With the Registrar of the International Registry (IR) for the Convention on International Interests in Mobile Equipment (the Convention) having its centre of administration in Ireland, the High Court of Ireland (the High Court) is becoming a key venue for disputes relating to IR registrations. The High Court has issued two recent rulings in disputes relating to IR registrations originating entirely outside of Ireland under the Convention and the Protocol thereto on Matters Specific to Aircraft Equipment. In these two cases, the High Court has addressed the issue of wrongful registrations taking the form of registrable non-consensual rights or interests (Non-Consensual Interests). Registrable Non-Consensual Interests are non-consensual rights or interests (i.e., a right or interest conferred under the law of the Contracting State)1 registrable pursuant to Article 40. Non-Consensual Interests with respect to which a Contracting State has made a declaration under Article 40 have priority over registered international interest only if such Non-Consensual Interests are registered.

The Convention outlines a specific procedure that an aggrieved party should follow to have a wrongful registration (including a wrongful Non-Consensual Interest) removed from the IR:

• under Article 25(4), if a registration ought not to have been made or is incorrect, the creditor (as defined in the Convention) must, without undue delay, procure its discharge or amendment after written demand by the debtor (as defined in the Convention);

• if the creditor fails to respond to a demand under Article 25, Article 44(2) grants the Irish Courts exclusive jurisdiction, on the application of the debtor, to make an order directed to the Registrar of the IR (being currently Aviareto Limited), requiring that the Registrar discharge the registration; and

• under Article 44(3), if a person fails to comply with an order of the High Court requiring a person to procure the amendment or discharge of a registration, the High Court may direct the Registrar to take such steps as will give effect to that order.

PNC Equipment Finance LLC v. Aviareto Limited and Link Aviation LLC (unreported, High Court 19 December 2012)

Minnesota Choice Aviation III LLC (Minnesota Choice) was the registered owner of a Dassault-Breguet Falcon 900B (the Dassault Aircraft) which was financed by General Electric Capital Corporation (GECC). GECC's security interests were registered as international interests with the IR. Minnesota Choice subsequently leased the Dassault Aircraft to Link Aviation LLC (Link). The international interest created by the lease agreement in favour of Minnesota Choice was also registered on the IR. Immediately following the termination of the lease agreement (approximately one year after the commencement of the lease term), Link proceeded, for vexatious reasons, to register a purported registrable Non-Consensual Interest on the IR. The High Court subsequently confirmed the baseless nature of the registration.

Approximately ten months after Link registered its purported Non-Consensual Interest, PNC Equipment Finance LLC (PNC) acquired from GECC the debt relating to the financing of the Dassault Aircraft with a view to ultimately taking possession of and selling the Dassault Aircraft. In February 2010, following an application by Minnesota Choice, a court in the State of Minnesota required Link to immediately discharge the offending registrations. When Link failed to comply, PNC, through direct correspondence with the Registrar, requested assistance with the discharge of the Non-Consensual Interest. The Registrar declined to assist without an order from the High Court.

In March 2010, Minnesota Choice voluntarily surrendered possession of the Dassault Aircraft to PNC which would go on to sell the Dassault Aircraft to a third party. As it required unencumbered title over the Dassault Aircraft in order to sell it, PNC initiated proceedings in the High Court seeking an order under Article 44(1) of the Convention for the Registrar to procure the discharge of the Non-Consensual Interest from the IR. The High Court held that under Article 44(2), PNC was a “debtor” for the purposes of that Article by reason of (i) its obligation to assume clean title to the Dassault Aircraft before selling it to a third party and (ii) it being an assignee of the security interests originally held by GECC. The High Court also held that PNC had a “sufficient interest” for the purposes of Article 44(3), and Nicholas Kearns J. held:

• that the order of the Minnesota Court was prima facie evidence that the disputed registrations should not have been made as a Non-Consensual Interest as it was not an interest recognised under the laws of the US as capable of registration on the IR (due to no Article 40 declaration having been made and due to the lack of relevant filing with the FAA); and

• that the Registrar could not remove the disputed registration except by order of the High Court.

Kearns J. directed the Registrar to remove the Non-Consensual Interest from the IR should Link fail to comply with the order within 21 days (which period corresponds to the time within which Link could have appealed the decision) and awarded costs in favour of PNC and the Registrar.

TransFin-M, Ltd v. Stream Aero Investments S.A. and Aviareto Limited, High Court (Commercial Division) 18 April 2013

In September 2012 TransFin-M, Ltd (a Russian entity) (TransFin) and Stream Aero Investments S.A. (a Panamanian entity) (Stream Aero) signed a letter of intent regarding the potential sale of a Gulfstream G-550 aircraft (the Gulfstream Aircraft). Unbeknownst to TransFin, Stream Aero had signed the letter of intent in its capacity as a broker with the intention of selling the Gulfstream Aircraft to a third party, Star Jet (Hong Kong) Limited (Star Jet), immediately after acquiring it from TransFin. The negotiations between TransFin and Stream Aero were unsuccessful, but shortly after their collapse TransFin made contact with Star Jet and ultimately sold the Gulfstream Aircraft to Star Jet directly.

Stream Aero claimed that it was entitled to an agency fee as a result of the sale (such fee being a percentage of the total sale price of the Gulfstream Aircraft) and following demand for payment of monies allegedly owed to it, proceeded to register a Non-Consensual Interest against the Gulfstream Aircraft on the IR. TransFin sought an order from the commercial division of the High Court pursuant to Article 25(4) and Article 44(3) of the Convention.

Peter Kelly J. held:

• under Article 44(2) and Article 44(3) of the Convention, that the Registrar discharge the registration if, after 21 days from the perfection of the order, Stream Aero had failed to do so; and

• irrespective of whether Stream Aero had a contractual basis on which to claim the agency fee, there was no legal basis for the IR registrations as neither Panama nor Russia had made the requisite declarations under Article 40.

Kelly J. also awarded costs in favour of TransFin and noted that TransFin could have sought relief from the Panamanian courts and then enforced any such relief through the Irish courts. Notwithstanding this comment from Kelly J., this case is a clear example of the High Court's willingness to rule on substantive issues in disputes.

Conclusion

At this early stage in the life of the Convention, Ireland is presenting itself as a key jurisdiction for resolving IR-related disputes. The speed with which the Irish courts have thus far addressed and resolved these matters (the entire application of the TransFin case was processed through the Irish Courts in a matter of weeks), as well as their procedural capacity to make ex parte orders for leave to serve proceedings on parties outside of Ireland, may well prove to be significant incentives for litigants seeking to enforce their IR-related rights, to bring their disputes before the Irish courts.

While it is a promising development for the global aircraft finance industry that the High Court is willing to accept jurisdiction for wrongful IR registration disputes, it remains to be seen if it will also accept jurisdiction in cases on other aspects of the Convention and take the lead on interpreting its more substantive provisions. Nonetheless, in the short term, the practical and prompt approach of the Irish Courts will prove useful in the proper and efficient functioning of the IR, affording predictability regarding unfounded or malicious registrations.

_{1 For example, in Malta a lien for unpaid wages or unpaid taxes constitutes a registrable Non-Consensual Interest, and in China, rights pursuant to a court order constitute a registrable Non-Consensual Interest (Goode, Official Commentary – Convention on International Interests in Mobile Equipment and Protocol Thereto on Matters Specific to Aircraft Equipment, p. 713).}