India acceded to the Convention on International Interests in Mobile Equipment and the Protocol on Matters Specific to Aircraft Equipment (the Cape Town Convention) on 31 March 2008.
However, to date, the laws of India have not been fully aligned with the Cape Town Convention, and this has severely hampered the ability of creditors of Indian airlines to fully access the protections that should be afforded by the Cape Town Convention.
The issues befalling banks and leasing companies in repossessing their aircraft from defaulting Indian airlines have been highlighted by a number of high profile airline insolvencies over the years.
Whilst some efforts have been made by the Indian legislature, over the last fourteen years, to give full effect to the Cape Town Convention, India still needs underpinning legislation fully aligned with the Cape Town Convention in order to ensure that creditors' rights are fully protected in cases of insolvency and, ultimately, to enable Indian airlines to access lower lease rates and other benefits associated with the unequivocal implementation of the Cape Town Convention (such as OECD discounts).
India’s Ministry of Civil Aviation (MoCA) has, therefore, proposed a new law that will be consistent with the Cape Town Convention, thereby facilitating the repossession of aviation equipment and its export from India. The MoCA has asked for comments on the proposed legislation, called the Protection and Enforcement of Interests in Aircraft Objects Bill 2022, from all the stakeholders involved.
If implemented, the Bill should result in a growth in the aviation leasing and finance community's confidence in India, and the prospects for the Indian aviation industry more generally.
The Reed Smith aviation team will be keeping an eye on developments with interest!