Cape Town Convention

Syllabus: GS2/ Bills & treaties 

In Context

• The Rajya Sabha passed ‘The Protection of Interests in Aircraft Objects Bill, 2025‘, a landmark legislation aimed at giving legal force to international treaties governing aviation finance.
  • It seeks to implement the Cape Town Convention and Aircraft Protocol within the Indian legal system.

What Is the Cape Town Convention?

• About: 
  • Adopted in 2001, the Cape Town Convention on International Interests in Mobile Equipment and its Aircraft Protocol were designed to create a uniform legal framework to facilitate asset-based financing and leasing of high-value mobile equipment like aircraft, helicopters & aircraft engines.
• Objectives of the Convention: 
  • Safeguard the rights of lessors and creditors
  • Provide legal remedies in cases of default
  • Reduce cross-border legal complexities
  • Enable quick repossession and deregistration of aircraft in case of payment failures
• Ratification:
  • India ratified the Convention in 2007, but until now, had no domestic legislation to operationalize its provisions.

Protection of Interests in Aircraft Objects Bill, 2025

• Key Provisions of the Bill:
  • Legal Enforceability: Grants statutory recognition to the Cape Town Convention and Protocol in India.
  • Creditor Remedies: In case of default, allows creditors or lessors to reclaim possession of aircraft within two months or a mutually agreed period.
  • DGCA as Domestic Registry: Designates the Directorate General of Civil Aviation (DGCA) as the domestic registry for aircraft-related international interests and dues.
  • Mandatory Reporting: Airlines must report dues to lessors on a per-aircraft basis.
    • Lessors must inform DGCA about their operations and interests in India.
• Clarity in Bankruptcy Scenarios: Offers clearer protections to lessors in situations where airlines become insolvent.

Impact and Benefits

• The legislation is expected to:
  • Reduce leasing costs by 8–10%
  • Encourage global leasing firms to operate from or partner with India
  • Lower airfares over time due to more affordable aircraft financing

Source: IE