Martin Cullen (Waterford, Fianna Fail)
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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.

Olivia Mitchell (Dublin South, Fine Gael)
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I welcome this Bill to the House. The Minister is aware that I inquired as to its status a number of times as I too was anxious that it would come before the House before it rose and would be transposed into Irish law. Consequently, I welcome the fact that it has being taken this week. On behalf of the Fine Gael Party, I am happy to give it my support.

As a result of the 9/11 attacks and reinforced by subsequent international events including rising fuel prices, the entire aviation sector has been subject to a climate of uncertainty, to put it mildly. It brings uncertainty for manufacturers, financiers, lessors, exporters, importers, airlines and for ordinary air passengers. The Air Navigation Bill passed by this House last week was a result and possible manifestation of that uncertainty, whereby the State found itself forced into a position to provide air carriers with insurance cover for potential dirty bomb damage, because the entire commercial insurance business had simply withdrawn from that market. However possibly perversely, alongside that uncertainty the world is becoming increasingly dependant on aviation. At the same time increased globalisation and the changing axis of the world economy towards Asia mean that everyone, including Ireland, needs certain, affordable and easier access to safe skies. It is essential for Ireland as an island country both to have that kind of access and certainty itself and that it is available internationally to the people with whom we hope to trade and do business. I welcome the proposed incorporation of the Cape Town Convention into Irish law as we must welcome anything that brings certainty and predictability to such a high-stakes sector which is so subject to fluctuation, natural disaster and as we saw from the 9/11 attacks, to the evil machinations of Man.

As the Minister stated, the main objectives of the convention are to bring about efficient financing of aircraft and engines by promoting uniformity of contract through the protocol as well as predictability for those with a security interest in the asset concerned. This will bring a win-win situation. It means higher sales for manufacturers as financing becomes easier. It means easier access for emerging economies to such finance, as the level of risk for them — usually it is their Government — is reduced. It means reduced financing costs and enhanced access to different types and sources of funding for airlines. Moreover, younger fleets mean that greater fuel efficiencies are available to such airlines. In addition, this benefits passengers, in reduced air fares, improvements in an increased flow of services as well as more routes. It also increases safety for passengers because it means fleet replacement is made much easier, so one has a younger, and consequently a safer fleet.

It also brings benefits for Governments, in particular for developing countries, but also in developed countries where the national airline fleet purchases have been funded or backed by Government guarantees, as the greater degree of certainty about the enforcement of rights will bring lower costs for them. Even for Governments such as our own, which is contemplating privatisation, the risk reduction associated with the convention means that other cost-effective sources of finance have opened up to airlines that might previously have had — I use the word advisedly — the cushion of State-provided finance or guarantees.

Our own Irish airlines, Aer Lingus and Ryanair, are both expanding airlines that plan to expand their fleet and this legislation comes at the perfect time for them. Both will benefit significantly from the discounts likely to be offered to airlines of ratifying countries. I have read that one US bank is offering a 33% premium reduction for aircraft delivered before September 2005 for ratifying countries. This kind of incentive will be quite common for early participation in the protocol.

Ratification has a particular significance for Ireland in that the bid by Aviareto to operate the international register was successful. I am unsure whether the Minister is aware of the point, but a condition of the contract was that the winning bidder would ratify the convention. As the host country to the registry, other EU countries have been looking to Ireland to give the lead and I hope they will now quickly follow Ireland's example and transpose the convention into their own laws. This will ensure a flow of funds to the registry, which obviously needs funds to function properly.

As the Minister noted, the contract to operate the registry was won against stiff international competition and it is of no small significance to Ireland. It is quite a feather in the cap of this company and the stakeholders. Did the Minister state that it was a joint venture company? It is not an insignificant achievement and it puts Ireland on the world aviation map and puts us at the cutting edge of the financing sector of aviation. Hence, for Ireland and for international aviation, it is a very good day's work. I am happy to support this Bill on behalf of Fine Gael.

Róisín Shortall (Dublin North West, Labour)
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I welcome this Bill on behalf of the Labour Party and we are happy to facilitate its speedy passage this evening. The fact that work has been carried out so quickly on this Bill to enable the ratification of the protocol and convention is a positive development. We welcome the object of the convention in terms of facilitating the easier financing of aircraft purchase through assets based arrangements and do not wish to do anything to delay that process. There are undoubted benefits to Irish airlines in the speedy passage of this legislation and by signing up to the convention.

At a time when the future of airline travel is based on the low cost model, it is critical that the EU plays a part in facilitating the purchase of aircraft, which will enable the various airlines to continue to provide a low cost model to travellers and facilitate easy access to air travel. We can all remember the days when the prices of tickets, even to London, were outrageous. We very much welcome the developments which have taken place in the past 20 years or so. To the fore in that was Ryanair to which we all have much to be grateful in terms of the development of that market. It has certainly forced the hand of Aer Lingus in terms of wising up to the modern airline market, changing its cost base and developing attractive air traffic costs and fares attractive to the public. It was forced into that competitive situation which has been good and from which we have all benefited.

Why is the Minister not prepared to remain involved with Aer Lingus? Why has he taken such a hard line in terms of the future of the national airline? This type of asset-based financing is one of several options available to Aer Lingus in terms of replacing its fleet. Much has been made by this Minister and his predecessor about the urgency with which Aer Lingus needs to access capital, yet nobody has managed to put a figure on it. We know from the chairman of Aer Lingus that it has had no difficulty in financing the replacement of its short-haul fleet. It could easily look after the replacement of its long-haul fleet as a State company. There are numerous options, including this one and long-term leasing arrangements. Aer Lingus would have no difficulty raising loans, for example, and there is always the option of State investment in the company.

I again put on record my grave concerns about what the Minister proposes to do in regard to the national airline. There are many key national strategic interests which the Minister and the Government, as representatives of the shareholder, should bear in mind in terms of the future of the national airline. I reiterate my concern about the direction the Minister is taking as there is no reason Aer Lingus cannot stay in State hands. A number of Government spokespersons, particularly the Minister's predecessor, are particularly disingenuous about the situation in Aer Lingus and the possibilities for the future. I presume we will come back to that when the Minister gets advice from those he proposes to employ to advise him following the taking of the decision. We will return to that matter later in the year.

To return to this Bill, I congratulate the Minister's officials who were involved in the preliminary work and design for this legislation and the international registry. Obviously very impressive work was carried out and the proof of that is the fact that Ireland has been unanimously selected as the winner of the competition organised to select the operator of the registry for the first five years. That is undoubtedly a feather in our cap in terms of aviation development. Great credit is due to SITA and the people in the Department who brought this about. We have been very successful in this regard and it will be an important catalyst in terms of Ireland developing a strong role in the financial aspects of the aviation industry.

As I mentioned, we are very happy to facilitate the speedy passage of this Bill. However, I hope the Minister will take on board the small number of amendments I tabled in good faith and which are intended to improve the Bill. I was disappointed last week when we dealt with the Air Navigation and Transport (Indemnities) Bill in that I thought the Minister was somewhat churlish in not accepting an amendment for which he accepted the need. It seemed he did not want to accept it to avoid the inconvenience of having to table an amendment and any slight delay. I hope the Minister will be generous and accept some of these amendments, the purpose of which is to improve this short Bill. I look forward to the Minister's generosity in that regard.

Martin Cullen (Waterford, Fianna Fail)
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I thank the Deputies for facilitating the Bill and for their strong support for it. This is a great win for Ireland on the international stage and it amplifies once again the strength of the Irish financial services sector and the important role of Ireland and Dublin in international finance in general. I think that was a key element in the international competition which Ireland won against some pretty stiff competition, as the Deputies said. It was a surprise to some that Ireland won and there was much angst because we did.

The convention will reduce the financing costs for airlines but it certainly will not deal with any other issues in regard to companies seeking finance in terms of trying to lever on assets. One of the Deputies referred to one bank offering a 33% reduction in terms of rates. We know this is available. I will not, however, rehearse many of the arguments I could put to Deputy Shortall about Aer Lingus. I do not hold an ideological view on the company. If it were at all possible and if the company could have a realistic future in State hands, I would be the first to support that. No State airline has a future. That fact is accepted. I had discussions yesterday with trade unions on that.

I was travelling recently and I picked up a magazine — I think it was The Economist, although I am not absolutely certain — in which the international assessment was dismissive of what would be left in Europe in terms of airlines, irrespective of sales and so on. It was firmly of the view that the only four airlines left in Europe in a short period would be Lufthansa, British Airways, KLM and Air France. It did not see any other airline surviving.

Aer Lingus is unique in what it has achieved to date. We must capture what it has achieved and give it life into the future. The Deputy was right that it is not about the money. That is one of the issues. The issue is commercial access, working in the markets, decision-making processes etc. I am pleased with the way matters are proceeding and people on all sides are up for the challenge. I hope we can clarify some of the questions Deputies Olivia Mitchell and Shortall raised in respect of the future. We look forward to that. I thank the two Deputies for their support for the Bill.