To which major air law treaties is your state a party?

Bermuda has adopted implementing legislation pursuant to the International Interests in Mobile Equipment (Cape Town Convention) Act, 2016 resulting in the extension of the Cape Town Convention to Bermuda with effect from 1 January 2018.

Bermuda is not a signatory (or a party by extension from the United Kingdom) to the Rome Convention, the Geneva Convention or the Chicago Convention. Bermuda is, by Order-in-Council from the United Kingdom, a party to the New York Convention.

In relation to the Chicago Convention, certain provisions of thatConvention with which the United Kingdom is obliged to ensure that its overseas territories (including Bermuda) comply are reflected in the Air Navigation (Overseas Territories) Order 2013 and Overseas Territories Aviation Requirements, applicable in Bermuda.

Domestic legislation

What is the principal domestic legislation applicable to aviation finance and leasing?

The principal domestic legislation is the following:

  • the Air Navigation (Overseas Territories) Order 2013, as amended (the Order);
  • the Mortgaging of Aircraft and Aircraft Engines Act 1999 (the Act); and
  • the Bermuda International Interests in Mobile Equipment (Cape Town Convention) Act 2016.
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?

Except for public policy considerations, there are no restrictions under Bermuda law on the parties’ freedom to choose the governing law of such arrangements.

Title transfer

Transfer of aircraft

How is title in an aircraft transferred?

There are no requirements under Bermuda law as to how title for an aircraft can be transferred. It is customary for a bill of sale to be used; however, this is not a Bermuda law requirement.

Registration of the new owner (if registered in the name of the legal or beneficial owner rather than the charterer by demise) must be made with the Bermuda Civil Aviation Authority (BCAA).

Transfer document requirements

What are the formalities for creating an enforceable transfer document for an aircraft?

Except for general enforceability considerations, there are no specific formalities.

All documents must be submitted in English to the BCAA or accompanied by a certified translation.

There are no notarisation or apostille requirements under Bermuda law to transfer title of an aircraft.

The bill of sale or lease agreement will have to be certified as a true copy of the original as part of the application to the BCAA.

Registration of aircraft ownership and lease interests

Aircraft registry

Identify and describe the aircraft registry.

Bermuda’s aircraft register (the Bermuda Aircraft Register) is a Category I register under the United States Federal Aviation Administration’s Flight Standard Service International Aviation Assessment Programme (recognising the Bermuda Aircraft Register’s compliance with international safety standards and oversight of its registered aircraft operating in the United States). The Bermuda Aircraft Register is maintained by the BCAA and consists of both corporate and privately owned jets.

The registration of an aircraft for the purposes of public transport typically requires arrangements between the BCAA and the relevant foreign (non-Bermuda) civil aviation authority of the air operator. The BCAA would be responsible for registration, permission and validation for the aircraft and flight crew on the Bermuda Aircraft Register, while the foreign civil aviation authority would be delegated with the safety regulatory oversight responsibilities.

The BCAA has an ICOA 83-bis arrangement in place with Russia, which has been in effect since 1999. International lessors and financiers regularly require Russian-operated aircraft in which they have an interest to be registered in Bermuda. Additional agreements are in place with Austria, Azerbaijan and Uzbekistan.

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?

Registration of an aircraft on the Bermuda Aircraft Register may be made in the name of a qualifying owner or charterer by demise (in each case a ‘registrant’). Pursuant to the Order, and subject to certain other restrictions, an aircraft can only be registered under the name of the legal or beneficial owner or a charterer by demise incorporated or established in, or a citizen of, Bermuda, the United Kingdom, the European Economic Area or the Commonwealth.

Pursuant to the Order, an aircraft can be refused registration if its existing registration overseas would not cease by operation of law upon its registration on the Bermuda Aircraft Register or its registration on the Bermuda Aircraft Register would be against the public interest.

The BCAA has a discretion to cancel a registration on a change of ownership, or if any unqualified person otherwise becomes entitled to a legal or beneficial interest by way of ownership in the aircraft or in a share therein, in which latter case the registration will become void and the original Certificate of Registration must be returned to the BCAA.

With respect to interests in aircraft engines, only mortagee interests can be registered, with such interests being registered on the Bermuda Register of Aircraft Engine Mortgages pursuant to the Act. Mortgages can be registered against Bermuda-registered aircraft engines that are either owned by, or otherwise in the possession of, a Bermuda incorporated company (see question 17).

Registration of ownership interests

Summarise the process to register an ownership interest.

Registration and an application for a Certificate of Registration is made through the Aircraft Information and Records System, an electronic filing and record-keeping system maintained by the BCAA. The initial application for approval ‘in principle’ in relation to a proposed registration is submitted by authorised and certified users (which includes certain Bermuda lawyers) along with the following particulars:

  • company or individual name under which the aircraft is to be registered;
  • make, model and serial number of the aircraft, its intended base and its principal geographical areas of operation;
  • maintenance, operations and crewing arrangements;
  • intended use of the aircraft (ie, private or public transport); and
  • name and contact information of the person who will be responsible for technical presentation of the aircraft to the BCAA during the registration process (ie, the operator).

The BCAA will issue an approval ‘in principle’ that lists any further items required in support of the formal application for a Certificate of Registration.

The BCAA will inspect the aircraft prior to the issuance of a Certificate of Airworthiness (along with other requisite certificates, including a noise certificate, flight crew validations and navigation approvals), which is renewable annually following further inspections.

Simultaneous with the application to the BCAA, an application is made to the Bermuda Regulatory Authority for a Class Six Radio (Aeronautical Mobile Services) Licence. The radio licence is issued once the aircraft has been registered by the BCAA and is required before an aircraft can be flown.

An aircraft can be registered and a Certificate of Registration issued without a Certificate of Airworthiness, but a permit to fly will be required prior to the aircraft being flown.

Title and third parties

What is the effect of registration of an ownership interest as to proof of title and third parties?

While registration and the issue of a Certificate of Registration indicates that the BCAA considers the relevant application to be qualified for registration, and may, therefore, be considered prima facie evidence of ownership or the holding of an applicable charter by demise interest in the aircraft, registration is not proof of legal ownership and the Certificate of Registration will state so on its face.

Registration of lease interests

Summarise the process to register a lease interest.

See question 7, in the context of charterers by demise. In general terms, the BCAA will not concern itself with the terms of the lease itself, but will require a certified true copy of the original lease agreement as evidence of the lease arrangement.

Certificate of registration

What is the regime for certification of registered aviation interests in your jurisdiction?

The Certificate of Registration is issued by the BCAA and set out therein are the following particulars:

  • the number of the Certificate of Registration;
  • the nationality mark and the registration mark given to the aircraft;
  • the name of the constructor of the aircraft and its designation; and
  • the serial number of the aircraft and the name and address of every person who is entitled as owner to a legal interest in the aircraft or in the case of an aircraft that is subject to a charter by demise, the name and address of the charterer by demise.
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?

If the aircraft is subject to a mortgage registered on the Bermuda Register of Aircraft Mortgages or the Register of Aircraft Engine Mortgages, the aircraft will not be deregistered without the consent of all parties registered as mortgagees.

Although not a legal requirement, as a matter of practice, whenthere is a charter by demise over the aircraft, the BCAA will agree, if requested, not to deregister the aircraft without the consent of the registered owner.

With regard to the deregistration process itself, there is no specific form of deregistration request and deregistration will, therefore, typically consist of the owner of the aircraft making a written application to the BCAA requesting cancellation of the Certificate of Registration. In support of the application, the owner must enclose a resolution of the board of directors of the registrant company authorising the cancellation. The original Certificate of Registration and other documents issued at the time of registration must be returned to the BCAA for cancellation, as the aircraft cannot be deregistered until the BCAA receives the original of the signed certificate.

Except for any aircraft that is subject to an undischarged mortgage, the BCAA will deregister the aircraft in accordance with the registrant’s instructions, and will issue a letter of deregistration, which confirms the deletion of the aircraft from the Bermuda Register. The aeronautical regulatory authority of the next intended state of registration will be informed of the deletion by the BCAA.

In addition, the other principal requirements for deregistration of an aircraft are:

  • that any balance on the account for the aircraft is paid in full; and
  • if a certificate of airworthiness for export is required, the relevant party will need to make a request to the BCAA for such a certificate and make arrangements for one of the BCAA surveyors or its agents to inspect the aircraft.
Powers of attorney

What are the principal characteristics of deregistration and export powers of attorney?

Under Bermuda law, a deregistration power of attorney, when granted to secure an obligation owed, typically, to the finance parties, will be irrevocable until that obligation is discharged and will survive the insolvency of the grantor. The power of attorney may be granted to more than one attorney-in-fact on a joint or several basis, or both.

Further, under Bermuda law, a power of attorney is required to be executed as a deed. However, a deregistration power of attorney need not be governed by Bermuda law. It will frequently have the same governing law as the other transaction documents, for example, English law or New York law.

It is possible to send the deregistration power of attorney to the BCAA; however, the BCAA will no longer formally acknowledge a deregistration power of attorney given the BCAA’s adoption of the irrevocable deregistration and export request authorisations (IDERA) process in compliance with the Cape Town Convention.

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.

Creditors can now file IDERAs with the BCAA, with the result that the BCAA will only accept deregistration instructions from the party named in the IDERA as the ‘authorised party’. Previously the registrant of the aircraft could have granted a deregistration power of attorney (as per question 13). However, as a matter of English common law, since a power of attorney grants a power only, as opposed to creating an enforceable obligation, it cannot be enforced against the BCAA. The IDERA, on the other hand, creates an enforceable obligation of the BCAA and is therefore a much more useful document to the financier. Although the IDERA refers to export, it should be noted that practically none of the commercial aircraft registered on the Bermuda Register are actually physically present in Bermuda, but are located in those jurisdictions that have article 83-bis treaties with Bermuda. As such, export from such jurisdictions should be addressed with a separate export power of attorney recognised by the relevant foreign jurisdiction. It should also be noted that an IDERA must be in connection with an international interest created on or after the date on which the legislation became effective in Bermuda (ie, 1 January 2018). It is not appropriate to file IDERAs in respect of international interests created before that date.

The IDERA must be completed and submitted in the BCAA’s prescribed form to the BCAA. The BCAA will then record, countersign and acknowledge execution of the IDERA.


Security document (mortgage) form and content

What is the typical form of a security document over the aircraft and what must it contain?

Security usually takes the form of a mortgage. There is no statutory format with which the mortgage must comply. The mortgage itself need not be governed by Bermuda law and the original mortgage deed need not be provided to the BCAA.

If the relevant mortgage is to be registered as an international interest at the International Registry under the Cape Town Convention, then it must be in such a form as to constitute an international interest under the Cape Town Convention.

The following are also common in aviation finance structures:

  • assignments of any charter agreements, insurances, warranties or aircraft leases relating to the aircraft. In addition, the borrower will usually deliver a deregistration power of attorney to the lender, the terms of which prohibit the borrower from deregistering the aircraft without the lender’s consent;
  • charges over the shares of the company owning an aircraft; and
  • leasing or charter by demise arrangements, where the owner gives control and possession of the aircraft to the charterer. The charterer then becomes responsible for all responsibilities and liabilities associated with its operation.
Security documentary requirements and costs

What are the documentary formalities for creation of an enforceable security over an aircraft? What are the documentary costs?

There are no specific documentary formalities under Bermuda law. No stamp duty or other documentary costs should be payable.

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.

With respect to a mortgage over an aircraft registered on the Bermuda Aircraft Register, it is possible to register the mortgage on the Bermuda Register of Aircraft Mortgages and the Register of Aircraft Engine Mortgages pursuant to the Act. Mortgages can be registered against Bermuda-registered aircraft and aircraft engines that are either owned by, or otherwise in the possession of, a Bermuda incorporated company. Such mortgages give the lender priority over unsecured creditors of the aircraft’s owner, permit the lender to take possession of the aircraft in the event of a default by the borrower and permit the lender to sell the aircraft to realise monies to pay the lender’s debt.

There are two specialised registers, one for the registration of aircraft mortgages and the other for the registration of aircraft engine mortgages. The Minister responsible for aviation is empowered to make regulations in respect of the administration of the two registers, as well as in respect of fees and charges in relation to the services provided under the Act, and in respect of making provision for the rights and liabilities of the mortgagors and mortgagees.

The procedure to effect registration of a mortgage is simple and straightforward, requiring an application by the mortgagee. The mortgagee must provide the BCAA with a short registration form summarising the principal points of the mortgage (ie, date, aircraft description, mortgagor contact details and confirmation of the sum secured). An original of the registration form (although, in certain circumstances the BCAA may proceed on the basis of a pdf copy), signed by either the mortgagee or his or her agent or legal counsel must be submitted to the BCAA, together with a copy of the mortgage certified by the applicant to be a true and correct copy and the necessary registration fee (calculated on an ad valorem basis).

If the aircraft mortgage grants a charge over assets that goes beyond the scope of an aircraft or aircraft engine, and the registrant is a Bermuda incorporated company, the document should be registered with the Registrar of Companies under the Companies Act 1981 to protect the priority over those assets. Charges for shares and other ancillary security documents are also generally filed with the Registrar of Companies to protect priority if the registrant is a Bermuda incorporated company. Similarly, in leasing transactions, leasing documents are filed with the BCAA and are also generally registered with the Registrar of Companies under the Companies Act 1981 if the registrant is a Bermuda incorporated company.

Under the Cape Town Convention, an electronic International Registry has been created that is open 24 hours a day, seven days a week. Creditors with an international interest in an aircraft object can register their interest on the International Registry provided that the debtor is located in or the aircraft is registered in a ‘contracting state’. A contracting state is a jurisdiction that has ratified the Cape Town Convention. It should be noted that as an overseas territory, Bermuda is not a contracting state but rather a ‘territorial unit’ of a contracting state, namely the United Kingdom.

To constitute an ‘international interest’ the agreement creating the interest must:

  • be in writing;
  • relate to an object of which the debtor has power to dispose;
  • enable the object to be identified for the purpose of the Convention; and
  • if a security agreement, enable the secured obligations to be determined.

The debtor is situated in a contracting state when it:

  • is incorporated or formed in a contracting state;
  • has its registered office or statutory seat in a contracting state; or
  • has its centre of administration in a contracting state.

If the debtor is a Bermuda company, international interests can now be registered against the Bermuda company on the International Registry.

Registration of security

How is registration of a security interest certified?

The BCAA will issue a certificate of registration, which is generally available on, or soon after, the date of registration. The certificate states the date and time of registration, whether it is the first or a subsequently registered mortgage with respect to the relevant aircraft, the principal details of the mortgage and acknowledges receipt of the relevant registration fee.

Effect of registration of a security interest

What is the effect of registration as to third parties?

A registered mortgage is given statutory priority over subsequently registered mortgages and unregistered mortgages. The priority of the registered mortgage will not be affected by the bankruptcy of the mortgagor, and the security interest will rank in preference to any right, claim or interest of other creditors. It should be noted, however, that possessory liens for work done on the aircraft (whether before or after the mortgage was created), over persons lawfully entitled to possession of the aircraft or with a right to detain the aircraft, will have priority over a registered mortgage. In addition, a previously registered mortgage or a mortgage created prior to the coming into force of the Act would have priority over a subsequently registered mortgage.

Registration of the mortgage cannot take effect until the aircraft is registered, but a lender can apply to file a priority notice with the BCAA in advance of the execution and delivery of an aircraft mortgage or aircraft engine mortgage. This provides notice of the lender’s intention to file a mortgage. If a mortgage is entered on the Aircraft Register or Aircraft Engine Register within 14 days of the priority notice being filed, the mortgage is deemed to have priority from the time the notice was registered. Lodging a priority notice will prevent any other security interests over the aircraft being registered in advance of registration of the mortgage that is the subject of the priority notice.

The priority notice is a simple form, along the same lines as the mortgage registration form, and must be accompanied by the applicable nominal priority registration fee.

All registered mortgagees must provide their consent to removal of the aircraft in question from the Aircraft Register before the removal can take place, and a registered mortgage will continue to exist despite removal of the aircraft from the Aircraft Register.

Although registration of a mortgage does not constitute evidence of its validity, it does constitute express notice of all facts appearing on the Mortgage Register.

International interests registered on the International Registry take priority over subsequently registered interests and also have priority over non-registered interests over the same assets. It is possible to vary such priority by registering subordination agreements on the International Registry. In addition to ease of registration, the International Registry provides greater transparency, as potential creditors can easily search the Register to identify prior security interests already granted. Although most of the security documents in relation to an aircraft financing will constitute an international interest, which can be registered on the International Registry, it is expected that most parties will elect a dual registration procedure and register on both the International Registry and the local Bermuda Register of Aircraft Mortgages.

This will be beneficial in circumstances where:

  • the aircraft may need to be repossessed in a non-contracting state that does not recognise the Cape Town Convention;
  • the debtor does not consent to registration on the International Register (no consent is needed to register on the Bermuda domestic register); or
  • it turns out the security did not actually constitute an international interest or should not have been registered under the Cape Town Convention.

Practically speaking, until such time as there is case law supporting the application of the Cape Town Convention, most creditors will adopt the more cautious route of dual registrations.

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?

A typical security package for a financing involving Bermuda will consist of an aircraft mortgage, a security assignment of the borrowing party’s contractual rights (eg, under the relevant lease arrangements, the lease rentals or insurances) and a deregistration power of attorney or IDERA. It is often the case that the lenders will take security over the shares of the (often Bermuda) owner or borrower. These documents will usually not be governed by Bermuda law but by, for example, English or New York law, save that a share mortgage over the shares of a Bermuda company is often governed by local law.

The secured party is often a security trustee or collateral agent for the financing parties from time to time.

The concept of a security trustee is recognised in Bermuda and may be applied in granting of security over aircraft. A mortgage may be granted in favour of the beneficiary or a security trustee appointed or acting under a trust for the benefit of persons to whom a debt or other obligation is due.

The security trustee would be recognised as the mortgagee and will be entitled to exercise all the rights in relation to the mortgage accorded to mortgagees. Accordingly, the mortgage will only refer to and recognise the security trustee as the person in whose favour the mortgage is registered, without any reference to the underlying lenders. The lender syndicate may therefore vary without any necessity to amend the mortgage.

A right in rem enables a party to bring an action against property as opposed to an action against a person (which is called a right in personam). A right in rem developed under maritime law. Its basic purpose was to enable parties to obtain redress when a vessel was in the jurisdiction of the English courts even though its owner was abroad.

There is no right in rem against aircraft, with the very limited exceptions of:

  • salvage;
  • towage (waterborne aircraft only); and
  • pilotage (waterborne aircraft only).

Proceedings in rem in the case of these exceptions are expressly provided for in Bermuda legislation.

Security over spare engines

What form does security over spare engines typically take and how does it operate?

The statutory definition of ‘aircraft engine’ in the Act includes all parts, equipment and data, and manuals and records relating to them. A registered mortgage may cover any store or spare parts for the aircraft, but does not include a mortgage created as a floating charge or a mortgage of spare parts on their own. It is possible to register a mortgage over an aircraft engine on the Bermuda Register of Aircraft Engine Mortgages pursuant to the Act (see question 17).

Enforcement measures

Repossession 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?

Subject to enforceability considerations under the governing law, the lex situs and any other relevant laws (other than Bermuda law), will typically be recognised by the Bermuda courts and enforce contractual arrangements such as lease termination provisions created under foreign laws. The Bermuda courts would also generally recognise self-help remedies by which the counterparties may take possession of the aircraft, for example, by dealing directly with the BCAA pursuant to a deregistration power of attorney to effect a deregistration.

The procedure for repossession of an aircraft will be governed by the provisions of the mortgage and the relevant provisions of the proper law governing the mortgage. There are no specific Bermuda statutory provisions dealing with the repossession of an aircraft. Therefore, the procedure is similar to that used for a claim in respect of personal chattels.

Before the Bermuda courts, the mortgagee can commence proceedings by serving a writ setting out the claim for the mortgage debt (and all related costs) and delivery of the mortgaged aircraft.

The mortgagee can also make a claim for an injunction or other relief that the court can order. An application for an injunction can be submitted before commencing an action for the payment of the mortgage debt or repossession of the aircraft. For ex parte applications, full disclosure must be made to the court (full disclosure meaning everything relating to the application, including anything damaging to the applicant’s case). The Bermuda court has discretion to grant an injunction and, if granted, can make it conditional on certain terms imposed by it.

If an injunction is granted, it will likely take the form of a prohibition on the mortgagor from removing the aircraft from its current location or from disposing of it without the court’s prior permission. When considering whether to grant the injunction, the Bermuda court will have regard to whether the injunction would disrupt passenger travel or business in general.

Enforcement of security

Outline the basic measures to enforce a security interest. How may the owner lawfully impede the mortgagee’s right to enforce?

See question 22. Further, the Bermuda courts would typically recognise self-help remedies in the context of an enforcement of security interests over the aircraft (and often over the shares of the aircraft-owning vehicle). Bermuda law will generally also respect the secured parties’ security interests in the event of the insolvency of the relevant company (if the registrant is a Bermuda-incorporated company).

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?

The generally endorsed approach is that the following forms of lien exist as a matter of Bermuda law:

  • seller’s lien arising pursuant to section 40 of the Sale of Goods Act 1978, whereby an unpaid seller may have a lien over the aircraft to the extent the buyer fails to pay the purchase price;
  • salvage lien;
  • possessory lien, at common law, which requires the purported lienholder to have continuous possession of the aircraft upon which it has contributed labour that has improved the aircraft in some way; and
  • contractual lien, for example arising out of a contractual agreement with respect to aircraft repairs, landing charges, etc.

As a matter of Bermuda law, a possessory lien will have priority over a registered mortgage.

Generally, issues of compensation for detentions, requisitioning, etc, are typically also dealt with contractually in the transaction or insurance documentation.

Enforcement of foreign judgments and arbitral awards

How are judgments of foreign courts enforced? Is your jurisdiction party to the 1958 New York Convention?

As regards judgments obtained in English courts (as well as the courts of many other common law jurisdictions, including Scotland, Hong Kong and Australia), Bermuda’s Judgments (Reciprocal Enforcement) Act 1958 (the Reciprocal Enforcement Act) provides for the registration and enforcement of judgments by the Bermuda Court. For such foreign judgment to be registered and enforced in Bermuda, it must satisfy various criteria, including that it be final and conclusive as between the parties thereto and that it be given by a superior court of the relevant jurisdiction.

Judgments obtained in the United States must be enforced at common law rather than under the Reciprocal Enforcement Act. 
Bermuda is a party to the New York Convention, which was extended to Bermuda by the United Kingdom in November 1979. The legislative provisions contained within the Bermuda International Conciliation and Arbitration Act 1993 give effect to the New York Convention in Bermuda. The Convention requires the courts of a contracting state to give effect to private agreements to arbitrate and to recognise and enforce arbitration awards made by a territory of another contracting state (reciprocity).

Taxes and payment restrictions


What taxes may apply to aviation-related lease payments, loan repayments and transfers of aircraft? How may tax liability be lawfully minimised?

Bermuda currently has no form of income, corporate or capital gains tax and no estate duty, inheritance tax or gift tax.

Additionally, if the registrant is a Bermuda incorporated company, Bermuda exempted companies (as well as exempted limited partnerships and exempted trusts) are entitled to obtain a tax assurance exempting the entity from the effects of any changes to the Bermuda tax regime until 31 March 2035 (with this date likely to be extended at the applicable time).

Exchange control

Are there any restrictions on international payments and exchange controls in effect in your jurisdiction?

Bermuda has exchange controls, which apply to residents in respect of the Bermudian dollar pursuant to the Exchange Control Act 1972 and the Exchange Control Regulations 1973. Exempted companies are considered to be non-resident for exchange control purposes, so there are no controls on their freedom to make transfers and carry out transactions in all other currencies.

Default interest

Are there any limitations on the amount of default interest that can be charged on lease or loan payments?

Arrangements that provide for a penal rate of interest may be unenforceable under English common law principles, which are of persuasive, if not binding, authority before the courts of Bermuda.

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?

Aircraft registered on the Bermuda Aircraft Register are almost invariably located and operated outside Bermuda.

Were an aircraft to be imported into Bermuda, it would be subject to Bermuda import duty.

Insurance and reinsurance

Captive insurance

Summarise any captive insurance regime in your jurisdiction as applicable to aviation.

Bermuda is the largest jurisdiction for captive insurance, with captive insurance companies regulated by the Bermuda Monetary Authority.

In relation to aircraft insurance, apart from when the relevant aircraft is ‘ordinarily based’ in Bermuda, Bermuda insurance legislation does not apply and it is typically the case that insurance is placed in the principal aviation insurance centres of London and New York.

Cut-through clauses

Are cut-through clauses under the insurance and reinsurance documentation legally effective?

There are no statutory provisions in relation to such clauses in Bermuda. The position under Bermuda law will reflect English common law principles, which are of persuasive, if not binding, effect before the courts of Bermuda.


Are assignments of reinsurance (by domestic or captive insurers) legally effective? Are assignments of reinsurance typically provided on aviation leasing and finance transactions?

Subject to the usual enforceability qualifications, such arrangements are effective under Bermuda law and are common in aircraft finance transactions.


Can an owner, lessor or financier be liable for the operation of the aircraft or the activities of the operator?

With respect to an owner, section 76 (4) of the UK Civil Aviation Act 1982 is extended to Bermuda to the effect that loss or damage caused by an aircraft in flight or by a person in, or an article, animal or person falling from, such an aircraft, is transferred to the person to whom the owner has demised, let or hired out the aircraft if the demise, let or hire is for a period of more than 14 days and no crew member is employed by the owner.

In general terms, a lessor or financier would not otherwise be liable solely by operation of Bermuda law.

Strict liability

Does the jurisdiction adopt a regime of strict liability for owners, lessors, financiers or others with no operational interest in the aircraft?

Save as noted in question 33, the owner of the aircraft would be subject to strict liability by virtue of section 40(2) of the UK Civil Aviation Act 1949, extended to Bermuda.

Third-party liability insurance

Are there minimum requirements for the amount of third-party liability cover that must be in place?

There are no specific Bermuda law requirements.

Update and trends

Recent developments

Are there any emerging trends or hot topics in aviation finance and leasing in your jurisdiction?

Bermuda has long been a hub of the securitisation industry. In keeping with this, in recent times 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 Bermuda incorporated special purpose vehicles (often Irish tax resident) (the issuer). The notes issued by the issuer in these transactions are typically then listed - often these listings have been made on the Irish Stock Exchange, but more recently we have seen an increase in ABS listings on the Bermuda Stock Exchange, with its favourable disclosure requirements and listing fee structure.