Guidance on the Application of the Cape Town Convention To Bermuda
Effective 1st 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. An international legal framework that is recognised in all Contracting States, the Convention 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 its own behalf and on behalf of Bermuda with the International Institute for the Unification of Private Law – UNIDROIT. The Convention’s extension to Bermuda means, for example, that lenders who provide finance to Bermuda companies can protect their interests in any relevant aircraft asset in accordance with the Convention by registering 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 with respect 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 an 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 eight persons or goods in excess of 2,750 kg, and helicopters carrying five or more persons.
Revoking an IDERA
To revoke an IDERA, the Authorised Party 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 on behalf of the Authorised Party, 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 appoint a Certified Designee who is authorised to request de-registration on behalf of the Authorised Party in the event of a default in repayments by the Registered Owner. This can be achieved 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, it must be removed prior to the recording of a new designation. Also, the Authorised Party can revoke the IDERA or remove the designation without notifying 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 notifying the Certified Designee. As soon as a designation is removed, the IDERA reverts to the Authorised Party.
IDERA De-registration Request
An IDERA may only be exercised by the Authorised Party, Certified Designee or their authorised signatories in the event of a default by the Registered Owner.
If, at the time of the IDERA de-registration request, a registered mortgage that was created prior to 1st January 2018 is currently entered in the Bermuda Register of Aircraft Mortgages, the mortgage must be discharged or the mortgagee must consent in writing prior to the de-registration of the aircraft.
If other parties are disputing whether an IDERA can be exercised, they must obtain a court order to prevent the Bermuda Aircraft Registry from de-registering the aircraft.
Although de-registration will normally be actioned as soon as possible, it may be delayed if an Export Certificate of Airworthiness is required as the aircraft must remain registered for the Certificate to be issued. It is therefore essential that the de-registration request be made only when the aircraft is ready to be de-registered.