The Cape Town Convention and Its Relationship to Past and Current National Laws in the USA

Registration Issues

The Cape Town Convention awards priority to the international interest that is registered first, whether or not the creditor had actual knowledge of the existence of a pre-existing but unregistered interest.[1] As discussed above in Part I, the FTFOP rule under UCC Article 9, both before and after the USA became a Contracting State, is similar in effect to the Convention’s priority rule. However, in some situations under UCC Article 9 the rights of buyers and other non-secured party transferees would be affected by the existence or not of knowledge that the transfer violates the rights of a secured party.

Under USA federal law there exists a national registry, operated by the Federal Aviation Administration (FAA) in Oklahoma City, for the recordation of conveyances, leases, and instruments for security purposes affecting interests in airframes, aircraft engines, and helicopters.[2] This is an object-based registry—indexed and searchable based on the aircraft asset’s description (not unlike, for this purpose, the international registry under Cape Town). The recordation applies to actual transaction documents that are filed for recordation—bills of sale, mortgages, conditional sale (i.e., title reservation) agreements, leases, and the like. Before the Cape Town Convention entered into force recordation in the FAA registry was necessary for the validity of interests as against most third parties and USA federal law continues to so provide.[3]

Under USA federal law one can access the international registry only through the FAA as an entry point (except with respect to aircraft engines).[4] Moreover, access to the international registry through the FAA as an entry point is conditioned upon the filing for recordation of the transaction documents in the FAA registry in exactly the same fashion as was required before the entry into force of Cape Town. Access is further conditioned on the FAA’s authorization of an international registration.[5] Even though under Cape Town it is the international registration—not the filing for recordation of documents in the FAA registry—that controls issues of third-party effectiveness and priority, USA federal law requires compliance with both regimes. This structure was thought necessary to obtain the support and cooperation of the FAA and Oklahoma City-based interests (such as attorneys and title companies) in the process of obtaining USA ratification of Cape Town.

This redundant registration structure is difficult to justify based on the costs and meager (if any) benefits of the system. It should be reconsidered. It is understandable that the FAA would want to ensure a reliable system for maintaining a registry of ownership of aircraft for purposes of nationality registration.[6] But maintaining a USA federal registry for all transaction documents seems unwarranted given the presence and role of the international registry.

Security interests in railroad cars, locomotives, and other railroad rolling stock generally are governed by UCC Article 9. Leases of such assets are governed by UCC Article 2A. However, such assets are subject to a special federal law requiring the filing for recordation of transaction documents (e.g., mortgages, leases, conditional sale agreements, and the like) with the Surface Transportation Board registry as a condition for perfection.[7] Security interests in and leases of space assets are treated under USA law in general in the same manner as are rail equipment. However, space assets are not subject to any special registration system.

The International Registry under the Cape Town Convention is an object-based system based on registration (and searches) against an aircraft object (generally identified by manufacturer, model, and serial number) as opposed to another identifier such as a debtor’s name.[8] Moreover, it is a “notice filing” system, containing only limited information that provides notice to third parties that there may be an international interest that warrants further investigation.[9] In that respect the International Registry is similar in approach to the UCC Article 9 name-based notice filing system. However, it was a novel approach for aircraft equipment, and would be for rail equipment, which have been (and remain) subject to transactional document recordation systems under USA federal law, as described above.

  • [1] Convention art. 29(1), (2).
  • [2] 49 U.S.C. § 44107.
  • [3] 49 U.S.C. § 44108(a), (b).
  • [4] Convention art. 18(5) (protocol may provide for Contracting States to designate entry points);Aircraft Protocol art. XIX(1) (Contracting State may designate entry points), (2) (designation maypermit but may not compel use of entry points for aircraft engines).
  • [5] 49 U.S.C. § 44107(e)(3); 14 C.F.R. § 49.63).
  • [6] See Chicago Convention on International Civil Aviation (1944) art. 77(maintenance of nationalregistry).
  • [7] 49 U.S.C. § 11301; 14 C.F.R. §§ 1177.1-1177.5.
  • [8] Convention art. 18(1); Aircraft Protocol art. XX(1); Registry Regulations Section 5.3(c).
  • [9] Roy Goode, The Convention on International Interests in Mobile Equipment and Protocolthereto on Matters Specific to Aircraft Objects: Official Commentary 4 2.122 (3d ed. 2013).
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