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Cape Town Convention Extended to Bermuda

January 2018 Julie E. McLean

After much anticipation, the Bermuda International Interests In Mobile Equipment (Cape Town Convention) Act 2016 came into operation in Bermuda on 1 January 2018. Essentially this legislation extends the Convention on International Interests in Mobile Equipment and its corresponding Protocol and Declarations (together the “Cape Town Convention”) to Bermuda.

What does it mean for Bermuda?

Bermuda is already a leading aviation financing jurisdiction with numerous Bermuda companies used to finance and register aircraft. Bermuda is also the jurisdiction of choice for aviation asset backed securitisations. This is due to its sophisticated infrastructure, strong legislative structure and a respected civil aviation authority (with just over 830 aircraft on the Bermuda Aircraft Register). Being a party to the Cape Town Convention will further strengthen this position.

With the majority of aircraft on the Bermuda Aircraft Register being registered in the commercial category, the ability to secure financing at lower costs and potentially with the “Cape Town Discount” will facilitate the purchase of new aircraft by a number of airlines operating in the jurisdictions where Bermuda already has an “Article 83 bis” treaty in place (currently the Russian Federation, the Republic of Uzbekistan and the Republic of Azerbaijan).

As an overseas territory of the United Kingdom, Bermuda courts would have followed the law set out in the Blue Sky case1. This case provided that even if the parties had contractually agreed that the governing law of a mortgage is English law, if the jurisdiction where the aircraft was physically situated at the time the mortgage affixed, did not recognise such a mortgage under its conflict of laws principles, the mortgage would not be valid (the “lex situs rule”). Bermuda has followed the UK’s lead and included in its domestic legislation a provision making it clear that where an international interest has been validly created and registered under the Cape Town Convention, it shall have effect in Bermuda regardless of the lex situs rule.


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Cape Town Convention Extended to Bermuda


Julie E. McLean
Director, Global Head of Aviation Finance Practice

Bermuda   +1 441 299 4925

1 Blue Sky One Ltd. & Ors -v- Mahan Air and Anor [2009][EWHC] 3314 (Comm)


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