Recent developments and trends

Recent developments

Are there any notable recent developments or trends in the aviation sector in your jurisdiction?

The Convention on International Interests in Mobile Equipment and the associated Aircraft Equipment Protocol (together known as the ‘Cape Town Convention’) were extended to the Cayman Islands by the United Kingdom on November 1 2015. The Cayman Islands made its own declarations under the Cape Town Convention, including the adoption of Alternative A, which is one of the conditions required to comply with the Organisation for Economic Cooperation and Development’s Aircraft Sector Understanding in order to obtain a discount on export credit financing.

The Cayman Islands has long been a hub of the securitisation industry. In keeping with this, recently there has been a growing trend among aircraft operating lessors eager to access the capital markets to securitise portfolios of aircraft in asset-backed securitisation (ABS) transactions using Cayman Islands-incorporated special purpose vehicles. The notes issued by the issuer in these transactions are then listed, and there has been a significant increase in ABS listings on the Cayman Islands Stock Exchange, with its favourable disclosure requirements and listing fee structure.

The Cayman Special Economic Zone (SEZ) recently created the Cayman Aviation Services Park to sit alongside the existing Cayman Maritime Services Park established in 2015. The Special Economic Zones (Cayman Enterprise City) (Amendment) Order 2017 states that the parks are designed to attract maritime and aviation services businesses in order to help establish the Cayman Islands as the largest maritime and aviation services cluster in the region. Businesses may set up operations in the Cayman Islands under the SEZ regime and obtain the benefits and concessions provided by the SEZ.

Regulatory framework

Domestic law

What is the primary domestic legislation governing the aviation industry in your jurisdiction?

As the Cayman Islands is an overseas territory of the United Kingdom, the registration of aircraft in the Cayman Islands is governed by the UK Air Navigation (Overseas Territories) Order 2013. Air Safety Support International, a wholly owned subsidiary company of the UK Civil Aviation Authority, is the regulatory body for aviation matters in the United Kingdom’s overseas territories.

International law

What international aviation agreements has your jurisdiction concluded?

In addition to the Convention on International Interests in Mobile Equipment and the associated Aircraft Equipment Protocol (together known as the ‘Cape Town Convention’), the Cayman Islands is a signatory to and has ratified the Convention on International Civil Aviation (Chicago 1944) through the United Kingdom.

Regulatory authorities

Which government bodies regulate the aviation industry and what is the extent of their powers?

Most matters relating to aviation are dealt with by the Civil Aviation Authority of the Cayman Islands (CAACI), which was established by the Civil Aviation Authority Law (2015 revision).

The CAACI’s remit is primarily that conferred on the governor of the Cayman Islands by the Air Navigation (Overseas Territory) Order 2013. The governor has delegated the powers granted therein to the CAACI. The CAACI deals with all matters relating to:

  • the licensing, certification and regulation of aircraft, flight crew and aerodromes;
  • air navigation services and aviation security in the Cayman Islands;
  • the economic regulation of air transport and the development of air services; and
  • ensuring that civil aviation in Cayman conforms to the standards of the ratified the International Civil Aviation Organisation.

The CAACI is ranked as a Category 1 Aviation Regulatory Authority by the US Federal Aviation Administration (FAA).

The CAACI is subject to the Overseas Territories Aviation Requirements, which are similar to those of the European Aviation Safety Agency, the FAA and Transport Canada, and based on International Civil Aviation Organisation standards.

Air carrier operations

Operating authorisation

What procedural and documentary requirements must air carriers meet in order to operate in your jurisdiction?

Aircraft can be registered in the Cayman Islands only if they are for private use (not for hire or reward). The exception is that commercial use aircraft may be registered where they are to be operated in a jurisdiction with which the Cayman Islands has an agreement under Article 83bis of the Convention on International Civil Aviation (Chicago 1944), to which the United Kingdom (representing the Cayman Islands) is party or under a Cayman air operator’s certificate. Under Article 83bis agreements, certain functions and duties normally carried out by a state registry are transferred to an operator’s state. The Civil Aviation Authority of the Cayman Islands retains airworthiness oversight. This is an attractive position for lessors and owners as they receive the asset on return with a complete maintenance history, in English, to a high standard. The Cayman Islands currently has an Article 83bis agreement with Saudi Arabia.

Ownership and control

Do any nationality or other requirements or restrictions apply to ownership or control of air carriers operating in your jurisdiction?

N/A.

Financial requirements

What financial thresholds must air carriers meet to obtain operating authorisation?

N/A.

Insurance coverage

What is the required level of insurance coverage for air carrier operations?

N/A.

Safety requirements

What safety requirements apply to air carrier operations, including with regard to professional and technical certifications?

The relevant European Aviation Safety Agency (EASA) approvals and Overseas Territories Aviation Requirements (OTARs) under the UK Air Navigation (Overseas Territories) Order 2013 apply.

Environmental obligations

What environmental obligations apply to air carrier operations?

The relevant EASA approvals and OTARs under the UK Air Navigation (Overseas Territories) Order apply.

Air traffic control

How are air traffic control services regulated in your jurisdiction?

The relevant OTARs under the UK Air Navigation (Overseas Territories) Order apply.

Routes

Do any licensing requirements apply to specific routes?

N/A.

Are any public service obligations in place with respect to remote destinations?

N/A.

Charter services

Do any special provisions apply to charter services?

No – these are not permitted unless the aircraft operator holds a Cayman air operator’s certificate or the aircraft falls under the scope of an Article 83bis agreement.

Taxes

What taxes apply to the provision of air carrier services?

N/A.

Consumer protection and liability

Airfares

Are airfares regulated in your jurisdiction?

N/A.

Passenger protection

What rules and liabilities are air carriers subject to in respect of:

(a) Flight delays and cancellations?

N/A.

(b) Oversold flights?

N/A.

(c) Denied boarding?

N/A.

(d) Access for disabled passengers?

N/A.

(e) Lost, damaged or destroyed luggage?

N/A.

(f) Retention and protection of passenger data?

N/A.

Cargo

What rules and liabilities apply to the air carriage of cargo?

N/A.

Marketing and advertising

Do any special rules apply to the marketing and advertising of aviation services?

N/A.

Complaints handling

Do any special rules apply to consumer complaints handling in the aviation industry?

N/A.

Aircraft

Aircraft register

What are the requirements for entry in the domestic aircraft register?

Aircraft can be registered in the Cayman Islands as private use aircraft (or commercial use aircraft subject to the existence of a relevant Article 83bis agreement or under a Cayman air operator’s certificate). Requirements for registration of aircraft are fully set out in the UK Air Navigation (Overseas Territories) Order 2013, which includes the criteria for who is considered to be a qualified person for registration. Such qualified persons are:

  • the crown in right of the UK or the Cayman government;
  • UK nationals;
  • commonwealth citizens;
  • nationals of any European Economic Area (EEA) state;
  • bodies incorporated in any part of the commonwealth and which have their registered office or principal place of business in any part of the commonwealth; or
  • undertakings formed in accordance with the law of an EEA state and which have their registered office, central administration or principal place of business within the EEA.

Aircraft registered on the Cayman Islands register will be subject to various technical directives concerning their maintenance and operation. Such requirements are fully detailed in separate notices available on the Civil Aviation Authority of the Cayman Islands (CAACI) website. The only requirements external to the CAACI are those relating to the Class 6 aircraft radio licence which, under statute, is administered by the Cayman Islands Information and Communications Technology Authority.

Mortgages and encumbrances

Is there a domestic register for aircraft mortgages, encumbrances and other interests? If so, what are the requirements and legal effects of registration?

Aircraft mortgages and mortgages with respect to engines and other parts with respect to Cayman registered aircraft can be registered on the aircraft mortgage register maintained by the CAACI under the Mortgaging of Aircraft Regulations 2015. Registration is not required for perfection or enforceability purposes, but does ensure priority over any non-registered mortgages or subsequently registered mortgages (subject to the priority regime under the Cape Town Convention where a related international interest has also been registered at the International Registry).

It is also possible for the priority of a mortgage to be fixed by filing a priority notice with the CAACI, pursuant to which the priority of an as-yet unregistered mortgage can be fixed for a 14-day renewable period. Once an entry has been made and the mortgage is registered (within 14 days, excluding public holidays), the mortgage will be deemed to have priority from the date of registration of the priority notice.

All information on the mortgage register is deemed to be in the public domain.

International interests that fall under the Cape Town Convention may be registered against a Cayman Islands-registered airframe or separate engines at the International Registry maintained pursuant to the Cape Town Convention.

Under the Mortgaging of Aircraft Regulations 2015, the effects of registration of international interests at the International Registry is now recognised from the effective date of the Cape Town Convention in the Cayman Islands. The priority of pre-existing aircraft mortgages on the Cayman Islands aircraft mortgage register is preserved, although from such date mortgages registered on the Cayman Islands aircraft mortgage register and as international interests at the International Registry will have their priority determined in accordance with the priority rules set out in the Cape Town Convention, subject to the priority of certain non-consensual rights or interests that will in any event take priority under Cayman law and under the Cape Town Convention as applicable to the Cayman Islands (eg, Cayman government liens for unpaid taxes or charges and repairers’ liens).

Detention

What rules and procedures govern the detention of aircraft?

Under Cayman law, detention rights may arise by statute, as result of a breach of contract or where an attachment of an aircraft is sought (eg, for non-payment of a debt or on the liquidation or insolvency of the owning company). Statutory rights of detention include the following:

  • Airport charges – aircraft can be detained and sold for non-payment of airport charges; default of payment creates a statutory lien.
  • Contravention of certain licensing and the air navigation provisions of the Air Navigation (Overseas Territories) Order.
  • Customs – where anything becomes liable to forfeiture under the Customs Law (2017 revision), any aircraft used for the carriage, handling, deposit or concealment of that thing will also be liable to forfeiture. Forfeiture of an aircraft may also occur where it has been adapted for use or is used for the purposes of smuggling or concealing goods.
  • Crimes – where a person is convicted of an offence, any property in his or her possession or under his or her control that was used in connection with the offence or intended to be used for that purpose may be forfeited to the crown by order of the court.
  • Terrorism – under the Aviation Security and Piracy (Overseas Territories) Order 2000, certain sections of the UK Aviation Security Act 1982 were extended to the Cayman Islands. Under the Terrorism Law (2017 revision), the Cayman courts may make forfeiture orders with respect to any property of a person convicted of financing terrorism which is intended to be, or is suspected of being, used for the purposes of terrorism (this includes aircraft).
  • War or national emergency – regulations made under the Emergency Powers Law (2006 revision) can give powers to the governor of the Cayman Islands to authorise the taking possession or acquisition of any property.

Safety and maintenance

What rules and procedures govern aircraft safety and maintenance?

The relevant European Aviation Safety Agency (EASA) approvals and Overseas Territories Aviation Requirements (OTARs) under the UK Air Navigation (Overseas Territories) Order 2013 apply.

Drones

What is the state of regulation on unmanned aerial vehicles (drones) in your jurisdiction?

The relevant EASA approvals and OTARs under the UK Air Navigation (Overseas Territories) Order apply.

Accidents

Investigation

How are air accidents investigated in your jurisdiction?

The relevant European Aviation Safety Agency (EASA) approvals and Overseas Territories Aviation Requirements (OTARs) under the UK Air Navigation (Overseas Territories) Order 2013 apply.

 Liability

What liability regime governs death, injury and loss arising from air accidents?

The relevant EASA approvals and OTARs under the UK Air Navigation (Overseas Territories) Order apply.

Regulatory notification

What are the reporting requirements for air accidents?

The relevant EASA approvals and OTARs under the UK Air Navigation (Overseas Territories) Order apply.

Airports

Ownership

What rules govern the ownership of airports (both public and private)?

There are three airports in the Cayman Islands (on Grand Cayman, Cayman Brac and Little Cayman), owned by the Cayman government. The rules governing ownership and other matters relating to airports are set out in the Airports Authority Law 2005.

Operation

What is the authorisation procedure for the operation of airports?

The operation of the Cayman airports is overseen by the Cayman Islands Airports Authority, pursuant to the Airports Authority Law.

What ongoing operating requirements apply (including obligations relating to safety, security and facilities maintenance)?

The requirements promulgated from time to time pursuant to the Airports Authority Law apply.

Airport charges

What airport charges apply and how are they regulated?

Pursuant to the Airports Authority Law, the applicable charges include:

  • departure tax received under Section 4 of the Travel (Departure Tax and Environmental Protection Fee) Law (2003 revision);
  • security tax received under the Airports (Security Tax) Regulations (2003 revision); and
  • aircraft landing and parking fees.

Access

What regulations govern access to airports?

Airports are governed by regulations promulgated pursuant to the Airports Authority Law.

Slot allocation

What regime governs the allocation of airport slots (including slot transfer, revocation and disputes)?

N/A.

Ground handling

How are ground handling services regulated?

These will be subject to such regulations promulgated under the Airports Authority Law 2005.

Competition issues

Governing regime

Do any sector-specific competition regulatory/legal provisions apply to the aviation industry in your jurisdiction?

N/A.

Code sharing and joint ventures

What (if any) competition concerns arise in relation to code sharing and air carrier joint ventures?

N/A.

State aid

What rules govern state aid in the aviation industry? Do any exemptions apply?

N/A.

Notable cases

Have there been any notable recent cases or rulings involving competition in the aviation industry?

No.

Dispute resolution

Disputes

What aviation-related disputes typically arise in your jurisdiction and how are they usually resolved?

N/A.