The Irish Government has signed an Order giving the Cape Town Convention Alternative A insolvency remedy force of law in Ireland.

The Cape Town Convention creates an international uniform body of law applicable to interests in aircraft assets for the protection of financiers, lessors and conditional sellers and to establish basic remedies available to them under agreements relating to the aircraft assets.

The Irish Minister for Transport, Tourism and Sport, Shane Ross TD ("the Minister"), announced on 10 May 2017 that the Government has signed an Order pursuant to the State Airports (Shannon Group) Act 2014 implementing the provisions of “Alternative A” of the Aircraft Protocol to the Cape Town Convention on International Interests in Mobile Equipment into Irish law.

The Irish Government has confirmed that the long-heralded Order to give effect to the “Alternative A” insolvency provisions of the Aircraft Protocol to the Cape Town Convention has been signed. While the Order has not yet been published, the Government announcement, made on 10 May 2017, states that the change in law has immediate effect.

Background

Alternative A of the Cape Town Convention [1] now has the force of law in Ireland, following signing of an Order by the Irish Government on 10 May 2017.

The Cape Town Convention was designed to establish a uniform set of rules to provide greater certainty and predictability around the protection, prioritisation and enforcement of rights in aircraft and aircraft engines. The Convention has a commercial objective, namely to facilitate efficient forms of asset-based financing.

Alternative A

Introduction

The Irish government has signed an order pursuant to the State Airports (Shannon Group) Act 2014 (the "Order") giving immediate legal effect to the "Alternative A" insolvency provisions ("Alternative A") of the Cape Town Convention on International Interests in Mobile Equipment (the "Cape Town Convention") and the associated Aircraft Protocol (the "Protocol").

In positive news for financiers and lenders, the Irish Government has signed an order which gives immediate effect to the “Alternative A” insolvency provisions of the Cape Town Convention.

In a High Court decision of 22 May 2017 Baker J rejected a proposal by a secured lender to write down a portion of a debtor couple's mortgage debt and warehouse half of the debt as future repayment of the warehoused part of the loan was not predicated on an ability to repay. Thus, the proposal was capable of creating circumstances amounting to insolvency at the end of the mortgage term in approximately 23 years.

Facts

In a significant judgment, the High Court has held that there is no bar on a personal insolvency arrangement including a split-mortgage. The court also held that while a Personal Insolvency Practitioner is required to have regard to a creditor’s proposed solution for resolution of mortgage debt (eg a split-mortgage), the PIP will not be acting unreasonably by failing to adopt that solution and instead adopting another reasonable solution (eg debt write-down).

The Court of Appeal has allowed an appeal by the Edward Holdings group of companies against a decision of O’Connor J in the High Court refusing to appoint an examiner to four of the seven group companies in respect of which an examiner was sought to be appointed. The group, which is controlled by Gerry Barrett, owns, amongst other assets, the Meyrick and G hotels in Galway.

Baker J in the High Court has given three recent judgments in matters concerning Section 115A(9) of the Personal Insolvency Acts 2012 – 2015 (the Acts). This Section gives a Court power to review and approve a Personal Insolvency Application (PIA) rejected at a meeting of creditors.

Re JD (a debtor) [2017] IEHC 119, High Court, 21 February 2017