•Experts warn of increased risks for Nigerian airlines •Calls grow for tougher sanctions on violations
By Chinelo Obogo
On January 2, the Minister of Aviation and Aerospace Development, Festus Keyamo, took to his X handle to announce with enthusiasm that a Nigerian Court had allowed repossession of a CRJ 1000 aircraft belonging to Arik Air.
He said the development was a historic first since Nigeria put the Cape Town Convention into practice.
A Federal High Court had on November 27,2024, in suit no FHC/L/CS/1141/2024, which is a fundamental right enforcement action by Captain Samuel Caulcrick & Ors Vs the Economic & Financial Crimes Commission (EFCC), allowed Export Development Canada (EDC) to repossess and tear down CRJ1000 5N-JEE (msn 19037) from Arik Air (W3, Lagos).
The aircraft was delisted from the Nigerian egister in 2022, but the EFCC blocked an attempt to repossess it in June 2023 and the court was told that this action was a violation of Cape Town Convention Article 14.
Arik has been in receivership since 2017 and under the control of the Asset Management Corporation of Nigeria (AMCON) and after the court ruling was made public, the airline’s shareholders made it known in a statement that Arik Air as operated and managed by them up to February 8, 2017 was not in default of lease obligations/repayments to both JEM Leasing and EDC and did not have any case of repossession of CRJ 1000 between the airline and JEM Leasing/EDC to address. They insist that they were not before the court on the subject of the repossession of the CRJ 1000 and the repossession matter has absolutely nothing to do with them
That notwithstanding, industry observers could appreciate Keyamo’s excitement because for many years, global aviation companies blacklisted Nigeria for breaching the ‘Convention on International Interests in Mobile Equipment’ and the ‘Protocol on Matters Specific to Aircraft Equipment’, which was concluded in Cape Town on November 16, 2001.
Nigeria has struggled with adhering to leasing contracts, particularly in disputes over the return of aircraft, which resulted in the country’s compliance score falling below the required threshold. This, in turn, led international lessors and companies to impose restrictions, effectively blocking domestic airlines from accessing international aircraft leases. However, in a significant turn of events, Justice John Tsoho, the Chief Judge of the Federal High Court, signed the Cape Town Convention (CTC) practice direction in September, paving the way for domestic airline operators to secure aircraft on dry lease.
Following this, the Aviation Working Group (AWG) in October last year, stated on its website that Nigeria’s score on the CTC Compliance Index had increased to 75.5%, placing the country in the ‘high category.’ This development marked Nigeria’s official removal from the AWG’s watch list of non-compliant countries.
Mixed reactions
Though the November court ruling can be interpreted by many as a good omen, industry stakeholders have mixed reactions to the CTC practice direction. At a Breakfast Meeting of Aviation Safety Round Table Initiative (ASRTI) held in Lagos late last year, under the theme, “Cape Town Convention: The Implications Of The Cape Town Practice Directions On The Fortunes Of Nigerian Airlines And The Economy,” lawyers and other experts evaluated the implications for domestic airlines.
ASRTI’s president, Air Cdr. Ademola Onitiju (Rtd) said of the practice direction, “The activation of the Practice Directions initiated in 2024 by the Minister of Aviation, Festus Keyamo, catapulted Nigeria into the enviable group of nations where lenders and investors are assured of a judicial system that eases the recovery of their assets and prompt resolution of related disputes.”
At the meeting, the Chief Executive Officer of TopBrass Aviation, Roland Iyayi, who was one of the guest speakers, raised issues about the possibility of default on the part of the lessor even after signing the IDERA which is supposed to provide some protection to the lessee by preventing the lessor from unilaterally deregistering an aircraft. He cited a very recent instance where a domestic airline paid $2 million to a Turkish lessor to lease an aircraft but days later, after receiving the full payment, the lessor came into the country and flew off with the plane, leaving the airline in a precarious position. This incident, he said, shows the often frustrating environment in which domestic airlines operate, especially when dealing with international lessors. He also pointed out that such experiences are not isolated and have become a pattern where infractions have occurred from both sides—lessors and lessees and that sometimes lessors still find ways to evade their obligations, leaving the domestic airlines vulnerable.
According to Iyayi, despite the glaring misconduct by the lessor, the Nigerian Civil Aviation Authority (NCAA) was unable to do anything to help the domestic airline. “A domestic carrier in Nigeria paid $2 million to a lessor. The lessor flew away with the money. The Nigeria Civil Aviation Authority (NCAA) could not help the airline,” Iyayi said.
The Lead Partner at Aelex Partners, Mr. Fubara Anga, acknowledged the concerns of domestic airline operators and echoed Iyayi’s sentiments that the Practice Direction, in its current form, potentially grants lessors an undue advantage and this perceived imbalance, he said, is a matter of concern that needs to be addressed to prevent any potential abuse by lessors. Anga stressed the importance of finding a balance that protects all parties involved, ensuring that the Practice Direction serves its intended purpose.
The second Vice President of ASRTI, Dr. Alex Nwuba, said it is necessary to address arbitration issues before escalating matters to the high court because such matters are of significant importance and requires immediate attention to ensure equitable resolution, while a lawyer, Pekun Sowole, noted with concern that the definition section of the Practice Direction failed to explicitly define which aspects of the assets were influenced by this directive. He said this ambiguity could lead to different interpretations and undermine its effectiveness.
Sowole also pointed out the Practice Direction does not have the power to prevent appeals to the Supreme Court and the implication of this is that despite its best intentions, any lawyer with the knowledge of legal loopholes could exploit these to frustrate its implementation. “Once a stay of execution is obtained, the aircraft goes nowhere and we are back to square one,” he said.
Operators who violate CTC must be sanctioned –Aligbe, Yadudu
The Managing Director of Belujane Konzult Limited, Mr. Chris Aligbe, highlighted the need for stringent sanctions against any operator who violates the CTC provisions. According to Aligbe, such violations should be met with severe consequences, including the suspension of the Air Operator Certificate for a period of 10 years. This, he argued, would serve as a strong deterrent and ensure compliance with the established guidelines. “Infraction without sanction is no infraction. Therefore, there should be sanction for any operator who violates the CTC Practice Directions provisions. Such operator should have the Air Operators Certificate suspended for a period of 10 years,” he said.
Former Managing Director of Federal Airports Authority of Nigeria (FAAN), Capt. Hamisu Yadudu, echoed Aligbe’s sentiment by stressing the importance of integrity in contractual agreements. He pointed out that when an airline signs an agreement with a lessor without any intention of complying with the terms and conditions therein, it gives a false sense of security to the lessor. “If as an operator, you know you will not comply with an agreement, don’t sign it,” he said.
At the end, though the practice direction has its many advantages, the concerns from stakeholders point to a need for a clear and more effective regulatory framework that addresses the nuances of aviation disputes. By refining the Practice Direction and closing loopholes, stakeholders hope that a more efficient resolution process can be achieved that would be a win-win for lessors and domestic airlines.
