Draft Protection and Enforcement of Interests in Aircraft Objects Bill, 2022

The Ministry of Civil Aviation has proposed a new law that will help international aircraft leasing companies to repossess and transfer planes out of India in case of a financial dispute with an Indian airline.

Background –

The proposed legislation comes more than 14 years after India acceded to Cape Town Convention.

Need of the Bill –

• India’s reputation in the aircraft leasing industry has taken a hit in the last decade to the point where the country’s airlines had to face higher lease charges, with many regional carriers even refused airplanes for rent.
• When Kingfisher Airlines filed for bankruptcy in 2012, leasing companies such as International Lease Finance Corp. (ILFC) and Germany’s DVB Bank faced many roadblocks in recovering their planes.
• Other companies filing petitions in Indian courts seeking de-registration of six Boeing 737 leased to SpiceJet in 2015 or the challenges faced in reclaiming aircraft when Jet Airways shut down in 2019 haven’t helped matters either.

About the bill –

• The Bill implements the provisions of the Convention on International Interests in Mobile Equipment and Protocol on Matters Specific to Aircraft Equipment which was adopted at a conference in Cape Town in 2001.
• These provide default remedies for the creditor and create a legal regime for disputes.
• Major Provisions in the Draft Bill –
  • • The proposed law provides remedies such as repossession of an aircraft object, or its sale or lease or collection of income from its use as well as de-registration and export of planes.
    • It also suggests remedies pending final adjudication of a claim as well as safeguards a debtor’s claim during insolvency proceedings against its Indian buyer.

About the Cape Town Convention & Protocol –

• The Convention on International Interests in Mobile Equipment was concluded in Cape Town in November 2001, as was the Protocol on Matters Specific to Aircraft Equipment.
• 83 countries, including India, have signed and ratified the Convention & the Protocol. India acceded to the Convention and the Protocol in March, 2008 which after a waiting period of three months became effective in July, 2008.
• Objective – The primary aim of the Convention and the Protocol is to resolve the problem of obtaining certain and opposable rights to high-value aviation assets, namely airframes, aircraft engines and helicopters which, by their nature, have no fixed location.
• The convention & the protocol was jointly adopted by International Civil Aviation Organisation (ICAO) and International Institute for the Unification of Private Law (UNIDROIT).
  • • ICAO, a specialised agency of the UN, changes the principles and techniques of international air navigation and fosters the planning and development of international air transport to ensure safe and orderly growth.
    • UNIDROIT is an intergovernmental organization whose objective is to harmonise international private law across countries through uniform rules, international conventions, and the production of model laws, sets of principles, guides and guidelines.