Recent amendments to the Civil Code concerning contracts of lease have bolstered the rights of lessors of aircraft such that they are now not materially different to those granted to the holders of security interests in terms of the Cape Town Convention. Aircraft leases are now akin to security interests and grant important rights and remedies to lessors and financiers. The changes better reflect the commercial realities underlying the aircraft lease relationship and should continue to improve Malta's legislative framework in this area.
While the rights of third-party owners of installed engines were recognised prior to amendments introduced in 2016, the protection of those rights was subject to serious procedural limitations which came to light in several related cases. Following the decisions in these cases, the law was amended so that it is now provided that the court seized with the acts of a warrant of arrest of an aircraft will also be competent to hear an application by the owner of an installed engine which does not belong to the aircraft owner.
Over the last few years, the government has sought to promote the development of the aviation sector through the introduction of legal and administrative infrastructure modelled on the common law system and international conventions, including the adoption of the Cape Town Convention, the creation of a dynamic aircraft and mortgage register and the introduction of comprehensive laws on trust.
The Aircraft Registration Act revamped the Maltese aviation regime, introducing tax incentives and other measures to increase competitiveness within the Maltese aviation sector. Among other things, it created interesting tax-planning opportunities, which can be availed of to ensure that income derived by non-residents from leasing aircraft or aircraft engines to Maltese-resident lessees is not subject to Maltese income tax.
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. Ratification of the convention will go some way towards making Malta a more attractive jurisdiction for aircraft registration.
Emulating the success of its Shipping Register, Malta is committed to establishing itself as a leading jurisdiction for aircraft registration. Plans were recently announced to reform the local regulatory framework and develop the registration of aircraft into a niche sector, with the potential of spearheading the creation of a cluster of aviation services.