In 2010 Malta embarked on an ambitious project to introduce the Aircraft Registration Act (the “ARA”) and to accede to the Cape Town Convention and its Aircraft Protocol. A few years later, the growing presence of AOC holders in Malta and the increase in aircraft registered in the National Aircraft Register is testament to the success story of the ARA.

This notwithstanding, there still is and will always be room for improvement, as shown by the recent Act to amend the ARA which became law in October 20161. The improvements affect four broad categories:

  1. General amendments to the ARA;
  2. Insolvency issues;
  3. Enforcement issues; and
  4. Amendments to other laws.

General amendments to the ARA

A number of general amendments were introduced in order to correct a number of inconsistencies or lacunas in the 2010 law and in particular the following:

  • revised definitions of airframes and aircraft engines in order to make the distinction between the two in specific contexts more clear;
  • updating of fees;
  • allowing the registrar in Malta to cancel the registration of an aircraft, if the person who is registering same is no longer a qualified person or is no longer entitled to operate such aircraft under a temporary title; and
  • the possibility to correct any accidental omissions or errors in the text of statutory mortgages which have been registered over the aircraft.

Insolvency Issues

The amending bill to the ARA has also introduced some new rules in the existing insolvency regime for ‘aircraft companies’. Aircraft companies are defined as those companies whose centre of main interest is in Malta and their sole asset is an aircraft or an aircraft engine over a mortgage or an international interest is registered. In such cases the law provides for beneficial procedural treatment for actions enforcing mortgages or international interests. Such holders of mortgages or international interests will receive supportive treatment in that they can act without interference from the insolvency processes and officers until such time as enforcement is complete.

Enforcement Issues

The law has also sought to reinforce the remedies which are available to the mortgagee and has introduced a number of rights which the mortgagee can exercise in the case of an enforcement of a mortgage. Such a right includes that of set-off whereby the mortgagee can acquire the aircraft and set-off the value of the aircraft against the amounts which are due to it. Naturally, should the value of the aircraft exceed the amounts which are due to the mortgagee, then the latter would have to deposit the difference in the courts. Preferred creditors under Maltese law are protected by particular rules in this context. A further remedy is that the mortgagee has the right, should there be an event of default, to take possession of the aircraft and lease or sell the aircraft and any amounts received from such sale or lease will be used to pay any outstanding amounts owed to the mortgagee.

Amendments to Other Laws

Further amendments have also been introduced in other laws as outlined below:

Code of Organisation and Civil Procedure The amendments to the COCP have introduced the possibility for Maltese courts to have jurisdiction in rem not only over aircraft but also aircraft engines, thus catering for situations whereby a claim is made only over the aircraft engine rather than the whole aircraft. In conjunction with this, provisions have also been included in order to allow for the possibility to issue a warrant of arrest over aircraft engines.

Civil Code Also, other amendments were made to the Civil Code whereby a number of provisions in relation to promise of sale and leasing of aircraft and ships where disapplied. The reasoning behind this amendment is that certain provisions under the Civil Code are not compatible with the industry requirements in aviation and shipping and thus the intention of such an amendment is to make sure that any agreements in relation to promise of sale and leases are regulated only by the law chosen in the contracts between the parties.

Interest Rate (Exemption) Regulations Another amendment relates to the Interest Rate (Exemption) Regulations whereby the limits imposed by our law in relation to interest rates for debts and other obligations which are secured by a mortgage or due under a lease of a ship or aircraft or aircraft engine whether registered in Malta or otherwise have been disapplied.

Financial Institutions Act The Financial Institutions Act has also been amended, introducing a licensing exemption for companies involved in the financial leasing of ships, aircraft and aircraft engines. Such entities, when registered in Malta, shall be exempt from licensing requirements if owned and controlled, or are subsidiaries of or exclusively funded by and the relevant financial leasing transaction is exclusively financed by persons or entities as described in Annex II to Directive 2014/65/EU of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments, or persons or entities recognized as eligible counterparties in accordance with article 30 of such Directive.