On 13 May 2021, the Kyrgyz Republic deposited its instrument of accession to the Cape Town Convention1 and Aircraft Protocol2 (collectively, the “Treaty”) with UNIDROIT, the official treaty depositary. The Treaty will enter into force for Kyrgyzstan on 1 September 2021.3
The Cape Town Convention is designed to protect rights of owners and financiers in movable property, including aircraft and aircraft engines. As a result, lenders, banks, leasing companies and investors would be able to benefit from internationally recognized legal framework and standards for cross-border aircraft leasing and financing transactions. Borrowers and lessees (airlines) potentially should be able to better manage transaction risks, thus reducing costs in respect of Kyrgyz-registered aircraft or aircraft mortgaged by or leased to Kyrgyz entities.
More than 80 countries are now parties to the Treaty, including Kazakhstan, Russia, Ukraine and Uzbekistan.
The Cape Town Convention and Aircraft Protocol will come into force on 1 September 2021. The ratification law4 in respect of the Treaty was adopted earlier, on 5 August 2020, and became effective on 11 August 2020.5 But because the Kyrgyz Republic has not deposited its instrument of accession with UNIDROIT up until now, the country’s accession to the Treaty has not been complete pursuant to the procedures provided in the Treaty.
With the Kyrgyz Republic depositing a formal instrument on 13 May 2021, the Treaty will become effective on 1 September 2021 and should have direct effect in the Kyrgyz courts and be binding as a matter of national law
Declarations made by the Kyrgyz Republic
The Kyrgyz Republic has made certain declarations under the Treaty as summarized below. Parties to transactions to which the Treaty applies (e.g., contracts of sale, mortgages and aircraft leases) may rely on the Treaty provisions subject to these declarations. Even though such declarations are lender-friendly, it remains to be seen how they will be applied by local courts and authorities in practice.
It should be noted that the application of the Treaty will depend on the declarations made by the Kyrgyz Republic, as well as on how such declarations interplay with the applicable national laws. Certain declarations (e.g., on self-help remedies and IDERA) may be difficult to enforce in practice without further regulations and procedures implementing the Treaty provisions.
Declarations made by the Kyrgyz Republic in its accession include the following:
- Article 39.1(a) of the Convention: Certain categories of liens shall be deemed to be nonconsensual rights having priority without registration on the Treaty’s International Registry, including liens in favour of employees for unpaid wages, liens in favour of repairers of an object, liens in favour of local individuals (natural persons) and legal entities for harm inflicted to health, life and property, and liens in favour of the competent authority of the Kyrgyz Republic with respect to mandatory state social insurance payments.
- Article 53 of the Convention: Settlement of disputes relating to the Treaty shall be effected by the courts of the Kyrgyz Republic having jurisdiction to resolve the relevant dispute under national law.
- Article 54.2 of the Convention: Any remedies under the Treaty not expressed to require application to the court may be exercised out-of-court (i.e., self-help remedies shall be permitted).
- Article VIII of the Aircraft Protocol: Kyrgyzstan adopts the Protocol choice of law provisions enabling the parties to an agreement to agree on the law to govern their contractual rights and obligations.
- Article XII of the Aircraft Protocol: Kyrgyzstan applies Article XII of the Protocol under which Kyrgyz courts in accordance with Kyrgyz laws shall cooperate to the maximum extent possible with foreign courts and foreign insolvency administrators in carrying out insolvency remedies available to creditors under the Protocol.
- Article XIII of the Aircraft Protocol: Kyrgyzstan applies Article XIII of the Protocol introducing a new concept of an “irrevocable deregistration and export request authorization (IDERA).” As a result, an IDERA issued by a local airline/lessee should be recognized in Kyrgyzstan pursuant to the Treaty.
- Article X of the Aircraft Protocol: Kyrgyzstan applies the entirety of Article X of the Protocol, with the time period not exceeding 10 calendar days for the types of relief indicated in Articles 13.1(a), 3 2195819-v1\ALMDMS (b) and (c) of the Convention and 30 calendar days for the types of relief indicated in Articles 13.1(d) and (e) of the Convention.
- Article XXX(3) of the Aircraft Protocol: The Kyrgyz Republic applies the entirety of Alternative A of Article XI of the Protocol in the course of all insolvency proceedings. The waiting period for the purposes of Article XI of the Protocol shall be 60 calendar days.
Please reach out to Baker McKenzie contacts mentioned in this alert, or your usual Baker McKenzie contact, if you need further information about the Treaty and its application in the Kyrgyz Republic.
Please also refer to our previous legal alert on Uzbekistan’s accession to the Treaty available at https://insightplus.bakermckenzie.com/bm/industrials-manufacturing-transportation/uzbekistanaccedes-to-the-cape-town-convention-and-aircraft-protocol.
1 The Convention On International Interests in Mobile Equipment signed at Cape Town on 16 November 2001.
2 Protocol to the Convention On International Interests in Mobile Equipment on Matters Specific to Aircraft Equipment signed at Cape Town on 16 November 2001.
3 See https://www.unidroit.org/89-news-and-events/3094-cape-town-convention-and-aircraft-protocol-accession-by-the-kyrgyz-republic
4 Law of the Kyrgyz Republic dated 5 August 2020 No. 114 On Accession of the Kyrgyz Republic to the Convention On International Interests in Mobile Equipment and Protocol to the Convention On International Interests in Mobile Equipment On Matters Specific to Aircraft Equipment signed on 16 November 2001 at Cape Town.
5 The law became effective on the date of its official publication; the law was published in “Erkin Too” newspaper on 11 August 2020 No. 63.