Aircraft Finance in Ukraine: What the Cape Town Declarations Actually Give a Financier

Aviation & asset finance | JVS Law

Ukraine’s declarations under the Cape Town Convention are among the more creditor-friendly in Europe. Alternative A with a sixty-day waiting period. IDERA. And a declaration that remedies the Protocol does not expressly send to a court may be exercised without leave of court at all.

Most people financing an aircraft into Ukraine have never read them. They are four paragraphs long, they have been in force since 2012, and they decide more about your recovery position than the lease does.

Ukraine ratified both the Convention and the Aircraft Protocol by Law No. 4904-VI of 6 June 2012. They entered into force for Ukraine on 1 November 2012. The ratifying law sets out six declarations, and they are worth reading in the order they matter.

Remedies without a court order (Article 54(2) of the Convention). Ukraine declared that any remedy available to a creditor under the Convention which the Protocol does not expressly identify as requiring an application to court is exercised without leave of court. This is the declaration that changes the shape of an enforcement plan. It is also the one most often assumed to say the opposite.

Alternative A, sixty days (Article XI of the Protocol). Ukraine declared under Article XXX(3) that it applies Alternative A in its entirety, to all insolvency proceedings, with a waiting period of no more than 60 calendar days. Alternative A is the hard version: on expiry of the waiting period the insolvency administrator or the debtor must give the aircraft object up, unless every default has been cured and the future obligations agreed. There is no judicial discretion to extend it.

IDERA and choice of law (Articles VIII and XIII of the Protocol). Declared under Article XXX(1). The irrevocable de-registration and export request authorisation is therefore live in Ukraine — and, unusually, it has an operating procedure behind it: the State Aviation Administration’s Instruction of 16 August 2013 governs both the authorisation code for access to the International Registry and the recording of an IDERA with the regulator.

The entry point (Article XIX). The State Aviation Administration of Ukraine is the designated entry point.

Courts (Article 53). The relevant courts for Article 1 and Chapter XII are the courts of general jurisdiction.

And the limit (Article 50). The Convention does not apply to Ukraine’s internal transactions, for any category of object. A financing that is Ukrainian on both sides falls back on Ukrainian law alone.

Read together, the declarations produce a recovery sequence that is unusually short on paper.

The international interest is registered on the International Registry through the entry point. On default, the remedies under Chapter III — possession, sale, collection of income, de-registration and export — run without a Ukrainian court order except where the Protocol itself requires one. The IDERA, recorded with the regulator, is what makes the de-registration limb operable rather than theoretical: the authorised party asks, and the regulator’s own instruction tells it what to do. If the airline goes into insolvency, Alternative A puts a hard sixty-day clock on the administrator.

That is a better position than a financier gets in a number of larger markets. It is also, on its own, an incomplete picture.

Cape Town is read as a security-interest instrument, and that reading leaves out the limb that matters to a buyer. Under Article III of the Aircraft Protocol, the Convention applies to a contract of sale as though the references to an agreement creating an international interest were references to that contract. The consequence is practical: a purchase can be entered on the International Registry, and the buyer takes the benefit of the priority rules instead of depending on where the aircraft happened to be at closing.

Article V sets the formalities, and they are short. The contract of sale must be in writing, must relate to an aircraft object of which the seller has power to dispose, and must enable the object to be identified in conformity with the Protocol. Meet those three and the contract transfers the seller’s interest to the buyer on its own terms.

Two features of the registration are worth planning around. A registered contract of sale remains effective indefinitely — unlike a security interest, there is no discharge date to diarise. And a prospective sale can be registered before closing, remaining effective until it is discharged or until the period stated in the registration expires. For a transaction with a Ukrainian nexus, the entry point is the same one named in Ukraine’s declaration under Article XIX — the State Aviation Administration.

None of this is a criticism of the framework. It is what the framework was never designed to reach.

An aircraft you cannot fly out is not an aircraft you have recovered. Ukrainian airspace has been closed to civil traffic since February 2022. Every remedy above ends at the same physical question, and de-registration and export are two different steps — the first is a regulatory act, the second needs a corridor.

The money leg is domestic law, not Cape Town. Lease payments out of Ukraine run through the currency regime and the tax code, neither of which the Convention touches. The settlement deadline and the reporting obligations sit in the 2018 currency legislation — with a Forbes Global 2000 exemption that is almost nobody uses — and withholding on lease payments raises treaty-interpretation questions that are still open.

Domestic deals are outside it. The Article 50 declaration means a purely Ukrainian financing gets none of the above. Structure accordingly, or accept Ukrainian civil law and the ordinary enforcement route.

Courts of general jurisdiction are the forum. Where a court is needed, the Article 53 declaration sends you to the ordinary local bench — with the timetable that implies, and none of the specialisation an aircraft financier would expect.

The Cape Town declarations tell you which remedies you have. They say nothing about whom you will be exercising them against. In Ukrainian aviation a number of potential counterparties are state enterprises, and they come with a credit history worth reading before signature.

One example is documented in a statute. In 2009 the state enterprise Kyiv Aviation Plant “Aviant” issued bonds under state guarantees. The state ended up performing them, and the debt of its legal successor — the Antonov State Enterprise — was restructured by a dedicated Law of Ukraine No. 1701-VIII of 20 October 2016: repayment in equal quarterly instalments over ten years starting from the first quarter of 2017, with accrued penalties and other sanctions written off and no further penalties accruing from the day the law took effect. In 2020 the law was supplemented to allow part of the debt to be settled by transferring a non-residential building at 41 Peremohy Avenue in Kyiv to the state at market value (Law No. 730-IX of 18 June 2020).

For a financier the point is not the amount but the mechanics. The obligation of a state enterprise to the state was rewritten by legislation — not by a court, not by agreement of the parties, not through an insolvency procedure. That is a different class of risk from the default of a private operator: it is cured neither by security nor by an arbitration clause, because what changes is the extent of the obligation itself.

The practical conclusion is straightforward. Where the other side is a state enterprise, the Cape Town toolkit still works against the asset — the aircraft, the engine, the registration, the IDERA. But the counterparty’s financial standing lives in a different coordinate system and has to be checked separately: the history of state guarantees, special restructuring statutes, pending court and enforcement proceedings.

• Is the interest actually registered, and against the right object? The Registry entry is the whole basis of priority. Airframe, engines and helicopters are separate objects with separate thresholds.
• Is the IDERA recorded with the State Aviation Administration, not merely signed? A signed IDERA in a deal file is not the same instrument as one lodged under the 2013 Instruction.
• Have you priced the export leg separately from the de-registration leg? They are different acts, and under current conditions they have different answers.
• Does the payment structure survive the currency regime and withholding? This is where most of the recurring friction actually sits, and it is domestic law throughout.
• Is any part of the structure internal to Ukraine? If so, the Article 50 declaration takes that part outside the Convention entirely.

Seven publications on Ukrainian aviation law and finance, written for international practitioners and published here in full. They are dated where dated — the Cape Town position above is the current one.

• Aircraft Finance in Ukraine — Ukrainian Law Firms: A Handbook for Foreign Clients. Why aircraft finance is its own segment of project finance, the common structures, and how Cape Town and Ukrainian law interact.
• Chambers Aviation Finance & Leasing 2019 — Ukraine: Law and Practice. Purchase and sale of aircraft and engines, transfer of ownership, lease terms and registration. Written with Kateryna Tsirat.
• Getting the Deal Through: Aviation Finance & Leasing 2019 — Ukraine chapter.
• Getting the Deal Through: Aviation Finance & Leasing 2018 — Ukraine chapter (contributing editor Mark Bisset, Clyde & Co).
• The Aviation Law Review, 4th edition (2016) — Ukraine chapter.
• The Aviation Law Review, 2nd edition (2014) — Ukraine chapter (ed. Sean Gates).
• Montreal Convention enforcement in Ukraine — IBA Aviation Law Committee newsletter, June 2017.

This page began in August 2019 as a note pointing to the author’s aircraft finance chapter in Ukrainian Law Firms 2019. Rewritten in August 2026 around Ukraine’s Cape Town declarations and what they do and do not reach; the law is stated as at that date.