Maltese

Aircraft Register Takes Off

FollowingtheenactmentofTheAircraftRegistrationActin2010whichisdesignedtoregulatethe registration of aircraft and aircraft mortgages in Malta and also to implement the Convention on International Interests in Mobile Equipment and Protocol thereto on Matters Specific to Aircraft EquipmenttherehasbeenarapidgrowthinthenumberofaircraftregisteredinMalta.Infactitwas recentlyreportedthatin2011therewasa21percentincreaseinthenumberofaircraftregistered inMaltawhencomparedto2010,withatotalof104aircraftnowontheaviationregister.Sowhat is it about the relatively new legislation that has encouraged air operating companies to flock to Malta? Despite being a registry in its infancy, it can undoubtedly draw on the wealth of experience of its sisterregistryinthe MerchantShippingDirectorate. A completerestructuringof the civilaviation directorate, the recruitment of highly specialised personnel and the tireless effort of the private industry service providers has been fundamental. Furthermore, the Act is to be construed consistentlywithRegulationECNo1008/2008oftheEuropeanParliamentandoftheCouncilof24 September2008oncommonrulesfortheoperationofairservicesintheCommunity,providingan additionallevelofcomforttostakeholders. Drawing on all the years of experience within the Maltese Ship Registry, the Maltese Government was well aware that if adequate protection to financial institutions was not awarded, the Maltese aircraftregistrywouldnevertakeoff.Therefore,mortgageescouldrestassuredthattheirinterests aregoingtobefullyprotectedandthattheprocesshasevenbeenfurtherstreamlinedwithinthe NationalAircraftRegistry. Bymeansofamortgageexecutedbythemortgagorinfavourofthemortgageeandsubjecttothe formalitiesoftheAct,aregisteredaircraftorasharethereinmaybemadesecurityofanydebtor otherobligation.Suchmortgageisindivisiblenotwithstandingthedivisibilityoftheunderlyingdebt orotherobligationwhichitmaysecure.Aregisteredmortgageshallattachtotheaircraftorshare thereininrespectofwhichitisregistereduntilitisdischarged. Itisalsopermissibleforamortgagetobeexecutedandregisteredinfavourofasecuritytrusteeand suchsecuritytrusteeshallberecognisedasthemortgageeoftheparticularmortgageandentitledto exercisealltherightsinrelationtothatmortgage.Giventhatmultiplefinanciersareofteninvolved duetothecostsinvolvedinaircraftfinancing,theroleofsecuritytrusteebecomesabeneficialtool wherebythevariousfinancierscouldappointasecuritytrusteeratherthaneachenforcingitsown securityinterestindividually. MortgagesshallberecordedintheorderoftimeinwhichtheyareproducedtotheDirectorGeneral oftheNationalAircraftRegisterandwhereitisstatedinthemortgagedeedthatitisprohibitedto createfurthermortgagesonanaircraftand/ortransfertheaircraftwithoutpriorwrittenconsentof themortgageeanoteshallbemadetothiseffectandwillbeadheredto.Therefore,wheremore than one mortgage is registered in respect of the same aircraft or share, the mortgagees shall be

entitled in priority according to the date and time at which each mortgage was recorded in the Register. Intheeventofamortgagordefaultingonthemortgagepayments,financierscanputtheirmindat restastheMaltesemortgagelawshavebeentriedandtestedandshowntheirworth.Sothereis plentyofcaselawthatwouldbedrawnuponbybothpractitionersandthecourtstoensuresmooth anduniformapplicationofmortgagelawswithintheaeronauticalrealm. Maltese law allows the mortgagee, in the case of default of any term or condition of a registered mortgageorofanydocumentoragreementreferredtotherein,uponnotifyingthedebtorinwriting to: 1. Takepossessionoftheaircraftorshare; 2. Selltheaircraftorshare; 3. Apply for any extensions, pay fees, receive certificates and generally do all such things in the nameoftheownerorregistrantasmayberequiredinordertomaintainthestatusandvalidity oftheregistrationoftheaircraft; 4. Leasetheaircraftsoastogenerateincome; 5. Receive any payment of the price, lease payments and any other income which may be generatedfromthemanagementoftheaircraft. Thedutytonotifywillbesatisfiedifthemortgageeorholderofanysecurityinterestgivesnoticeby meansofanelectroniccommunicationoranyothersuchmanneragreedtobetweentheparties. Thelawoffersagreatdealofprotectiontothemortgageeandexplicitlystatesthattheaboverights canbeexercisedwithouttheneedofanycourtintervention.Shouldthemortgageebehinderedby anyoneinthecourseofenforcinghisrights,supportofthecourtcouldbesoughtbythemortgagee andinthisrespectthecourtshouldrenderfullsupportasexpeditiouslyaspossible.Furthermore, subject to any possessory lien that a party may have, the debtor and person in possession of the aircraftareobligedtocooperatefullywiththemortgageewhenenforcinghisrights,includingbut not limited to, the surrendering and submitting of all data, manuals, technical records, parts, accessoriesandappurtenancesbelongingtotheaircraft. Inadditionamortgageisanexecutivetitlewhichmeansthatthemortgageecanproceeddirectly with enforcement without the need of commencing any form of action. This is fundamental as it allowsamortgageetoproceeddirectlytotheMaltesecourtsforajudicialsaleoftheaircraft. However,thelawdoesnotstophere.TheCourtApprovedPrivateSale,whichhasbeenputtothe testforthefirsttimeveryrecentlyinthemaritimesphere,enhancesfurthertheseadvantages.By application to the courts and subject to certain procedures being followed, in case of default, a mortgageemayselltheaircrafttoaprivatebuyer,therebybeingabletofetchthemostreasonable price(aswouldbethecaseinaprivatesale)butalsoallowingthebuyertobenefitfrompurchasing thevesselfreeandunencumbered(asinajudicialsalebyauction). NeedlesstosaytherearemanyotheradvantageswhyanaircraftoperatorshouldselecttheMaltese aircraftregistrywhicharebeyondthescopeofthisarticlebutsufficetosaythattheabovefactors alonealreadyjustifytheexponentialgrowthexperienced.

Dr.JeanPieGauciMaistreisthemanagingpartnerofGMAssociatesAdvocates. The content of this article is intended to provide a general guide to the subject matter. Specialist adviceshouldbesoughtaboutyourspecificcircumstances.