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Aircraft leasing and financing in Myanmar – domestic implementation of the Cape Town Convention

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05 November 2014

​On 1 August 2014, Myanmar adopted national legislation in order to give effect to the provisions of the aircraft-related Convention and Protocol commonly referred to in the aviation industry as the “Cape Town Convention”. This article provides a summary of the legislation, analyses its impact on the implementation of the “Cape Town Convention” in Myanmar and also provides some practical advice on other aspects of aircraft leasing and financing in Myanmar.


Myanmar acceded to the Convention on International Interests in Mobile Equipment (the Convention) and the Protocol to the Convention on International Interest in Mobile Equipment on Matters Specific to Aircraft Equipment (the Protocol) on 3 December 2012 with the effective date being 1 April 2013. In this article we refer to the Convention and the Protocol collectively as the Treaty. Myanmar has made declarations under Articles 39(1)(a), 40, 52, 53 and 54(2) of the Convention and Articles XXX(1), XXX(2) and XXX(3) and XXIX of the Protocol and there have been no official derogations from the Treaty.

The Treaty is intended to provide an international regime to protect lessors and financiers of aircraft. The very nature of aircraft (as mobile equipment) requires special protection for creditors – aircraft often move between jurisdictions (making it difficult to take security that works effectively across all borders) and are not within the creditor’s possession (in contrast to share certificates, for example). In addition, jurisdictions often do not provide their own registries for ownership and security interests to be registered against an aircraft – more often than not, it is the operator that arranges for registration of the aircraft and liaises with the local authority. All of this makes repossession (including deregistration) extremely difficult.

The Treaty allows the interests (referred to as “international interests”) of lessors, financiers and certain others to be registered against certain aircraft objects (airframes, engines and helicopters) in circumstances where the debtor (a charger, buyer under a conditional sale agreement or a lessee) is “situated” in a Contracting State. The holder of a registered interest is then entitled to exercise certain remedies under the Treaty if the debtor defaults. This can include quick processes for deregistration and return of an aircraft to the party with the international interest. In Myanmar, at this stage, the majority (if not all) registrations involving Myanmar as a Contracting State will be with respect to aircraft that are leased to a Myanmar airline as the ultimate lessee.

The protection provided by the Treaty has traditionally been of particular importance in jurisdictions which are not creditor-friendly or lack sufficiently developed legal frameworks. In Myanmar, which has had little or no practical experience of enforcement of security or repossession in the private commercial context, the Treaty should provide operating lessors and financiers with much needed comfort regarding the registration of their interests and a mechanism for repossession of their aircraft.

However, Myanmar’s accession to the Treaty has, until now, brought minimal practical advantages to operating lessors and financiers involved in leasing aircraft into Myanmar and hoping to rely on the Treaty. This is because, in order for the legal rights contained in an international treaty to be enforceable at a domestic level in Myanmar, Myanmar needs to enact domestic “implementing” legislation. This is the same for other dualist legal systems such as New Zealand and Canada which have had to enact legislation to bring the Treaty into force domestically. The position would be different if the Myanmar government was the defaulting debtor.

On 1 August 2014, Myanmar adopted national legislation entitled “Law Relating to International Interests in Aircraft Equipment” (the Aircraft Act) in order to give effect to the provisions of the Treaty. We discuss the implications of this below and also provide some practical advice on other aspects of aircraft leasing and financing in Myanmar.

Domestic implementation


Now that the Myanmar Parliament has enacted legislation to give effect to the Treaty, the domestic courts should, in theory, treat it in exactly the same way as any other Act of Parliament. This means that, to the extent that the Aircraft Act (and therefore the Treaty which it implements) is inconsistent with earlier Acts, it supersedes them. This is also specifically set out in the Aircraft Act which states that to the extent of any inconsistency between the Treaty and domestic legislation, the Treaty will prevail.

Myanmar’s approach to implementation – the form

As with much of the recent legislation in Myanmar, the Aircraft Act is brief, the detail being left to regulations, notifications or orders issued under the primary legislation by the relevant Ministry. One example of this approach being used in Myanmar is the Foreign Investment Law (2012) which was followed by the Foreign Investment Rules (2013) issued by the Ministry of National Planning and Economic Development and notifications (in 2013 and 2014) issued by the Myanmar Investment Commission (MIC).[1]

Crucially, though, the Aircraft Act provides that the provisions of the Treaty are to have the force of law in Myanmar and appends the Treaty (in English) to the Act. The intention of the Aircraft Act is therefore clear as compared to other recent legislation in Myanmar and it results in the wholesale implementation of the Treaty into law in Myanmar. This is similar to the approach taken by Ireland (a popular jurisdiction for aircraft financings) where the Treaty was also implemented by appending the entire Treaty to the relevant domestic legislation.

However, questions might be raised as to whether appending the Treaty in the English language to the Aircraft Act will result in any issues for its enforcement in Myanmar. Myanmar language is the official language of Myanmar and has, in practice, become the official language for any new legislation in Myanmar. We believe that this is unlikely to be a cause for concern as many laws that remain in operation are still in English and the Treaty is appended to a new bill that is itself in Myanmar language.

Is this all good news?

The provisions of the Aircraft Act have not been previously tested and it is not clear whether the Myanmar courts and relevant regulatory bodies would implement the Treaty and whether there will be derogations from the Treaty in practice. To the extent that the Treaty is implemented on the ground in the Myanmar language there is potential uncertainty in translation of the Treaty, for example, any inherent differences between the Myanmar and English languages.

In addition, the Aircraft Act provides for further rules, regulations and by-laws to be issued and for the Ministry of Transport (the MOT), with the approval of the Myanmar government, to issue and revoke notifications relating to all or part of the provisions of the Treaty (although to date the MOT has not done so). Notifications from the MOT are anticipated, but the current lack of ensuing notifications or regulations creates uncertainty around the exact legal framework for implementation and enforcement of rights under the Treaty. It will be important to consider these once issued and any impact they have on the Treaty and its implementation.

There will also remain a possibility that the Myanmar Parliament could pass legislation which is inconsistent with the Treaty that could supersede the Aircraft Act and, in turn, the Treaty. The MOT may also issue (or revoke) notifications in the future which effectively amend domestic implementation of the Treaty and decrease the levels of protection envisaged by the Treaty. This risk (i.e. the potential for future legislation to amend the current position) is, though, a common risk which would be relevant in most jurisdictions. Some comfort can also be taken in that it would not be in Myanmar’s interests to make amendments – if Myanmar no longer chooses to recognise certain parts of the Treaty, but does not make a declaration in accordance with its respective provisions, it would be in breach of its international obligations as a party to the Treaty.

Relevant Myanmar authorities

Supervisory bodies – MOT and DCA

Under the Aircraft Act, the Supervisory Authority for the purposes of the Treaty is to comprise the Minister of Transport (as Chairman) and other suitable persons. It will be the Supervisory Authority that will be able to exercise the duties and powers contained in the Treaty and the MOT is required (under the Aircraft Act) to appoint a suitable officer from the MOT as the Registrar to carry out the functions and duties relating to registration contained in the Treaty. We anticipate that the DCA will be heavily involved in performing these duties and powers although we expect this to be clarified once notifications or regulations have been issued.

Myanmar has declared that it will apply Article XI, Alternative A in its entirety to all types of insolvency proceeding. This provides that if there is an insolvency-related event with respect to the airline, the relevant insolvency administrator or the debtor must give possession of the aircraft to the creditor no later than the earlier of: (a) the end of the waiting period (declared by Myanmar to be 30 calendar days); and (b) the date on which the creditor would be entitled to possession of the aircraft object if this Article did not apply. Under Article 54(2) of the Convention, Myanmar also declared that “any remedies available to the creditor under the Convention which are not expressed under the relevant provision thereof to require application to the court may be exercised without leave of the court or other court action.”

In Myanmar, practice often prevails over the letter of the law and, without any precedent in this area, it remains to be seen whether the relevant authorities will in practice give effect to these provisions. The speed with which things are progressed and the adherence to timetables set by the Treaty, Myanmar declarations and the Aircraft Act is likely to largely rest on the individuals in the relevant ministries / regulating bodies, such as the MOT and DCA, being willing and able to implement the provisions of the Treaty.

The DCA’s primary function for many years has been to ensure compliance with safety standards within the aircraft industry in Myanmar dealing primarily with aircraft operators and, as a result, they have limited experience of the interrelations between lessors and lessees and their financiers. The DCA also has no practical experience of repossessions and there may be some delay caused by a lack of familiarity with the requirements of the Treaty and an uncertainty as to how to proceed. In addition, due to the much greater investments and activity in Myanmar since 2011/2012, government authorities (including the MOT, DCA and relevant courts) are often understaffed and unable to move as quickly as anticipated by the Treaty. In practice, we would expect that the DCA will take guidance as to how to proceed from the MOT.

Myanmar courts

One of the key provisions of the Treaty is set out in Article 20 (Relief pending final determination). Articles 20(1) and 20(8) of the Treaty provide that creditors who have shown evidence of a default by a debtor (likely to be a non-paying airline) will (if the debtor has at any time agreed, for example, in the original contract) be provided with speedy relief in various forms if requested pending final determination of a claim, including preservation of the value of the aircraft, possession, control or custody and/or immobilisation of the aircraft.

Myanmar declared that the defined term “courts” in Article 1 of the Treaty would mean the Kyauktada Township Court and the Yangon Divisional Court (which we understand is currently referred to as the Yangon Region High Court). This should mean that (under Article 54 of the Treaty) these courts would have exclusive jurisdiction for any claim brought under the Treaty and (under Article 55 of the Treaty) should be able to grant the relief (under Article 20) described above. We would query, though, how quickly these courts will be able to process “speedy” relief given their lack of familiarity with commercial contracts and potentially complex disputes involving multiple layers of lease and security interests.

Deregistration, Export and IDERAs

One of the key aspects of the Treaty is the agreement of a form of Irrevocable De-registration and Export Request Authorisation (IDERA) which allows operators and owners to appoint an authorised party to procure the deregistration of an aircraft of the relevant registry (in Myanmar this would be the aircraft register with the DCA) and to procure the export and physical transfer of the aircraft from Myanmar.

The Myanmar authorities must co-operate promptly with and assist a creditor exercising its rights under an IDERA. The Aircraft Act sets a time limit of five working days for the authorities’ delivery of such assistance.

Myanmar also declared that Article XIII of the Protocol would apply. This requires that if the debtor has issued an IDERA and has submitted it for recordation to the relevant registry authority (which we would expect to be the DCA), that the IDERA must be recorded. This would effectively require the DCA to counter-sign the IDERA and would provide greater comfort to lessors and secured parties that their rights under an IDERA would be respected. An IDERA may also not be revoked by the airline without the consent in writing of the authorised party which again assists in making IDERAs a relatively strong form of security for deregistration and export of an aircraft. To date, we are not aware of the DCA having agreed to counter-sign an IDERA, but this may change now that domestic legislation has been implemented in Myanmar.


Myanmar is an emerging market undergoing significant legal and regulatory development which in some areas can lead to a state of flux in the regulations and applicable laws. Alongside the Aircraft Act and the Treaty, lessors, financiers and airlines still need to navigate the interaction of their transactions with other laws such as the Myanmar Companies Act and the investment laws, all of which are currently undergoing reform, the results of which are not yet clear. Practice, as opposed to the law, can also dictate the approach to doing business in Myanmar on the ground.

Therefore, while acceding to the Treaty and enacting the Aircraft Act are positive steps and on the face of it appear to create a strong framework for aircraft leasing and financing going forwards the devil may well be in the detail of the ensuing notification from the MOT and any further regulations, orders or directives from the MOT or DCA. In addition, it remains to be seen whether the capacity building required to bring the relevant authorities and personnel up to speed with international practices and the effect of implementation of the Treaty can be achieved in a timely manner.


  • It is recommended that the proposed leasing and financing structures are included in application by the ultimate lessee to, or otherwise approved by, the MIC.
  • Formal procedures that have become redundant in other jurisdictions are still important in Myanmar – for example, notarisation, legalisation and consularisation can be important where documents are signed overseas by foreign entities and should be considered before execution of any documents.
  • Check stamp duty requirements upfront – documents required to be stamped must be stamped before execution or within a set time period of being brought into Myanmar. Failure to do so incurs potentially heavy penalties. Typically, no instrument that is required to be stamped can be: (a) admitted as evidence for any purpose; or (b) acted upon, registered or authenticated by any public officer, unless it has been duly stamped. In the event of a deficiency in stamping, it remains to be seen whether the requirements relating to stamp duty or the rights given to interested parties under the Treaty would prevail.
  • The difference between concepts such as operating leases, finance leases, instalment sales etc. may not necessarily be understood or recognised by relevant authorities in Myanmar.
  • Check how an airline will make payments under the lease - for example, are the requisite banking relationships in place, does the airline have the necessary approvals?
  • We advise having a clear understanding, early in the transaction, of the insurance aspects. Typically, Myanmar Insurance will front a policy that is reinsured overseas but they may not be willing to sign any security-related documentation.
  • Dispute resolution should also be considered carefully. While offshore arbitration is preferable, particularly as Myanmar has acceded to the New York Convention, there is not at present domestic implementing legislation and therefore enforcement of an arbitral award remains uncertain.
  • Under Article XXX(1) of the Protocol, Myanmar declared that it would apply Article VIII. This expressly allows parties to an agreement to agree on the law to govern their contractual rights and obligations. While the general view is that the Myanmar courts will recognise foreign laws as the governing laws for contracts, this is a helpful confirmation in the context of aircraft financing transactions.
  • Myanmar is a signatory to some bilateral investment treaties, the ASEAN Comprehensive Investment Agreement and some double tax agreements or treaties that should be considered when structuring a transaction. In addition, the practical ease of doing business between Myanmar and the relevant jurisdictions should be considered carefully, especially banking relationships.
  • Many companies in Myanmar (including airlines) do not have transparent ownership structures and anyone involved in leasing an aircraft to Myanmar needs to consider carefully due diligence on the airlines and counterparties. In addition, while most sanctions have been relaxed or removed, international companies should be careful not to foul fall of any regime to which they, or their financiers, are subject.
  • It is important to recognise that timelines are often longer than one would expect and often need to be extended during the course of a transaction as the parties on the ground familiarise themselves with international practices and adapt to the requirements of cross-border transactions and international parties familiarise themselves with the Myanmar market and the fluid and dynamic domestic business environment.


Relevant Regulatory body

  • Department of Civil Aviation (DCA), an organisation under the Ministry of Transport.
  • The Director General of the DCA is empowered by the Union of Myanmar Aircraft Act, 1934 and the Union of Myanmar Aircraft Rules, 1937 to regulate civil aviation activities in Myanmar.

Aircraft register

  • The DCA (a subordinate organisation under the Ministry of Transport) operates the Aircraft Register. The register is in theory open to the public.

Owner or operator register?

  • This is an owner registry, but in practice the local operator (airline) makes all applications to the DCA.

Temporary certificates of registration?

  • A temporary certificate of registration may be issued which will be valid until the first landing at a customs aerodrome in Myanmar, at which point a customs certificate can be obtained and provided to the DCA in order to obtain the permanent certificate of registration.