Irish court grants Order to discharge International Registry registrations following novel application of Article 44(1) Cape Town Convention

Background

Our client, a US aircraft lessor, had contracted to sell an aircraft and related engines (the Aircraft). However, the purchaser indicated that it would not complete the purchase, unless a series of international interests registered in the International Registry against the Aircraft, in respect of a long expired sublease, were discharged. This presented our client with a difficult practical and legal scenario.

The Problem?

This presented our client with a difficult practical and legal scenario:

1: Our client was neither the "creditor" nor the "debtor" in respect of the international interests and accordingly had no right itself to discharge the registration of the international interests under the Cape Town Convention;

2: The sublessor of the Aircraft (being the "creditor" and, as such, the holder of the right to discharge the registration of the international interests) had ceased to exist having been dissolved some years previously;

3: The sublessee of the Aircraft (being the "debtor") in the short time available was not willing to go through the established mechanism to discharge the registration by issuing a demand pursuant to Article 25(4) and relying on Article 44(2) of the Cape Town Convention to seek an Order of the Irish Court directing the Registrar to discharge the registrations;

4: Our client had no legal basis to compel the sublessee to co-operate to obtain an order through the established mechanism; and     

5: There was no order of any court having jurisdiction under the Cape Town Convention in relation to the discharge of the registrations such that the Irish Court's jurisdiction under Article 44(3) of the Cape Town Convention could be relied on.

The Solution

To address the issue, our client, adopting a broad interpretation of the jurisdiction of the Irish courts under Article 44(1) of the Cape Town Convention, brought a novel application against the Registrar of the International Registry (the Registrar) seeking an Order pursuant to Article 44(1) of the Cape Town Convention directing the Registrar to discharge the registration of the international interests. Article 44(1) provides:-

"The courts of the place in which the Registrar has its centre of administration shall have exclusive jurisdiction to award damages or make orders against the Registrar."

While the Irish Courts in previous cases involving discharge of registrations of non-consensual liens, have demonstrated a willingness to assume jurisdiction to make an order to discharge registration of international interests, this was the first case where the international interests were validly created and registered international interests which had expired when the sublease expired and where the holder of the right to discharge the registrations of the international interests had ceased to exist and the debtor was unwilling to co-operate with the owner to follow the more usual procedure which would have enabled the matter to fall squarely within the Irish Court's jurisdiction under Article 44(2) of the Cape Town Convention.  Accordingly, there was some uncertainty as to whether the Irish Court would accept our client's broad interpretation of Article 44(1) to assume jurisdiction to make an Order, notwithstanding that neither Articles 44(2) nor 44(3) were applicable. If the Court did not assume jurisdiction, our client would not be in a position to sell the Aircraft free of the international interests so there was a lot at stake for our client. 

On 15 May 2017, the Irish Commercial Court, recognising that the discharge of the registrations could not be made otherwise than by the Registrar pursuant to an order of the Irish Court, granted the Order sought requiring the Registrar to effect the discharge of the relevant registrations as soon as practicable upon the making of the Order. 

The Court did not hand down a formal written judgment setting out the basis on which it was prepared to take a broad interpretation of Article 44(1) but we are strongly of the view that our positive engagement with the Registrar in advance of bringing the application and the fact that the Registrar had no objection to the Order may have been persuasive in this regard.

Costs

The parties having agreed to bear their own costs, the Commercial Court made no order as to costs. 

Timing

The matter was concluded within 8 working days from the filing of the substantive papers on 8 May to receipt of confirmation on 16 May 2017 that the Registrar had effected the discharges in compliance with the Order. As the application was uncontested the Commercial Court was happy to make its final Order at the initial directions hearing. In the case of a contested application, a separate date for the substantive hearing would have been allocated resulting in a longer process.

Comment

This decision, and the speed with which it was made, demonstrates again that the Irish Commercial Court appreciates the commercial realities of aviation transactions involving the International Registry and is prepared to be flexible in giving effect to the objective and spirit of the Cape Town Convention to facilitate efficient aircraft sales, financing and leasing.

If you have any questions or would like to discuss anything in this update, please contact any member of the A&L Goodbody Aviation Finance Team. 

Date Published: 29 May 2017