Jetrader - Autumn 2016 - 33

and Protocol to the Convention on
International Interests in Mobile Equipment
("the Protocol"), which together form the
"Cape Town Convention."3 The solutions
that the two conventions provide to the
matter are completely different from each
other. The Geneva Convention regards the
engines as component parts of the aircraft,4
whereas the Cape Town Convention adopts
the separate identity of the engines.5
Component part could be explained
as "a thing that is attached to another
principal thing in such a way that it cannot be separated from it without causing

meaningful damage to one of the things,
[becoming] a component of the principal thing,"6 and that "if a movable thing
becomes a component of another movable
thing, which has to be regarded as the
principal thing, then the ownership of the
movable thing passes over to the owner
of the principal thing."7
Aircraft engines are very movable
objects, and not a single one of them is
uniquely manufactured to be used in a
specific aircraft. Therefore, it has become
a common practice for airline companies
to engage in engine pool agreements
with other airline companies to establish
back-up engines in case of repair or overhaul. While it would be quite reasonable
to expect a new car to have an engine, a
frame and wheels as a whole, as the car
would be useless otherwise, it is a different case for aircrafts. Aircraft engines
are extremely valuable, and in aviation
financing practice they are to be leased,
sold and financed independently.
At the time of the Geneva Convention,
aircraft engines were not technologically
developed like they are today, and it was
not a common practice to lease or finance
them separately. Therefore, there was no
need to consider whether an aircraft engine
was a separate asset or not. Still, law and
more accurately international law should
not be casuistic and should respond to
the changing circumstances of the world.
Aviation technology has developed, and
in turn market structure has evolved too.

And because the Geneva Convention has
not been able to catch up the needs of
the market structure, it became crucial
to create a new international instrument
reflecting the needs and features of the
market, which brought the industry to the
Cape Town Convention.

Financing and Leasing
Aircraft Engines under the
Cape Town Convention
The Cape Town Convention was created
in 2001 to solve the issues that the Geneva
Convention had not been able to address
and aimed to reflect the demands of the
aviation market. For this purpose, representatives from aircraft manufacturers,
creditor banks, airline companies and states
came together to constitute the "Aviation
Working Group"8, which has involved and
advised in the drafting process of the
new provisions.9 The key aspects of the
Cape Town Convention can be summarized
as follows:
* The creation of an international interest
in mobile equipment.
* A centralized international registry
accessible 24 hours a day over the
Internet.
* Relatively few and straightforward rules
of priority.
* A basket of remedies for enforcement of
the international interest.
* Provisions to protect the priority of an
international interest in the event of the
insolvency of the debtor.
Jetrader * Autumn 2016 33
Jetrader - Autumn 2016

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