying 5 or more persons.
Revoking an IDERA
To revoke an IDERA the Authorised Party of an IDERA or their authorised signatory must complete and sign the “Revocation of an IDERA” application. Please note that when a designation has been made, the Authorised Party can revoke the IDERA without reference to the Certified Designee. Also, If the application has been signed by an authorised signatory, then a copy of the power of attorney document must be provided with the application.
Recording a Certified Designee
Once an IDERA has been recorded, the Authorised Party may wish to record a Certified Designee who is authorised to request deregistration on behalf of the Authorised Party in the event of a default in repayments by the Registered Owner by submitting a Certified Designee application. Please note that there can only be one designation in place at any one time. If an existing designation is in place this must be removed prior to the recording of the new designation. Also, the Authorised Party can revoke the IDERA or remove the designation without reference to the Certified Designee.
Removing a Certified Designee
The Authorised Party, Certified Designee or their authorised signatories can remove an existing designation by submitting a Request to Remove a Designation on an IDERA application. Please note that the Authorised Party can remove the designation without reference to the Certified Designee. As soon as a designation is removed the IDERA reverts to the Authorised Party.
IDERA Deregistration Request
An IDERA may only be exercised in the event of a default by the Registered Owner, by the Authorised Party, Certified Designee or their authorised signatories.
If, at the time of the IDERA deregistration request, a registered mortgage is currently entered in the Bermuda Register of Aircraft Mortgages that was created prior to 1 January 2018, the mortgage must be discharged or the mortgagee must consent in writing prior to the deregistration of the aircraft.
If a registered mortgage is currently entered on the Bermuda Register of Aircraft Mortgages that was created after 1 January 2018, consent of the mortgagee (in terms of the Bermuda Register of Aircraft Mortgages) is NOT required. Also, consent of the Registered Owner or other party on the Bermuda Registry’s registration records is NOT required.
If other parties are disputing whether an IDERA can be exercised, they must obtain a court order to prevent the Bermuda Aircraft Registry from deregistering the aircraft.
Although deregistration will normally be actioned as soon as possible, this may be delayed if an Export Certificate of Airworthiness is required as the aircraft must remain registered in order for the Export C of A to be issued. It is therefore essential that the deregistration request be made only when the aircraft is ready for deregistration.