The Convention on International Interests in Mobile Equipment (“Cape Town Convention”) and Protocol to the Convention on International Interests in Mobile Equipment on Matters Specific to Aircraft Equipment (“Protocol”) were concluded in Cape Town on 16 November 2001, and entered into force on 1 March 2006. They are to be read and interpreted as one instrument.

Aiming to improve legal certainty in the aircraft business, the Cape Town Convention and the Protocol are designed to reduce risks for creditors and consequently, reducing the leasing costs of their borrowers. This should lead to granting more credit for the acquisition or leasing of more modern and efficient aircraft.

On 20 February 2007, Indonesia ratified the Cape Town Convention under Presidential Regulation No. 8 of 2007 (“PR 8/2007”), and applies all the provisions of Article X of the Protocol, which are related to Article 13 of the Cape Town Convention and supposedly, overcome several important issues related to "relief pending final determination". A creditor (lessor or chargor) is therefore legally entitled to "speedy relief" from a court under a certain court order pending the final ruling on the lawsuit.

Out of all the reliefs available, this advisory only discusses the legal issues associated with applying for relief in the form of the repossession of aircraft and only from the lessor’s perspective

Practical Legal Issues

As a result of ratifying the Cape Town Convention, Indonesian Law No. 1 of 2009 on Aviation (“Aviation Law”) acknowledges the eligibility of a creditor (lessor) to obtain “speedy” interim relief from the courts to, among other things, request the repossession of its aircraft from a defaulting debtor (see Article 13 of the Cape Town Convention jo. Article 79 of the Aviation Law jo. PR 8/2007) within 10 (ten) calendar days.

Despite Indonesia’s decision to apply Article X of the Protocol, several legal issues have been left unresolved by the Aviation Law which affects its enforceability in practice. The following issues under Article 79 (1) of the Aviation Law could hinder the enforceability of the clause.

Please read the complete advisory below.