An aircraft is an asset that constantly crosses borders, and that historically created a problem for lenders: security taken in one country might not be recognised in another. The Cape Town Convention addresses exactly that. Below we cover how the international registry works, what an IDERA is and why it affects the cost of financing.
What the instrument is
This is the 2001 Convention on International Interests in Mobile Equipment and its Protocol on Matters Specific to Aircraft Equipment. The purpose is stated plainly by regulators: to reduce the cost of raising finance for high-value mobile assets that routinely cross borders.
The mechanism has two parts. The Convention gives creditors an internationally recognised set of rights on a debtor's default or insolvency, while the international registry it created, supervised by ICAO, allows interests to be registered and thereby establishes the priority of claims against other parties.
Accession runs country by country and in different years: the United States implemented it through a 2004 act with changes effective from 1 March 2006, the United Kingdom from 1 November 2015. The practical consequence: applicability is checked against the specific jurisdiction of registration.
Which aircraft it applies to
The Convention does not cover everything. Thresholds are set by size: airframes type certificated to carry at least eight persons or goods exceeding 2,750 kilograms; helicopters at least five persons or the same goods weight.
For engines: jet propulsion engines with at least 1,750 pounds of thrust, turbine and piston engines with at least 550 rated take-off horsepower. That last threshold was reduced from 750, widening the range of eligible aircraft.
The practical conclusion: most business jets fall within the Convention, but light turboprops and some general aviation aircraft may not. Not all registered aircraft are eligible for the protection the Convention offers — this is verified for the specific aircraft.
IDERA: what it is and why
The Convention's key instrument for owner and lender is the Irrevocable De-Registration and Export Request Authorisation, known as an IDERA. It is a short document in a form prescribed by the Protocol, linked to a security document between debtor and creditor.
The mechanics are simple and firm: once an IDERA is recorded, only the party declared by the registered owner as the authorised party has the right to de-register and export the aircraft. For a lender this is a remedy on default: without such authority, repatriating an asset from a foreign jurisdiction could take years.
An IDERA is recorded with the jurisdiction's registry authority. Revocation is possible but only by the authorised party under a set procedure — which is what 'irrevocable' means from the owner's perspective.
Why it affects the cost of money
A lender's logic is direct: the more reliably and quickly it can recover the asset on default, the lower the risk premium in the rate. The Convention provides predictability where previously there was a patchwork of national procedures with varying outcomes.
The second effect is priority. Registering an interest in the international registry fixes the order of claims, and a buyer or lender can check whether third-party rights were registered earlier. That makes title verification meaningful rather than declaratory.
For an owner the practical conclusion is this: an aircraft in a jurisdiction supporting the Convention is financed more cheaply and easily than a comparable aircraft outside its perimeter. That is one criterion in choosing a registry.
How it works in a transaction
When buying an aircraft, searching the international registry forms part of the legal review alongside verifying the chain of title. The aim is to confirm that no third-party security interests are registered that would pass with the asset.
Registration of interests at closing is often carried out by the escrow agent or title company acting as a professional user of the registry: all registrations for the transaction are made simultaneously at the moment of closing.
A separate concept is the right to discharge: by default it belongs to the creditor under an international interest, and only its holder can discharge that entry. It can be transferred on assignments, which is also verified.
What preceded the Convention
Before 2001 a lender financing an aircraft relied on the national law of the country of registration. On default, with the asset moved to another jurisdiction, recognition of the security depended on local law and the outcome was unpredictable.
For aviation this created a paradox: an asset designed to cross borders was secured by instruments that did not. The premium for that risk was priced into rates and made financing more expensive for everyone in the market.
The Convention closed exactly that gap. Hence its practical effect: it matters not to lawyers as such but to owners — through the cost of money and the speed of closing.
What registration achieves
Registering an interest in the international registry serves three functions. It makes the interest visible to all market participants, fixes priority by time of registration, and secures recognition of rights in other contracting states without a separate procedure in each.
In practice this means searching the registry is mandatory when buying: an unregistered third-party interest may lack priority, but a registered one passes with the asset. A search costs little and takes little time.
It is not only security interests that are registered. Prospective international interests, assignments of rights and lease agreements all appear, and the picture for an aircraft emerges from all the entries together.
How the registry is searched
Searches of the international registry are made by manufacturer's serial number rather than tail number: the latter changes on re-registration, while the serial stays with the aircraft for life. That matters for a correct search.
Access is through authorised users — typically lawyers or title companies. The search result shows registered interests, their priority and the parties holding the right to discharge entries.
A practical point when buying: the search is run twice — during due diligence and immediately before closing, since new entries can appear between those dates.
What the Convention provides on insolvency
A separate part of the Convention addresses debtor insolvency procedures. States choose an application option on accession, and that determines how quickly a creditor gains access to the asset if the operator becomes insolvent.
To an owner taking no financing this seems abstract. But it shapes the market as a whole: predictable procedures increase banks' willingness to lend against transactions in a given jurisdiction, and therefore the liquidity of aircraft registered there.
The practical consequence at resale: an aircraft in a jurisdiction whose regime lenders understand is easier to sell, because the buyer has more financing options.
What an owner should check
Three questions. First: does the specific aircraft meet the Convention's thresholds by type and parameters. Second: is the jurisdiction of registration a party to the Convention and how has it implemented it — the detail varies by country.
Third: are there current registered interests and an IDERA on the aircraft, and who is named as the authorised party. The last matters particularly when buying an aircraft with a financing history: an undischarged entry can block a transaction.
Working with the international registry is a task for specialist lawyers, not a broker. The FAA publishes reference material on the Convention's application, as do national regulators, but applying it to a specific transaction requires legal assessment.
JetHunter accounts for an aircraft's status in the international registry when preparing a transaction: undischarged interests and IDERA questions surface before signing rather than at closing, when resolving them costs time and money.
«The Cape Town Convention did for aviation finance what security registers did for real estate: a lender can finally see whose rights in an aircraft were registered ahead of its own.»
— Alexey Mordvintsev, CEO of JetHunter
Author: Alexey Mordvintsev, CEO of JetHunter, President of the Association of Professionals of Executive Aviation Industry (APIDA). Over 14 years in the industry.
