On June 22, 2004, the Senate Foreign Relations Committee approved H.R. 4226 and the full House voted by voice vote to pass legislation implementing the Cape Town Convention and the Protocol on Matters Specific to Aircraft Equipment (Treaty Doc 108-10 or Cape Town Treaty).
The Cape Town Treaty, as it is sometimes referred to by virtue of its negotiation in Cape Town, South Africa in 2001, would establish an international legal framework for security and leasing interests in aircraft and would create an international registry to keep track of transactions involving planes, helicopters, and engines, as well as a set of regulations relating to payments, contracts, and bankruptcy.
Although the U.S. currently uses the proposed asset-based financing rules, this legal framework will be expanded to other signatories to the treaty. This will provide greater consistency and security for asset-based lenders, including aircraft financers. This should eliminate some of the risks associated with aircraft financing and, hopefully, expand the availability of aircraft financing for international transactions. The Senate is expected to ratify the treaty by the end of the year.