Cape Town Convention Revisited.

The Cape Town Convention, an international treaty that affects many aircraft transactions (even those involving only parties located in the United States), came into effect on March 1, 2006, and the business aviation industry has now worked through most of the growing pains of adopting procedures to comply with this treaty. While this may appear to be old news, many individuals are still unaware of the requirements of the Cape Town Convention and how it impacts their aircraft transactions.

In general, the Cape Town Convention applies to certain identified aircraft objects, including (i) all aircraft type certificated to transport at least eight persons (including crew) or goods in excess of 2,750 kilograms, (ii) all helicopters type certificated to transport at least five persons (including crew) or goods in excess of 450 kilograms, and (iii) all aircraft engines capable of producing 550 horsepower or the equivalent (1,750 pounds of thrust). By way of example, both the airframe and engines of a King Air C-90 are aircraft objects subject to the Cape Town Convention.

If the Cape Town Convention is applicable to a transaction, the parties involved in either a sale transaction or a financing transaction must make filings with the FAA Aircraft Registry (as they have done historically) and, in addition, make registrations on the International Registry established under the Cape Town Convention. International registrations can be made with respect to contracts of sale, security agreements, conditional sale agreements, lease agreements, assignments and other types of transactions that impact aircraft objects covered by the Cape Town Convention. Even in a straightforward cash sale transaction involving an aircraft subject to the Cape Town Convention, it is highly recommended that the parties register the contract of sale on the International Registry, in addition to filing a bill of sale and aircraft registration application with the FAA Aircraft Registry. Likewise, for aircraft and engines subject to the Cape Town Convention, a lender must register its security interest with the International Registry in order to perfect its security interest, since the International Registry takes precedence over the FAA Aircraft Registry filings and the Uniform Commercial Code, as adopted by the various states, when determining the priority of liens.

In order to utilize the International Registry, the parties to the transaction (e.g., both the buyer and the seller or the borrower and the secured lender) must be registered as transaction user entities on the International Registry, due to the fact that registrations require the consent of both parties. Any of the aircraft title companies or aviation law firms located in Oklahoma City are available to assist with the process of registering as a transaction user entity. The registration process generally takes several days to accomplish, so the parties to a transaction should plan well in advance of the anticipated closing date to make certain that all parties are appropriately registered as transaction user entities prior to the closing.

Additional information about the Cape Town Convention may be found at www.internationalregistry.aero.

Jeffrey D. Peier is a business attorney with an emphasis in aviation law at Klenda, Mitchell, Austerman, & Zuercher, L.L.C., in Wichita, Kansas. He may be reached at 316.267.0331 or .

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