PRESENTATION TO THE NCOP ON THE CONVENTION ON INTERNATIONAL INTERESTS IN MOBILE EQUIPMENT BILL, MARCH 2007

CONTENTS ● PURPOSE OF PRESENTATION ● BACKGROUND ● PURPOSE AND BENEFITS OF THE CONVENTION AND PROTOCOL ● OBJECTS OF THE BILL ● CONTENTS OF THE BILL ● THE BILL IN RELATION TO CURRENT LEGISLATION ON RECOGNITION OF RIGHTS IN AIRCRAFT ● CONSULTATION ● FINANCIAL IMPLICATIONS ● CONCLUSION & RECOMMENDATION

PURPOSE OF PRESENTATION To request the NCOP to consider and approve the Convention on International Interests in Mobile Equipment Bill, 2007

BACKGROUND ● SA hosted a Diplomatic Conference in Cape Town from 29 October 2001 – 16 November 2001 ● The Convention was signed on 16 November 2001 ● Ratification of Convention and Protocol approved by the National Assembly on 20 June 2006 and the NCOP on 19 September 2006 ● Instruments of Ratification submitted (DFA) to the Institute for the Unification of Private Law (UNIDROIT) on 21 November 2006 ● UNIDROIT accepted the Instruments of Ratification on 18 January 2007 ● Convention and Protocol to be enacted into law in terms of Section 231(4) of the Constitution of SA, 1996

PURPOSE AND BENEFITS OF THE CONVENTION AND PROTOCOL To establish an international legal regime for the creation, enforcement, registration and priority of security interests held by creditors, conditional sellers and lessors, thus overcoming problems experienced in obtaining secure and readily enforceable rights in aircraft objects. This reduction in risk translates into a reduction in the cost of capital of companies purchasing or leasing aircraft. (Example, Ex-Im Bank of USA provides a 33% reduction of its risk premium on financing large commercial aircraft) In essence, the Convention and Protocol bring significant economic benefits to countries by bringing within their reach, commercial finance for mobile equipment that may previously have been available only at relatively high cost.

OBJECTS OF THE BILL To give effect to SA’s obligations on matters specific to aircraft equipment in terms of the Convention and Protocol To enact the Convention and Protocol into law To provide for matters connected therewith

CONTENTS OF THE BILL Section 1: Inserts definitions, as applicable to the Bill. Section 2: Deals with the enactment of the Convention and Protocol and provides for amendments thereto, subject to compliance with Section 231 of the Constitution, Section 3: Designates the SACAA as entry point through which information may be transmitted to the International Registry.

CONTENTS OF THE BILL (continued) Section 4: Determines that the High Court, referred to in section 166(c) of the Constitution, 1996, has jurisdiction in terms of Article 53 of the Convention Section 5: Enables the Minister of Transport to make regulations regarding any ancillary or incidental administrative or procedural matter necessary for implementation / administration of the Act. Section 6: Short title and entry into force on date fixed by the President by Proclamation

THE BILL IN RELATION TO CURRENT LEGISLATION ON RECOGNITION OF RIGHTS IN AIRCRAFT The Convention on the International Recognition of Rights in Aircraft Act, 1993 Convention on International Interests in Mobile Equipment Bill, 2007 ● System established in terms of the Geneva Convention of 1948 ● Established local registers maintained by individual participating states ● System fragmented and all participating states’ registers to be consulted to establish interests filed by financiers ● System established in terms of the Cape Town Convention and Protocol of 2001 ● Established a centralised international electronic registry ● Centralised system provides greater confidence in the decision to grant credit and reduces borrowing costs.

THE BILL IN RELATION TO CURRENT LEGISLATION ON RECOGNITION OF RIGHTS IN AIRCRAFT(continued) The Convention on the International Recognition of Rights in Aircraft Act, 1993 Convention on International Interests in Mobile Equipment Bill, 2007 ● Administrative cost to the State for maintaining the local register of interests ● Due to local application of this Act, it is not in conflict with the Cape Town Convention and Protocol. ● International registry created and maintained at no cost to the State ● Promulgation of the Convention on International Interests in Mobile Equipment Act not in conflict with SA Domestic Law

CONSULTATION ● Extensive consultation took place prior to the signing of the Convention and Protocol in Cape Town on 16 November 2001 ● The Bill (with both the Convention and the Protocol) was published in the Government Gazette on 6 July 2005 for comments ● Draft Bill was distributed to - – The South African Civil Aviation Authority – The Airports Company of South Africa – The Air Traffic Navigation Services Company – The Airlines Association of Southern Africa – The Commercial Aviation Association of South Africa

CONSULTATION (continued) ● Responses were received supporting the Bill ● The State Law Advisers’ Office considered the Bill and recommended amendments (incorporated into the Bill) ● The Chief State Law Adviser (International Law) found the Convention and Protocol in compliance with international law practice ● The Department of Transport is satisfied that: – The Bill proposes measures that are not contentious, although unique; and – Those likely to be affected by the Bill have been afforded a reasonable opportunity to influence the content.

FINANCIAL IMPLICATIONS There are no financial implications for the State as the Cape Town Convention and Protocol are private law instruments relating to the financing of high value mobile assets

CONCLUSION AND RECOMMENDATION ● The Convention and Protocol have as their aim the promotion of asset-based financing by establishing a legal framework that will protect interests in aircraft equipment ● The proposed Convention on International Interests in Mobile Equipment Bill, 2007, incorporating both the Convention and Protocol, will give legal effect in South Africa to this important international legal instrument ● It is therefore recommended that the Convention on International Interests in Mobile Equipment Bill, 2007 be approved by the NCOP in accordance with Section 231(4) of the Constitution, 1996