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27 January 2010
In response to the recommendations of a legal group commissioned by the Ministry for Infrastructure, Transport and Communications, the Maltese government is proposing to ratify and implement the Cape Town Convention on International Interests in Mobile Equipment and the Aircraft Protocol thereto.
The decision was taken on the back of a wider government objective: to mirror the success that Malta has achieved in the maritime sector by building a reputable aircraft registry and attracting foreign aircraft owners and operators to register their aircraft in Malta. Draft legislation has already been produced and a bill entitled the Aircraft Registration Act has been made available for public consultation and is at its final drafting stages.
The intent behind the convention is to facilitate the acquisition and financing of aircraft. It seeks to do this in a number of ways and is credited with five key objectives.
First, it provides for the creation of so-called 'international interests' in aircraft, which essentially are rights that owners, lessors, lessees or financiers have in relation to aircraft and which are recognized in the various contracting states.
Second, the convention establishes an international registry which is fully accessible online. The registry, which is physically located in Ireland, allows rights holders to register publicly their international interests over aircraft, thus giving notice to third parties. Furthermore, registration has the effect of preserving priority over certain unregistered interests and over creditors in general in case of insolvency of the aircraft owner or operator.
Third, the convention seeks to provide creditors with a range of remedies for enforcement of their rights or interests over aircraft, including means for speedy interim relief, at times without the need for judicial intervention.
More generally, the convention's fourth and fifth objectives are to ensure that the particular needs of the aircraft finance sector are met, and to afford financiers and creditors in the aviation market greater confidence when granting credit. In practice, this has also had the effect of making credit cheaper to obtain, thus benefiting borrowers, be they aircraft owners or operators.
Undoubtedly, therefore, ratification of the convention will go some way towards making Malta a more attractive jurisdiction for aircraft registration. To date, Ireland is the European leader as far as aircraft registration is concerned, with more than 1,100 aircraft on its books. Ireland has been a member of the convention since it came into effect on March 1 2006 and was the first European country to ratify it. Since then, the only other European countries to ratify the convention have been Albania and Luxembourg (in February and October 2008, respectively). In August 2009 the European Union also 'ratified' the convention as a "regional economic integration organisation" in accordance with Article 48 of the convention itself, but the European Union's power to bind member states is limited only to certain aspects covered by the convention. Accordingly, in order to give fuller effect to the convention, individual member states must ratify the convention separately.
This is where things become interesting. Assuming that the convention is ratified soon, as is the government's intention, Malta will be the first EU member state to accede to the convention since the European Union's ratification. It will be only the fourth country in Europe to have done so. Malta already offers an attractive package to foreign investors and has positioned itself as a preferred jurisdiction for the holding of assets and investments. Malta's favourable characteristics include:
The ingredients are right and possibly, as the world seems to be making its way out of the financial crisis and prospects for 2010 are looking good, so is the timing.
However, the new aircraft registration law and ratification of the Cape Town Convention alone will not necessarily suffice. Additional fiscal incentives mirroring those available to shipping companies should be considered and, if appropriate, implemented together with the proposed legislative changes. Furthermore, on a more practical or logistical level, the establishment of the aircraft registry, which is currently housed within the Department of Civil Aviation's premises in Luqa, will require additional resources and space - perhaps even a total relocation. The effort and investment are justified because the potential for success in making Malta a centre for aircraft registration is real.
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