Martin Cullen (Waterford, Fianna Fail)

The purpose of the Cape Town Convention is simple; it is to make it easier to finance the purchase of aircraft. Senators will be aware from reading the Bill that the Schedules contain the text of the convention and protocol relating to aircraft objects. For convenience, when I mention the convention, I will be referring to the two documents together.

As everyone in this House will be aware, aircraft are expensive items, even when bought second-hand. It is a rare occasion when an airline can afford to acquire additional aircraft without borrowing. However, because aircraft move between countries, it is not as easy to borrow for an aircraft as it is for a piece of industrial or commercial property. In the case of buildings and land the lending institutions 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 that the aircraft itself 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 of the countries that have 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 the lending institutions, the convention will enable lending rates to be reduced. This will have benefits for airlines and, ultimately, passengers. For example, the United States 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 what is known as the international registry. The purpose of this registry is to record the existence of loans and leases which are 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. In order to gain the protection of the convention a loan or lease must be recorded in the registry. If there are two or more loans for the same aircraft, 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 there are loans recorded for any particular aircraft. However, 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 the 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.

With this in mind my Department participated extensively in the preparatory work leading up to the diplomatic conference in Cape Town in November 2001 where the convention was adopted. We made it clear at an early stage that we were anxious to have the registry located in Ireland to underscore our long-standing commitment to international aviation and to support the aircraft financing activity in Ireland. The Department, with the valuable assistance of senior Land Registry officials, contributed to the work of the international registry task force established to define the role and operation of the registry. One of the meetings 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 in order to ensure an efficient operation. That competition was held by the ICAO in the first half of 2004 and I was delighted when the Irish company Aviareto was unanimously selected as the winner at an international conference in Montreal in May last year. The other bids came from Canada, Singapore and Spain.

Aviareto is a small PPP project between my Department and SITA. SITA is 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 has recently announced the expansion of its activities in Letterkenny which will involve the employment of a further 123 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, namely, Panama, Ethiopia, Nigeria, the United States, Pakistan and Oman. Due to Ireland's long-standing support for this project and, in particular, because Aviareto was selected to operate the registry, it is my ambition for Ireland to be one of the first eight ratifying countries. I am sure this House will support me in this objective.

I would like to make it clear that the registry will not take over the role of the Irish Aviation Authority with regard to registering the nationality of Irish aircraft or regulating aviation safety. The registry 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 also important to note that there is no obligation to use the registry, or take advantage of the convention. Due to the fact that aircraft financing involves large sums of money, all of the parties to a loan or lease will have professional legal and financial advisors. Consequently we can be satisfied that all users of the registry and the convention will do so on the basis of carefully considered decision. The convention will not affect the status of financial interests where the parties choose not to register them or 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.

I would like to give a brief overview of the content of the Bill. It is a short Bill and most of the text is in the Schedules which contain the convention and protocol.

Sections 1 to 3 contain standard provisions in legislation, namely, the Short Title, purpose of the Bill and interpretations. Section 4 provides that the convention and protocol will have the force of law in Ireland. As I said earlier, 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. 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 for disputes. 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. Due to the fact that 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. That 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 to an amount not exceeding €40,000. The Minister's shareholding will be an important indication of Irish support for the convention and protocol and 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 will be important to ensure a dispute with one party cannot affect the operation of the registry for the benefit of others. Sections 12 to 14, inclusive, are standard provisions relating 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 relating to the Minister's expenses under the Act.

Section 16 inserts, into the Act that implements the Montreal Convention, standard provisions relating to the making of orders under that Act. These include the laying of orders relating to the Montreal Convention before the Oireachtas and providing for annulment by either House. It was not possible to include these amendments in the legislation before it was enacted because of a deadline to enact it before the expansion of the European Union on 1 May 2004.

The convention represents an important and welcome step forward in the legal framework connected with aviation finance and the location of the international registry in Ireland is a great achievement. I commend the Bill to the House.