On Thursday September 12, 2024, Nigeria issued the Federal High Court (Cape Town Convention & Aircraft Protocol) Practice Direction, 2024, under the hand of Chief Judge of the Federal High Court of Nigeria. The Federal High Court is Nigeria’s national court with the exclusive jurisdiction to adjudicate aviation disputes, including disputes relating to the safety of aircraft as well as matters falling within the ambit of the Montreal Convention.
The issuance of the Cape Town Convention Practice Direction is particularly significant because Nigeria has had a history of contentious legal battles over aircraft repossession, which have made lessors wary. In some cases, repossessing aircraft from Nigerian airlines has been frustrated as a result of court injunctions preventing repossession efforts. Within this context, the Cape Town Convention Practice Direction is a welcome development as it demonstrates the political will by the Nigerian government to stimulate aircraft leasing transactions as well as foreign direct investment in the aviation sector in Nigeria.
Following the issuance of the Cape Town Convention Practice Direction, Aviation Working Group has, in its Q3 assessment, reviewed Nigeria’s compliance levels with the Cape Town Convention from 49 to 70.5. The Cape Town Convention Compliance Index is an index developed by the Aviation Working Group ( AWG ) to monitor and assess compliance by contracting states to the Cape Town Convention with their respective undertakings thereunder.
Nigeria’s current rating, which is in the same categorisation as the United Arab Emirates, Malaysia, Qatar and Turkey and ahead of countries like South Africa and India, represents a medium probability level that the terms of Cape Town Convention (with applicable declarations) will be substantially complied with.
Nigeria’s current rating falls behind the AWG’s top tier ratings which are: (a) 100 – 88, signifying a very high probability level that the terms of Cape Town Convention (with applicable declarations) will be substantially complied with; and (b) 87 – 75, signifying a high probability level that the terms of Cape Town Convention (with applicable declarations) will be substantially complied with. Countries that have the very high probability categorisation include, the United Kingdom, Malta, Australia, Singapore, Norway, Sweden, New Zealand, Canada and Ireland.
Key Factors & Assumptions Underlying Medium-Level Classification
Nigeria’s recent medium-level classification assumes that:
(a) The Cape Town Convention prevails over conflicting national law;
(b) IDERA recordation and enforcement regulations have been enacted but questions remain as to its consistency with the Cape Town Convention, clarity and/or predictability.
(c) The remedy of deregistration requires documents or actions in the exclusive control of the airline.
(d) There are precedents with mixed outcomes relating to compliance with the terms and intent of the Cape Town Convention. Such precedents have low predictive value for the outcome of future cases with similar facts given the issuance of court practice directions addressing non-compliant judicial precedents.
(e) Nigeria is eligible for the OECD discount, after taking subsequent corrective action following one or more instances of substantial non-compliance.
(f) The Nigerian Government has established a communications channel with AWG and work on Cape Town Convention issues has been effective and efficient.
Critical Milestones for a High-Level Classification
It would appear that the outlook for international lessors remains one of cautious optimism, with significant improvement unlikely until Nigerian courts begin to enforce aircraft repossession under the Cape Town Convention Practice Direction. In other to achieve the highest possible AWG ranking, Nigeria needs to be able to demonstrate that the Cape Town Convention is comprehensively implemented through legislation, rules and regulations and that there are precedents/case law with outcomes that are substantially compliant with the terms and intent of Convention. Several local rules and regulations rules may be relevant in this context. For instance, existing fair contract regulations do not exempt international supply contracts from reasonability or fairness standards.
Relevant Balogun Harold Insights
Aircraft Financing in Nigeria: Some Key Legal Considerations
