Words by Matthew Stocker
Tell us a bit about the jurisdiction
The Cayman Islands has long been a leading jurisdiction for aviation transactions in both the commercial and the corporate jet sectors. Among the reasons for this are: the Cayman Islands’ tax-neutral status; its political stability; the developed, English-based legal system; supporting infrastructure and high-quality service providers; the flexible and commercial nature of its legislation; and its adherence to international standards of compliance and other matters.
As an overseas territory of the United Kingdom, the registration of aircraft in the Cayman Islands is governed by the UK Air Navigation Order (Overseas Territories) Order 2013, as amended (the ANOTO). Air Safety Support International, a wholly-owned subsidiary company of the UK Civil Aviation Authority, is the regulatory body for aviation matters in the UK’s overseas territories.
Most matters relating to aviation in the Cayman Islands are dealt with by the Civil Aviation Authority of the Cayman Islands (CAACI). The CAACI’s remit is primarily that conferred by the ANOTO. Thus, the CAACI deals with all matters relating to:
- The licensing, certification and regulation of aircraft, flight crew and aerodromes
- Air-navigation services and aviation security in the Cayman Islands
- The economic regulation of air transport and the development of air services
- Ensuring that civil aviation in Cayman conforms to the standards of the International Civil Aviation Organisation (ICAO).
The CAACI is subject to the Overseas Territories Aviation Requirements (OTARs), which are similar to those of the European Aviation Safety Agency, the FAA and Transport Canada, and based on ICAO standards.
The CAACI is ranked as a Category 1 Aviation Regulatory Authority by the US Federal Aviation Administration.
The Convention on International Interests in Mobile Equipment and the associated Aircraft Equipment Protocol (together, the Cape Town Convention) came into force in the Cayman Islands on 1 November 2015. Additionally, the Cayman Islands is a signatory to and has ratified the Convention on International Civil Aviation (the Chicago Convention) through the UK.
Is there a weight restriction?
It is the CAACI’s policy to only accept aircraft of a Certified Maximum Take-Off Weight (MTOW) exceeding 12,500lbs/5,700kg for registration on the Cayman Islands Aircraft Register maintained by the CAACI. Exceptions are considered on a case-by-case basis with respect to modern light turbojet, turboprop aircraft and helicopters based on Cayman Islands-registered yachts, and where the CAACI is satisfied that the operational base of the aircraft is to be the Cayman Islands.
Which aircraft type certificates are accepted?
The CAACI accepts aircraft with Type Certificates issued by the FAA, Transport Canada, JAA and EASA.
Is there an age restriction?
There is no set age restriction. However, for aircraft manufactured in or before 1990, prospective registrants should make an initial inquiry with the CAACI as to the suitability of the aircraft for inclusion on the Cayman Islands Aircraft Register. Each aircraft will be considered on a case-by-case basis.
Are there nationality requirements?
Persons wishing to register an aircraft must first prove eligibility to hold a legal or beneficial interest by way of ownership or charter by demise in an aircraft registered in Cayman (or a share therein). The requirements for registration of aircraft are set out in the ANOTO, which includes the criteria for persons qualified to hold a legal or beneficial interest by way of ownership or by charter by demise in an aircraft to be registered. Such qualified persons are:
- The Crown in right of the UK or the Cayman government
- UK nationals
- Commonwealth (including Cayman Islands) citizens
- Nationals of any European Economic Area (EEA) state
- Bodies incorporated in any part of the Commonwealth (including Cayman Islands) and which have their registered office or principal place of business in any part of the Commonwealth (including Cayman Islands)
- Undertakings formed in accordance with the law of an EEA state and which have their registered office, central administration or principal place of business within the EEA.
What are the typical structures used?
The registrant will typically, therefore, be a Cayman Islands exempted company incorporated with limited liability. Companies incorporated elsewhere in the Commonwealth, for example in the British Virgin Islands, are also commonly used.
Cayman Islands exempted companies are popular for these purposes for the following principal reasons:
- The establishment and maintenance of a Cayman exempted company is straightforward, quick and cost-competitive. The company is incorporated on a same-day basis and the certificate of incorporation may be obtained overnight
- The Cayman Islands is a tax-neutral jurisdiction and, as such, no direct taxes or withholdings are payable under Cayman Islands law with respect to the company. In addition, a Cayman-exempted company may obtain an undertaking as to tax concessions issued by the Governor-in-Council of the Cayman Islands, which guarantees an exemption from any changes to the zero-tax regime in the Cayman Islands for a period of 20 years from the date of the undertaking
- There are no minimum capital requirements for a Cayman-exempted company under the laws of the Cayman Islands (save in the case of certain regulated entities), although there must be at least one share in issue at all times
- There is no Cayman law requirement to have locally resident directors or other officers or to hold shareholder or director meetings physically in Cayman. A Cayman-exempted company must, though, maintain a registered office in the Cayman Islands and keep certain corporate records and registers at such registered office
- There is no statutory requirement to prepare annual accounts or to file accounts in the Cayman Islands. The SPV will be required to keep such books of account that give a true and correct view of its affairs
- The Cayman AML/KYC regime complies with international standards and will, therefore, be familiar to most transaction parties.
The registrant is often established as a special purpose vehicle, the sole activities of which will be to finance (if applicable), own and operate the aircraft. Additionally, it is frequently the case that the owner entity will enter into leasing arrangements or operator/management agreement with an approved professional operator/MRO.
Is there a requirement to have local directors of shareholders?
No specific requirement for this.
Do you need to have a local office or physical presence?
No specific requirement for this, save that, as noted above, a Cayman-exempted company must maintain a registered office in the Cayman Islands and keep certain corporate records and registers at such registered office.
What continuing requirements are there to keep an aircraft registered?
The certificate of airworthiness must be renewed on an annual basis. The registered owner of the aircraft is also required to inform the CAACI of any change in information submitted at the time of registration of the aircraft.
Inspections and CoAs
Which of the following are possible?
Private use – the majority of aircraft registered on the Cayman Islands Aircraft Register are registered in the private category. Aircraft operated in the private category must not be used, in whole or in part, for commercial operations, ie for ‘hire or reward’.
Commercial air transport/aircraft charter:
Commercial-use aircraft may be registered where they are to be operated under a Cayman Islands Air Operator’s Certificate or in a jurisdiction with which the Cayman Islands has an agreement under Article 83 bis of the Chicago Convention. Under Article 83 bis agreements, certain functions and duties normally carried out by a state registry are transferred to an operator’s state, albeit that the CAACI retains airworthiness oversight. The Cayman Islands currently has an Article 83 bis agreement with Saudi Arabia.
What are the requirements for a Certificate of Airworthiness?
The initial issue and annual renewal of a Certificate of Airworthiness requires that the aircraft undergo a survey by a surveyor authorised by the CAACI. Once the CAACI is satisfied as to the foregoing due diligence requirements, the applicant may request that an airworthiness survey be scheduled and nominate a Technical Coordinator. The Technical Coordinator must be approved by the CAACI and will work with the CAACI surveyor to complete the technical inspection of the aircraft. Upon the surveyors being satisfied that all airworthiness requirements (including as to the aircraft’s maintenance schedule, flight operations, aircrew validations, maintenance authorisation and radio licensing) have been met, a recommendation will be made for the issue of a Certificate of Airworthiness and all other associated aircraft documents.
What is the inspection interval for a Certificate of Airworthiness?
This is an annual requirement.
What operation requirements are there?
The CAACI must be satisfied that flight operations will be conducted in a manner consistent with internationally-recognised safety standards and recommended practices.
Registration costs and service: Are aircraft registered in the name of the aircraft operator or the aircraft owner?
The Cayman Islands Aircraft Register is not an owner registry – the registrant may be the owner of the aircraft or may be a charterer by demise, and must in any event fall within one of the categories of qualifying persons described above.
What is the initial cost to register an aircraft? The principal registration fees are:
- Certificate of Registration – CI$500 (US$600)
- Registration Mark – CI$500 (US$600)
- Certificate of Airworthiness – CI$200 (US$240) per 500kg of maximum take-off weight (MTOW)
- Due Diligence – CI$250 (US$300) per hour
- Radio Licence fee – CI$98 (US$120).
What are the annual costs for aircraft registration?
The costs of the renewal of the Certificate of Airworthiness are calculated by reference to a sliding scale based on aircraft MTOW.
What is the average time needed to register an aircraft?
The average time to effect a registration of an aircraft in the Cayman Islands is four to six weeks, although it is possible to fast-track applications in certain circumstances.
How much does it cost to register a mortgage?
Mortgage registration fees are calculated on a sliding scale with respect to the amount secured, with fees capped at CI$5,000 (approximately US$6,000) for mortgages securing an amount greater than US$20 million.
Is there a cost to register a priority notice?
Mortgage priority notice fees are CI$250 (approximately US$300) per notice.
Does the registry/aviation authority require a notarised/authenticated document to register an aircraft?
As part of the registration process, the CAACI will conduct financial and legal due diligence on the registration applicant and look through the corporate structure up to the ultimate beneficial owner of the aircraft (the Beneficial Owner). In connection with this, the CAACI will typically require:
- Notarised or certified-true copies of the certificate of incorporation and memorandum and articles (or equivalent) of the applicant
- A certificate of good standing in respect of the applicant
- A notarised or certified-true copy the register of directors and register of members (or equivalent documents) of the applicant
- Notarised or certified-true copies of the passport photos of the directors (or equivalent) of the applicant
- A transparent overview of the business of the Beneficial Owner
- A notarised or certified-true copy of the passport of the Beneficial Owner.
Has the jurisdiction ratified the Cape Town Convention?
Yes, as noted above.
What date did it come into effect?
1 November 2015.
Which Cape Town declarations have been made?
The Cayman Islands made its own declarations under the Cape Town Convention, including the adoption of Alternative A, which is one of the conditions required to comply with the Organisation for Economic Cooperation and Development’s Aircraft Sector Understanding to obtain a discount on export credit financing.
Financing and de-registration
Is there a requirement for a governing law of mortgage?
The mortgage itself need not be governed by Cayman Islands law (it is often English law- or New York law-governed).
There is no statutory format with which the mortgage must comply.
Where the relevant mortgage is to be registered as an international interest at the International Registry under the Cape Town Convention, then such a mortgage must be in such form as to constitute an international interest under the Cape Town Convention.
What is most common choice of law for financings?
It is often English law- or New York law-governed.
Can financiers file a priority notice of their interests?
Registration of the mortgage cannot take effect until the aircraft is registered, but the mortgagee may secure its interest prior to registration of the aircraft by submitting a priority notice to the CAACI.
This priority notice will ensure that, for a period of 14 days (which is capable of renewal) from the date of filing the priority notice, any mortgage referred to in the priority notice will have priority over any other mortgage registered (or with respect to which a priority notice is filed) subsequently to the filing of that priority notice. Upon registration of the relevant mortgage, the priority of such mortgage will be deemed to run from the date of filing of the priority notice.
The priority notice is a simple form, similar to the mortgage-registration form, and must be accompanied by the applicable nominal priority registration fee.
Can financiers file a Deregistration Power of Attorney/Irrevocable Deregistration Power of Attorney (IDERA)?
A deregistration power of attorney can be filed with the CAACI pursuant to which the registered owner appoints a third party (typically the mortgagee) as its attorney-in-fact with relevant powers including the authority to cancel the registration or amend the registered particulars with respect to the aircraft. Further, an IDERA may be filed with the CAACI pursuant to the Cape Town Convention.
Is there a public mortgage registry?
With respect to a mortgage over an aircraft registered on the Cayman Aircraft Register, as mentioned above, it is possible to register such a mortgage on the Cayman Aircraft Mortgage Register under the Mortgaging of Aircraft Regulations, 2015 and with the International Registry under the Cape Town Convention.
Is it easy for financiers to perfect a mortgage?
The aforementioned registrations will go to priority but not to issues of perfection/validity.
The procedure to effect registration of a mortgage on the Cayman aircraft Mortgage Register is straightforward. The mortgagee must provide the CAACI with a short registration form summarising the principal points of the mortgage (ie date, aircraft description, mortgagor details and confirmation of sum secured). The registration form, signed by or on behalf of the mortgagee, must be submitted to the CAACI together with a copy of the mortgage certified by the applicant to be a true and correct copy (the original mortgage instrument need not be provided to the CAACI and, indeed, it is advisable that the original mortgage not be brought to the Cayman Islands to avoid the possibility of triggering a liability to Cayman Islands stamp duty).
The mortgage registration fee should also be submitted upon registration, which fee is calculated on an ad valorem basis depending on the sum secured, up to a maximum amount (at current rates) of approximately US$6,000.
Upon registration, the CAACI will issue a notification of registration, which is generally available on the date of registration. The notification, inter alia, states the date and time of registration and whether it is the first or a subsequently registered mortgage with respect to the relevant aircraft.
Where the mortgage or other relevant security interest constitutes an international interest under the Cape Town Convention, then such international interest may also (or instead) be registered at the International Registry pursuant to the Cape Town Convention.
Subject to the effects of registration under the Cape Town Convention (see below), a Cayman-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), or 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 9 October 1979 would have priority over a subsequently registered mortgage.
Additionally, under the Mortgaging of Aircraft Regulations, 2015, the effects of registration of international interests at the International Registry are now recognised from the date of coming into effect of the Cape Town Convention in the Cayman Islands (1 November 2015). The priority of pre-existing aircraft mortgages on the Cayman Aircraft Mortgage Register is preserved although, from such date, mortgages registered on the Cayman Aircraft Mortgage Register and as international interests at the International Registry will have their priority determined in accordance with the priority rules set out in the Cape Town Convention, subject, in all cases, to the priority of certain non-consensual rights or interests that will in any event take priority under Cayman Islands law and under the Cape Town Convention as applicable to the Cayman Islands – for example, Cayman government liens for unpaid taxes or charges, repairers’ liens.
What are the requirements for deregistration of an aircraft?
The following items will typically be required to deregister an aircraft from the Cayman Islands Aircraft Register:
- A letter of request to deregister from the registrant addressed to the CAACI
- The return to the CAACI of the original of the certificate of registration for the aircraft endorsed at section III on the back and signed by the registrant of the aircraft
- That any balance on the account for the aircraft is paid in full
- Where the aircraft is mortgaged or subject to any other vested interest, the written consent of the mortgagee/interested party will be required
- Where a Certificate of Airworthiness for Export is required, the relevant party will need to make a request to the CAACI for such a Certificate and to make arrangements for one of the CAACI surveyors to inspect the aircraft
- Payment of the CAACI’s deregistration fee of CI$500.00 (approximately US$600).
If an IDERA has been filed in respect of an aircraft then the CAACI is required to deregister that aircraft following a request from the person designated in the IDERA.
What are the requirements for deregistration of mortgage?
To deregister a mortgage from the Cayman Islands Aircraft Mortgage Register, the CAACI will require the submission to the following items:
- A standard discharge-of-mortgage form
- Documentary evidence that the mortgage debt has been satisfied (usually a copy of the relevant deed of release)
- Evidence of the authority of the signatory on behalf of the mortgagee
- Payment of the mortgage deregistration fee of CI$250 (approximately US$300).
Importing and exporting aircraft
Are there significant taxes or fees involved in importing an aircraft?
Aircraft registered on the Cayman Aircraft Register are almost invariably located and operated outside of the Cayman Islands. Were an aircraft to be imported into Cayman, it would be subject to Cayman Islands import duty.
The Cayman Islands currently has no form of income, corporate or capital gains tax and no estate duty, inheritance tax or gift tax.
Additionally, Cayman Islands exempted companies (as well as exempted limited partnerships, exempted limited liability companies and exempted trusts) are entitled to obtain an undertaking as to tax concessions from the Governor-in-Council of the Cayman Islands exempting such entity from the effects of any changes to the Cayman Islands tax regime for a period of (in the case of an exempted company) 20 years from the date of such undertaking.
Is an Export Certificate of Airworthiness, licence or permit required to export an aircraft?
This depends on the requirements of the jurisdiction to which the aircraft is to be exported.
How much does it cost and how long does it take to get one?
The cost of an Export Certificate of Airworthiness is CI$100 (approximately US$120) per 500kg of MTOW.
Are there significant taxes or fees involved in exporting aircraft?
Judgements and arbitration
Will a court in this country recognise and enforce a judgement rendered by a New York State Court or a US federal judge?
The courts of the Cayman Islands would recognise as a valid judgement, a final and conclusive judgement in personam obtained in such courts under which a sum of money is payable (other than a sum of money payable in respect of multiple damages, taxes or other charges of a like nature or in respect of a fine or other penalty) or, in certain circumstances, an in personam judgement for non-monetary relief, and would give a judgement based thereon provided that: (a) such courts had proper jurisdiction over the parties subject to such judgement, (b) such courts did not contravene the rules of natural justice of the Cayman Islands, (c) such judgement was not obtained by fraud, (d) the enforcement of the judgement would not be contrary to the public policy of the Cayman Islands, (e) no new admissible evidence relevant to the action is submitted prior to the rendering of the judgement by the courts of the Cayman Islands, and (f) there is due compliance with the correct procedures under the laws of the Cayman Islands.
Will a court in your jurisdiction recognise and enforce a judgement rendered by an English court?
Can the government of the country requisition or confiscate an aircraft without needing to pay compensation?
Under Cayman law, detention rights may arise by statute, as result of a breach of contract or where an attachment of an aircraft is sought (eg, for non-payment of a debt or on the liquidation or insolvency of the owning company). Statutory rights of detention include the following:
- Airport charges – aircraft can be detained and sold for non-payment of airport charges; default of payment creates a statutory lien
- Contravention of certain licensing and the air navigation provisions of the Air Navigation (Overseas Territories) Order
- Customs – where anything becomes liable to forfeiture under the Customs Law (2017 revision), any aircraft used for the carriage, handling, deposit or concealment of that thing will also be liable to forfeiture. Forfeiture of an aircraft may also occur where it has been adapted for use or is used for the purposes of smuggling or concealing goods
- Crimes – where a person is convicted of an offence, any property in his or her possession or under his or her control that was used in connection with the offence or intended to be used for that purpose may be forfeited to the Crown by order of the court
- Terrorism – under the Aviation Security and Piracy (Overseas Territories) Order 2000, certain sections of the UK Aviation Security Act 1982 were extended to the Cayman Islands. Under the Terrorism Law (2017 revision), the Cayman courts may make forfeiture orders with respect to any property of a person convicted of financing terrorism which is intended to be, or is suspected of being, used for the purposes of terrorism (this includes aircraft)
- War or national emergency – regulations made under the Emergency Powers Law (2006 Revision) can give powers to the governor of the Cayman Islands to authorise the taking possession or acquisition of any property.
Are there any recent cases where the aviation authority/aircraft registry has refused to honour a request by an owner or lessor to deregister an aircraft?
Not as far as we are aware.
Have there been any recent legislative changes or significant cases that owners or financiers should be aware of?
The principal aviation-specific legislative change in recent times has been the implementation of the Cape Town Convention and related statutory and regulatory amendments (including the Mortgaging of Aircraft Regulations, 2015).
Aside from this, the Special Economic Zone in the Cayman Islands (SEZ) has recently created the Cayman Aviation Services Park to sit alongside the existing Cayman Maritime Services Park established in 2015. The Special Economic Zones (Cayman Enterprise City) (Amendment) Order, 2017, provides that the Cayman Maritime and Aviation Services Park is designed to attract maritime and aviation services businesses to assist in establishing the Cayman Islands as the largest maritime and aviation services cluster in the region. Businesses may set up operations in the Cayman Islands under the SEZ regime and obtain the benefits and concessions provided by the SEZ.
Are any legislation or regulatory changes planned?
Not as far as we are aware