Malaysia has acceded to the Cape Town Treaty and accompanying Protocol relating to aircraft. In addition to Malaysia, eight other countries have ratified or acceded to the Cape Town Treaty including Ethiopia, Ireland, Nigeria, Oman, Pakistan, Panama and the United States. With Malaysia’s accession, the treaty is set to go into effect March 1, 2006.
The treaty establishes 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.