Ireland to Adopt ‘Alternative A’ Insolvency Remedies Set Out in Cape Town Convention

Author:Mr John O'Connor and Gerry Thornton

The State Airports (Shannon Group) Act 2014 (the "Act") was signed into law on 27 July 2014. The Act is further evidence of the Irish government's commitment to the aviation finance and leasing sector and further bolsters Ireland's position as a centre of excellence in aviation.

The Act amends the existing International Interests in Mobile Equipment (Cape Town Treaty) Act 2005, to provide for the implementation of the insolvency regime set out in 'Alternative A' in Article XI of the Protocol to the Cape Town Convention, in respect of aircraft objects. This will replace Ireland's domestic insolvency laws with respect to aircraft objects, and will provide more security and certainty to creditors upon the occurrence of an insolvency related event of default.

'Alternative A' requires the insolvency administrator or debtor (airline/owner), by the end of the 'waiting period' or any earlier date the creditor (lessor or lender) would be entitled to possession of the aircraft object, to either:

give possession of the aircraft object to the lessor or lender; or cure all defaults other than a default constituted by insolvency proceedings and agree to perform all future obligations under the relevant agreements. The Act currently specifies a 'waiting period' of 60 days. The primary benefit of adopting 'Alternative A' is that it provides the lender/lessor and the airline/owner or the insolvency administrator with a clear deadline by which the aircraft object must be returned to the lender/lessor or retained by the debtor or airline or the insolvency administrator. The 60 day 'waiting period' is a significant...

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