INTERNATIONAL INTERESTS IN AIRCRAFT EQUIPMENT BILL

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INTERNATIONAL INTERESTS IN AIRCRAFT EQUIPMENT BILL: Order for Second Reading read.

4.51 pm

The Senior Minister of State for Transport (Mrs Lim Hwee Hua): Mr Speaker, Sir, I beg to move, "That the Bill be now read a Second time."

Sir, Singapore intends to accede to the Convention on International Interests in Mobile Equipment and the Protocol to the Convention on International Interests in Mobile Equipment on Matters Specific to Aircraft Equipment. The two Treaties are commonly referred to as the Cape Town Convention and Aircraft Protocol.

The Cape Town Convention and Aircraft Protocol establish an international

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legal regime to facilitate aircraft-asset leasing and financing. They aim to overcome the problem of obtaining secure and readily enforceable rights in aircraft and aircraft equipment or what are collectively known as aircraft objects. Such aircraft objects are items of high-value, yet are mobile and without any fixed location. By establishing a harmonised, transparent and efficient legal framework governing such transactions, they create greater certainty amongst intending financiers as to the efficacy of their rights. This helps to lower the risks and, therefore, costs of lending.

Sir, let me highlight the key features of the Cape Town Convention and Aircraft Protocol.

First, they provide for the creation of an international interest in aircraft objects which is recognised in all Contracting States. This facilitates the securing and enforcing of rights in aircraft objects in the Contracting States which now share a common legal framework in this respect.

Second, a set of rules are laid down to govern speedy relief pending final determination of a creditor's claim, and the priority of competing interests and assignments of such interests in aircraft objects. At the same time, there are safeguards for debtors to ensure that remedies are exercised in a commercially reasonable manner.

Third, an electronic International Registry is established for the registration of international interests which gives public notice of such an interest to third parties and protects the priority of the holder of that interest in insolvency proceedings against the debtor. Interested parties may now search and obtain information on who has security interests in such aircraft objects. Importantly, the creditor with a duly registered interest is now able to preserve

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his priority against subsequently registered interests or unregistered interests as well as the debtor's insolvency administrator.

Sir, in effect, such a legal regime gives intending creditors greater confidence in their decision to grant credit on highly mobile capital-intensive assets. It enhances the credit rating of equipment receivables and reduces borrowing costs to the advantage of all interested parties.

Singapore's accession to the Cape Town Convention and Aircraft Protocol would facilitate the financing of aircraft objects here by providing greater legal predictability and assurance of lower risk. These would directly translate into lower lending costs and better lending terms.

Notwithstanding the current downturn, in the longer term, we would benefit from opening the local aircraft financing and leasing industry to a growing global market in other Contracting States.

Mr Speaker, Sir, the Cape Town Convention and Aircraft Protocol are flexible in allowing variation in some of their provisions which Contracting States must decide upon and choose by making the necessary Declarations when acceding to the Treaties. I would like to elaborate on the key provisions which Singapore intends to vary.

First, the Cape Town Convention and Aircraft Protocol set out an array of remedies available to the creditor when a debtor defaults or in the event of debtor insolvency. We intend to choose to dispense with the requirement for the creditor to seek leave of court when exercising such remedies. This manner of 'self-help' will give financiers the maximum degree of assurance of their ability to recover possession of an aircraft object following a debtor default or upon the commencement of insolvency proceedings on the debtor. But there will be

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safeguards in the form of specific procedures which the creditor will be required to follow in order to prevent abuse of such an arrangement. These are spelt out in the relevant sections of the Cape Town Convention and Aircraft Protocol, and will be further expanded in subsidiary legislation to this Bill in due course.

Second, under the Cape Town Convention and Aircraft Protocol, we will declare that non-consensual rights or interests will have priority over any registered international rights. Essentially, we want a right or an interest in an aircraft object that is recognised and enforceable under Singapore laws to have priority over a registered international interest in that same aircraft object.

Mr Speaker, Sir, this Bill seeks to give effect in Singapore to the Cape Town Convention and Aircraft Protocol. Apart from providing for the Cape Town Convention and Aircraft Protocol to have the force of law in Singapore and for the making of regulations as are necessary or expedient, the Bill makes certain consequential amendments to the Bills of Sale Act (Cap. 24) and the Companies Act (Cap. 50) to align all three legislations on the governance of aircraft object leasing and financing, so as to avoid any conflict between the unique provisions of the Cape Town Convention and Aircraft Protocol and those of existing laws.

Sir, I beg to move.

Question put, and agreed to.

Bill accordingly read a Second time and committed to a Committee of the whole House.

The House immediately resolved itself into a Committee on the Bill. – [Mrs Lim Hwee Hua].

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Bill considered in Committee.

The Senior Minister of State for Transport (Mrs Lim Hwee Hua):

The Chairman: The citation year "2008" will be changed to "2009", as indicated in the Order Paper Supplement.

Clauses 1 to 8 inclusive ordered to stand part of the Bill.

The First to Third Schedule inclusive ordered to stand part of the Bill.

Bill reported without amendment; read a Third time and passed.