Aero dynamic

With surrounding legislation frequently complex, the Cayman Islands has sought to facilitate ease of aircraft ownership. By Mark Western

The Cayman Islands provides a safe, stable and ‘friendly flag’ for registration of an aircraft and a developed system for perfecting a security interest over that aircraft.

The Air Navigation (Overseas Territories) Order 2007 (as amended) (AN(OT)O) is a UK statutory instrument that has been extended to the UK’s overseas territories and is the primary legislation applicable to aviation in the Cayman Islands, containing regulations on the operational and airworthiness requirements of locally registered aircraft.

A number of local statutes have also been enacted, for example the Mortgaging of Aircraft Regulations 1979, which sets out the local regime for registering aircraft mortgages. The Civil Aviation Authority of the Cayman Islands (CAACI) is the regulatory authority and is mandated by law inter alia to ensure that civil aviation in Cayman conforms to the standards and recommended practices of the International Civil Aviation Organisation established by the Chicago Convention.

The average time taken to effect an aircraft registration is between six and eight weeks and an aircraft mortgage registration can be effected within 24 hours. The CAACI has proven itself to be one of the most ‘hands on’ of aviation authorities by routinely working closely with applicants to assess and complete the registration requirements in order to meet deadlines set. In addition, wherever possible the CAACI will deploy its expertly qualified airworthiness surveyors to inspect an aircraft in its home base in order to fulfil the initial and annual registration requirements.

The CAACI’s aircraft register is primarily a ‘private register’, which means that, other than Cayman Airways (the national flag carrier of Cayman) and airlines mainly servicing the public of Cayman on a regular basis, the Aircraft Register is not normally open for aircraft used in commercial aircraft activity. However, the CAACI has agreed so-called Article 83 bis agreements with Saudi Arabia and is in the process of considering such agreements with other states. Pursuant to these agreements, the CAACI makes bilateral transfers of safety oversight responsibilities related to the lease, charter and interchange of aircraft, and aircraft operated in those jurisdictions are allowed to be used in the ‘commercial’ category.

The AN(OT)O sets out the category of persons who are eligible to be registered as follows:

  • the Crown in right of Her Majesty’s Government in the UK or in right of the Government of the Territory;
  • Commonwealth citizens;
  • UK protected persons;
  • bodies incorporated in some part of the Commonwealth and having their principal place of business in any part of the Commonwealth;
  • businesses carrying on business in Cayman; and
  • unqualified persons residing or having a business in Cayman.

Either the owner of the aircraft or a charterer by demise of the aircraft may be registered on the aircraft register. In the majority of cases, a Cayman exempted company will be established as a special purpose vehicle in order to meet the qualified applicant requirements.

The CAACI registration procedures are not unduly complicated and the fees involved are competitive.

A party taking a mortgage over an aircraft registered with the CAACI is able to register that mortgage on a mortgage register. The AN(OT)O provides that the registered mortgagee must provide their consent to removal of the aircraft in question from the aircraft register before such removal can take place and, further, the applicable statute provides that the registered mortgage will continue to exist despite removal of the aircraft from the register.

In order to effect registration of a mortgage the mortgagee must provide the CAACI with a registration form summarising the salient points of the mortgage (date, aircraft description, mortgager contact details and confirmation of sum secured). Also, an original of the registration form signed by either the mortgagee or their agent/legal counsel must be submitted to the CAACI together with a copy of the mortgage certified by the applicant to be a true and correct copy. The mortgage registration fee, an ad valorem fee of one-tenth of 1 per cent of the sum secured, subject to a cap of $30,488 (£20,732), should also be submitted. Once registered the mortgage registration remains valid for the duration of the mortgage without the need to comply with any renewal requirements.

The mortgage itself need not be governed by Cayman law and there is no statutory format that the mortgage must comply with.

The security of Cayman, its developed UK-based legal system and supporting infrastructure, the efficiency and professionalism of the CAACI, the ease with which an aircraft and aircraft mortgage can be registered and the resultant security for a mortgagee who records their security interest locally are all very persuasive reasons to register an aircraft in Cayman. n
Mark Western is a partner at Maples
and Calder