10 Things You Need To Know About… Registering An Aircraft In The Cayman Islands - Aviation

The Cayman Islands is a globally recognised and highly regarded jurisdiction with a market leading aircraft registry in the Civil Aviation Authority of the Cayman Islands (the "CAACI"). The combination of a strong, stable and creditor friendly jurisdiction together with a well-established, highly experienced and client focused aircraft registry makes the Cayman Islands the ideal choice for owners, operators and financiers alike when it comes to registering their aircraft. Here are 10 things you need to know about registering an aircraft in the Cayman Islands.

1. The Cayman Islands is a leading offshore jurisdiction

The Cayman Islands is recognised as a leading international financial centre, combining a stable and trusted legal and political framework with a flexible yet robust corporate regime and creditor friendly laws. Laws are passed by a Legislative Assembly which follows the British parliamentary model and the legal system is based on English common law, with the Privy Council being the ultimate court of appeal. The Cayman Islands has a solid regulatory and compliance regime with measures in place to ensure it meets the highest international standards, particularly in relation to anti-money laundering and anti-corruption requirements. The well-established financial services industry provides airlines, operators and financiers with access to highly experienced local service providers, professionals and financial institutions with a wealth and depth of specialist aviation sector specific knowledge and experience As a tax neutral jurisdiction, there are no direct taxes such as income tax, capital gains or withholding tax imposed by the Cayman Islands Government on the owners or financiers of any Cayman Islands registered aircraft as a result of the financing or registration of the aircraft (although import duties may apply if the aircraft is brought into the Cayman Islands).

2. The Cayman Islands Aircraft Registry is an established and highly regarded international aircraft registry

The CAACI, which maintains the Cayman Islands Aircraft Registry, and the associated aircraft register (the "Cayman Aircraft Register"), is the statutory body with responsibility for the oversight, regulation and supervision of the aviation sector within the Cayman Islands, including the registration of aircraft on the Cayman Aircraft Register. The CAACI operates in accordance with the Air Navigation (Overseas Territories) Order as amended (the "ANOTO"), a United Kingdom statutory instrument which contains the legal framework for aviation in Cayman and for aircraft registered on the Cayman Aircraft Register.

The CAACI's highly experienced staff are able to offer registration and support services on a global basis from their head office in the Cayman Islands, and have access to a network of experienced surveyors and technical representatives across Europe and North America. The CAACI have developed a reputation for providing a responsive, efficient and high quality client focused service to operators, financiers and counterparties.

The CAACI is rated as a Category 1 Aviation Regulatory Authority by the US Federal Aviation Administration (the "FAA"), and applies high standards of safety and airworthiness that are based on the regulatory codes applied by the UK Civil Aviation Authority, the FAA, EASA and Transport Canada. One of the benefits of this is that Cayman Islands registered aircraft flying into or over US airspace will not be subject to certain of the TSA Waiver Authorization requirements, making it much easier for operators to fly into or transit over the US.

3. The Cayman Aircraft Register is primarily a private use register, although commercial aircraft may be accepted in certain circumstances.

The Cayman Aircraft Register is primarily a private use register, and the majority of the aircraft registered with the CAACI are private aircraft not being operated for hire or reward.

The CAACI will not generally accept aircraft that have a certified maximum take-off weight of less than 5,700kg onto the Cayman Aircraft Register, although there are exceptions to this requirement, including for aircraft which are based in the Cayman Islands, for certain modern light turbojet or turboprop aircraft, and for helicopters based on Cayman Islands registered yachts. There is no formal age restriction for Cayman Islands registered aircraft, but before accepting an aircraft onto the Cayman Aircraft Register, the CAACI will consider a number of different factors including the year of manufacture of the aircraft, its operating history and its current state of registration.

In recent years, the CAACI has been successful in opening up the Cayman Aircraft Register to commercially operated aircraft. For example, the CAACI has a longstanding article 83bis arrangement in place with the General Authority of Civil Aviation of Saudi Arabia, enabling registration of a number of Saudi Arabian operated aircraft on the Cayman Aircraft Register. The CAACI has also issued a small number of Cayman Islands air operators certificates ("AOC") to operators wishing to register their commercial aircraft on the Cayman Aircraft Register.

4. The CAACI offers a transition register for lessors and financiers seeking an interim solution in relation to repossessed or returned aircraft

A comparatively recent development is that the CAACI is now able, in certain circumstances, to offer an interim solution to lessors and financiers looking for a suitable jurisdiction in which to temporarily register aircraft that have been repossessed or returned following termination of their leases until they can find a new lessee/purchaser. Under the Air Navigation (Fees) Regulations, 2010, the CAACI has the power to permit the temporary registration of an aircraft on the Cayman Aircraft Register for the convenience of an owner desiring to store or sell the aircraft, for a limited period and for a fee to be agreed between the CAACI and the owner.

The CAACI's Transition Register offers lessors and financiers the opportunity to register their aircraft with a reputable and high quality registry that provides a high level of oversight and access to experienced surveyors. In order to avail themselves of this temporary title registration, the lessor/financier will need to fall within one of the categories of person qualified to own a Cayman Islands registered aircraft under the ANOTO and the aircraft will need to meet the CAACI's registration criteria. The CAACI is, however, able to offer expedited services to lessors seeking to avail themselves of a temporary title registration in certain circumstances.

5. Applications for registration of an aircraft on the Cayman Aircraft Register are accepted from a broad range of owners

In order to register an aircraft on the Cayman Aircraft Register, the registered owner must fall within one of the approved categories of persons qualified to own an aircraft as set out in the ANOTO.

Categories include:

The Crown in right of Her Majesty's Government in the United Kingdom or in right of the Government of the Territory (Cayman Islands);
United Kingdom nationals;
Commonwealth citizens (which includes citizens of the Cayman Islands);
Nationals of any European Economic Area State;
Bodies incorporated in any part of the Commonwealth and which have their registered office or principal place of business in any part of the Commonwealth (which would include companies incorporated in the Cayman Islands, the BVI or Bermuda); or
Undertakings formed in accordance with the law of a European Economic Area State and which have their registered office, central administration or principal place of business within the European Economic Area.

Where the owner of the aircraft does not meet any of the qualifications set out above, it would be possible to establish a Cayman Islands exempted company and transfer title of the aircraft to that newly formed company prior to registration.

6. The CAACI offers a streamlined and straightforward registration process through its VP-C Online portal

The CAACI uses an online portal, VP-C Online, to process applications for the registration of aircraft. This is intended to simplify and streamline the application process as far as possible.

The CAACI will first complete their due diligence checks on the owner before they can accept an aircraft onto the Cayman Aircraft Register. The application is submitted through the VP-C Online portal together with copies of any supporting documents. Once the CAACI has confirmed that all the documentation is in order, an airworthiness survey will need to be scheduled with one of the CAACI's surveyors, and following completion of a successful survey and payment of the registration fee, a certificate of airworthiness will be issued. The owner can then deregister the aircraft from its existing state of registry (if relevant) and the CAACI will register the aircraft on the Cayman Aircraft Register and issue a Cayman Islands Certificate of Registration in respect of the aircraft.

If a specific registration mark is required, provided the mark is available, it is possible to reserve this as part of the registration process. Registration marks for Cayman Islands aircraft are 5 letters starting with the designation "VP-C" (i.e. VP-Cxx).

7. Lessees/operators can register the aircraft with the CAACI as a Charterer by Demise

Where the lessee/operator of the aircraft is eligible to do so, and meets the requirements for a qualified person under the ANOTO, they may register the aircraft in their capacity as charterer by demise of the aircraft. The registration process is broadly the same as for a standard registration, although certain additional documentation, such as a copy of the relevant lease evidencing the right to operate the aircraft, will be required.

8. The Cayman Islands is a Cape Town contracting jurisdiction

Following the ratification by the UK government of the Convention on International Interests in Mobile Equipment and the associated protocol on matters specific to aircraft equipment (together the "Cape Town Convention"), and its subsequent extension to the Cayman Islands on 1 November 2015, the Cayman Islands is now recognised as a territorial unit of a contracting state for the purposes of the Cape Town Convention.

This means that where a Cayman Islands registered aircraft meets the applicable size and power requirements to qualify as an "aircraft object" under the Cape Town Convention, any "international interest" (as such term is defined in the Cape Town Convention) will be capable of registration on the international registry established pursuant to the Cape Town Convention (the "International Registry"). As a result, creditors involved in financing an eligible Cayman Islands registered aircraft now have the additional comfort of knowing they can protect their security interests in that aircraft by making a filing in respect of any validly created and existing international interest with the International Registry.

9. The Cayman Islands offers financiers a creditor friendly regime in which to take security over an aircraft

One distinct advantage for financiers in relation to aircraft registered on the Cayman Aircraft Register is that the Cayman Islands offers the opportunity to take a registered security interest over the aircraft in a strong, stable and creditor friendly jurisdiction.

It is possible for a financier to register a mortgage over a Cayman Islands registered aircraft with the CAACI. Following the ratification by the UK of the Cape Town Convention, and its extension to the Cayman Islands, the Cayman Islands now have a dual system for perfection and priority of security interests over Cayman Islands registered aircraft. This means that:

Where the aircraft is of a type that would qualify as an aircraft object under the Cape Town Convention and there is a valid "international interest" created in respect of the aircraft, then that international interest will be registrable on the international registry in accordance with the provisions of the Cape Town Convention. In that case, priority in respect of the security interest will be determined solely by reference to the filings on the international registry. No additional filings are required with the CAACI in order to perfect or secure priority in respect of the security interest, and although it would still be possible for a mortgage to be separately registered with the CAACI in respect of that aircraft, any mortgage constituting an international interest validly recorded with the international registry over a Cayman Islands registered aircraft would automatically take priority over the local Cayman Islands mortgage registration; and
Where the Cape Town Convention would not apply to the aircraft (for example because the aircraft does not meet the minimum thrust/weight requirements), a separate local mortgage registration will be required with the CAACI, and priority of the aircraft mortgage will be determined by the date and time of registration of the mortgage on the Aircraft Mortgage Register maintained by the CAACI.

There is no prescribed form which a mortgage over a Cayman Islands registered aircraft must take, and no requirement that it is governed by Cayman Islands law. Typically, the security interest over the aircraft will be created by a mortgage document governed by either an English or New York law, and this will generally be recognised and upheld by a Cayman Islands court.

10. Cayman Maritime & Aviation City offers a streamlined solution for owners and operators seeking to establish a physical presence in the Cayman Islands

The CAACI has worked closely with Cayman Enterprise City, the administrator of the Cayman Islands special economic zone (the "SEZ"), to establish Cayman Maritime & Aviation City. This is a new park within the SEZ focused on providing businesses in the shipping and aviation sectors with a streamlined, cost efficient approach to establishing a physical presence within the Cayman Islands, enabling them to take advantage of the many benefits of relocating some or all of their operations and staff to the Cayman Islands.

Cayman Maritime & Aviation City is a particularly helpful option for owners and operators seeking to obtain a Cayman Islands AOC who need to establish a physical presence within the Cayman Islands for the purpose of meeting the requirements of the AOC.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Cayman Islands: 10 Things You Need To Know About… Registering An Aircraft In The Cayman Islands