Draft Convention on International Interests in Mobile Equipment 2001


CHAPTER III - DEFAULT REMEDIES

Article 12

Remedies of chargee

1. - In the event of default as provided in Article 16, the chargee may, to the extent that the chargor has at any time so agreed, exercise any one or more of the following remedies:

(a) take possession or control of any aircraft object charged to it;

(b) sell or grant a lease of any such aircraft object;

(c) collect or receive any income or profits arising from the management or use of any such aircraft object,

or apply for a court order authorising or directing any of the above acts.

2. - A chargee proposing to sell or grant a lease of an aircraft object under paragraph 1 otherwise than pursuant to a court order shall give reasonable prior notice in writing of the proposed sale or lease to:

(a) interested persons specified in Article 1(cc)(i) and (ii); and

(b) interested persons specified in Article 1(cc)(iii) who have given notice of their rights to the chargee within a reasonable time prior to the sale or lease.

3. - A chargee giving ten or more calendar days' prior written notice of a proposed sale or lease to interested persons shall be deemed to satisfy the requirement of providing "reasonable prior notice" specified in paragraph 2 of this article. The foregoing shall not prevent a chargee and a chargor or a guarantor from agreeing to a longer period of prior notice.

4. - Any sum collected or received by the chargee as a result of exercise of any of the remedies set out under paragraph 1 shall be applied towards discharge of the amount of the secured obligations.

5. - Where the sums collected or received by the chargee as a result of the exercise of any remedy given in paragraph 1 exceed the amount secured by the security interest and any reasonable costs incurred in the exercise of any such remedy, then unless otherwise ordered by the court the chargee shall pay the excess to the holder of the registered interest ranking immediately after its own or, if there is none, to the chargor.

Article 13

Vesting of aircraft object in satisfaction; redemption

1. - At any time after default as provided in Article 16, the chargee and all the interested persons may agree that ownership of (or any other interest of the chargor in) any aircraft object covered by the security interest shall vest in the chargee in or towards satisfaction of the secured obligations.

2. - The court may on the application of the chargee order that ownership of (or any other interest of the chargor in) any aircraft object covered by the security interest shall vest in the chargee in or towards satisfaction of the secured obligations.

3. - The court shall grant an application under the preceding paragraph only if the amount of the secured obligations to be satisfied by such vesting is commensurate with the value of the aircraft object after taking account of any payment to be made by the chargee to any of the interested persons.

4. - At any time after default as provided in Article 16 and before sale of the charged aircraft object or the making of an order under paragraph 2, the chargor or any interested person may discharge the security interest by paying in full the amount secured, subject to any lease granted by the chargee under Article 12(1). Where, after such default, the payment of the amount secured is made in full by an interested person other than the debtor, that person is subrogated to the rights of the chargee.

5. - Ownership or any other interest of the chargor passing on a sale under Article 12(1)(b) or passing under paragraph 1 or 2 of this Article is free from any other interest over which the chargee's security interest has priority under the provisions of Article 41.

Article 14

Remedies of creditor

1. - In addition to the remedies specified in Article 12 and in Articles 15 and 19, the creditor may, to the extent that the debtor has at any time so agreed and in the circumstances specified in such provisions:

(a) procure the de-registration of the aircraft; and

(b) procure the export and physical transfer of the aircraft object from the territory in which it is situated.

2. - The creditor shall not exercise the remedies specified in paragraph 1 without the prior consent in writing of the holder of any registered interest ranking in priority to that of the creditor.

Article 15

Remedies of conditional seller or lessor

In the event of default under a title reservation agreement or under a leasing agreement as provided in Article 16, the conditional seller or the lessor, as the case may be, may:

(a) terminate the agreement and take possession or control of any aircraft object to which the agreement relates; or

(b) apply for a court order authorising or directing either of these acts.

Article 16

Meaning of default

1. - The debtor and the creditor may at any time agree in writing as to the events that constitute a default or otherwise give rise to the rights and remedies specified in Articles 12 to 15 and 19.

2. - In the absence of such an agreement, "default" for the purposes of Articles 12 to 15 and 19 means a substantial default.

Article 17

Additional remedies

Any additional remedies permitted by the applicable law, including any remedies agreed upon by the parties, may be exercised to the extent that they are not inconsistent with the mandatory provisions of this Chapter as set out in Article 21.

Article 18

Standard for exercising remedies

Any remedy given by this Convention shall be exercised in a commercially reasonable manner. An agreement between the debtor and the creditor as to what is a commercially reasonable manner shall be conclusive.

Article 19

Relief pending final determination

1. - A Contracting State shall ensure that a creditor who adduces evidence of default by the debtor may, pending final determination of its claim and to the extent that the debtor has at any time so agreed, obtain from a court speedy relief in the form of such one or more of the following orders as the creditor requests:

(a) preservation of the aircraft object and its value;

(b) possession, control or custody of the aircraft object;

(c) immobilisation of the aircraft object; and/or

(d) lease or management of the aircraft object and the income therefrom;

(e) sale and application of proceeds therefrom.

2. - For the purposes of the preceding paragraph, "speedy" in the context of obtaining relief means within such number of calendar days from the date of filing of the application for relief as is specified in a declaration made by the Contracting State in which the application is made.

3. - Ownership or any other interest of the debtor passing on a sale under sub-paragraph e) of paragraph 1 of this article is free from any other interest over which the creditor's international interest has priority under the provisions of Article 41 of this Convention.

4. - In making any order under paragraph 1 of this Article, the court may impose such terms as it considers necessary to protect the interested persons in the event that the creditor:

(a) in implementing any order granting such relief, fails to perform any of its obligations to the debtor under this Convention; or

(b) fails to establish its claim, wholly or in part, on the final determination of that claim.

5. - The creditor and the debtor or any other interested person may agree in writing to exclude the application of the preceding paragraph.

6. - Before making any order under paragraph 1, the court may require notice of the request to be given to any of the interested persons.

7. - Nothing in this Article affects the application of Article 18 or limits the availability of forms of interim relief other than those set out in paragraph 1.

8. - With regard to the remedies in Article 14(1):

(a) they shall be made available by the registry authority and other administrative authorities, as applicable, in a Contracting State no later than [five] working days after the creditor notifies such authorities that the relief specified in Article 14(1) is granted or, in the case of relief granted by a foreign court, recognised by a court of that Contracting State, and that the creditor is entitled to procure those remedies in accordance with this Convention; and

(b) the applicable authorities shall expeditiously cooperate with and assist the creditor in the exercise of such remedies in conformity with the applicable aviation safety laws and regulations.

9. - Paragraphs 1(e), 2, 3, 5 and 8 of this Article apply only where a Contracting State has made a declaration to that effect under Article 68(2) and to the extent stated in such declaration.

Article 20

Procedural requirements

Subject to Article 67(2), any remedy provided by this Chapter shall be exercised in conformity with the procedure prescribed by the law of the place where the remedy is to be exercised.

Article 21

Derogation

The parties may, by agreement in writing, exclude the application of Article 22 and, in their relations with each other, derogate from or vary the effect of any of the provisions of Articles [...]. (4)

Article 22

Remedies on insolvency

1. - This Article applies only where a Contracting State that is the primary insolvency jurisdiction has made a declaration pursuant to Article 68(3).

Alternative A

2. - Upon the occurrence of an insolvency-related event, the insolvency administrator or the debtor, as applicable, shall, subject to paragraph 7, give possession of the aircraft object to the creditor no later than the earlier of:

(a) the end of the waiting period; and

(b) the date on which the creditor would be entitled to possession of the aircraft object if this Article did not apply.

3. - For the purposes of this Article, the "waiting period" shall be the period specified in a declaration of the Contracting State which is the primary insolvency jurisdiction.

4. - References in this Article to the "insolvency administrator" shall be to that person in its official, not in its personal, capacity.

5. - Unless and until the creditor is given the opportunity to take possession under paragraph 2:

(a) the insolvency administrator or the debtor, as applicable, shall preserve the aircraft object and maintain it and its value in accordance with the agreement; and

(b) the creditor shall be entitled to apply for any other forms of interim relief available under the applicable law.

6. - Sub-paragraph (a) of the preceding paragraph shall not preclude the use of the aircraft object under arrangements designed to preserve the aircraft object and maintain it and its value.

7. - The insolvency administrator or the debtor, as applicable, may retain possession of the aircraft object where, by the time specified in paragraph 2, it has cured all defaults and has agreed to perform all future obligations under the agreement. A second waiting period shall not apply in respect of a default in the performance of such future obligations.

8. - With regard to the remedies in Article 14(1) :

(a) they shall be made available by the registry authority and the administrative authorities in a Contracting State, as applicable, no later than five working days after the date on which the creditor notifies such authorities that it is entitled to procure those remedies in accordance with this Convention; and

(b) the applicable authorities shall expeditiously cooperate with and assist the creditor in the exercise of such remedies in conformity with the applicable aviation safety laws and regulations.

9. - No exercise of remedies permitted by this Convention may be prevented or delayed after the date specified in paragraph 2.

10. - No obligations of the debtor under the agreement may be modified without the consent of the creditor.

11. - Nothing in the preceding paragraph shall be construed to affect the authority, if any, of the insolvency administrator under the applicable law to terminate the agreement.

12. - No rights or interests, except for preferred non-consensual rights or interests of a category covered by a declaration pursuant to Article 52(1), shall have priority in the insolvency over registered interests.

13. - The rules of this Convention shall apply to the exercise of any remedies under this Article.

Alternative B

2. - Upon the occurrence of an insolvency-related event, the insolvency administrator or the debtor, as applicable, upon the request of the creditor, shall give notice to the creditor within the time specified in a declaration of a Contracting State pursuant to Article 68(3) whether it will:

(a) cure all defaults and to agree to perform all future obligations, under the agreement and related transaction documents; or

(b) give the creditor the opportunity to take possession of the aircraft object, in accordance with the applicable law.

3. - The applicable law referred to in sub-paragraph (b) of the preceding paragraph may permit the court to require the taking of any additional step or the provision of any additional guarantee.

4. - The creditor shall provide evidence of its claims and proof that its international interest has been registered.

5. - If the insolvency administrator or the debtor, as applicable, does not give notice in conformity with paragraph 2, or when he has declared that he will give possession of the aircraft object but fails to do so, the court may permit the creditor to take possession of the aircraft object upon such terms as the court may order and may require the taking of any additional step or the provision of any additional guarantee.

6. - The aircraft object shall not be sold pending a decision by a court regarding the claim and the international interest.

Article 23

Insolvency assistance

The courts of a Contracting State in which an aircraft object is situated shall, in accordance with the law of the Contracting State, co-operate to the maximum extent possible with foreign courts and foreign insolvency administrators in carrying out the provisions of Article 22.

Article 24

De-registration and export authorisation

1. - Where the debtor has issued an irrevocable de-registration and export request authorisation substantially in the form annexed to this Convention and has submitted such authorisation for recordation to the registry authority, that authorisation shall be so recorded.

2. - The person in whose favour the authorisation has been issued (the "authorised party") or its certified designee shall be the sole person entitled to exercise the remedies specified in Article 14(1) and may do so only in accordance with the authorisation and applicable aviation safety laws and regulations. Such authorisation may not be revoked by the debtor without the consent in writing of the authorised party. The registry authority shall remove an authorisation from the registry at the request of the authorised party.

3. - The registry authority and other administrative authorities in Contracting States shall expeditiously co-operate with and assist the authorised party in the exercise of the remedies specified in Article 14(1).

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