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25 March 2020
The Cape Town Convention on International Interests in Mobile Equipment, which was concluded in Cape Town on 16 November 2001, came into force in the United Kingdom on 1 November 2015. Following ratification, the United Kingdom made a declaration under Article 52 of the convention extending its application to Bermuda. The convention came into force in Bermuda on 1 January 2018.
As a result of the convention coming into force, leasing companies, owners, lenders and other parties that deal with Bermudian entities participating in aircraft transactions and/or aircraft registered in Bermuda may opt to take the additional steps necessary to obtain the protections conferred by the convention.
The Bermuda International Interests in Mobile Equipment (Cape Town Convention) Act 2016 (the Cape Town Convention Act) gives effect to the Cape Town Convention in Bermuda and came into force along with the convention on 1 January 2018.
As well as giving the force of law in Bermuda to the entire Cape Town treaty (ie, the convention, the Aircraft Protocol and the declarations made by the United Kingdom thereunder) and recognising the international interest provided under the convention, the Cape Town Convention Act provides that the Cape Town Convention prevails over any other act or statutory instrument of Bermuda that conflicts with the convention.
Bermuda's constitutional status means that it is not itself a contracting state within the meaning of the Cape Town Convention; instead, it is considered a 'territorial unit' of the United Kingdom, which is a contracting state. Article 52(5) of the convention and Article XXIX(5) of the Aircraft Protocol provide that a 'debtor' (eg, a lessee under a lease or the chargor under a security agreement) incorporated in a territorial unit such as Bermuda is considered to be situated in a contracting state for all purposes of the convention.
Article 52 of the Cape Town Convention provides that a contracting state may make declarations in respect of its territorial units that are different from the declarations made regarding that contracting state itself and/or the declarations made regarding any other territorial unit of that state.
The United Kingdom has made a series of declarations with respect to Bermuda, including the following:
At the time of writing, the United Kingdom has made no declarations applicable to Bermuda under, among others, the following provisions:
The extension of the Cape Town Convention to Bermuda means that a Bermuda special purpose vehicle (SPV) can now be used for transactions where the parties require the convention to have the force of law in the SPV's jurisdiction of incorporation. This has undoubtedly provided greater comfort to aircraft financiers and provided an additional reason for Bermuda to be the jurisdiction of choice for the registration and financing of aircraft.
For further information on this topic please contact Gavin Woods at Carey Olsen Bermuda by telephone (+1 441 542 4500) or email (firstname.lastname@example.org). The Carey Olsen Bermuda website can be accessed at www.careyolsen.com.
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