Mr. Speaker, I will let my previous record stand in terms of congratulations to you.
I am pleased to have this opportunity to discuss the legislative amendments that will come into force upon the ratification of the convention on international interests and mobile equipment, and the protocol to the convention on international interests and mobile equipment on matters specific to aircraft equipment.
Canada is a leader in electronics registries and has one of the most modern asset based financing systems in the world. Canada already has a sophisticated financial regime that uses assets as collateral. However, implementation of the convention and protocol would benefit the aviation industry by amending insolvency legislation and establishing an international registry specifically for aircraft equipment.
The convention and protocol would establish an international registry in which interests in aircraft equipment would be registered. This registry would replace individual national registries. It would record the existence of rights and prospective rights and determine their priority for use in the purchasing and financing of aircraft.
Currently in Canada each province and territory maintains its own aircraft registry and the federal government maintains a registry as mandated by the Bank Act. The establishment of a single worldwide international registry would replace both the federal and provincial registries for aircraft and aircraft parts in Canada, greatly simplifying aircraft registration. This will create a uniform, secure and predictable environment at the international level for Canadian business. This is in line with Canada's goal of achieving enhanced transparency, security and predictability in international business.
The Bank Act's special security regime allows banks in Canada to register security interests on a national basis for certain types of defined products listed in the act. The types of products that can be registered under the Bank Act are technically broad enough to include aircraft equipment covered by the new protocol.
Since the goal of the protocol is to create a single international registry, amendments to the Bank Act would be required to avoid overlap. The most effective means of doing this would be to remove the aircraft equipment from the application of the Bank Act. The international registry would allow aircraft owners, lessors and financial institutions to record their rights, including security interests in aircraft and aircraft engines.
Registration establishes the purchasers' or the creditors' priority over the unregistered or the subsequently registered interests of other parties. Information in the Internet based registry will be available to and accessible by any individual or company directly. This will provide a considerable advantage in terms of time, cost savings and improved certainty in resolving questions of priorities of interests.
Aviareto, an Ireland based company, was selected as registrar to a tendering process supervised by the International Civil Aviation Organization. The establishment of the international registry has begun and Aviareto will operate the registry once the convention and protocol come into force.
Before Canada ratifies the convention and protocol, a careful examination will be done of the final acceptability of the terms of operation of the new international registry. Canada will withhold ratification until it is satisfied that the registry is fully operational and secure. Amendments to the Bankruptcy and Insolvency Act, the Companies' Creditors Arrangement Act, and the Winding-Up and Restructuring Act would also be required in order to implement the convention and the protocol.
The bill provides for a special remedy in the case of insolvency that would impose a fixed stay period of 60 days. After this period, creditors could reclaim an aircraft or aircraft equipment on which they have a security. Under current legislation there are various periods within which creditors are subject to a stay on their ability to enforce security interests. These stays can sometimes extend to more than a year. The adoption of a fixed 60 day stay period would increase certainty in the system and level the playing field between Canada and the United States.
The U.S. industry already benefits from a similar provision under the U.S. bankruptcy code. The adoption of consequential amendments to Canada's insolvency laws would benefit Canadian aircraft manufacturers, financiers and airlines at the international level. Although these changes would provide better protection for creditors, they would not materially impact the debtors' ability to pursue reorganizations in the case of insolvency.
The federal legislation required to implement the convention and protocol would make the necessary amendments to the relevant acts. The legislative amendments may be proclaimed into force at different times, but no later than the date on which the convention and the protocol enter into force in Canada.
The establishment of the international registry and the associated harmonized asset based legal regime will significantly reduce the risks associated with aircraft financing. The effect will be a healthier, more stable international aviation industry. Adopting the bill will set in motion the legislative amendments required to achieve the goal.