Martin Cullen (Waterford, Fianna Fail)

I move: "That the Bill be now read a Second Time."

The purpose of the Cape Town Convention is to make it easier to finance the purchase of aircraft. There are two parts to the convention. The convention itself provides a general framework for an international legal basis for financing moveable assets. It is accompanied by a protocol containing more specific arrangements for aircraft assets. It is envisaged other protocols will be developed to deal with railway rolling stock and space assets, but these are not dealt with in the Bill. The Schedules contain the text of the convention and of the protocol relating to aircraft objects. For convenience, when I refer to the convention, I will also be referring to the aircraft protocol.

Aircraft are expensive items, even when bought second hand. It is a rare occasion that an airline can afford to acquire additional aircraft without borrowing. However, because aircraft move between countries, it is not easy to borrow for an aircraft as for industrial or commercial property. In the case of a building or a plot of land, the bank lending the money for its purchase will always know where the property is situated and what law applies in connection with a lease or mortgage on the property.

The purpose of the Cape Town Convention is to create a uniform international legal framework for loans and leases for aircraft so an aircraft can be the asset securing the loan. This framework will provide lending institutions with stability and certainty about their ability to repossess aircraft that are subject to loans or leases if the borrower fails to make the contractual payments. If, at the time of the default on the loan payments, the aircraft concerned is in any country that has ratified the convention, the courts of that country will apply the rules of the convention to determine who may take possession of the aircraft. By reducing the risk for lending institutions, the convention will enable lending rates to be reduced.

This will obviously have benefits for airlines and, ultimately, for passengers. It will be of particular benefit to the less developed countries where access to large-scale finance is more difficult. As a concrete example of this, the US Government's Export-Import Bank has offered reduced interest rates in respect of loans to airlines in countries that have ratified the convention.

An important part of the convention is the creation of the international registry. Its purpose is to record the existence of loans and leases covered by the convention and to establish priority between them on a first come, first served basis. The registry will operate over the Internet on a 24 hour, seven day a week basis. To gain the protection of the convention, a loan or lease must be recorded in the registry. If two or more loans for the same aircraft exist, which is quite common, the loan registered first will have priority over later registrations. Members of the public, as well as those in the aviation and financing industries, will be able to search the registry to discover if loans are recorded for any particular aircraft. Only appropriately authorised users will be able to add or change information in the registry.

A substantial number of the world's aircraft leasing and financing companies are located in Ireland. In addition to direct employment in those firms, their location in Ireland has resulted in a considerable volume of high-profile work for Irish legal and accounting firms. My Department has supported this project for several years. At an early stage we made it clear we were anxious to have the registry located in Ireland to underscore our long-standing commitment to international aviation and to support aircraft financing activity in Ireland. My Department participated in the preparatory work leading up to the diplomatic conference in Cape Town in November 2001 where the convention was adopted.

With the valuable assistance of senior Land Registry officials, my Department contributed to the work of the international registry task force, established to define the role and operation of the registry. One meeting of the task force was held in Dublin Castle in January 2000. It was decided at an early stage that a competition would be held to select the operator of the registry to ensure its efficient operation. It was held by the International Civil Aviation Organisation in the first half of 2004. I was delighted when an Irish company, Aviareto, was unanimously selected as the winner at an international conference in Montreal in May last year. Other bids came from Canada, Singapore and Spain.

Aviareto is a small PPP project between my Department and SITA, a major international company owned by over 700 aviation companies worldwide. It is the world's leading provider of global information and telecommunications solutions to the air transport and related industries. It has offices in Letterkenny and Dublin, employing 60 people in Ireland. The company recently announced the expansion of its activities in Letterkenny, which will employ more than 120 additional staff. Aviareto will be a small employer with probably fewer than ten staff and will be based at SITA's Dún Laoghaire offices.

The convention will come into force when it has been ratified or acceded to by eight countries. So far, there have been six ratifications and accessions by Panama, Ethiopia, Nigeria, the United States, Pakistan and Oman. Due to Ireland's long-standing support for this project, and especially because Aviareto was selected to operate the registry, it is my ambition for Ireland to be one of the first eight ratifying countries, and I am sure the House will support me in this.

The registry will not take over the role of the Irish Aviation Authority for registering the nationality of Irish aircraft or regulating aviation safety. It will only be concerned with recording the existence of leases and loans for aircraft. It will do so for aircraft throughout the world, not just for Irish aircraft. When considering the Bill, it is important to note there is no obligation to use the registry or to make use of the convention. The Bill will not impose changes on people who do not wish to take advantage of it.

Aircraft financing involves large sums of money. All the parties to a loan or lease will have professional legal and financial advisers. Consequently, we can be satisfied all users of the registry and the convention will do so on the basis of carefully considered decisions. It is also important to note the convention will not affect the status of financial interests where the parties choose not to register them. It will not affect cases where the financial interest was created before the convention comes into force in the relevant country, even if the interest is subsequently included in the registry.

This is a short Bill. Most of the text is contained in the Schedules, containing the convention and protocol. Sections 1 to 3, inclusive, contain standard provisions in legislation such as the Short Title, purpose of the Act and interpretations. Section 4 provides that the convention and protocol will have the force of law in Ireland. The convention and protocol will only apply where people have chosen to take advantage of it.

Section 5 empowers the Government to make various declarations that are permitted under the convention and protocol. These allow a certain amount of tailoring to take account of national circumstances. As the convention has been formulated in a way that closely reflects common law legal systems, such as we have in Ireland, the declarations are primarily for the benefit of countries with other legal systems.

Section 6 contains standard provisions in connection with making orders, such as the inclusion of consequential provisions and specification of when an order takes effect. Section 7 specifies that the High Court is the appropriate court. Under the convention, disputes involving the registry must be heard in the Irish courts because the registry is based here.

Section 8 requires courts to take notice of the convention and protocol. Section 9 requires that proceedings for damages must take account of compliance with the relevant articles of the convention. Because the registry will be a computer-based system, it is important for users to comply with its requirements if they wish to have its protection. It was never intended that the registry would have responsibility for checking the quality or accuracy of the information placed in the database, which is the responsibility of the users. The registry will be responsible to ensure that no errors are introduced while the data is stored in the database.

Section 10 empowers the Minister to subscribe for shares in the registry company, Aviareto, to an amount not exceeding €40,000. The Minister's shareholding will be an important indication of Irish support for the convention and protocol as well as the registry company. Section 11 prohibits a court from making an order that would prevent the registry from providing the services prescribed by the convention and protocol. This section does not prevent anyone from pursuing a claim for damages against the registrar. However it is important to ensure that a dispute with one party cannot affect the operation of the registry for the benefit of others.

Sections 12 to 14 are standard provisions pertaining to orders including the laying of orders before the Oireachtas and the usual opportunity for either House to pass a resolution to annul an order. Section 15 is a standard provision in respect of the Minister's expenses under the Act when enacted. Section 16 inserts standard provisions into the Act that implements the Montreal Convention pertaining to the making of orders under that Act. These include the laying of orders made in respect of the Montreal Convention before the Oireachtas and providing for possible annulment by either House. Because of a deadline to enact that Act before the expansion of the European Union on 1 May 2004, it was not possible to include these amendments before it was enacted.

This convention represents an important and welcome step forward in the legal framework connected with aviation finance and having the international registry located in Ireland is a great achievement. I congratulate all those involved in that process and I commend the Bill to the House.

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