About the Cape Town Convention
- The Convention on International Interests in Mobile Equipment (Cape Town Convention) is an international treaty adopted in 2001 to facilitate the financing and leasing of high-value mobile assets.
- It establishes a uniform legal framework for recognising and protecting the interests of creditors, lenders and lessors in mobile equipment.
- It aims to reduce risks for financiers, thereby making aircraft and other high-value assets easier to finance and lease.
- It was adopted at Cape Town, South Africa, on 16 November 2001 and entered into force on 1 March 2006.
- The Convention is supported by sector-specific protocols, including the Aircraft Protocol.
Major Objectives
- Legal Certainty: Establishes internationally recognised rights of creditors, lenders and lessors over mobile assets.
- Protection of Creditors: Provides remedies in case of default by borrowers or lessees.
- Reduced Financing Costs: Reduces financial risks for lenders, making asset financing and leasing more affordable.
- International Uniformity: Creates common rules for registration, priority of interests and enforcement across contracting countries.
Key Features and Provisions
- International Interest: Recognises security interests, leasing rights and conditional sale interests in specified mobile equipment.
- International Registry: Provides an electronic system to register interests and establish priority among competing claims.
- Creditor Remedies: Allows creditors to seek possession, control or recovery of assets in case of default, subject to the Convention and applicable declarations.
- Insolvency Protection: Provides rules governing the rights of creditors when a debtor becomes insolvent.
- Aircraft Protocol: Contains specific provisions for aircraft objects, including aircraft engines, airframes and helicopters.
India’s Position and Implementation
- Accession: India acceded to the Cape Town Convention and Aircraft Protocol in 2008.
- Domestic Legislation: Parliament enacted the Protection of Interests in Aircraft Objects Act, 2025, which came into force on 1 May 2025.
- DGCA: Designated as the Registry Authority responsible for registration and deregistration of aircraft objects.
- Creditor Protection: Provides legal remedies to creditors and lessors in cases of default, including recovery of aircraft objects.
- Overriding Effect: The Act prevails over inconsistent provisions of other laws.
- Jurisdiction: High Courts have jurisdiction over claims under the Convention.
Conclusion
The Cape Town Convention provides a uniform international legal framework for protecting interests in high-value mobile assets. Its implementation through the Protection of Interests in Aircraft Objects Act, 2025 strengthens India’s aviation financing framework and improves legal certainty for aircraft lessors and creditors.
| This concept has been mentioned in the following article: Bharatiya Vayuyan Niyam, 2026 |