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3 February 2014
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17 March 2014
Historically the British Virgin Islands (BVI) have often incorporated the holding company for an aircraft registered in another jurisdiction. The aircraft itself has typically not been registered in the BVI. In fact, only one aircraft to date has been registered in the BVI - the local police aircraft.
This is about to change. The BVI is going head-to-head with other offshore jurisdictions for the registration of both private and commercial aircrafts.
Offshore aircraft registrationAircraft are registered offshore for similar reasons to why companies are incorporated in offshore jurisdictions - neutrality. It is not to avoid regulation. The ;overseas territories are regulated to International Civil Aviation Organisation standards ;as ;a minimum, and often to higher UK standards.
However, aircraft are ;often leased or financed. The person providing the ;lease ;or financing is often in a jurisdiction other than the jurisdiction of the borrower or lessee, and as a result it is possible to decide where to register the aircraft.
The person providing the financing or lease will often not want to use the home jurisdiction of the borrower or lessee, as in the event of the insolvency of such a party the lender may not feel sufficiently protected with the home jurisdiction as a result of an inadequate legal system to enforce security.
Alternatively, the person providing the financing or the lease may simply feel that the home jurisdiction does not have adequate regulation governing civil aviation or may fear an act of nationalism, war or other extraordinary event. A neutral jurisdiction, such as the BVI, fits the bill perfectly.
Another reason is that they may not want the registration of their home jurisdiction to show up on their aircraft. For example, an 'N' registration for the US is not always welcome elsewhere around the world.
The overseas territories have a strong legal history. It is this legal strength that gives lenders the comfort they require in order to be certain that they will be able to realise their assets if necessary.
The BVI is particularly well known for its international business companies (recently renamed 'BVI business companies'). It is expected and encouraged that an aircraft be owned by a BVI business company. In fact, this is a necessary precondition unless the aircraft will be owned by an individual or company meeting certain specified requirements. Furthermore, BVI companies do not pay any tax in the BVI and aircraft and their parts may be imported into the BVI duty-free.
An important feature is the ability to delegate aircraft inspection to a competent authority in a competent jurisdiction. This contrasts with many onshore jurisdictions, which require that an inspection of an aircraft be carried out in their home territory.
Registering processThe 'Register of Aircrafts' is managed and maintained by the BVI's director of civil aviation and overseen by Air Safety Support International (ASSI), a not-for-profit, wholly owned subsidiary of the UK Civil Aviation Authority (CAA). As such, the CAA is indirectly responsible for ensuring aircraft safety in the BVI, including with respect to such registry.
There is a four-step process to register an aircraft in the BVI. ASSI recommends that prospective applicants seek BVI legal advice before proceeding with any application.
While ASSI is in the process of finalising the various supporting documents and determining fees, it is hoped that aircraft registration in the BVI will become effective within the next few months.
The BVI is a competitive jurisdiction for offshore incorporation and transactional work. In fact, it is the leading jurisdiction for offshore incorporations and has recently become the second most popular jurisdiction to launch an offshore hedge fund. With the introduction of aircraft registration in the BVI, it is anticipated that the jurisdiction will soon be a world leader in this regard as well.
Robert Briant is a partner at Conyers Dill & Pearman in the BVI