To which major air law treaties is your state a party?
Malta is a party to the following major air law treaties:
- the Chicago Convention on International Civil Aviation (Chicago, 7 December 1944), ratified by Malta on 5 January 1965;
- the Convention relating to Co-operation for the Safety of Air Navigation (Eurocontrol) (Brussels, 13 December 1960, as subsequently amended), ratified by Malta on 1 July 1989;
- the Convention for the Unification of Certain Rules for International Carriage by Air (Montreal, 28 May 1999), ratified by Malta on 5 May 2004;
- the Hague Convention for the Suppression of Unlawful Seizure of Aircraft (The Hague, 16 December 1970), ratified by Malta on 14 June 1991;
- the Montreal Convention for the Suppression of Unlawful Acts against the safety of Civil Aviation (Montreal, 23 September 1971) and Protocol (Montreal, 24 February 1988), ratified by Malta on 14 June 1991;
- the Tokyo Convention on Offences and Certain Other Acts Committed on Board Aircraft (Tokyo, 14 September 1963), ratified by Malta on 28 June 1991; and
- the Cape Town Convention on International Interests in Mobile Equipment and the Aircraft Protocol (Cape Town, 16 November 2001), ratified by Malta on 1 October 2010.
Moreover, since Malta is a member state of the European Union, the European Union Act, Chapter 460 of the Laws of Malta, makes all acts adopted by the European Union, including regulations and directives, binding on Malta.
Malta is also a party to the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York, 10 June 1958). It was ratified by Malta on 22 June 2000.Domestic legislation
What is the principal domestic legislation applicable to aviation finance and leasing?
The principal legislation covering aviation finance and leasing is the Aircraft Registration Act, Chapter 503 of the Laws of Malta. The Act implemented the provisions of the Cape Town Convention on International Interests in Mobile Equipment and the Aircraft Protocol thereto, thereby providing the necessary legislative amendments for aviation finance and leasing. The Act also regulates the registration of aircraft, special privileges on aircraft (including mortgages) and the leasing and operation of aircraft.Governing law
Are there any restrictions on choice-of-law clauses in contracts to the transfer of interests in or creation of security over aircraft? If parties are not free to specify the applicable law, is the law of the place where the aircraft is located or where it is registered the relevant applicable law?
In principle, the parties are free to choose the governing law and such choice must emanate from a clear clause in the contract or from the contractual terms or the overall facts of the case. However, this right of the parties is subject to the provisions of Regulation (EC) No. 593/2008 of the European Parliament and of the Council of 17 June 2008 on the law applicable to contractual obligations (Rome I). With regard to non-contractual obligations, the choice of law is subject to the provisions of Regulation (EC) No. 864/2007 of the European Parliament and the Council of 11 July 2007 on the law applicable to non-contractual obligations (Rome II).
Title transferTransfer of aircraft
How is title in an aircraft transferred?
Title to an aircraft may be transferred by means of a bill of sale or a contract of sale. Title may also be temporary in the case of a lease agreement, an operating agreement or similar agreement. The transfer of ownership of an aircraft may also be reserved by the parties in a title reservation agreement, in which case title is not transferred until the condition or conditions laid down in the agreement are fulfilled.Transfer document requirements
What are the formalities for creating an enforceable transfer document for an aircraft?
The transfer document consists in a bill of sale or a contract of sale which must be in writing ad validitatem, and in which the seller, being the person who has a valid title to dispose of an identifiable aircraft, binds him or herself to transfer the aircraft for a price that the buyer binds him or herself to pay to the seller.
Registration of aircraft ownership and lease interestsAircraft registry
Identify and describe the aircraft registry.
In accordance with article 4 of the Aircraft Registration Act, the National Aircraft Register (NAR) is maintained by the Director General of civil aviation (DGCA) in Malta. In accordance with article 3 of the Registration of Aircraft Act, the DGCA records, among others, the details of:
- the aircraft and the engines attached thereto;
- the registrant (ie, the person in whose name an aircraft is registered in the NAR);
- the mortgages registered on the aircraft; and
- any irrevocable deregistration and export request authorisation, or any other power of attorney, irrevocable or otherwise.
Applicants who may register aircraft in the NAR must be qualified persons in accordance with article 6 of the Aircraft Registration Act. The following are such persons:
- the government of Malta;
- a citizen of Malta, an EU member state, an EEA state or Switzerland, having a place of residence or business in any of such states;
- an undertaking formed and existing in accordance with the laws of Malta, an EU member state, an EEA state or Switzerland and having its registered office, central administration and principal place of business within any of such state, whereof not less than 50 per cent of the undertaking is owned and effectively controlled by citizens of any such state or by the government of Malta or any EU member state, whether directly or indirectly through one or more intermediate undertakings; and
- a natural person who is a citizen of, or an undertaking established in, an ‘approved jurisdiction’ in terms of the Aircraft Registration (Approved Jurisdiction) Regulations (2011) is qualified to register aircraft in construction or one which is not used to provide air services. Such a person or undertaking is referred to in the Aircraft Registration Act as an ‘international registrant’.
An applicant may also be: an owner of the aircraft who operates the said aircraft; an owner of an aircraft under construction or temporarily not being operated or managed; an operator of an aircraft under a temporary title; a buyer of an aircraft under a conditional sale or title reservation or similar agreement; or a trustee under the terms of a beneficial trust.
Registrants of aircraft not engaged in air services are not subject to the same qualifying requirements applicable to aircraft used for air services. ‘Air service’ is defined in the Aircraft Registration Act as ‘a flight or a series of flights carrying passengers, cargo and, or mail for remuneration and, or hire as defined in article 2(4) of Regulation (EC) No. 1008/2008 of the European Parliament and of the Council of 24 September, 2008, on common rules for the operation of air services in the Community’.Registrability of ownership of aircraft and lease interests
Can an ownership or lease interest in, or lease agreement over, aircraft be registered with the aircraft registry? Are there limitations on who can be recorded as owner? Can an ownership interest be registered with any other registry? Can owners’, operators’ and lessees’ interests in aircraft engines be registered?
In accordance with article 4(2)(a)(iv) of the Aircraft Registration Act, the Director General responsible for civil aviation must, inter alia, record in the NAR the ownership rights in the aircraft or an engine including when:
- held by a trustee, for a single interest or more;
- held by one or more owners;
- divided into fractional shares or otherwise; or
- held under an agreement with reservation of ownership rights or under conditions affecting title.
Moreover, by article 4(2)(b) the Director General must note in the NAR if required to do so under the applicable law or if requested to do so by the registrant or by any other person who demonstrates an interest in such information being entered in the NAR:
- the lessor right relating to the aircraft or an engine when the lessor is a person different from the owner, although the same person may appear on the register as lessee;
- the lessee rights in relation to the aircraft or an engine and all matters relating thereto;
- the details of the resident agent where the registrant is an international registrant; and
- information on any international interest registered in the International Registry and the debtor thereof.
The persons who can be recorded as owners must be qualified persons in accordance with article 6 of the Aircraft Registration Act.
Apart from the NAR and the International Registry, Maltese law does not allow or recognise the registration of an ownership interest in an aircraft or engine with any other registry.Registration of ownership interests
Summarise the process to register an ownership interest.
In the application for the registration of the aircraft a request is made for the notation of ownership interests or title of the owner in the NAR. The relevant part of the application is signed by the owner and countersigned by the registrant (ie, the person in whose name the aircraft is registered). Proof of ownership, such as in the form of a bill of sale or a contract of sale, must be submitted to the DGCA, who is legally bound to include the ownership interests or title of the owner in the certificate of registration. The relative document must be notarised and apostilled if it emanates from a country outside the European Union. If it originates from a member state of the EU a legalised certified true copy thereof suffices.
Title to an engine does not automatically vest in the owner of the host aircraft. In fact, according to article 4(2)(a)(ii) of the Aircraft Registration Act, when the engines or replacement engines do not belong to the registrant of an aircraft, the details of the engines or replacement engines are recorded in the NAR with the consent of the owner of the said engines or replacement engines.Title and third parties
What is the effect of registration of an ownership interest as to proof of title and third parties?
Registration constitutes proof of title that can be relied upon by third parties. The certificate of registration, showing an ownership interest or title in the aircraft or a share therein, constitutes prima evidence of its contents. Registration of an aircraft in the NAR makes the information public and is deemed to be known by third parties. Consequently, in the case where the owner has no title or a defective one, but has nonetheless registered an ownership interest, the onus of proof lies on the one who challenges such ownership interest shown in the certificate of registration issued by the DGCA.Registration of lease interests
Summarise the process to register a lease interest.
A request is made in the application for the registration of aircraft for the notation in the NAR with regard to the lease interest in the aircraft. A copy of the supporting document (ie, the lease or operating agreement for the aircraft) must be submitted to the DGCA together with the application for the registration of the aircraft.Certificate of registration
What is the regime for certification of registered aviation interests in your jurisdiction?
The DGCA issues a non-transferrable certificate of registration to the person in whose name the aircraft is registered. The registration certificate contains information on the following:
- the date of issue;
- the nationality marks of the aircraft and the registration marks assigned to it by the DGCA;
- the name of the constructor of the aircraft and its designation;
- the serial number of the aircraft; and
- the manufacturer, serial numbers and physical details of the engines attached to the aircraft and any replacement engines to the extent that they are designated for use on the aircraft.
The DGCA does not issue a separate engine certificate of registration. He or she may issue a certificate of registration when the aircraft is still under construction, but such certificate must expressly state that the aircraft is not permitted to operate until it complies with the provisions of the applicable law.Deregistration and export
Is an owner or mortgagee required to consent to any deregistration or export of the aircraft? Must the aviation authority give notice? Can the operator block any proposed deregistration or export by an owner or mortgagee?
In accordance with article 15 of the First Schedule to the Aircraft Registration Act, where an IDERA is in place, the authorised party cannot deregister the aircraft and procure the export and physical transfer of the aircraft without the prior consent in writing of the holders of any registered interest ranking in priority to that of the authorised party.
The DGCA will accept a request for deregistration and export only if:
- the request is properly submitted by the authorised party under a recorded irrevocable deregistration and export request authorisation; and
- the authorised party certifies to the DGCA that all registered interests ranking in priority to that of the authorised party have been discharged or that the holders of such interests have consented to the deregistration and export.
Furthermore, reasonable prior notice of deregistration and export is to be given to the debtor, any guarantor and any other person who has had his or her interest over the aircraft or aircraft objects annotated in the register.Powers of attorney
What are the principal characteristics of deregistration and export powers of attorney?
A power of attorney or IDERA may be recorded in the NNAR by the DGCA. In line with article 4(2)(a)(vi) of the Aircraft Registration Act, where a mandate or power of attorney, irrevocable or otherwise, granting powers relating to the exercise of rights relating to the aircraft, or to the closure of the register on behalf of the registrant, is granted for a stated period of time after which it shall lapse, such date must be recorded in the register and the registration of the mandate will cease to have effect after such date.
Moreover, in accordance with article 13(2) of the Aircraft Registration Act, where the request is made by an authorised person or his or her delegate in writing, pursuant to an IDERA or power of attorney registered in the NAR or in the International Registry, such request shall be acted upon in all cases unless the authorised person ranks in priority after any mortgage or any international interest registered in the NAR or in the International Registry respectively. In such a case the authorised person must certify that all registered interests ranking in priority to him have been discharged or that the holders of such interests have consented to the deregistration and export.
When an IDERA has been registered, it may not be revoked by the debtor without the consent in writing of the authorised person. On the other hand, the DGCA will remove an IDERA from the registry at the request of the authorised person.
In case of insolvency of the debtor or the creditor, an irrevocable mandate by way of security continues to be binding on, or for the benefit of, the liquidator of the debtor or the creditor in accordance with the terms of that mandate.Cape Town Convention and IDERA
If the Cape Town Convention is in effect in the jurisdiction, describe any notable features of the irrevocable deregistration and export request authorisation (IDERA) process.
Article 13 (2) of the Aircraft Registration Act (the Act) and article 25 of the First Schedule of the Act provide for the granting of an IDERA by the registered owner to a creditor. The IDERA must be submitted to the DGCA in the form outlined in the Second Schedule of the Act. It must be signed by the registrant and submitted in duplicate together with documentary evidence that the signatory has due authority to bind the registered owner by his or her signature. It need not be countersigned by the DGCA and he or she does not require a separate designation letter from the beneficiary in favour of the creditor. In Malta IDERA exists in parallel with powers of attorney and both documents are equally effective and practicable.
SecuritySecurity document (mortgage) form and content
What is the typical form of a security document over the aircraft and what must it contain?
The mortgage is the typical form of a security document over the aircraft. The mortgage is executed by the mortgagor in favour of the mortgagee as creditor on a statutory form in the presence of, and attested by, a witness. It is drawn up in English and may be registered as security for payment of a principal sum and interest, an account current or the performance of any other obligation, including a future obligation, due by the mortgagor as debtor to the mortgagee as creditor. According to article 29(4) of the Act, the mortgage may also be executed and registered in favour of a security trustee appointed or acting under a trust for the benefit of persons to whom a debt or other obligation is due.
Moreover, by article 29(5) of the Act, it is not necessary to indicate the monetary value of the indebtedness in the mortgage unless it is intended to secure a future obligation, in which case a maximum sum by way of principal for which the mortgage is granted must be expressly stated in the registered instrument and reflected in the register by the Director General of civil aviation (DGCA). No other economic terms, such as repayment dates and principal interest, are required to be registered.
In line with article 30(2) of the Act, mortgages are recorded by the DGCA in the chronological order in which they are produced to him or her for that purpose, and he or she must notify on each mortgage that it has been recorded, stating the day and hour of that record. This procedure is of utmost importance, because mortgages rank in accordance with the date and time of their registration.
In addition to mortgages, creditors and debtors may also register international interests over airframes, aircraft engines or helicopters (aircraft objects) in accordance with the First Schedule of the Act in the International Registry.
An interest is constituted as an international interest under the First Schedule of the Act where the agreement creating or providing for the interest:
- is in writing;
- relates to an aircraft object of which the chargor, conditional seller or lessor has power to dispose;
- enables the aircraft object to be identified; and
- in the case of a security agreement, enables the secured obligations to be determined, but without the need to state a sum or maximum sum secured.
An international interest is an interest that is:
- granted by the chargor under a security agreement;
- vested in a person who is the conditional seller under a title reservation agreement; or
- vested in a person who is the lessor under a leasing agreement.
In accordance with article 29(7) of the Act, when an international interest is registered in the International Registry it becomes enforceable even in the absence of the registration or notation in the National Aircraft Register (NAR) and becomes regulated by the First Schedule of the Act and the law governing its terms.Security documentary requirements and costs
What are the documentary formalities for creation of an enforceable security over an aircraft? What are the documentary costs?
For the registration of a mortgage, the DGCA requires the following:
- an original mortgage form signed by the mortgagor and attested by a witness;
- if the mortgage is being signed by an authorised attorney in Malta, an original power of attorney granted by the mortgagor; and
- copies of the corporate resolutions authorising the granting of the mortgage and empowering the nominated attorney to execute the mortgage in Malta.
There are other documentary formalities with regard to documents executed outside Malta, such as legalisation, certification of copies, notarisation and apostillation. In this regard costs vary depending on which formality is required, the type of document and the country from where the document emanates.Security registration requirements
Must the security document be filed with the aviation authority or any other registry as a condition to its effective creation or perfection against the debtor and third parties? Summarise the process to register a mortgagee interest.
The mortgage does not have any effect until it is recorded by the DGCA in the NAR, and in fact it takes its priority from the date and time of its registration.
The process for registering a mortgage entails the delivery of the documents outlined in the reply to question 15 to the DGCA for immediate recording of the mortgage in the NAR. For this purpose it is common practice for the mortgagor or his or her authorised attorney to pre-clear the documents in advance so that there will be no delays in the recording of the mortgage.
At present, a charge of €500 is payable to the DGCA upon the registration of a mortgage and a charge of €250 is payable upon the registration of an amendment mortgage.Registration of security
How is registration of a security interest certified?
The DGCA must notify on each mortgage that it has been recorded, stating the day and hour of that record. Mortgages rank in accordance with the date and time of their registration. In accordance with article 15(3) of the Aircraft Registration Act, a transcript of the NAR is issued by the DGCA upon request and upon payment of the prescribed fee. The transcript will show, inter alia, the mortgage registered on the aircraft and its priority.
In the case of international interests, the certificate issued by the International Registry is prima facie evidence of its contents.Effect of registration of a security interest
What is the effect of registration as to third parties?
The registration of a mortgage confers priority over subsequent mortgages registered over the same aircraft. In case of a number of mortgages registered over the same aircraft, the mortgages rank in priority according to the date and the time at which each mortgage is recorded in the National Aircraft Register.
In terms of article 32(2) of the Aircraft Registration Act, all mortgages registered in the National Aircraft Register rank after any international interest, prospective international interest and other right or interest registered in the International Registry on such aircraft or share therein, irrespective of the date and time of registration in the International Registry.Security structure and alteration
How is security over aircraft and leases typically structured? What are the consequences of changes to the security or its beneficiaries?
The concept of security trust is recognised in Malta and is commonly used in granting security over aircraft. The trustee can hold the security for a changing group of beneficiaries (ie, new lenders) because the mortgage recognises the security trustee as the person in whose favour the mortgage is registered without any reference to the underlying beneficiaries (lenders). In fact the security trustee can exercise all the rights in relation to the mortgage. As to the nature of the security, a mortgage constitutes a right in rem over the aircraft.Security over spare engines
What form does security over spare engines typically take and how does it operate?
The security emanating from a mortgage over an aircraft extends to any engine attached to the airframe only when such an engine is the property of the owner of the airframe granting the mortgage, even though the engines are specifically mentioned in the instrument of mortgage or the NAR. This is in line with article 573 of the Civil Code, Chapter 16, of the Laws of Malta.
In accordance with the First Schedule of the Aircraft Registration Act, international interests may be registered over aircraft engines in the International Registry. These interests are:
- granted by the chargor under a security agreement;
- vested in a person who is the conditional seller under a title reservation agreement; or
- vested in a person who is the lessor under a leasing agreement.
Enforcement measuresRepossession following lease termination
Outline the basic repossession procedures following lease termination. How may the lessee lawfully impede the owner’s rights to exercise default remedies?
In terms of article 14 of the First Schedule of the Act, in the event of default under a leasing agreement, the lessor may:
- terminate the agreement and take possession or control of any aircraft object to which the agreement relates; or
- apply for a court order authorising or directing either of these acts.
In addition to these remedies, the lessor may, in line with article 15 of the First Schedule of the Act, to the extent that the lessee has at any time so agreed:
- procure the deregistration of the aircraft; and
- procure the export and physical transfer of the aircraft object from the territory in which it is situated.
However, the lessor cannot exercise these remedies without the prior consent in writing of the holder of any registered interest ranking in priority to that of the lessor.
The above remedies also apply to a conditional seller under a title reservation agreement.Enforcement of security
Outline the basic measures to enforce a security interest. How may the owner lawfully impede the mortgagee’s right to enforce?
The remedies of a lessor or a conditional seller have been dealt with in question 21. With regard to a chargee, in the event of default, the chargee may in terms of article 12 of the First Schedule of the Aircraft Registration Act, to the extent that the chargor has at any time so agreed, exercise any one or more of the following remedies:
- take possession or control of any aircraft object charged to it;
- sell or grant a lease of any such aircraft object; and
- collect or receive any income or profits arising from the management or use of any such aircraft object.
Alternatively, the chargee may apply for a court order authorising or directing any of the acts referred to in the preceding paragraph.
One must note here that the chargee proposing to sell or grant a lease of an aircraft object must give reasonable prior notice in writing of the proposed sale or lease to the interested persons.Priority liens and rights
Which liens and rights will have priority over aircraft ownership or an aircraft security interest? If an aircraft can be taken, seized or detained, is any form of compensation available to an owner or mortgagee?
In accordance with article 42 of the Aircraft Registration Act, the following debts are secured by a special privilege upon the aircraft, as well as any proceeds from any indemnity arising from any mishaps as well as any insurance proceeds, provided that the said privilege does not apply in relation to an indemnity payable under a liability policy:
- judicial costs incurred in respect of the sale of the aircraft and the distribution of the proceeds thereof pursuant to the enforcement of any mortgage or other executive title;
- fees and other charges due to the DGCA arising under applicable laws of Malta in respect of the aircraft;
- wages due to crew in respect of their employment on the aircraft;
- any debt due to the holder of a possessory lien for the repair, preservation of the aircraft to the extent of the service performed on and value added to the aircraft;
- the expenses incurred for the repair, preservation of the aircraft to the extent of the service performed on and value added to the aircraft; and
- wages and expenses for salvage in respect of the aircraft.
The following debts are also secured by a special privilege upon the aircraft, as well as any proceeds from any indemnity arising from any mishaps as well as any insurance proceeds, other than from a liability policy, but only if they are registered in the International Registry:
- taxes, duties and, or levies due to the government of Malta in respect of the aircraft; and
- wages and expenses for assistance or recovery in respect of the aircraft.
How are judgments of foreign courts enforced? Is your jurisdiction party to the 1958 New York Convention?
As Malta is a member of the European Union, Regulation (EU) No. 1215/2012 of the European Parliament and of the Council of 12 December 2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters applies to Malta. This entails the filing of an application before the Maltese court requesting the court to make the judgment of a court in an EU member state enforceable in Malta. The only defences that can be raised by opponents are the defences under article 45 of Regulation (EU) No. 1215/2012. With regard to judgments emanating from non-EU countries, one has to commence a lawsuit requesting the court to enforce that judgment in Malta.
Malta is a party to the 1958 New York Convention. Foreign arbitral awards may be registered with the Malta Arbitration Centre in accordance with Rules 53 to 57 of the Arbitration Rules. Once registered with the Malta Arbitration Centre, the foreign arbitration award becomes enforceable in Malta.
Taxes and payment restrictionsTaxes
What taxes may apply to aviation-related lease payments, loan repayments and transfers of aircraft? How may tax liability be lawfully minimised?
Under Maltese tax law no withholding tax is payable on the lease payments when the lessor is not tax-resident in Malta. The tax legislation is very favourable to aircraft operators who are not tax-resident in Malta. Income derived by them from the ownership, leasing or operation of aircraft used in international aviation business is not taxed in Malta if such income is not received in Malta. This is so even if the aircraft is registered in, or operated from, Malta. Moreover, the applicable accelerated tax depreciation rates are six years for the airframe and engines and four years for the interior of the aircraft.
With regard to value added tax, leasing of aircraft is chargeable to VAT, but only on the deemed use of the aircraft within European airspace. For this purpose the VAT Department has issued a formula that establishes the percentage of such use taking into account the features of the particular aircraft. Through this scheme the lessor may claim back the original VAT incurred upon acquisition of the aircraft. No VAT is charged in respect of the supply of aircraft destined to be used by airline operators for reward chiefly for international transport of passengers or goods.Exchange control
Are there any restrictions on international payments and exchange controls in effect in your jurisdiction?
No exchange control restrictions apply.Default interest
Are there any limitations on the amount of default interest that can be charged on lease or loan payments?
As a general rule, interest may be charged up to a maximum rate of 8 per cent per annum. However, in terms of articles 26A to 26E of the Commercial Code, Chapter 13 of the Laws of Malta, which deal with late payment in commercial transactions, the legal interest for late payment is set at the applicable European Central Bank reference rate plus 8 per cent. ‘Reference rate’ is defined in article 26A as the interest rate applied by the European Central Bank to its most recent main refinancing operations, or the marginal interest rate resulting from variable-rate tender procedures for the most recent main refinancing operations of the European Central Bank.Customs, import and export
Are there any costs to bring the aircraft into the jurisdiction or take it out of the jurisdiction? Does the liability attach to the owner or mortgagee?
Under Maltese law no customs or import duty or export levy is payable in respect of civil aircraft. Moreover, aircraft are not considered to be chargeable assets for stamp duty purposes.
Insurance and reinsuranceCaptive insurance
Summarise any captive insurance regime in your jurisdiction as applicable to aviation.
Article 3(1) of the Civil Aviation (Insurance Requirements for Air carriers and Aircraft Operators) Order (SL 499.41) (the Order) lays down that no aircraft shall be flown in Malta without having insurance cover that meets the requirements of Regulation EC 785/2004 on insurance requirements for air carriers and aircraft operators. The Order does not require the insurance to be placed with a domestic insurer, and as a matter of fact there is no common practice to place the insurance of aircraft in the local market.Cut-through clauses
Are cut-through clauses under the insurance and reinsurance documentation legally effective?
Cut-through clauses under the insurance and reinsurance documentation are legally effective since it is possible under Maltese law to stipulate for the benefit of a third party. Article 1000 of the Civil Code lays down that it is lawful for a person to stipulate for the benefit of a third party when such a stipulation constitutes the mode or condition of a stipulation made by that person for their own benefit, or of a donation or grant made by that person to others; and the person who has made any such stipulation may not revoke it if the third party has signified the intention to avail him or herself thereof.Reinsurance
Are assignments of reinsurance (by domestic or captive insurers) legally effective? Are assignments of reinsurance typically provided on aviation leasing and finance transactions?
Assignments of reinsurance are legally effective in Malta. In the general terms of article 1469 of the Civil Code, the assignment or sale of a debt, or of a right or of a cause of action is complete, and the ownership is ipso jure acquired by the assignee as soon as the debt, the right or the cause of action, and the price have been agreed upon, and, except in the case of a right transferable by the delivery of the respective document of title, the deed of assignment is made. Moreover, the assignment must be made in writing ad validitatem and the assignee may not, in regard to third parties, exercise the rights assigned to him or her except after due notice of the assignment has been given to the debtor, by means of a judicial act, by the assignee him or herself or by the assignor.Liability
Can an owner, lessor or financier be liable for the operation of the aircraft or the activities of the operator?
Article 13 of the Civil Aviation Act, Chapter 232 of the Laws of Malta, lays down that where an aircraft has been bona fide demised, let or hired out for any period exceeding 14 days to any other person by the owner thereof, and no pilot, commander, navigator or operative member of the crew of the aircraft is in the employment of the owner, the relevant articles of the Civil Aviation Act which attach liability to the owner of the aircraft would apply instead to the person to whom the aircraft has been so demised, let or hired out.Strict liability
Does the jurisdiction adopt a regime of strict liability for owners, lessors, financiers or others with no operational interest in the aircraft?
Malta does not adopt a regime of strict liability for owners, lessors, financiers or others with no operational interest in the aircraft. If they prove to the satisfaction of the court that the aircraft was not flown with their actual fault or privity, then liability would attach to the person having the operational interest in the aircraft.Third-party liability insurance
Are there minimum requirements for the amount of third-party liability cover that must be in place?
In accordance with article 3 of the Civil Aviation (Insurance Requirements for Air carriers and Aircraft Operators) Order (SL 499.41), aircraft, including gliders, with a maximum take-off mass of less than 500kg, and microlights that are used for non-commercial purposes, or are used for local flight instruction that does not entail the crossing of international borders, are required to have, in respect of liability for third parties, a minimum insurance cover per accident of 0.75 million special drawing rights (SDR). In respect of non-commercial operation of aircraft with a maximum take-off mass of less than 2,700kg, the minimum insurance cover must be 100,000 SDR per passenger. The insurance requirements with respect to all other aircraft are set out in Regulation EC 785/2004 on insurance requirements for air carriers and aircraft operators.
Update and trendsKey developments of the past year
What were the key cases, decisions, judgments and policy and legislative developments of the past year?
Amendments to the Companies Act made very recently by Act V of 2020 will, when brought into force, empower the Minister responsible for the regulation of financial services to make regulations in order to (1) provide for the formation, constitution, authorisation and regulation of cell companies carrying on or engaged in shipping or aviation business; and (2) make it possible for a company carrying on or engaged in shipping or aviation business to convert into a cell company.
'Aviation business' means (1) the ownership, operation (under charter, lease or otherwise), administration and management (including personnel engagement, employment or management whether on board or otherwise) of any ship and the carrying on of all ancillary financial, security, commercial and other activities in connection therewith; (2) the holding of shares or other equity interests in any undertaking, whether Maltese or otherwise, established solely or mainly for the carrying on or carrying out of any one or more of the activities above referred to and the carrying on of all ancillary financial, security, commercial and other activities in connection therewith; (3) the activities of a parent company which holds shares or other equity interests in undertakings, whether Maltese or otherwise, where any one or some of these undertakings is established solely or mainly for the carrying on or carrying out of any one or more of the activities above referred to and the carrying on of all ancillary financial, security, commercial and other activities in connection therewith; (4) the raising of capital through loans, the issue of guarantees or the issue of securities by an undertaking when the purpose of such activity is to achieve the above mentioned objects or activities; or (5) the carrying on of such other objects or activities within the aviation sector and related or connected matters which the Minister may, on the advice of the Malta Financial Services Authority, from time to time prescribe.
The Minister may furthermore make Regulations that provide for the formation, constitution, authorisation and regulation of incorporated cell companies and incorporated cells as limited liability companies with separate legal personality under the Act and which make it possible for such companies to carry on or be engaged in shipping or aviation business.
Prior to the publication of Act V of 2020, cell companies were only considered in relation to the sectors of insurance and securitisation. This alternative structure is an important legislative development making the aviation sector in Malta more innovative and efficient.