Key Aviation Registers In Canada

Practising aviation law in Canada means working with a number of registries that record information such as security interests and information regarding the identity of an aircraft or of its owner/operator. Navigating such databases can quickly prove complex when setting up transactions or financing.

This bulletin focuses on four key aviation registers used in Canada, covering both aircraft registration and security interests on aircraft.

1. International Registry of Mobile Assets (the "International Registry")

The International Registry is a register used worldwide in all countries that signed the 2001 Cape Town Convention on International Interests in Mobile Equipment, more commonly referred to as the "Cape Town Convention" (the "Cape Town Convention"). The Cape Town Convention provides a set of standardized rules for any movable object that is likely to cross borders, including aircraft, helicopters, trains, spacecraft and construction machinery. Each of these categories of equipment must be the subject of a protocol in order for the provisions of the Cape Town Convention to apply. Currently, only the Protocol on Matters Specific to Aircraft Equipment is in force, and since 2006. Most of Canada's major economic partners are also parties to the Cape Town Convention.

The International Registry currently allows all aerospace industry stakeholders to register the following:

• international interests (security interests);
• any sale or prospective sale;
• the assignment of any international interest; and
• the subordination of any international interest.

It can therefore be used to trace an aircraft's entire chain of title since its original delivery. An aircraft is registered using the airframe and engine serial numbers, which numbers are provided by the relevant parts manufacturers and remain the same regardless of the country where the aircraft is ultimately registered.

The International Registry is unique since it operates on a "first come, first served" basis. It does not provide any distinction in rank between creditors or international interests, except with respect to any registered subordination of interests. Nonetheless, international interests can also be divided among creditors on a percentage basis, notably in the case of syndicated financing.

An important point to bear in mind when registering security interests in the International Registry is that the airframe and aircraft engines are separate objects subject to separate registrations, since each of these parts is interchangeable and replaceable. Unlike local registers, which include broadly defined collateral, the International Registry only permits the registration of international interests in airframes or engines that meet the following criteria:

• Airframes that are type certificated to transport at least eight passengers or goods in excess of 2,750 kilograms;
• Helicopters that are type certificated to transport at least five passengers or goods in excess of 450 kilograms;
• Jet propulsion aircraft engines with at least 1,750 pounds of thrust or its equivalent; and
• Turbine-powered or piston-powered aircraft engines with at least 550 rated take-off horsepower or its equivalent.

Considering the global scope of the International Registry, the security interests registered therein are the most crucial when it comes to aircraft financing, primarily because of their enforceability against countries that have ratified the Cape Town Convention.

2. Canadian Civil Aircraft Register ("CCAR")

The CCAR was implemented by the Aeronautics Act¹ and is administered by Transports Canada. It is the obligation of every Canadian, as defined in the Canada Transportation Act², to register all aircraft in their possession within the CCAR.

To be considered a Canadian under the Canadian Aviation Regulations³, a natural or legal person must be:

• a Canadian citizen; or
• a permanent resident of Canada.

In the case of a legal entity, partnership or any other legal structure, the following criteria apply:

• it is incorporated or formed under the laws of Canada or a province;
• at least 75% of the voting interests are owned and controlled by Canadians; and
• it is controlled in fact by Canadians.

Unlike other registers, the CCAR lists the operators who have the custody and control of an aircraft, and not the owners who actually hold title. As such, if the aircraft is subject to a management agreement, lease or sublease, the CCAR will only show the manager, lessee or sublessee as the registered owner, since they have the custody and control of the aircraft on a day-to-day basis. In that respect, Canada differs from other countries such as the United States, where the Federal Aviation Administration Registry is a register of title holders that also includes operators.

The CCAR is also a useful tool that provides technical information regarding the aircraft and its engines. Searches can be done using information such as the aircraft registration number, serial number or model name. However, given that Canadian aircraft registration numbers consist of the letter C followed by four other letters, those codes are commonly reused, so it is possible that an aircraft that was recently registered could have a long CCAR record associated with its mark history. Thus, anyone wishing to obtain an aircraft's chain of title should refer to the International Registry first.

3. Personal Property Securities Registers ("PPSRs") and the Register of Personal and Movable Real Rights ("RPMRR")

In Quebec, the RPMRR provides for the registration of hypothecs, rights of ownership of the lessor, rights resulting from a lease, and assignments of these contracts, to name a few; PPSRs do the same, save that "security interests" are registered instead of one subset of these, i.e. hypothecs. In both Quebec and common law provinces, such information is published in the form of a collateral description. In aircraft deals, security interests are registered in provincial registers to compensate for the fact that only certain elements can be registered in the International Registry (i.e. security interests against "aircraft objects" only – i.e. airframes and engines). Replacement parts, for example, may be subject to a security interest in such provincial registers, but not in the International Registry. Security interests relating to rights arising under ancillary documents (management agreements, leases, subleases) and cash-flows arising from such documents (fees, revenue) are also registered in these provincial registers for the purpose of providing greater collateral to secure the financing.

Generally speaking, the aircraft is registered both in the province where the debtor (the borrower or the lessee) is domiciled and in the province where the hangar storing the aircraft is located when it is not flying or in operation, regardless of whether or not the hangar belongs to the debtor. Normally, insofar as an asset is not subject to cross-border movement, as in the case of unassembled parts, for example, only the location of the asset matters. However, given that aircraft are highly mobile, creditors would be well advised to anticipate all possibilities.

These registers can be searched using a debtor's name and only provide a description of the asset or rights subject to the security interest. However, they rarely clearly indicate the beneficial owner of an aircraft, although in Quebec they sometimes indicate the identity of a party holding lessor ownership rights or rights of the lessor under a leasing (crédit-bail) or the rights of ownership under rights resulting from a lease under a lease, and since many aircraft are subject to a leasing/lease or subleasing/sublease, this renders the task more complex.

Conclusion

In sum, the best way to get a clear picture of aircraft ownership and related security interests is to search the International Registry, the CCAR and the relevant country's local security interest registers. The table below shows the information recorded in each register regarding an aircraft:

Footnotes

1. RSC 1985, c A-2.

2. Section 55(1) of the Canada Transportation Act, SC 1996, c 10.

3. SOR/96-433.

4. However, as discussed it is possible that an aircraft that was recently registered could have a long CCAR record associated with its mark history. Thus, anyone wishing to obtain an aircraft's chain of title should refer to the International Registry first.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.