§ 7.54 p.m.
§ THE MINISTER WITHOUT PORT-FOLIO (LORD DRUMALBYN)
My Lords, I beg to move that the draft Mortgaging of Aircraft Order 1972, a copy of which was laid before the House on July 13, be approved. In doing so I would also draw to the attention of the House the minor amendments contained in the correction slip published on July 21, copies of which have been made available to noble Lords. The purpose of this Draft Order is to provide a simple system for the registration of mortgages on aircraft at a central registry. If your Lordships approve the draft, the Order will be made under powers conferred in Section 16 of the Civil Aviation Act 1968. At present, under English law an aircraft can be mortgaged, and the priority of a mortgage can be safeguarded as against subsequent mortgages by registration under the Bill of Sale Acts 1878 and 1882. The procedure, however, is recognised by all concerned to be antiquated. cumbersome and unsatisfactory. If the Order is made, the ordinary law of England governing chattel mortgages will continue to apply, as at present, but the procedure for registration and for priorities will be simplified and brought up to date.
The system proposed is not unlike that provided by the Merchant Shipping Act 1894 for registration of mortgages of ships, except that it does not establish a register or title or prescribe a statutory form of mortgage. Instead, it provides that certain particulars of the mortgage shall be set out on a prescribed form and entered in the register to be kept by the Civil Aviation Authority, which already maintains the United Kingdom Register of Aircraft. This means that the necessity for collateral deeds of covenant, which are common in the case of ships, will be avoided. It also means that where a mortgaged foreign aircraft is transferred to the United Kingdom Register of Aircraft, it will be possible to enter partticulars of the existing mortgage on the register of mortgages. The Order provides only for the registration of mortgages of United Kingdom registered aircraft. The powers granted by Section 16 of the 1968 Act do not enable provision 400 to be made in respect of the mortgaging of foreign registered aircraft.
The draft Order provides for the Mortgage Register to come into operation on October 1, 1972. Thereafter if, as is hoped, the Register proves to be a useful innovation it is proposed to proceed to ratification of the 1948 Geneva Convention on the International Recognition of Rights in Aircraft, in drafting which the noble and learned Lord, Lord Wilberforce, played a leading part on behalf of this country. The Convention provides for certain rights, including mortgages, to be recognised by all States parties to it if those rights have been constituted in accordance with the laws of the State in which the aircraft is registered and are recorded in a public record of that State. An Order enabling this to be done can be made under Section 17 of the Civil Aviation Act 1968. In Scotland it is not possible to create a mortgage over a movable other than a ship without giving up possession. Schedule 2 makes the necessary changes in the law of Scotland to permit security over aircraft to be created without delivery. The power to make these changes is conferred in Section 16 of the Civil Aviation Act to which I have already referred.
I should mention two complementary pieces of minor legislation that will need to be made. Article 4 of the Air Navigation Order 1972 will be amended to provide that aircraft which are the subject of a registered mortgage may not be removed from the United Kingdom Register of Aircraft without the consent of the mortgagee, and the Civil Aviation Authority (Charges) Regulations 1972 will be amended to prescribe charges for the various services to be provided by the Authority in maintaining the Register.
My Lords, this draft Order has been prepared in close consultation with potential mortgagors and mortgagees of aircraft. It will estabish a useful facility for manufacturers, would-be owners and all concerned with financing the purchase of aircraft. It will also be the first step towards ratification of the Geneva Convention on the International Recognition of Rights in Aircraft. I confidently commend it to your Lordships.
§ 7.59 p.m.
§ LORD BESWICK
My Lords, I am grateful to the noble Lord for the explanation he has given of this Order. May I ask him what is the position so far as the other place is concerned? Was it the uncorrected version that was approved, or was it the version which is now before us? Do I gather that the Order has still to be approved by the Lower House before it will come into force?
Before I come to the substance of the Order I ought to declare an interest in this, which I readily do. I had a different kind of interest over a very long period of years—in fact I was absolutely amazed to find that this matter had not been brought before the House before now. It was in 1948 that this country first signed the Geneva Convention on the international rights in aircraft and I hope that, as a matter of historical interest or of curiosity, the noble Lord will be able to tell me why this Order is only now coming before your Lordships. It seems to me absolutely incredible that this should be so. We are in fact the only major country concerned with these matters which has not ratified the Geneva Convention. The United States, for example, took the necessary steps of ratification as far back as September 6, 1949.
The Order we are now asked to approve—and I certainly agree with the noble Lord that we should approve it—should be regarded as only a first step before ratification. I hope we can be given a complete assurance that there will be no delay at all before we go on to the next step. The noble Lord said that it was proposed to ratify the Convention, but he used the phrase "in a reasonable time". What is "a reasonable time" in this context, when it has taken us 24 years to bring the Order before the House? I hope that we can be given some further assurance on that.
I confirm absolutely what the noble Lord has said, that there will be practical and positive advantages in ratification. I can think, for example, of a case where it became necessary to realise on the assets of an overseas company, and the asset in which the United Kingdom was interested—an aeroplane—was in fact in the 402 United Kingdom at a United Kingdom airfield. But because we were unable to claim the protection of the Geneva Convention, the aircraft had to be flown back to the country of registration in order to be disposed of. Clearly, it would have been a considerable advantage if we had been able to conduct the operation here, and this could have been done if the United Kingdom had ratified the Convention. I can think of another example where a United States company needed similarly to realise on a mortgaged aircraft. In that case the machine was in the country of the debtor operator, but thanks to their membership of the Geneva Convention the United States was able to recover the aircraft and affect the sale from the United States. I am still puzzled how successive Governments —and this is no Party matter—have contrived to delay ratification for so many years. What conceivable advantage has there been to us? I welcome the Order, but I hope that the noble Lord can give me an absolute assurance, when he says there will be ratification of the Convention within a reasonable space of time, that he can put a date to it.
§ 8.3 p.m.
§ LORD DRUMALBYN
My Lords, to answer the noble Lord's first question, the Order with the correction slip was approved without discussion in another place, but the correction slip was available to them, as it was of course also available to the Special Orders Committee, who did not comment on the fact that there was this correction slip. I am assured that it is in order.
The noble Lord asked about the reason for the long delay. It is of course quite a considerable time since 1948. At the present time, the Order has been ratified by 33 out of a possible 120 States. As the noble Lord said, this includes the United States of America. It also includes the German Federal Republic, France, the Netherlands, Switzerland, the Scandinavians, and some Latin American countries. The first attempt to secure legislation to enable the domestic record to be established, and the Convention to be ratified was made some 20 years ago, but it came to nothing because those concerned with the drafting of the Bill considered that certain aspects of the Convention were unacceptable in United Kingdom law. The matter was then 403 referred to a Committee set up for this purpose by the then Lord Chancellor. After lengthy deliberations, the Committee concluded that the Convention could be accepted and at that time it attached to its Report a draft Bill which was pretty complex.
In the meantime, enthusiasm for ratification had rather waned. Although there were some representations from the S.B.A.C., there was nothing done until 1968. The Party opposite made provision in the 1968 Act for the matter to be dealt with under Sections 16 and 17; Section 16 in so far as the Order is concerned, and Section 17 in so far as adherence to the Convention is concerned. There has been some delay since then. I quite agree with what the noble Lord has said, and there is no doubt that the incident to which he referred brought this rather forcibly to the attention of Her Majesty's Government. We have proceeded from there with general consent without any further delay, and we now have this Order before us.
The particular example to which he referred was when, in January, the British Aircraft Corporation sold a BAC 1–11 aircraft to Pan International in Germany. At that time Pan International became insolvent, and the aircraft was protected by a mortgage registered in Germany. The German court refused to allow the aircraft to be brought back to the United Kingdom, where it could be maintained much more cheaply and easily and prepared for resale, on the grounds that the United Kingdom had not ratified the Convention. That has obviously brought the matter to a head, and it is plain that there is a desire on all sides to have an Order of this description.
What I said in my opening remarks was that if this facility proved to be useful, we would then proceed to ratification. We do not propose to proceed right away. We want first to see whether use is made of this facility, and in such a case we shall proceed to ratification without undue delay. Of course I cannot give the noble Lord an absolute assurance on that; it would, of course, need a further Order. But if use is made of these facilities, we certainly intend to proceed to ratification.
§ LORD BESWICK
My Lords, I am not sure that I require the leave of the 404 House to speak again, but, if so, I hope that it will be granted. I thought, first of all, that all I had to call attention to was the pained expression on the face of the noble and learned Lord the Lord Chancellor, when it was disclosed that a Lord Chancellor's Committee had taken so long to consider certain matters. Then the noble Lord came to the final paragraphs of his reply, and said that it was proposed to wait until it was seen whether use was made of this facility. Does this mean that we have to wait until one or two companies go bankrupt, and we have other examples of the difficulties that are provided for British concerns here? I had been led to believe that, after this burst of activity and the presenting of this Order, a certain malaise was again setting in, and it appears that my information was correct. It is now going to be a question of waiting. If we wait only half the time we have waited for this—that is, only for 12 years—it really is too long. I would ask the noble Lord to give me an assurance that he recognises the logic of what I am saying, because we shall not get the full benefit of this Order unless we ratify the Geneva Convention. We do not get the reciprocity which is otherwise needed in these matters. I hope he can give me an assurance before we pass the Order that he will look again at this and will let me know that some action is to be taken, because I cannot conceive of any advantage in further delay.
§ LORD DRUMALBYN
My Lords, it is not true to say that we shall not get any benefit. The noble Lord qualified what he said by saying that we shall not get the full benefit until we have ratified the Convention. We fully appreciate this. We think it right, however, to see how this facility is actually received, and whether or not it is used. I can assure the noble Lord that it will not be a question of waiting another 12 years, or anything like that. I should hope it would not be as much. I cannot say that it will be 12 weeks, but I hope it will be a very much shorter time than 12 years. I think the noble Lord is unduly pessimistic in saying that it will be a matter of years.
§ LORD BESWICK
My Lords, may I ask the noble Lord, when he says that we have to wait and see how it is received—received by whom? From whom is he 405 expecting this encouragement to come? I can assure him that the industry would like to see ratification next Tuesday week. If he is waiting for further examples, it seems to me absolutely absurd that we should wait until there is another bankruptcy or two to see whether this is of value.
§ LORD DRUMALBYN
My Lords, we are not waiting for a further bankruptcy. We are waiting to see whether the register is made use of. If it is, then we shall make the said ratification.