Opportunities for Maltese aviation
On March 9, 2010 Parliament published a Bill titled the Aircraft Registration Act, 2010 (the "Bill") to regulate the registration of aircraft and aircraft mortgages in Malta. The Bill forms part of a reform currently under way that seeks to encourage...
On March 9, 2010 Parliament published a Bill titled the Aircraft Registration Act, 2010 (the "Bill") to regulate the registration of aircraft and aircraft mortgages in Malta. The Bill forms part of a reform currently under way that seeks to encourage growth of aviation business in Malta. We have recently witnessed increased interest by aviation companies investing in Malta operations, particularly in the aircraft maintenance sector.
The Bill unifies the laws on registration of aircraft and mortgages into a single Act, and focuses on ways to attract more aviation-cluster business to Malta and not limitedly to creating aircraft registration incentives. The relevant regulatory body for this sector will be the newly established Authority for Transport in Malta, pursuant to the recently enacted Authority for Transport in Malta Act, 2009 which provides for the establishment of a single transport authority assuming the functions previously exercised by various independent transport authorities.
A major feature of the Bill is the implementation of the Cape Town Convention on International Interests in Mobile Equipment and the Aircraft Protocol thereto (the Cape Town Convention) which has been hailed to facilitate asset-based financing by providing increased protection for secured creditors. The Cape Town Convention will come into force in Malta three months after Malta deposits its instrument of ratification at the depository of the convention in Rome. The registration of security interests in the International Registry pursuant to the Cape Town Convention is fast becoming a market standard in aircraft finance transactions. The government's decision to accede to the Cape Town Convention further supports Malta's reputation as a lender-friendly jurisdiction while facilitating the acquisition of aircraft and offering prospective investors of aircraft a reduction in cost on their borrowings.
Widening of eligibility rules for aircraft registration
The Bill seeks to broaden the possibilities for registration of aircraft by widening the eligibility rules for private aircraft as well as the relevant capacities in which applicants may register their aircraft, which have now been extended to an owner of an aircraft under construction, an operator of an aircraft under a temporary title such as a lease, and a buyer under a conditional sale or title reservation agreement.
Eligibility rules for the registration of private aircraft are now more far-reaching than those applicable to aircraft used for air services, because the latter are caught by the qualifying requirements to obtain a Maltese operating licence in terms of Regulation (EC) No. 1008/2008 on common rules for the operation of air services in the Community. Aircraft in construction may now also be registered.
Recognition of fractional ownership
It is not uncommon for the title to an aircraft or its engines to be split among co-owners in specified fractions or percentages. Each fractional interest may be financed by a different creditor which takes security over the particular fractional interest it has financed.
The Bill recognises this concept and supports it for both registration and security purposes. Each ownership interest may now be recorded in the national aircraft register and in certificates issued by the Director General of Civil Aviation. Security over fractional interests in aircraft may also be registered in the International Registry pursuant to the provisions of the Cape Town Convention.
More informative national aircraft register
The aircraft register has been re-designed with a view to permitting the recordation of more details in relation to the persons holding an interest in the relevant aircraft and/or its engines, the rights over the aircraft by virtue of title, whether temporary such as of a lessee, or otherwise, as well as the registration of any power of attorney granted in favour of a creditor which is invariably granted by way of security for the deregistration and export of the aircraft.
Fine-tuning of ancillary rules
The implementation of the Cape Town Convention into the new Act has prompted several amendments to Maltese law. Certain legal concepts which were previously absent from our Civil Code have now been introduced while others were amended or clarified to ensure the smooth and effective implementation of this new regime. Other ancillary laws are being likewise amended. The Civil Code will contain new provisions on security by title transfer of movables with a view to providing more flexible types of security in response to the demands of various industries. The rules on mandate are also being amended to permit a power of attorney that is granted by way of security to be given irrevocably in favour of a creditor.
Independently of the Bill, some clarifications on the fiscal rules are also being discussed. These rules would have to be made within the parameters of EU law so as to align to the rules applicable to this sector in other EU states. Concerns regarding the withholding of tax on lease payments are being addressed while it is also being proposed that the depreciation periods for wear and tear of aircraft and aircraft equipment will be decreased in order to obtain a competitive edge. Finally, guidelines on finance leasing of aircraft are expected to be introduced with the objective of providing sufficient clarity on the tax treatment of such structures.
From a procedural point of view, special rules on jurisdiction and actions in rem against aircraft will be introduced in the Code of Organisation of Civil Procedure as well as a warrant of arrest specific to aircraft.
The Bill presents an opportunity for Malta to establish a relevant presence in the aviation sector. We are being invited to rise to the challenge of attracting more aviation business to our shores by providing the highest standards of service and adopting a flexible approach where one is called for. It is now time to take the leap that would make Malta an emerging centre for aviation business. The opportunities being created and presented by the new legislation should not be missed.
The author is the partner heading the aviation practice at Ganado & Associates, Advocates, and was a member of the team at Ganado & Associates, Advocates involved in advising the Ministry for Infrastructure, Transport and Communications (MITC) and drafting the new legislation.