On 25 June 2019, the Icelandic Parliament enacted a law enabling the government to ratify the Convention on International Interests in Mobile Equipment (“Convention”) and the Protocol on Matters Specific to Aircraft Equipment (“Aircraft Protocol”). The Icelandic Government recently finalised the ratification process and the Convention and Aircraft Protocol took effect on 1 October 2020. Simultaneously, the main provisions of the implementing Act entered into force and will take precedence over pre-existing incompatible Icelandic legislation.
In simple terms, the Convention and Aircraft Protocol concern the creation of so-called international interests in aircraft and other aircraft objects and the registration of such international interests in the International Register, which is an on-line registry, exclusively accessible on the Internet. Certain security interests, defined as international interests, having the required nexus to Iceland, will qualify for registration in the International Registry. The International Register is an important novelty in securing creditor interests in aircraft equipment, and will replace the older Register of Rights in Aircraft insofar as concerns rights covered by the Convention and Aircraft Protocol.
It follows from the entry into force of the Convention and Aircraft Protocol that owners of Icelandic registered aircraft can now grant an irrevocable deregistration and export request authorisation (IDERA) to a creditor and file the same with the Icelandic Transport Authority. In insolvency matters, Iceland makes the Alternative A-declaration with a waiting period of 60 days.
Finally, Iceland makes a declaration under Article 39.1.b of the Convention so that the authority of airport operators to prevent the departure of aircraft to secure the payment of outstanding debts of the operator remains in place. Therefore, the uncertainty revolving around the extent of that detention right is due to continue.
Iceland’s membership of the Cape Town Convention is an important step and will be welcomed by Icelandic airlines. It is to be expected that their access to credit will increase while the cost of funds may go down.
For further information please contact: Erlendur Gislason, Partner or Arnar Sveinn Hardarson, Associate.