On 12 October 2012 the Minister for Infrastructure and Transport announced the Government will sign the Convention on International Interests in Mobile Equipment (the Cape Town Convention) which creates a uniform international legal framework to protect investors in aircraft objects such as passenger airliners, helicopters and aircraft engines. As aircraft objects frequently move across borders, the rights and protection available to creditors may be subject to a variety of international laws. Where a debtor defaults on their loan or lease, creditors will likely have to undertake an exhaustive legal process to repossess their property, possibly involving a number of different jurisdictions. For this reason, creditors generally charge a premium for lending to protect themselves against the substantial risks and uncertainty involved. By signing the Cape Town Convention, the Australian aviation industry will have increased access to cheaper asset financing and sources of finance external to the local market. At the same time, the Cape Town Convention provides financiers with more certainty around Australia’s insolvency laws in relation to aircraft objects. A Regulation Impact Statement was prepared by the Department of Infrastructure and Transport and assessed as adequate by the Office of Best Practice Regulation.
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