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  • The Unforeseen Benefits of Driverless Transport during a Pandemic

    The COVID-19 pandemic has been not only causing major social upheaval but disrupting business development and the economy as well. Nevertheless, since last March, we have seen many developments and new projects involving self-driving vehicles (SDV). Here is an overview. Distancing made easy thanks to contactless delivery In mid-April 2020, General Motors’ Cruise SDVs were dispatched to assist two food banks in the delivery of nearly 4,000 meals in eight days in the San Francisco Bay Area. Deliveries were made with two volunteer drivers overseeing the operation of the Level 3 SDVs. Rob Grant, Vice President of Global Government Affairs at Cruise, commented on the usefulness of SDVs: “What I do see is this pandemic really showing where self-driving vehicles can be of use in the future.  That includes in contactless delivery like we’re doing here.”1 Also in California in April, SDVs operated by the start-up Nuro Inc. were made available to transport medical equipment in San Mateo County and Sacramento.  Toyota Pony SDVs were, for their part, used to deliver meals to local shelters in the city of Fremont, California.  Innovation: The first Level 4 driverless vehicle service In July 2020, Navya Group successfully implemented a Level 4 self-driving vehicles service on a closed site. Launched in partnership with Groupe Keolis, the service has been transporting visitors and athletes on the site of the National Shooting Sports Centre in Châteauroux, France, from the parking lot to the reception area.  This is a great step forward—it is the first trial of a level 4 vehicle, meaning that it is fully automated and does not require a human driver in the vehicle itself to control it should a critical situation occur. Driverless buses and dedicated lanes in the coming years In August 2020, the state of Michigan announced that it would take active steps to create dedicated road lanes exclusively for SDVs on a 65 km stretch of highway between Detroit and Ann Arbour.  This initiative will begin with a study to be conducted over the next three years. One of the goals of this ambitious project is to have driverless buses operating in the corridor connecting the University of Michigan and the Detroit Metropolitan Airport in downtown Detroit. In September 2020, the first SDV circuit in Japan was inaugurated at Tokyo’s Haneda Airport. The regular route travels 700 metres through the airport.  A tragedy to remind us that exercising caution is key  On March 18, 2018, in Tempe, Arizona, a pedestrian was killed in a collision with a Volvo SUV operated by an Uber Technologies automated driving system that was being tested. The vehicle involved in the accident, which was being fine-tuned, corresponded to a Level 3 SDV under SAE International Standard J3016, requiring a human driver to remain alert at all times in order to take control of the vehicle in a critical situation. The investigation by the National Transportation Safety Board determined that the vehicle’s automated driving system had detected the pedestrian, but was unable to classify her as such and thus predict her path. In addition, video footage of the driver inside the SDV showed that she did not have her eyes on the road at the time of the accident, but rather was looking at her cell phone on the vehicle’s console. In September 2020, the authorities indicted the driver of the vehicle and charged her with negligent homicide. The driver pleaded not guilty and the pre-trial conference will be held in late October 2020.  We will keep you informed of developments in this case.   In all sectors of the economy, including the transportation industry and more specifically the self-driving vehicles industry, projects have been put on hold because of the ongoing COVID-19 pandemic. Nevertheless, many projects that have been introduced, such as contactless delivery projects, are now more important than ever. Apart from the Navya Group project, which involves Level 4 vehicles, all the initiatives mentioned concern Level 3 vehicles. These vehicles, which are allowed on Quebec roads, must always have a human driver present. The recent charges against the inattentive driver in Arizona serve as a reminder to all drivers of Level 3 SDVs that regardless of the context of an accident, they may be held liable. The implementation of SDVs around the world is slow, but steadily gaining ground. A number of projects will soon be rolled out, including in Quebec. As such initiatives grow in number, SDVs will become more socially acceptable, and seeing these vehicles as something normal on our roads is right around the corner.   Financial Post, April 29, 2020, “Self-driving vehicles get in on the delivery scene amid COVID-19,”.

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  • Standing Senate Committee of Canada's Transport and Communications issues report on driving of smart vehicles

    Introduction In January 2018, the Senate's Standing Committee on Transport and Communications (hereinafter the "Committee"), chaired by the Hon. David Tkachuk, published a report on the impact of automated vehicles in the country at the behest of the Minister of Transport of Canada. The first generation of these vehicles are already travelling on our roads, and their increased use will probably have far-reaching social consequences, such as a reduction in the number of accidents 1 and greater transport freedom for the elderly, but also, potentially, the loss of jobs in the country. The Committee issued sixteen (16) recommendations relating to smart vehicles2, in particular on these vehicles' cybersecurity and insurance coverage, urging the government to act now, since "technology will overtake regulations". Automobile manufacturers seem to hold the same opinion. Shawn Stephens, Planning and Strategy Director at BMW Canada, says that "the technology is ready. The manufacturers are ready. It is the laws and the government that are slowing us down [our translation]"3. Plug-in vehicles and automated vehicles Plug-in vehicles are described by the Committee as relying on to two kinds of technologies: the ones designed for “infoentertainement” and the ones relating to communication between vehicles.  These plug-in vehicles can therefore receive information on approaching vehicles, for example on their speed, relevant routes, and on the services available along the selected route. For their part, automated vehicles make different degrees of autonomous driving possible by relying on various technologies. The automation of these vehicles is classified between levels 0 and 5, that is, from no automation at all to complete automation, which refers to a vehicle that is entirely self-driven, without any possibility of human input.4 The smart cars designation encompasses both these categories. Cybersecurity The Committee recommends that a best practices guide be adopted with regard to cybersecurity. Indeed, the threat of cyberattacks targeting smart cars has been worrying the automobile industry for some years, to such an extent that the Automotive Information Sharing and Analysis Centre was established in July 2015, to allow various manufacturers to share their knowledge and cooperate on this topic. A cyberattack against a smart vehicle could target the integrity of its electronic data, and therefore the safety of its passengers, as well as the personal information of the drivers obtained from the vehicle. As a matter of fact, a recommendation for drafting a bill aimed at protecting the personal data of smart vehicles' users was also issued.  Insurance Considering the real threat of cyberattacks targeting smart vehicles, manufacturers must to take out an insurance policy covering cyberattacks. On another note, KPMG deems that, as a result of the use of automated vehicles, accidents will drop by 35% to 40%, while repair costs will increase by 25% to 30%5. So, one can reasonably expect an impact on drivers' insurance premiums. Moreover, it is possible that the liability in an accident involving an automated vehicle be transferred from the vehicle's driver to its manufacturer by means of amendments to the Automobile Insurance Act6, or of new laws specifically relating to the driving of automated vehicles. These changes could have significant consequences on the various laws regulating automobile insurance in the country7. The Committee therefore issued the recommendation for Transport Canada to oversee the impact of plug-in and automated vehicles on the automobile insurance industry.  Some initiatives and challenges The Motor Vehicle Test Centre in Blainville is currently working on establishing whether or not smart vehicles comply with current Canadian security standards. We have also learned from the Committee's Report that the Canadian Regulatory Cooperation Council is currently working with the United States on the various issues connected to plug-in and automated vehicles. Despite the numerous initiatives on record, so far only Ontario has introduced legislation specifically regulating the use of automated vehicles on the province's roads. 8. Québec will have to go down this path in order to fill the current legal vacuum9.  Conclusion As discussed in our bulletin of February 201710, the growing number of automated vehicles on the roads of Québec cannot be taken lightly. A legislative framework specifically providing for this kind of vehicle is of the essence when we consider that, by some projections, a quarter of the total worldwide vehicles will be defined as smart by 203511. Plug-in vehicles are already traveling on the roads of Québec, as are various levels of automated vehicles. It is therefore vital for all levels of government to catch up with these technologies. Regulating the driving of smart vehicles is a hot topic pertaining to the development of artificial intelligence. As such, it needs to be followed closely.   It is estimated that up to 94% of road accidents are caused by human error, see Standing Senate Committee on Transport and Communications, "Driving Change: Technology and the Future of the Automated Vehicle", Ottawa, January 2018, page 29. Standing Senate Committee on Transport and Communications, "Driving Change: Technology and the Future of the Automated Vehicle", Ottawa, January 2018. MCKENNA, Alain, La Presse, « Véhicules autonomes : « Ce sont les lois et le gouvernement qui nous freinent », Montréal, 1 February 2018, online: See GAGNÉ, Léonie, Need to Know, Bulletin Lavery, de Billy, “Autonomous vehicles in Québec: unanswered questions” Montreal, February 2017. Standing Senate Committee on Transport and Communications, "Driving Change: Technology and the Future of the Automated Vehicle", Ottawa, January 2018, page 65. Automobile Insurance Act of Québec, CQLR c. A-25.Automobile insurance falls under provincial jurisdiction. Pilot Project - Automated Vehicles, O Reg 306/15. The Government of Québec is currently assessing Bill 165, which aims at, among other things, amending the Highway Safety Code and regulating the driving of autonomous vehicles. Supra, note 4. Boston Consulting Group, (2016), Autonomous Vehicle Adoption Study.

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  • Artificial Intelligence and the 2017 Canadian Budget: is your business ready?

    The March 22, 2017 Budget of the Government of Canada, through its “Innovation and Skills Plan” ( mentions that Canadian academic and research leadership in artificial intelligence will be translated into a more innovative economy and increased economic growth. The 2017 Budget proposes to provide renewed and enhanced funding of $35 million over five years, beginning in 2017–2018 to the Canadian Institute for Advanced Research (CIFAR) which connects Canadian researchers with collaborative research networks led by eminent Canadian and international researchers on topics including artificial intelligence and deep learning. These measures are in addition to a number of interesting tax measures that support the artificial intelligence sector at both the federal and provincial levels. In Canada and in Québec, the Scientific Research and Experimental Development (SR&ED) Program provides a twofold benefit: SR&ED expenses are deductible from income for tax purposes and a SR&ED investment tax credit (ITC) for SR&ED is available to reduce income tax. In some cases, the remaining ITC can be refunded. In Québec, a refundable tax credit is also available for the development of e-business, where a corporation mainly operates in the field of computer system design or that of software edition and its activities are carried out in an establishment located in Québec. This 2017 Budget aims to improve the competitive and strategic advantage of Canada in the field of artificial intelligence, and, therefore, that of Montréal, a city already enjoying an international reputation in this field. It recognises that artificial intelligence, despite the debates over ethical issues that currently stir up passions within the international community, could help generate strong economic growth, by improving the way in which we produce goods, deliver services and tackle all kinds of social challenges. The Budget also adds that artificial intelligence “opens up possibilities across many sectors, from agriculture to financial services, creating opportunities for companies of all sizes, whether technology start-ups or Canada’s largest financial institutions”. This influence of Canada on the international scene cannot be achieved without government supporting research programs and our universities contributing their expertise. This Budget is therefore a step in the right direction to ensure that all the activities related to artificial intelligence, from R&D to marketing, as well as design and distributions, remain here in Canada. The 2017 budget provides $125 million to launch a Pan-Canadian Artificial Intelligence Strategy for research and talent to promote collaboration between Canada’s main centres of expertise and reinforce Canada’s position as a leading destination for companies seeking to invest in artificial intelligence and innovation. Lavery Legal Lab on Artificial Intelligence (L3AI) We anticipate that within a few years, all companies, businesses and organizations, in every sector and industry, will use some form of artificial intelligence in their day-to-day operations to improve productivity or efficiency, ensure better quality control, conquer new markets and customers, implement new marketing strategies, as well as improve processes, automation and marketing or the profitability of operations. For this reason, Lavery created the Lavery Legal Lab on Artificial Intelligence (L3AI) to analyze and monitor recent and anticipated developments in artificial intelligence from a legal perspective. Our Lab is interested in all projects pertaining to artificial intelligence (AI) and their legal peculiarities, particularly the various branches and applications of artificial intelligence which will rapidly appear in companies and industries. The development of artificial intelligence, through a broad spectrum of branches and applications, will also have an impact on many legal sectors and practices, from intellectual property to protection of personal information, including corporate and business integrity and all fields of business law. In our following publications, the members of our Lavery Legal Lab on Artificial Intelligence (L3AI) will more specifically analyze certain applications of artificial intelligence in various sectors and industries.

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  • Drone operators, do you know the rules?

    Drones, also known as “UAVs” (for Unmanned Aerial Vehicles) have become more popular in Quebec over the past few years. From the surveillance of quarries and gravel pits, industrial sites, pipelines, farmland, open air mines and construction sites to package delivery, the collecting of aerial images to promote municipalities, film-making and property sales, there are countless uses for drones. However, it should be kept in mind that the use of drones is regulated by the federal government, and certain uses are subject to special rules that may include obtaining a special flight operations certificate (“SFOC”). Legislative and regulatory framework The use of drones is governed by the Aeronautics Act1, and in particular the Canadian Aviation Regulations2. The applicable rules differ depending on whether the drone constitutes an “unmanned air vehicle” or a “model aircraft” within the meaning of the Regulations. The difference between these types of aircraft depends on how much they weigh (more or less than 35 kg) and the proposed use (whether recreational or non-recreational). A “model aircraft” is an aircraft weighing up to 35 kg that is used for recreational purposes and that is not designed to carry persons or other living creatures3. An “unmanned air vehicle” is a power-driven aircraft, other than a model aircraft, that is designed to fly without a human operator on board4. In other words, an unmanned air vehicle is a drone that weighs over 35 kg, or one that weighs less than 35 kg if it is used for nonrecreational purposes. Unmanned air vehicles: SFOC required unless exempted Section 602.41 of the Regulations5 prohibits the operation of an unmanned air vehicle in flight except in accordance with an SFOC or an air operator certificate6. Section 603.66 of the Regulations also prohibits the use of an unmanned air vehicle unless the terms of an SFOC issued by the Minister are complied with. An SFOC is issued by the Minister pursuant to section 603.67 of the Regulations. The applicant must demonstrate the ability to conduct the proposed flight operation in accordance with the Special Flight Operations Standards7, which also indicate the form and manner of submitting an application. In theory, an SFOC is therefore required to use an unmanned air vehicle. However, the Act8 allows the Minister or a Department of Transport official authorized for such purpose to exempt, on any terms and conditions that may be specified, any person, aeronautical product, aerodrome, facility or service, or any class of persons, aeronautical products, aerodromes, facilities or services, from the application of Regulations. Two exemptions are currently available for individuals operating unmanned air vehicles for non-recreational purposes. The first exemption covers the use of drones with a take-off weight of more than 2 kg but less than 25 kg, subject to compliance with several conditions, including the following: General conditions: have at least $100,000 of civil liability insurance and at least $100,000 of insurance covering the operation of a UAV, not operate a UAV within eight hours after consuming an alcoholic beverage, not operate a UAV if the pilot is likely to suffer from fatigue making him unfit to properly perform his duties, make operational and emergency equipment available to the flight crew, etc. Flight conditions: be able to see the UAV directly, not fly the UAV at an altitude of more than 300 feet, not fly in Class G airspace9, only operate the UAV from a single control station, not conduct a take-off if the UAV has frost, ice or snow on its critical surfaces, not operate a UAV over a built-up area or open-air assembly of persons, maintain unassisted visual contact with the UAV to be aware of its position and able to visually scan the airspace in which it is being used in order to identify and avoid air traffic or objects, etc. Conditions related to the crew (pilot): have successfully completed a ground training program for pilots and be trained on the UAV system and qualified for the area and type of flight, etc. The second exemption applies to drones weighing less than 2 kg that are used for non-recreational purposes, which involve similar conditions to the first exemption, although they are fewer in number. If these conditions are not met, an SFOC must be obtained, just as for the use of drones weighing more than 35 kg for recreational purposes. Model aircraft: safety first The use of a “model aircraft” (a drone weighing less than 35 kg used for recreational purposes) does not require a specific permit. However, such an aircraft must be flown safely. Section 602.45 of the Regulations prohibits any person from flying a model aircraft into a cloud or in a manner that is or is likely to be hazardous to aviation safety. In the absence of a definition in the Regulations of what constitutes the “safe” use of a model aircraft, Transport Canada has published a circular to inform operators of model aircraft and unmanned air vehicles of the general guidelines and safety practices. In the circular, Transport Canada recommends for example that certain safety considerations be followed, such as not using a drone: within 9 km of an aerodrome (ex. an airport); within 150 m of people, animals, buildings, structures or vehicles; in populated areas or over a crowd, such as during sporting events, concerts, festivals or fireworks; near moving vehicles, highways, bridges, busy streets or any other place where drivers could be endangered or distracted; in restricted airspace (over military bases, prisons or forest fire areas), etc.10 Penalties for not following the rules A person operating a flight without an SFOC when one is required is liable to a fine of up to $5,000 for an individual and $25,000 for a corporation, and a person who fails to comply with the conditions of an SFOC is liable to a fine of up to $3,000 for an individual and $15,000 for a corporation11. The Criminal Code12 also creates an offence for the unsafe operation of an aircraft that endangers the safety of other aircrafts,13 which could lead to a fine or imprisonment for life. Compliance with the Regulations does not release the drone operator from complying with applicable provincial (and municipal)14 or federal15 regulations. In conclusion, note that an SFOC is required in the following cases: The aircraft weighs more than 35 kg, regardless of the proposed use; The aircraft weighs less than 35 kg and the proposed use is nonrecreational. Where an aircraft weighing less than 25 kg is used for non-recreational purposes, the operator may be exempt from the requirement of obtaining an SFOC provided he meets several conditions. If the operator cannot comply with the conditions to be met for any of the applicable exemptions, he will have no choice but to apply for an SFOC. Lastly, no permit is required to use a drone weighing 35 kg or less for recreational purposes, although the drone must be operated safely. Since the current exemptions will expire on December 21, 2016, the rules could change. Aeronautics Act, R.S.C. 1985, c. A-2 (the “Act”). Aviation is considered by the courts to be a matter of national importance and it therefore falls under the federal government’s jurisdiction to make laws for the peace, order and good government of Canada; see in this regard Johannesson v. Municipality of West St. Paul, [1952] 1 S.C.R. 292; Air Canada v. Ontario (Liquor Control Board), [1997] 2 SCR 581; Quebec (Attorney General) v. Canadian Owners and Pilots Association [2010] 2 SCR 536. Canadian Aviation Regulations, 1996, SOR/96-433 (Can. Gaz. II) (the “Regulations”). Supra, footnote 2. S. 101.01 of the Regulations. Supra, footnote 2. We will not discuss this type of certificate, which applies to commercial air service operators. Special Flight Operations Standards, in the “General Operating and Flight Rules Standards”, Part VI, Standard 623 of the Regulations. Supra, footnote 1. Section 601.02 (1) of the Regulations states that “Class G” is uncontrolled airspace. General Safety Practices, in “Model Aircraft and Unmanned Air Vehicle Systems”, 2014, Advisory Circular (AC) No. 600-002. Section 103.08 (1) and (2). R.S.C. 1986, c. C-46. For example, section 77 of the Criminal Code, supra, footnote 12. For example, section 85 of the Municipal Powers Act, CQLR, c. C-47.1 (which allows municipalities to adopt a by-law to ensure peace, order, good government and the general welfare of its citizens) could give municipalities the authority to regulate drones. Would such a regulation be constitutional? According to the jurisprudence, the federal government’s jurisdiction over aviation is exclusive, which means, according to the doctrine of interjurisdictional immunity, that a province would not have the authority to regulate or prohibit the use of drones. However, if the effect of a valid provincial statute (adopted in accordance with a matter of provincial jurisdiction) is to govern the use of drones, the question is whether the courts would apply the doctrine of federal paramountcy, allowing the provincial legislation to apply concurrently in the absence of an actual conflict. See, among other things, the Canadian Charter of Rights and Freedoms, S.C. 1982, c. 11 (U.K.); the Criminal Code, R.S.C. 1986, c. C-46.; the Environment Quality Act, CQLR 1978, c. Q-2; the Privacy Act, R.S.C. 1985, c. P-21; the Personal Information Protection and Electronic Documents Act, S.C. 2000, c. 5; the Radiocommunication Act, R.S.C. 1985, c. R-2; the Transportation of Dangerous Goods Act, S.C. 1992, c. 34 and the National Parks of Canada Aircraft Access Regulations, 1997, SOR/97-150 (Can. Gaz. II).

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  • Canadian ratification of the Convention on International Interests in Mobile Equipment and of the Protocol to the Convention on International Interests in Mobile Equipment on Matters Specific to Aircraft Equipment

    This bulletin includes an analysis of certain provisions of the Cape Town Convention and the Aircraft Protocol that will take effect in Canada on April 1, 2013.  AN OVERVIEWBy: Pierre Denis1 and Étienne Brassard2Lavery, de Billy LLP INTRODUCTIONThis Bulletin is intended as a brief overview of the above-mentioned Convention and its Protocol and is not an in depth analysis of each of their provisions. We selected the provisions which we believe are required or useful to gain a working understanding of the CTC in the context of an overview. While drafted in layman’s terms, this overview does raise a few transactional/financing legal points. Hopefully they will not overburden the reader’s review.Since they were concluded on November 16, 2001 at a Diplomatic Conference in Cape Town, South Africa, the Convention and Protocol have become known and referred to collectively as the “CTC” and this term will be used herein when referring to both. However, since certain terms are defined in the Convention and others in the Protocol, and given the need to read both the Convention and the Protocol in conjunction, when quoting or referring to definitions or Articles, a specific reference to the Convention or the Protocol, as the case may be, will be added. For ease of reference, the non-consolidated Convention and Protocol are readily available without cost at the web site of Unidroit3 and all quotes and references herein are to the non-consolidated version of each of them. The International Interests in Mobile Equipment (Aircraft Equipment) Act4, as amended, adopted by Canada provides that the non-consolidated texts have force of law.We will briefly discuss the meaning of aircraft objects, the rules of form to create an international interest, the choice of forum and certain jurisdictional rules adopted under the CTC, the rules applicable to the location of the debtor (or “where the debtor is situated” to use the CTC terminology), the defaults, remedies, as well as preliminary reliefs and “self-help remedies” rules. The main priority and registration rules of the International Register (the “IR”) will also be overviewed, as well as searches thereunder and will be followed by a few comments in respect of States and common law liens, “super priorities” and “prior claims” in the province of Québec, as well as “arrest” or “detain” rights, all of which will continue to be recognized. Priorities, assignments, accessory rights, subrogations and related defaults and priority rules will only be alluded to but not reviewed. We will finally discuss the coming into effect of the CTC in Canada, the grandfathered transactions and amendments thereto.1. PURPOSES OF THE INTERNATIONAL REGISTRY OF MOBILE ASSETSOther than commerce and trade benefits intended to be achieved by the adoption of the CTC, one of the main purposes of the IR, which is supervised by the International Civil Aviation Organization, is to centralize the recording of transactions related to aircraft objects (as hereinafter defined) occurring world-wide and is intended to eventually become the sole register for all transactions related to aircraft objects creating international interests, other than purely State internal transactions when a “national registry” exists in a Contracting State and has been declared to apply as “national interests” by such Contracting State and are registered at the IR5. Canada did not make such a declaration and does not currently have such a national registry to record “national interests” in aircraft objects. The Canadian Civil Aircraft Register merely records as “owner”6 the person(s) or entities which have “custody and control” of aircraft registered thereunder; it does not allow for the recording of either national or international interests (as hereafter discussed). Thus, we will not elaborate further in respect of such national interests.Some of the countries participating in the CTC negotiations had been asked by several industries to modernize and harmonize the various national registration systems applicable to security/title retention financing devices (if any even existed in certain States) related to aircraft objects. Their goal was to reduce the economic and insolvency risks created by the uncertainties related to the validity and effectiveness as against third parties of security agreements, title retention agreements (conditional sales), leases and title transfers related to aircraft objects and optimize the international uniformization and recognition by Contracting States of the remedies adopted under the CTC, the enforcement thereof by their courts, as well as the enforcement by the courts of Contracting States of foreign judgments in respect thereof rendered by the courts of other Contracting States.2. AIRCRAFT OBJECTS2.1 Types of aircraft object requiring registration.The CTC is intended to apply in relation to “aircraft objects”7, other than those used in military, customs or police services, which are defined in the Protocol to include the following:(i) “airframes”8 that are type certified to transport at least eight (8) persons including crew or goods in excess of 2,750 kilograms;(ii) “aircraft engines”9 having in the case of jet propulsion aircraft engines at least 1750 lb of thrust or its equivalent or in the case of turbine-powered or pistonpowered aircraft engines at least 550 rated take-off shaft horsepower or its equivalent; and(iii) “helicopters”10 that are type certified to transport at least five (5) persons including crew or goods in excess of 450 kilograms.Each of the foregoing includes all installed, incorporated or attached accessories, parts and equipment (in the case of airframes, other than aircraft engines) and all data, manuals and records relating thereto.Note that the Protocol specifically provides that ownership of or another right or interest in an aircraft engine shall not be affected by its installation on or removal from an airframe11.There is no defined term “helicopter engines”, but in the Official Commentary of the CTC12 (hereafter “CTC Official Commentary”), Professor Goode states:“(i) a helicopter engine is an “aircraft engine” when it is not attached to a helicopter; and(ii) when a helicopter engine is installed on a helicopter, the helicopter engine becomes a component or an accessory of the helicopter, and subsequently, loses the characterization as an “aircraft object.”Instead of registering a new international interest every time a helicopter engine is removed from a helicopter or registering an international interest against a helicopter engine while it is installed on a helicopter, the CTC Official Commentary suggests to adapt the security agreement in order to contemplate the existence and registration at closing of both current and prospective interests against the engine (i.e. when the engine will be removed from the helicopter, the prospective registration against the engine will become effective)13.3. WHAT IS AN INTERNATIONAL INTEREST3.1 Agreements covered by the CTC.The CTC is intended to apply to a broad range of agreements, both current and prospective, creating or evidencing a security agreement, a title reservation agreement or a leasing agreement of an aircraft object, as these terms are hereafter defined.None of the following agreements recognized by the CTC require a minimum term or duration to meet the definition requirements and to thus become subject to registration at the IR.3.1.1 Security agreement;Under the Convention:“security agreement” means an agreement by which a chargor grants or agrees to grant to a chargee an interest (including an ownership interest) in or over an object to secure the performance of any existing or future obligation of the chargor or a third person;14This definition is sufficiently broad to cover most forms of security interest and would include a security trust (fiducie-sûreté), a sale with a resolutory condition and a sale with a right of redemption securing a loan (as understood in the province of Québec under Article 1755 of the Civil Code of Québec (“C.c.Q.”), given that transfers of ownership interests as security are included. Of course, it also includes a Personal Property Security Act (“PPSA”) type security agreement and hypothec under the C.c.Q.Applicable law will determine if the agreement in question is a security agreement, a title reservation agreement or a leasing agreement (see Articles 2(4) and 5(2), (3) and (4) of the Convention).3.1.2 Title reservation agreement;Under the Convention:“title reservation agreement” means an agreement for the sale of an object on terms that ownership does not pass until fulfilment of the condition or conditions stated in the agreement;15Under Article 2(2) of the Convention, an agreement cannot be both a security agreement and a “title reservation agreement”. This last definition is arguably broad enough to include a consignment agreement where title will typically pass, subject to the other conditions of the agreement, upon consumption, use or resale of the property. While in the CTC Official Commentary16 Professor Goode states that a consignment agreement “without a rental charge” cannot be a leasing agreement, he also states earlier on that a consignment “does not cross the threshold of falling within a Convention category…”17. In our view, a consignment may arguably qualify if all other requirements of the CTC are met. The conceptual differences as to when titles passes between a conditional sale and a consignment are full payment of the purchase price in a conditional sale, as opposed to the payment thereof upon use, consumption or sale in the case of a consignment. They are all “conditions” contemplated by the definition, which when fulfilled, trigger the transfer of title to the property involved.3.1.3 Leasing agreement;This Convention provides:“leasing agreement” means an agreement by which one person (the lessor) grants a right to possession or control of an object (with or without an option to purchase) to another person (the lessee) in return for a rental or other payment;18This definition is broad. Certain transactions which would not be subject to a registration at a personal property register or at the Québec register of personal and movable real rights, are leasing agreements under this definition and qualify for registration at the IR if the aircraft object is involved in a transaction where an international interest is created. This would include sale and leaseback transactions in PPSA jurisdictions (which include all Provinces in Canada, save Québec).The definition undoubtedly includes the more common “financial leases” as well as “rental agreements”, as these terms are understood at common law and as codified in the C.c.Q. In the case of the C.c.Q. this is the case irrespective of the codified meaning given to “lease” (louage) and “leasing” (credit-bail) thereunder19.However, we again note that applicable law will determine if a lease or leasing is a “leasing agreement” under the CTC or a security agreement (see Article 2(4) of the Convention).3.2 Formal requirements.The Convention defines “international interest” as follows:“international interest” means an interest held by a creditor to which Article 2 applies;Article 2 of the Convention reads as follows:Article 2 — The international interest1. This Convention provides for the constitution and effects of an international interest in certain categories of mobile equipment and associated rights.2. For the purposes of this Convention, an international interest in mobile equipment is an interest, constituted under Article 7, in a uniquely identifiable object of a category of such objects listed in paragraph 3 and designated in the Protocol:(a) granted by the chargor under a security agreement;(b) vested in a person who is the conditional seller under a title reservation agreement; or(c) vested in a person who is the lessor under a leasing agreement.An interest falling within sub-paragraph (a) does not also fall within sub-paragraph (b) or (c).3. The categories referred to in the preceding paragraphs are:(a) airframes, aircraft engines and helicopters;(b) railway rolling stock; and(c) space assets.4. The applicable law determines whether an interest to which paragraph 2 applies falls within subparagraph (a), (b) or (c) of that paragraph.5. An international interest in an object extends to proceeds of that object.A few observations are required. An outright sale, while not an international interest, nevertheless benefits from the registration provisions of the CTC pursuant to Articles III and XIV of the Protocol and can thus benefit from the priority or ranking rules provided by the CTC. The IR is not, per se, a title registry, but the registration of contracts of sale will, over time, provide a searchable list of title transfers with regards to a specific aircraft object (assuming that the CTC applies to each transfer).“Non-consensual rights or interests” as defined in the Convention are not international interests although they are subject to registration at the IR if a Contracting State has made a declaration in respect thereof under Article 39 of the Convention. Canada has made such a declaration as we will see later on. We further note that a “prospective international interest” (discussed later) is an international interest for the purposes of the CTC.Article 7 of the Convention requires the existence of four (4) formal conditions for an international interest to exist.3.2.1 a writing;The requirement of a writing may seem innocuous. However, readers from civil law jurisdictions should note that certain formal domestic law rules do not apply. For instance, this is the case for the rule prescribed by Article 2692 of the C.c.Q. for hypothecs in favour of a person holding the power of attorney (fondé de pouvoir) of the creditors, which rule requires that the document be signed “…on pain of absolute nullity be granted by notarial act en minute…”. An agreement failing to comply with this rule, when it applies, would nevertheless create an effective international interest even if invalid as a matter of domestic law.Also note that a “writing” includes electronic records of information20.3.2.2 having the power to dispose of the aircraft object;This requirement is very broad and it was drafted as such so that entities which may not legally own, but have the “power” (as opposed to “right”) to create an interest in or dispose of an aircraft object could do so21 (for instance a conditional buyer reselling or leasing, a lessee sub-leasing or a trustee acting under a trust agreement). This includes every type of transfer whether by sale, lease, conditional sale or a transfer by way of security.3.2.3 identification of the aircraft object conforms to the Protocol requirements;This requirement is important and is completed by Article V of the Protocol in respect of contracts of sale and by Article VII of the Protocol which states:Article VII — Description of aircraft objectsA description of an aircraft object that contains its manufacturer’s serial number, the name of the manufacturer and its model designation is necessary and sufficient to identify the object for the purposes of Article 7(c) of the Convention and Article V(1)(c) of this Protocol.(emphasis added)This rule in effect prohibits the recognition of an international interest, current or prospective, in future aircraft objects and it follows that neither a general security agreement on all present and future personal property, nor a universal movable hypothec on all present and future movable property would charge future aircraft objects. See also the reference to “uniquely identifiable objects” in Article 2 of the Convention.In Canadian PPSA provinces, except Ontario, the Personal Property Security Regulation22 requires that reference be made to the Canadian registration marks of the aircraft (issued by Transport Canada), in any filing instead of the manufacturer serial number. This will no longer be required for IR purposes. However, it will still be possible to include such registration marks, as we will see later.3.2.4 a security agreement must permit the determination of the obligations secured but not an amount or maximum amount secured;Domestic law in several States or territories of States (in respect of a Federated State see Article 5 (4) of the Convention) such as the province of Québec in the case of hypothecs, requires that the maximum amount for which any property is being charged be specifically mentioned. Again, domestic law rules of form are ousted for international interests (such as the requirement to have a hypothec amount), provided that the secured obligations are determinable.As the IR is not a document filing system, should someone wish to ensure compliance with the above formal rules for an international interest to be created, such person would need to obtain copy of the underlying agreement. No rule is provided obligating a creditor to provide copy of the agreement to someone requesting it, as is the case for instance in various PPSA jurisdictions23. Domestic law could apply to this question24.3.3 Choice of law/applicable law.3.3.1 Choice of governing law recognition;Article VIII (2) of the Protocol provides:The parties to an agreement, or a contract of sale, or a related guarantee contract or subordination agreement may agree on the law which is to govern their contractual rights and obligations, wholly or in part.This rule applies in Canada which has made a Declaration adopting it as is permitted under the first paragraph of this Article. The governing law of an agreement should be contrasted with the applicable law. The applicable law of where the debtor is situated will apply irrespective of the chosen governing law of an agreement. For instance, the rules governing registration and perfection of agreements under applicable law of a non-Contracting State would apply even if a debtor situated in a non-Contracting State agrees to a choice of law clause which selects the laws of a Contracting State as the governing law of the contract. Conversely, a debtor situated in a Contracting State who agrees to a choice of the laws of a non- Contracting State would not, by doing so, avoid the application of the CTC to its agreement.3.3.2 Domestic law suppletive;Article 5 (2) of the Convention provides:2. Questions concerning matters governed by this Convention which are not expressly settled in it are to be settled in conformity with the general principles on which it is based or, in the absence of such principles, in conformity with the applicable law.This rule is self-explanatory. It should be noted that both Article 5 (3) of the Convention and Article VIII, paragraph 3 of the Protocol provide that it is the domestic rules of law which are applicable, as opposed to conflict of laws rules of that State. This would exclude a possible transfer (renvoi) to the laws of another State.3.4 Paramountcy of Protocol over the Convention.Article 6 of the Convention is self-explanatory and reads as follows:Article 6 — Relationship between the Convention and the Protocol1. This Convention and the Protocol shall be read and interpreted together as a single instrument.2. UN the extent of any inconsistency between this Convention and the Protocol, the Protocol shall prevail.4. CONNECTING FACTORS4.1 Location of debtor.The term debtor is defined as follows in the Convention:“debtor” means a chargor under a security agreement, a conditional buyer under a title reservation agreement, a lessee under a leasing agreement or a person whose interest in an object is burdened by a registrable non-consensual right or interest;25Article 3 of the Convention provides:Article 3 — Sphere of application1. This Convention applies when, at the time of the conclusion of the agreement creating or providing for the international interest, the debtor is situated in a Contracting State.2. The fact that the creditor is situated in a non-Contracting State does not affect the applicability of this Convention.Article III (1) of the Protocol further provides:1. Without prejudice to Article 3(1) of the Convention, the Convention shall also apply in relation to a helicopter, or to an airframe pertaining to an aircraft, registered in an aircraft register of a Contracting State which is the State of registry, and where such registration is made pursuant to an agreement for registration of the aircraft it is deemed to have been effected at the time of the agreement.These definitions make clear that the location of the debtor in a Contracting State is the main element required (connecting factor) for the CTC to apply in respect of aircraft objects, except aircraft engines. However, a debtor may be located in a non-Contracting State if the helicopter or airframe is registered as a civil aircraft in a national registry of a State which is a Contracting State.In respect of a contract of sale, Article III of the Protocol adds “purchaser” as a “debtor” for the purposes of certain Articles.Article 4 of the Convention provides the following rules to determine the location or “situs” of a debtor:Article 4 — Where debtor is situated1. For the purposes of Article 3(1), the debtor is situated in any Contracting State:(a) under the law of which it is incorporated or formed;(b) where it has its registered office or statutory seat;(c) where it has its centre of administration; or(d) where it has its place of business.2. A reference in sub-paragraph (d) of the preceding paragraph to the debtor’s place of business shall, if it has more than one place of business, mean its principal place of business or, if it has no place of business, its habitual residence.As these rules are relatively clear and have been inspired by Uniform Commercial Code (“UCC”) UCC/PPSA-type statutes rules such as “centre of administration” or the better known “chief executive office”, they will be familiar to most. In the province of Québec, the private international law “domicile” rule is now replaced by these rules in respect of a “…corporeal movable ordinarily used in more than one country…”26, when it qualifies as an aircraft object under the CTC.4.2 The location of the debtor rule is not applicable to aircraft engines.While mounted on an airframe, an aircraft engine will follow the same rule as other aircraft objects but are separately registered at the IR, as we shall see below. An engine which is not mounted on an airframe is subject to the rules of the place where it is physically situated. It is to be noted that the engines situated in a non-Contracting State may be registered at the IR. Whether the courts of a non-contracting State would recognize and enforce such an international interest is another matter.5. MEANING OF DEFAULTArticle 11 of the Convention provides:Article 11 — Meaning of default1. The debtor and the creditor may at any time agree in writing as to the events that constitute a default or otherwise give rise to the rights and remedies specified in Articles 8 to 10 and 132. Where the debtor and the creditor have not so agreed, “default” for the purposes of Articles 8 to 10 and 13 means a default which substantially deprives the creditor of what it is entitled to expect under the agreement.It follows from Article 11 that the parties may still determine which events may constitute defaults. However, secured creditors, conditional vendors and lessors will no doubt wish to continue providing what the events of default will be under their agreements to avoid any debate as to whether a default “substantially deprives the creditor of what it is entitled to expect under the agreement”, more particularly in connection with any attempted challenge from a debtor. This is particularly true in light of the “self-help” remedies hereafter discussed.It is also possible to argue that the default by law provisions of the C.c.Q. could continue to apply. See for instance Articles 1597 (la demeure), 1598, 1599 and 1600 C.c.Q. We further refer to Article 2740, paragraph 2 of the C.c.Q. which requires that the claims of creditors be “liquid and exigible” for the hypothecary recourses of the C.c.Q. to be available and which seems overridden.6. REMEDIES AGAINST AIRCRAFT OBJECTS6.1 Under a security agreement.Article 8 of the Convention sets out the three remedies available under a security agreement. The debtor must have agreed either in the agreement or thereafter to each of these remedies.6.1.1 taking possession or control of aircraft objects;This remedy is similar to one of the remedies available to secured creditors under existing Canadian law. It does not however refer to the concepts of “simple” or “full administration” as understood under the C.c.Q. Thus, these concepts will not apply to remedies against aircraft objects.6.1.2 selling or leasing of aircraft objects;These remedies are again not dissimilar to existing Canadian law. However, the concepts of sale by the creditor and of sale by judicial authority of the C.c.Q. will no longer apply.6.1.3 collect or receiving income or profit from the management or use of the aircraft objects;This remedy is interesting. While it is difficult to contemplate a “chargee” or secured creditor managing or using the aircraft object to earn “income or profit” when the aircraft or helicopter is still nationally registered in the name of the chargor or debtor who may have the sole right to the custody and control of the aircraft under the Canadian Aeronautics Act and the Canadian Aviation Regulations (“CARs”), it would be possible to de-register the aircraft and re-register it in the name of the secured creditor (or another third party) to collect such income or profit.If a creditor’s international interest is prior registered at the IR and the debtor leases the object to a third party, the creditor could collect the rental payments from the lessee instead of terminating the lessee’s rights.We further note that “income or profit” from an aircraft object is not itself an aircraft object and it is debatable whether security in such “income or profit” (which are normally considered as “accounts” or “claims” in the province of Québec) is subject to registration of a security interest or hypothec therein at the relevant register in the chargor’s or grantor’s State or territory of such State.We also refer to the definition of “proceeds” in the Convention:“proceeds” means money or non-money proceeds of an object arising from the total or partial loss or physical destruction of the object or its total or partial confiscation, condemnation or requisition;27This definition does not include receivables arising from the “use or management” of an aircraft object and we are left with the reference to “income or profit” in Article 8 of the Convention as the sole basis for this “secured” remedy under the CTC. What of “comingled” proceeds in a bank account of a secured lender? “Traceability” or whether an object’s proceeds (as normally understood) remains identifiable are matters for applicable law to determine.286.2 Under a title retention agreement or lease.Article IX of the Protocol sets out the two remedies available under a title retention agreement or lease. Unlike under a security agreement, these remedies are available without any specific agreement by the debtor permitting them.6.2.1 terminate the agreement and take possession or control of the aircraft object;It is to be noted that Professor Goode states in the CTC Official Commentary that in jurisdictions where a title retention agreement or a particular type of lease is treated as a security agreement, the provisions of the Convention related to a title reservation agreement or a lease may not apply29. All Canadian PPSAs consider that title retention agreements create security interests, as well as leases of more than one year30. We also note that a title retention agreements, for the purposes of the Canadian insolvency statutes, a security agreement (as defined in such statutes) which statutes apply in all Canadian provinces and territories. One may thus question which remedies apply to them outside insolvency proceedings and we will need to await court decisions to clarify this.In the province of Québec, in respect of leases and leasing agreements as defined in the C.c.Q., it is clear that the termination of the “leasing agreement” and possession of the aircraft object in accordance with this CTC remedy ends the matter and the lessor may thereafter freely dispose of the repossessed aircraft object without having to account to the debtor thereafter. This is a significant advantage as the remedies will vary depending on the governing law of the “leasing agreement”. Similarly, conditional sale remedies could be available in respect of an instalment sale agreement under Article 1745 of the C.c.Q. governed by Quebec law (outside insolvency proceedings), instead of the remedies available under a security agreement.Since the Canadian Declarations include this Article, no application or leave from a court is required to exercise this remedy. This is part of the so-called “self-help remedies” hereafter discussed.6.3 Realization to be commercially reasonable.Article IX (3) of the Protocol reads as follows:Article 8(3) of the Convention shall not apply to aircraft objects. Any remedy given by the Convention in relation to an aircraft object shall be exercised in a commercially reasonable manner. A remedy shall be deemed to be exercised in a commercially reasonable manner where it is exercised in conformity with a provision of the agreement except where such a provision is manifestly unreasonableExisting case law in Canada may provide guidance as to what may or may not be “manifestly unreasonable”. Creditors are likely to require acknowledgements from debtors in their agreements that the remedies set out in the agreement are commercially reasonable and not manifestly unreasonable.6.4 Self-help “remedies”.Article 54(2) of the Convention reads as follows:2. A Contracting State shall, at the time of ratification, acceptance, approval of, or accession to the Protocol, declare whether or not any remedy available to the creditor under any provision of this Convention which is not there expressed to require application to the court may be exercised only with leave of the court.As part of its Declarations deposited with its instrument of ratification, the Government of Canada has specifically accepted this Article of the Convention. This Declaration reads as follows:“The Government of Canada also declares, in accordance with Article 54 of the Convention, that any remedy available to a creditor under any provision of the Convention, the exercise of which does not thereby require application to the court, may be exercised without leave of the court.”Professor Goode makes several comments in respect of this “remedy”. He states the following31:“Conversely, where a State makes a declaration under Article 54(2) that remedies are to be available without leave of the court, then the creditor cannot be required to institute court proceedings to enforce a remedy”.He also states:32“Article 54(2) requires a Contracting State to declare whether or not any remedy which under the Convention does not require application to the court is to be exercisable only with leave of the court. Moreover, the Convention does not affect rules of criminal law or tort law in national legal system. ”He also states the following in respect of certain remedies available to a conditional seller or lessor, (which we believe equally apply to self-help “remedies”):33“The Convention does not, of course, entitle the creditor to use violence or other unlawful means or affect the criminal liability of a creditor who uses such means.”Self-help will thus be subject to existing national legal system rules and its public order laws. In Canadian common-law jurisdictions, self-help is allowed34.In the province of Québec this is new law and it is to be anticipated that guidance from the common-law provinces case law, among others, will be sought by Québec courts in determining what a creditor may or may not do without leave of a court. We would anticipate that wherever an attempt to realize is being objected to, a creditor would not forcibly remove an aircraft object without leave from a court but we will need to await Québec court decisions for guidance as to the limits of this new “remedy”.6.5 Registration and export request authorization.This additional remedy is provided at Article XIII of the Protocol and is available in Contracting States that have made a Declaration in that respect as part of their ratification of the CTC. Canada has made such a Declaration (Alternative A). A creditor which has obtained from a debtor such a form of irrevocable de-registration and export request authorisation substantially in the form attached to the Protocol would be entitled to request from the Contracting State’s national registry authority, the deregistration of the aircraft further to a default. See Article X (6) of the Protocol and the Declarations made by Canada. The national registry authority and administrative authorities are obliged to expeditiously cooperate for such purposes. Article X (6) refers to “within 5 working days”. This remedy is not dissimilar to certain powers of attorney provided in Canadian security agreements and hypothecs and while there are issues relating to their effectiveness and whether they can be irrevocable. The Protocol makes its effectiveness very clear and this will expedite realization and export of the aircraft object when required.6.6 Additional Remedies.Article 12 of the Convention provides:Any additional remedies permitted by the applicable law, including any remedies agreed upon by the parties, may be exercised to the extent that they are not inconsistent with the mandatory provisions of this Chapter as set out in Article 15.Penalties, interest, liquidated damages and non-monetary awards would be examples of these additional remedies35.6.7 Prior notices.Article 8(4) of the Convention reads as follows:4. A chargee proposing to sell or grant a lease of an object under paragraph 1 shall give reasonable prior notice in writing of the proposed sale or lease to:(a) interested persons specified in Article 1(m)(i) and (ii); and(b) interested persons specified in Article 1(m)(iii) who have given notice of their rights to the chargee within a reasonable time prior to the sale or lease.This article is completed by Article IX (4) of the Protocol which adds:4. A chargee giving ten or more working days’ prior written notice of a proposed sale or lease to interested persons shall be deemed to satisfy the requirement of providing “reasonable prior notice” specified in Article 8(4) of the Convention. The foregoing shall not prevent a chargee and a chargor or a guarantor from agreeing to a longer period of prior notice.This 10 day prior notice replaces any prior notice required by domestic law in respect of any security agreement. It does not apply where a leasing agreement or a title retention agreement is involved.We note the definition of “debtor” quoted above and that of “interested persons” as follows:“interested persons” means:(i) the debtor;(ii) any person who, for the purpose of assuring performance of any of the obligations in favour of the creditor, gives or issues a suretyship or demand guarantee or a standby letter of credit or any other form of credit insurance;(iii) any other person having rights in or over the object;36A chargee or secured creditor would therefore be required to provide such a prior notice to a guarantor, a provider of a standby letter of credit or of any other form of credit insurance.6.8 Effects of realization.The CTC contains provisions relating to the allocation of proceeds also called “collocation” among “interested parties”, the effects of realization, the vesting of ownership of an aircraft object in satisfaction of the underlying obligations and in respect of the effect of such ownership and satisfaction. We invite the reader to review Articles 9 and 10 of the Convention and the CTC Official Commentary37.As a final note, Article 15 of the Convention reads as follows:In their relations with each other, any two or more of the parties referred to in this Chapter may at any time, by agreement in writing, derogate from or vary the effect of any of the preceding provisions of this Chapter except Articles 8(3) to (6), 9(3) and (4), 13(2) and 14.The provisions which cannot be waived essentially relate to the reasonableness of the recourses, the collection and application of proceeds of realization (8(3) to 8(6)), consideration already paid by the debtor (9(3)), the possibility of curing defaults afforded to interested parties (9(4)), certain reliefs pending final determination (13(2)) and procedural matters.Except for the above, the parties to any agreement may vary the remedies as may be agreed among them.7. PRELIMINARY RELIEF (CONSERVATORY MEASURES)Both Article 13 of the Convention and Article X of the Protocol address the interim measures or relief available through the courts (to ground, protect, preserve, immobilize, etc. the aircraft object) pending a final determination of certain issues.Article 14 of the Convention reconfirms that: “…procedure will be as prescribed by the law of the place where the remedy is to be exercised”.8. REMEDIES ON INSOLVENCYOne of the important changes brought about by the CTC in certain Contracting States that ratified the CTC is the changes to the bankruptcy and insolvency provisions of statutes of such Contracting States.The CTC and the Protocol in particular recognize that speedy recovery is crucial to creditors given the intrinsic high value of aircraft objects and the need for their continued maintenance. We will only briefly discuss these changes to bankruptcy legislations of Contracting States given that Canada had enacted essentially the same provisions in its Canadian insolvency statutes some years ago. In a nutshell, at the end of the “waiting period” as defined in Article XI of the Protocol (and which Canada declared to be 60 days in its Declarations deposited with its Instrument of Ratification) the debtor or “insolvency administrator” must give possession of the aircraft object to the creditor, unless the insolvency administrator or the debtor, as the case may be, has cured all defaults other than bankruptcy and insolvency events and has agreed to perform all future obligations provided under the agreement between the debtor with the creditor. These remedies on insolvency provisions apply in respect of all security agreements, title reservation agreements and leasing agreements subject to the CTC.In addition, these remedies on insolvency provisions recognize the continued priority of registered interests in such proceedings except of course for the priority afforded to nonconsensual rights or interests declared by a State to continue to apply pursuant to Article 39(1) of the Convention, as Canada did.Article 30(2) provides:2. Nothing in this Article impairs the effectiveness of an international interest in the insolvency proceedings where that interest is effective under the applicable law.This provision means that the applicable law will continue to determine if an unregistered international interest is effective in insolvency proceedings.38 Courts in common law PPSA jurisdictions in Canada have given priority to a trustee in bankruptcy over unregistered security interest, whereas Québec courts have given priority to the unregistered right in the same context.39Article 30(3) of the Convention also maintains the insolvency rules of the applicable law relating to “…avoidance of a transaction as a preference or a transfer in fraud of creditors, as well as rules to enforce rights to property available to an insolvency administrator”.9. THE INTERNATIONAL REGISTRY9.1 Types of registrations.The CTC permits many types or registration at Section 16 of the Convention as follows:Article 16 — The International Registry1. An International Registry shall be established for registrations of(a) international interests, prospective international interests and registrable non-consensual rights and interests;(b) assignments and prospective assignments of international interests;(c) acquisitions of international interests by legal or contractual subrogations under the applicable law;(d) notices of national interests; and(e) subordinations of interests referred to in any of the preceding subparagraphs.2. Different international registries may be established for different categories of object and associated rights.3. For the purposes of this Chapter and Chapter V, the term “registration” includes, where appropriate, an amendment, extension or discharge of a registration.The IR is a web site operated by Aviareto Limited and located in Dublin, Ireland.We will discuss only two types of registrations, in addition to the absence of “national interests” in Canada discussed earlier. They are “prospective international interests” and “international interests”.9.1.1 prospective international interest;The definition thereof in the Convention provides:“prospective international interest” means an interest that is intended to be created or provided for in an object as an international interest in the future, upon the occurrence of a stated event (which may include the debtor’s acquisition of an interest in the object), whether or not the occurrence of the event is certain;40This definition is completed by the definition of “prospective sale” as follows:“prospective sale” means a sale which is intended to be made in the future, upon the occurrence of a stated event, whether or not the occurrence of the event is certain;41These definitions do not mean that the aircraft object may not be determined at the time of the registration of a prospective international interest. On the contrary, the definitions of “object” and “aircraft objects” make it clear that the description must comply with the requirements of the CTC in respect of the description of aircraft objects highlighted above. Parties contemplating the grant of an international interest in the future is not enough. There must be real negotiations relating to a uniquely identified object with an intent to create an international interest in such object upon the occurrence of such event42.While registrations in advance of the execution of an agreement are common under UCC/PPSA type registrations in commercial transactions, this is new law in the province of Québec. If the prospective international interests becomes an international interest, no second registration is required and the priority of registration rule of the IR will apply.9.1.2 international interest;We already discussed international interest earlier and would simply add here that again the following priority of registration rule will apply.9.2 Priority of registration rule.Section 29 of the Convention adopts the rule that the first to register a registered interest has priority. However, given certain exceptions, it is best to quote Article 29 at length:Article 29 — Priority of competing interests1. A registered interest has priority over any other interest subsequently registered and over an unregistered interest.2. The priority of the first-mentioned interest under the preceding paragraph applies:(a) even if the first-mentioned interest was acquired or registered with actual knowledge of the other interest; and(b) even as regards value given by the holder of the first-mentioned interest with such knowledge.3. The buyer of an object acquires its interest in it:(a) subject to an interest registered at the time of its acquisition of that interest; and(b) free from an unregistered interest even if it has actual knowledge of such an interest.4. The conditional buyer or lessee acquires its interest in or right over that object:(a) subject to an interest registered prior to the registration of the international interest held by its conditional seller or lessor; and(b) free from an interest not so registered at that time even if it has actual knowledge of that interest.5. The priority of competing interests or rights under this Article may be varied by agreement between the holders of those interests, but an assignee of a subordinated interest is not bound by an agreement to subordinate that interest unless at the time of the assignment a subordination had been registered relating to that agreement.The CTC provides a number of rules relating to the priority of competing rights and the reader should review Article 29 and following of the Convention as completed by the Protocol in respect of sale agreements. The Official Commentary reviews the priority rules and has done a thorough analysis of these rules and absent court precedents at this time, we defer to its analysis43. We note however that these rules apply in respect of the various possible registrations described in Article 16 of the Convention quoted above.9.3 Registration requirements.We have already discussed how aircraft objects need to be described. The IR rules and regulations make clear that no other information in respect of the aircraft objects involved may or can be added. For instance, landing gears, propellers, avionics and auxiliary power units cannot be included in the description in the forms to be used for IR registration purposes.9.4 User Entity, its Administrator and the named Professional User Entity. The regulation, procedural requirements and guide to effect registrations at the IR require the user to become a “user entity”. The user entity names an “administrator” and the user entity may also name a “professional user entity”. It is also to be noted that the other party must also become a user and to consent to the registration. For a full analysis of the inner workings of the IR the reader should consult the International Registry User Manual (“User Manual”)44 and the Regulations and Procedures for the International Registry (“ICAO Regulation”)45.Note that pursuant to Article 18(5) of the Convention a State may designate an entity or entities in its territory as the entry point

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