ARCHIVED — Vol. 147, No. 7 — March 27, 2013

Registration

SI/2013-26 March 27, 2013

INTERNATIONAL INTERESTS IN MOBILE EQUIPMENT (AIRCRAFT EQUIPMENT) ACT
JOBS AND GROWTH ACT, 2012

Order Fixing April 1, 2013 as the Day on which the Provisions of the International Interests in Mobile Equipment (aircraft equipment) Act that are not in force, and Sections 414 to 423 of the Jobs and Growth Act, 2012 Come into Force

P.C. 2013-265 March 7, 2013

His Excellency the Governor General in Council, on the recommendation of the Minister of Transport,

  • (a) pursuant to section 19 of the International Interests in Mobile Equipment (aircraft equipment) Act, chapter 3 of the Statutes of Canada, 2005, fixes April 1, 2013 as the day on which the heading before section 1, sections 1 to 9.1 and Schedules 1 to 3 of that Act come into force; and
  • (b) pursuant to section 424 of the Jobs and Growth Act, 2012, chapter 31 of the Statutes of Canada, 2012, fixes April 1, 2013 as the day on which sections 414 to 423 of that Act come into force.

EXPLANATORY NOTE

(This note is not part of the Order.)

Proposal

That the Governor in Council fix April 1, 2013, as the day on which the provisions of the International Interests in Mobile Equipment (aircraft equipment) Act (the IIME Act) that are not in force, and sections 414 to 423 of the Jobs and Growth Act, 2012, come into force.

Purpose

Bringing into force the provisions of the IIME Act that are not yet in force and sections 414 to 423 of the Jobs and Growth Act, 2012 are necessary in order for Canada to successfully ratify and implement 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 “Convention and Protocol”). Canada’s ratification and implementation of the Convention and Protocol would assist Canadian airlines in achieving important savings on the financing of aircraft.

Background

The Convention and Protocol are multilateral agreements that establish a commercially oriented, international legal framework to protect security and leasing interests in aircraft equipment (i.e. airframes, engines and helicopters), thereby facilitating cross-border, asset-based financing and leasing of this equipment.

The Convention and Protocol allow the value of aircraft equipment to be used as security for payment, and also establish an international registry for security interests in aircraft equipment. The registry records the existence of rights and determines their order of priority for use in the purchase and financing of this equipment, in order to facilitate the resolution of questions of title in the event of insolvency or bankruptcy.

The Convention and Protocol provide creditors with greater assurance that aircraft assets could be recovered in a timely manner in cases where those operating the assets, including airlines, become financially insolvent. This allows lending institutions the possibility of reducing risk premiums. In turn, it will offer more favourable lending with significant cost savings for the Canadian aviation industry.

The Convention and Protocol have both been in force internationally since 2004 and 2006, respectively. In 2004, Canada signed the Convention and Protocol. In 2005, Canada adopted the IIME Act (which received Royal Assent on February 24, 2005), and amended other legislation, which implement the Convention’s and Protocol’s obligations, paving the way for Canada’s eventual ratification.

An international arrangement —  the Aircraft Sector Understanding (ASU) — was negotiated subsequently and changed the international context by identifying specific declarations (i.e. options that a country can opt in or out of) that would be required in order for ratifying countries’ airlines to benefit from discounts from official export credit agencies. Stakeholders and Canadian officials recognized the need to amend federal implementing legislation in order to be able to make these declarations. As a result, the IIME Act was amended by way of the Jobs and Growth Act, 2012 (which received Royal Assent on December 14, 2012).

In order to enable Canada’s full compliance with the ASU, force of law must be given to Alternative A, a provision within Article XI of the Protocol that deals with remedies on insolvency. The Jobs and Growth Act, 2012, achieves this by way of amendments to the IIME Act. Sections 414 to 423 of the Jobs and Growth Act, 2012 make consequential amendments to the Bankruptcy and Insolvency Act, the Companies’ Creditors Arrangement Act, and the Winding-up and Restructuring Act to remove redundant language that is no longer necessary given the adoption of Alternative A by Canada.

On December 21, 2012, Canada deposited its instrument of ratification with the International Institute for the Unification of Private Law (UNIDROIT), signifying that the Convention and Protocol can come into force for Canada on April 1, 2013. Thus, it is important that the IIME Act and sections 414 to 423 of the Jobs and Growth Act, 2012 be brought into force on that day.

Financial implications

The costs associated with bringing into force the IIME Act and consequential amendments to other legislation by bringing into force sections 414 to 423 of the Jobs and Growth Act, 2012 will be addressed within existing budgets.

Federal/provincial implications

Provincial and territorial legislation is also required to proceed with the ratification of the Convention and Protocol, as certain elements of the treaties fall within their jurisdiction. Although the federal implementing legislation was adopted in 2005, there was not yet a critical mass of provinces and territories with implementing legislation to ratify the Convention and Protocol and bring the IIME Act into force. Therefore, it was necessary to hold off on bringing the IIME Act into force.

Alberta, British Columbia, Manitoba, Newfoundland and Labrador, Northwest Territories, Nova Scotia, Nunavut, Ontario, Quebec and Saskatchewan have now passed implementing legislation and explicitly support ratifying the Convention and Protocol. While the Convention and Protocol would only apply to those provinces and territories with implementing legislation, New Brunswick, Prince Edward Island, and Yukon remain eligible to join later.

Consultation

Transport Canada conducted extensive consultations with Canadian industry stakeholders. All expressed very strong support for the ratification and implementation of the Convention and Protocol, which includes as a necessary step the coming into force of the IIME Act and sections 414 to 423 of the Jobs and Growth Act, 2012. Industry is following developments closely.

Policy implications

Bringing into force the IIME Act and sections 414 to 423 of the Jobs and Growth Act, 2012 is a necessary final step for the ratification and implementation of the Convention and Protocol to take place on April 1, 2013. It demonstrates the Government of Canada’s commitment to supporting the competitiveness of Canada’s airline industry, which should benefit from substantial financial discounts once the Convention and Protocol are ratified and in force for Canada.

Communication strategies

Aviation industry stakeholders (i.e. airlines and manufacturers) are expected to react positively to the coming into force of the IIME Act and sections 414 to 423 of the Jobs and Growth Act, 2012. No parties are known to oppose this. Transport Canada will explore proactive communications opportunities. Supporting communications products, including media lines and questions and answers, will be prepared, as necessary.

Departmental contact

For more information, please contact

Jean Surette
Senior Policy Advisor
National Air Services Policy
Transport Canada
Telephone: 613-949-0112