International Interests in Mobile Equipment (Cape Town Convention) Act 2013

The Act directly affects any person or entity that holds or seeks to enforce an “international interest” in “aircraft objects” within the meaning of the Protocol. This includes:

• Financiers and lessors who take security over or lease airframes, aircraft engines or helicopters that satisfy the Protocol’s criteria (typically airframes of 5500 kg or more, engines of 1750 kg or more thrust, and helicopters of 3000 kg or more).
• Australian airlines and operators who borrow against or lease such equipment.
• Owners, buyers and sellers in the secondary aircraft market.
• Insolvency administrators, liquidators and deed administrators of Australian companies that operate aircraft subject to registered international interests.
• The Civil Aviation Safety Authority (CASA) and Airservices Australia, to the extent that their administrative actions intersect with de-registration and export remedies under the Protocol.
• Foreign creditors whose interests are registered in the International Registry established under the Convention.

Because the Act has extraterritorial operation (s 6), it also affects foreign parties whose aircraft are physically present in Australia or whose contractual arrangements are governed by Australian law. Conversely, Australian creditors can rely on the treaty’s remedies in any other Contracting State. The Crown is bound (s 4), so Commonwealth agencies that own or operate qualifying aircraft objects are subject to the same rules.

The Act does not directly regulate individuals in their personal capacity; its reach is commercial and institutional. However, directors and officers of corporate debtors may feel its effects indirectly when a creditor exercises self-help remedies under the Convention without first obtaining court leave.

The Act itself creates few standalone duties. Its key contribution is to elevate the rights and duties contained in the Convention and Protocol to the status of Australian law.

Under the incorporated treaty text, a creditor holding a registered international interest obtains:

• The right to take possession or control of the object upon default (Convention Article 8).
• The ability to procure de-registration and physical export of an aircraft (Protocol Article X and the “IDERA” mechanism).
• Priority over subsequently registered interests and over most unregistered interests (Convention Article 29).
• Protection in insolvency proceedings, including the ability to demand return of the aircraft after a prescribed “waiting period” (Protocol Article XI, Alternative A being the version adopted by Australia).

A debtor must cooperate in allowing these remedies and must not interfere with a creditor’s exercise of them. The Act’s supremacy clause (s 8) means that any provision of the Corporations Act 2001 (Cth), the Personal Property Securities Act 2009 (Cth) or State law that would otherwise impede these remedies is displaced to the extent of inconsistency.

The Act also confers procedural rights. Parties may apply to the Federal Court or a State or Territory Supreme Court for orders enforcing the treaty remedies (s 9). A declaration under Article 53 of the Convention cannot alter this domestic jurisdictional allocation (s 9(3)). Rule-making power under s 10 allows the Minister to prescribe forms, fees and procedural details that flesh out the practical exercise of these rights.

The Act contains no criminal offence provisions or civil penalty units. Enforcement occurs through the private remedies created by the Convention and Protocol, now enforceable as Australian law. A creditor may apply to an Australian court for orders compelling compliance, for damages, or for specific performance. Because the treaty remedies are self-executing in many respects, a creditor may lawfully take possession without prior judicial authorisation where this can be done without breach of the peace.

Section 10(2) permits regulations to prescribe fees for services connected with the Act or the treaty. These fees cannot amount to taxation (s 10(3)). Breach of any such fee obligation would be enforceable as a debt due to the Commonwealth.

In insolvency contexts, the Act’s supremacy clause allows a creditor to override the ordinary moratorium in s 440B or s 471B of the Corporations Act 2001 (Cth) once the waiting period under the chosen form of Article XI has expired. Failure by an administrator to hand over the aircraft object after that period can be met with an application for directions or compensation under the treaty rules as applied by s 7.

The Act is designed to sit atop the existing statute book. Its interaction with other legislation is governed by the express supremacy rule in s 8. That section subordinates every other Commonwealth law (except the Cape Town Act itself), and all State and Territory laws, to the Convention and Protocol.

The most significant interaction is with the Personal Property Securities Act 2009 (Cth). The Convention and Protocol create their own registration and priority system. Section 8 ensures that a registered international interest under the Cape Town regime takes priority over a PPSA security interest that is not also perfected in the International Registry. The interaction is further addressed in the Personal Property Securities Regulations 2010 (Cth), which carve out Cape Town interests from certain PPSA chapters.

In corporate insolvency, the Act displaces parts of the Corporations Act 2001 (Cth) that would otherwise prevent a secured creditor from enforcing its security during the “waiting period”. Once that period ends, the administrator must give possession in accordance with the treaty.

The Act also interacts with the Civil Aviation Act 1988 (Cth) and the Air Navigation Act 1920 (Cth). CASA is required to honour a valid Irrevocable Deregistration and Export Request Authorisation (IDERA) once the creditor becomes entitled to exercise remedies. The Convention therefore modifies the administrative discretion otherwise vested in CASA.

At common law, the Act’s supremacy clause prevents equitable doctrines or contractual arrangements that contradict the treaty from prevailing. Section 9(4) deems matters arising under the Convention or Protocol (as given force by s 7) not to be matters arising directly under a treaty for the purposes of s 38 of the Judiciary Act 1903. This preserves the Federal Court’s jurisdiction and prevents removal of matters into the High Court’s original jurisdiction on treaty grounds.

The statute has remained substantially unchanged since its enactment in 2013. The commencement of operative provisions was deferred until 1 September 2015 to coincide with the Convention’s entry into force for Australia. No amending Acts have altered the core structure.

The Minister has exercised the s 10 rule-making power on several occasions to prescribe procedural details, fees for International Registry-related services performed by the Australian designated entry point, and to align certain forms with the Protocol’s requirements. These rules are technical rather than substantive.

The absence of major legislative amendment reflects the self-contained nature of the treaty. Changes to the international regime are effected through diplomatic conferences that amend the Convention or Protocol themselves; once those amendments enter into force for Australia, s 3 automatically updates the definitions and, by extension, the content of Australian law. The Act therefore requires no domestic amendment to track treaty evolution.

Because the Act simply incorporates the treaty text, most litigation has concerned the interpretation and application of specific Convention or Protocol articles rather than the validity of the Act itself. Australian courts have accepted without challenge that s 7 validly gives the treaty the force of law and that s 8 operates to override inconsistent domestic legislation.

One area of judicial attention has been the interaction between Protocol Article XI (insolvency remedies) and the voluntary administration regime in Part 5.3A of the Corporations Act 2001 (Cth). Courts have confirmed that once the “waiting period” selected by Australia expires, the administrator’s power to retain the aircraft object ends, and the creditor may exercise de-registration and export rights. Attempts by administrators to argue that the Cape Town Act does not bind the Crown in right of a State have failed in light of the clear wording of s 4.

Controversy has occasionally arisen over the breadth of the supremacy clause. Academics and practitioners have questioned whether s 8 could theoretically override constitutional protections or fundamental common-law rights. To date, no court has been required to decide the outer limits of the clause. In practice, the Federal Court and State Supreme Courts have interpreted the treaty provisions consistently with Australia’s obligations under the Vienna Convention on the Law of Treaties, giving primacy to the treaty text while reading it harmoniously with the Cape Town Act’s procedural framework.

Section 9(3) has prevented Australia from making an Article 53 declaration that would have conferred exclusive jurisdiction on a single court; the current multi-court conferral has therefore been maintained.

Most practitioners assume the Cape Town regime only matters when an aircraft crosses borders. In fact, once Australia is a Contracting State, the treaty rules apply to every qualifying aircraft object whose debtor is situated in Australia at the time the international interest is created, even if the object never leaves Australian airspace (Convention Article 3). This “debtor location” rule catches many purely domestic financings.

Another common misunderstanding is that registration in the Australian Personal Property Securities Register satisfies the Convention. It does not. Priority under the treaty depends on registration in the International Registry in Dublin. A PPSR registration alone leaves the creditor exposed to a later-registered international interest.

The IDERA mechanism is irrevocable. Once lodged with CASA, the authority cannot be withdrawn without the creditor’s consent. Many lessees sign IDERAs at delivery without fully appreciating that they hand the lessor a “self-help” de-registration power that survives even a dispute over lease termination.

Section 8’s supremacy clause can produce surprising results in State-based chattel mortgage or hire-purchase legislation. A creditor who complies with the Convention’s default remedies will not be in breach of State consumer-protection statutes that would otherwise require notice or court leave. This displacement is not always obvious on the face of the State Acts.

Finally, the rule-making power in s 10(1)(c) is broader than many realise. It authorises rules that “carry out and give effect to the provisions of the Convention or the Protocol”. This has been used to prescribe detailed procedural steps for Article XIII applications that go beyond what the treaty text itself contains. Compliance professionals should check the latest Cape Town Convention Rules whenever advising on enforcement steps.

Compliance begins with identifying whether a transaction involves an “aircraft object” as defined in the Protocol. If it does, and the debtor is situated in Australia (or the object is otherwise within the Convention’s scope), the parties must:

1. Draft the security agreement or lease to contain the wording required by Convention Article 7 for the creation of an international interest.
2. Register that interest in the International Registry promptly. Registration must identify the object by its manufacturer’s serial number.
3. For operating leases and financings, obtain and lodge an IDERA with CASA at the time of registration or delivery.
4. Ensure that any subordination or priority agreement is also registered in the International Registry.
5. In financing documents, expressly select the remedies and declarations made by Australia (including Alternative A with a 60-day waiting period).
6. When a default occurs, follow the exact sequence set out in the Convention and Protocol rather than the general law of repossession. Self-help is permitted only where it can be exercised without breach of the peace.
7. In insolvency, monitor the expiry of the waiting period and be ready to apply to the Federal Court or relevant Supreme Court for any ancillary orders.
8. Pay any fees prescribed under the s 10 rules for registry services or CASA processing of IDERAs.

Legal opinions should routinely address Cape Town compliance. Where an opinion is required for an aircraft financing, it must confirm that the international interest has been validly created, that it has been registered, and that the chosen insolvency regime (Alternative A) will operate notwithstanding Part 5.3A of the Corporations Act 2001 (Cth).

Annual training for in-house counsel at airlines and lessors should cover the interplay between the Cape Town Act and the PPSA, because dual registration (International Registry plus PPSR) is often required to achieve complete protection. Finally, any amendment to an existing registered interest must itself be registered in the International Registry if it is to maintain priority. Failure to do so is one of the most frequent causes of loss of ranking.