Operating under the Cape Town Convention and Aircraft Protocol, the International Registry of Mobile Assets (IR) provides for the electronic registration and protection of ‘international interests’, with priority being determined on a “first-to-file” basis. This applies to aircraft objects – namely airframes capable of transporting at least 8 persons, including crew, or goods in excess of 2750 kilograms, helicopters capable of transporting at least 5 persons, including crew, or goods in excess of 450 kilograms, and aircraft engines that have at least 1750 lb of thrust or its equivalent (jet propulsion) or have at least 550 rated take-off shaft horsepower or its equivalent (turbine-powered or piston-powered). In addition to these size requirements the debtor, lessee, or seller, must be “situated” in a contracting state, which Canada is.
As with any other security interest, international interests must be registered in order to be perfected (as against the interests of all third parties). The aircraft or engine manufacturer’s name, the model designator, and the manufacturer’s serial number form the subject of each registration.
As the IR is monitored by the International Civil Aviation Organization and centralizes the recording of transactions, registration is considered best practice for purchasers, creditors, debtors, lessors, lessees, agents and others in protecting their financial and/or ownership interests in such an asset. For example, registering a contract of sale on the IR can provide a purchaser with priority against other validly granted, unregistered interests held by a creditor of the aircraft seller. Registration with the IR can also have a positive effect on resale values by providing a clearer picture of the ownership and title history. In order to demonstrate the priority of interests, the IR produces Priority Search Certificates, which provide a complete history of registrations upon searching against an aircraft or engine. Most registrations made on the IR are made on a consent basis. In other words, unlike PPSA registrations that can be made, a contract of sale or international interest-type registration require the other party to consent to the registration.
It is important to note that much consideration must be given to the formal requirements for an international interest and contract of sale. YYZlaw keeps current on these matters and will provide the necessary guidance required, as relevant to your transaction.
Transacting User Entity Accounts
The first step for entities seeking to register interests in aircraft assets on the International Registry (IR) is to have a valid Transacting User Entity (“TUE”) account established on the IR. Only a TUE can be a named party in a registration. An entity must apply to become an approved TUE by completing the required application, consisting of a confirmation of entitlement to act form and documents showing the due registration or existence of the entity. Each entity will need one administrator. The administrator may be an employee, attorney for or agent of the entity. All applications for approved TUE accounts are reviewed by the registry officials. Upon approval, the administrator of the TUE may register interests in aircraft assets on the IR. An administrator should be well versed on the duties associated with this appointment.
TUEs are valid for one year and, once established, the administrator manages the account by safeguarding its unique secure-access key. A TUE account is renewable each year, on notice, for a fee. However, it is not uncommon to allow the account to become dormant and reactivated on an as-needed basis. In this situation any existing registrations will crystalize and lay dormant until the account is reactivated. The timeframe to reactivate a TUE account varies from hours to a matter of days, depending on the IR’s workload. However, it is a necessary step to confirm both parties in any aircraft transaction are approved TUEs prior to a closing, where an international interest or contract of sale is to be registered.
In Canada, the only service provider dedicated to assisting companies with aviation transactions, including the registration and administration of TUE accounts on the IR, is EscroAir Canada Inc. EscroAir, while closely affiliated with YYZlaw, abides by self-imposed confidentiality and transparency obligations in order to maintain separation between itself, as escrow agent and YYZlaw, as aviation lawyers.
Different types of searches can be conducted on the International Registry.
An entity search will confirm whether the entity is a TUE and its status – such as approved, disabled or suspended. It is important to ensure, prior to filing an International Registry (IR) interest, that the TUE is in an approved status.
A Contracting State search will show which States have ratified or acceded to the Cape Town Convention and Aircraft Protocol and view the declarations and designations of the respective Contracting State or States.
An informational search, using only the aircraft object’s manufacturer’s serial number, will indicate which priority searches should be completed on a specific aircraft object and ensures that a priority search cannot be conducted without first completing the wider information search. These searches produce a listing of any aircraft object matching, in whole or in part, the serial number of the aircraft object identified in the pre-populated manufacturer’s list, as well as any aircraft object that has been the subject of a prior registration, including if a registration was made using the manufacturer’s list or by free-text. The search results provide a snapshot of those specific aircraft objects that are on the IR manufacturer’s list or have prior registrations. This information can then be used to obtain the appropriate priority search certificates.
A priority search is performed against the manufacturer’s name, generic model designation and serial number. A “priority search certificate”, issued in response to a priority search and provided by the IR, reflects the official records of the IR with regard to an aircraft object. The priority search certificate sets forth the information relating to any registrations against a particular aircraft object, together with the date and time such registration was made, or it will confirm that no such registration has been made with regard to such aircraft object. Any registrations with respect to an aircraft object will be listed in chronological order on the priority search certificate.
A search of airframe and engines in an aviation transaction should be conducted prior to a closing in order to disclose any existing registrations against the specific aircraft object, confirm any required discharges have been completed prior to closing, if required, and post-closing to confirm any new registrations have been completed and are searchable, thus establishing the intended priorities under the Cape Town Convention.
YYZlaw has years of experience assisting clients with all facets and functions of the IR, regularly assisting with forming and maintaining Transacting User Entity accounts, filing contracts of sale and filing or discharging registrations of international interests, as well as obtaining priority search certificates to assist purchase, sale, lease or financing transactions of aircraft and engines. Our assistance and guidance provide clients with the satisfaction that their assets are secure and at optimum value.