All questions

Current developments

i Recent casesShipping

Case law in the field of Maltese asset finance is particularly rich and continuously developing the principles on which this industry is based. The Indian Empress cases14 generated considerable media interest both locally and internationally and are landmark judgments in several ways, most notably because this was the first time that a Maltese court imposed certain eligibility requirements for the bidders in a judicial sale by auction of vessels, including that of making a cash deposit in court prior to the sale taking place, and providing guarantees for a certain threshold value or providing other evidence as to the bidders' ability to complete the vessel purchase.

Aviation

Although it cannot be regarded as a recent case, we mention the proceedings in relation to two aircraft that at the time were owned by two Irish entities and were leased to an Italian operator, WindJet SpA (the lessee). The aircraft were registered in Ireland. The lessee had entered into insolvency proceedings and had a number of dues owed to Società Aeroporto Catania SpA. The latter had a special privileged claim over the aircraft in terms of Italian law. Therefore, the airport applied for, and obtained, an order from the Italian court for a precautionary arrest warrant.

In the meantime, the owners of the aircraft terminated the lease agreements and flew the aircraft to Malta (which is a contracting state under the Cape Town Convention) in order to protect the aircraft from the claim of the airport. Once in Malta, the airport applied to the Maltese court for a precautionary warrant of arrest in terms of Council Regulation (EC) No. 44/2001 of 22 December 2000 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (Brussels I).

The courts of Malta referred to Article 31 of Brussels I and mainly focused on Maltese procedural law, and in particular whether the airport had, prima facie, a case against the lessors or otherwise to detain the aircraft. The Maltese courts accepted the application of the airport and dismissed the claims of the lessors, even though the latter claimed that they had a right of repossession under the Cape Town Convention. This case highlighted the potential conflict between Brussels I and the Cape Town Convention.

Furthermore, in a recent court judgment, the Maltese court rejected the issuance of a warrant of prohibitory injuction to withhold a company from enforcing their rights under an IDERA and in particular the deregistration of aircraft from the Malta Aircraft Registry. The court understood and stressed that issuing a warrant of prohibitory injunction in the applicant companies' favour would inhibit the proper adoption of the Cape Town Convention and any principles under the Aircraft Registration Act (Chapter 503 of the Laws of Malta).

ii Developments in policy and legislationShipping

Procedures for an arrest of vessel in Malta have been recently upgraded to enable, for the first time in Maltese legislative history, privately engaged bailiffs to formally serve a warrant of arrest on ships that are in Maltese territorial seas. Act XXXI is the law that brought these changes into force, effective as of 18 December 2019. The new law changes the traditional rule that required that service of warrants of arrest must necessarily be done by a court official, typically a court marshall. The new law introduces flexibility into the procedure for service of an arrest in that it enables the creditor to engage a private bailiff (identified a priori to the court) to physically serve upon and notify the warrant of arrest to the ship's master and proceed to seize the ship's papers for them to be lodged in court. Under the newly promulgated procedure, a privately engaged bailiff will work hand in hand with court officials, thus ensuring that all steps remain subject to court scrutiny.

The new procedure is specifically intended to facilitate the arrest of ships in difficult weather conditions, particularly where ships are miles away from Maltese shores, on anchorage and when sea conditions are bad. Now, more appropriately, rather than having court personnel shipped out to vessels to enable notification of an arrest warrant, lawyers acting for creditors can tap the private sector to engage individuals that are apt to go out to sea in such weather conditions in place of the court marshall.

Aviation

In 2016, a number of amendments were made to the Aircraft Registration Act in terms of Act No. LII of 2016. These amendments can be summarised as follows.

General amendments

A number of general amendments were introduced to correct a number of inconsistencies or lacunas in the 2010 law and, in particular, revised definitions of airframes and aircraft engines to make the distinction between the two in specific contexts more clear; updating of fees; and allowing the registrar in Malta to cancel the registration of an aircraft if the person who is registering the same is no longer a qualified person or is no longer entitled to operate such aircraft under a temporary title.

Insolvency

The amending bill introduced some new rules in the existing insolvency regime for aircraft companies. The law has been amended to provide for beneficial procedural treatment for actions enforcing mortgages or international interests.

Enforcement

The amending bill has introduced a number of rights that the mortgagee can exercise in the case of an enforcement of a mortgage, such as that of set off, whereby the mortgagee can acquire the aircraft and set off the value of the aircraft against the amounts that are due to it.

Furthermore, in 2021, a number of other amendments were made to the Aircraft Registration Act (the ARA) in terms of Act 37 of 2021. These amendments can be summarised as follows.

Registration marks

The ARA was amended in order to have a greater pool of available registration marks. The registration marks have been extended to a group of three to five characters, which can be a combination of capital letters in roman character or Arabic numbers, or both.

Flexibility in the registration of aircraft

An element of flexibility has been introduced in the ARA in relation to the registration of aircraft. The details to be included on the fire-proof plates have been limited to the Malta registration marks, thus making it easier to prepare these in advance and also facilitating the sale and purchase of aircraft.

Furthermore, the Registrar General has been provided with discretionary powers to proceed with the registration of an aircraft, even though not all the documents that are required for registration have been provided. Nonetheless, it is important to note that this discretionary power is not unlimited and certain documents must be provided at all times.

Unmanned aircraft

The definition of unmanned aircraft has been included in the ARA to allow for the registration of such aircraft 'operating or designed to operate autonomously or to be piloted remotely without a pilot on board'. The design of unmanned aircraft is subject to certification under the Basic EASA Regulation.

Regulations of IDERAs

The introduction of IDERAs in the ARA in 2010 was groundbreaking. Further specific regulations of the registration, deregistration and enforcement of the IDERA were deemed necessary, as well as the need to introduce timelines within which the Director of Civil Aviation would need to register and enforce the IDERA, thus providing more certainty to IDERA holders. Furthermore, although the concept of certified designee was already mentioned in the ARA, clear procedures have been introduced whereby IDERA holders could nominate certified designees with the latter being authorised to enforce the IDERA and deregister and export the aircraft.

Enforcement of IDERAs

Although the ARA had already catered for the IDERA enforcement procedure, the relevant provisions have been amended in order to outline the procedure with more clarity and insert deadlines. Prior to the amendments, the ARA did not specify how many IDERAs could be registered and by whom. These amendments clarify that only one IDERA can be registered and it has to be issued by the registrant, which is usually the operator of the aircraft. Furthermore, the law states that upon the enforcement of an IDERA, the IDERA shall be acted upon by the Civil Aviation Directorate; in other words, that the aircraft is deregistered at all times without the Civil Aviation Directorate having to enter into the merits of the case, unless there is an international interest that ranks higher in priority to the registered IDERA.

Warrant of ejection or expulsion

A new warrant has been introduced whereby an aircraft or vessel owner or any mortgagee can request the issuance of a warrant of ejection or expulsion, so that the operator or lessee, or other occupants of the vessel or aircraft, must leave the aircraft or vessel within a specific time. This complements the already existing warrant of arrest.

iii Trends and outlook for the future

Malta aims to consolidate its position as the largest flag in the European Union in terms of registered tonnage, but also to maintain the high standards it embraces and has become reputed for with shipowners, charterers and financiers. Malta will continue to be an active advocate of maritime affairs both at the IMO as well as the EU level, and will continue to fine tune its legislation from time to time to adequately meet international standards and demands.

The same applies in relation to aviation. The number of aircraft operators in Malta has increased quite substantially, and Malta's aim is to create an aviation-friendly environment for operators, aircraft financiers and lessors.