1.1 Please list and briefly describe the principal legislation and regulatory bodies which apply to and/ or regulate aviation in your jurisdiction.
The Cayman Islands are a British Overseas Territory. The Secretary of State of the United Kingdom government takes lead responsibility for ensuring that the Cayman Islands (and other overseas territories) comply with the obligations of the Chicago Convention. The Civil Aviation Authority of the United Kingdom has established a subsidiary company, Air Safety Support International ("ASSI"), to oversee, support and promote aviation safety regulation in its overseas territories, including the Cayman Islands. ASSI is responsible for supporting the UK's overseas territories in all aspects of aviation safety regulation.
The Civil Aviation Authority of the Cayman Islands
The Civil Aviation Authority of the Cayman Islands (the "CAACI") is the body responsible in the Cayman Islands for ensuring that civil aviation in the Cayman Islands conforms to the standards of the International Civil Aviation Organization ("ICAO").
The CAACI's functions include the following:
- the regulatory oversight of the aviation industry throughout the Cayman Islands;
- the certification and licensing of aerodromes, heliports and air transportation services;
- registration of aircraft (including maintenance of the Cayman Islands Aircraft Register (the "Aircraft Register") and the issuance, renewal, cancellation, revocation and variation of certificates of airworthiness of aircraft;
- the validation of crew and maintenance personnel licences;
- the safety oversight of Cayman Islands Air Operator Certificate ("AOC") holders;
- the issuance of air transport permits and operating licences for foreign registered scheduled and non-scheduled carriers operating in the Cayman Islands;
- the regulation of charges levied by airport operators;
- acting as liaison between the Government of the Cayman Islands and the UK Department for Transport; and
- regulation of air traffic.
It should be noted that the aircraft register maintained by the CAACI (the "Aircraft Register") is primarily for aircraft undertaking private use operations and aircraft registered on the Aircraft Register must not be used for commercial operations (i.e. for hire or reward) unless an AOC is obtained or the aircraft falls within an Article 83 bis agreement.
The principal legislation which applies to and regulates aviation in the Cayman Islands is the Air Navigation (Overseas Territories) Order 2013 ("ANOTO").
Other notable legislation pertaining to the aviation industry is as follows:
- Air Navigation (Fees) Regulations, 2010.
- Air Navigation (Overseas Territories) (Amendment) (No. 2) Order, 2014.
- Air Navigation (Overseas Territories) (Amendment) Order, 2014.
- Air Navigation (Overseas Territories) (Amendment) Order, 2015.
- Air Transport (Licensing of Air Services) Regulations, 1977.
- Aircraft (Landing and Parking Fees) Regulations (1995 Revision).
- Airport Regulations (1995 Revision).
- Airports Authority Law (2005 Revision).
- Civil Aviation Act 1949 (Overseas Territories) Order 1969 SI No. 592 of 1969.
- Civil Aviation Act 1982 (Overseas Territories) (No. 2) Order 2001 SI No. 3367 of 2001.
- Civil Aviation Act 1982 (Overseas Territories) Order 2001 SI No. 1452 of 2001.
- Civil Aviation Authority Law (2015 Revision).
- Civil Aviation (Investigation of Air Accidents and Incidents) Regulations, 2016.
- Mortgaging of Aircraft Order, 1972.
- Mortgaging of Aircraft Regulations, 2015.
The Overseas Territories Aviation Requirements ("OTARs") provide guidance to the aviation industry in the Cayman Islands (and other UK overseas territories) on the effective implementation of the standards and recommended practices under the Chicago Convention and the ANOTO.
1.2 What are the steps which air carriers need to take in order to obtain an operating licence?
Application for an AOC must be made to the CAACI as the competent authority in the Cayman Islands with responsibility for issuing an operator's licences.
The operation of aircraft on a foreign air operator's certificate is permitted, however, the grant of air transport permits and operating licences by the CAACI will be required for foreign registered scheduled and non-scheduled carriers to operate in the Cayman Islands. There are minimum requirements that must be met for non-scheduled/charter air transport operations to the jurisdiction as well as scheduled/charter air transport operations to the jurisdiction together with payment of the applicable fees. In addition, companies that supply more than one-off ad hoc charters or who provide air ambulance services can be issued with either a blanket permit or verification letter.
1.3 What are the principal pieces of legislation in your jurisdiction which govern air safety, and who administers air safety?
The principal legislation in the Cayman Islands that governs air safety is the ANOTO. The CAACI is responsible for administering air safety in the jurisdiction under the provisions of ANOTO and the Civil Aviation Authority Law (2015 Revision).
1.4 Is air safety regulated separately for commercial, cargo and private carriers?
The CAACI regulates all aspects of safety in the aviation industry.
1.5 Are air charters regulated separately for commercial, cargo and private carriers?
Air charters are not regulated separately for commercial, cargo and private charters.
1.6 As regards international air carriers operating in your jurisdiction, are there any particular limitations to be aware of, in particular when compared with 'domestic' or local operators? By way of example only, restrictions and taxes which apply to international but not domestic carriers.
The Airports Authority Law (2005 Revision) provides that one of the functions of the Airports Authority is to ensure airports in the Cayman Islands conform to the standards and recommended practices of ICAO.
Pursuant to Article 135 of ANOTO, all foreign registered aircraft operating into the Cayman Islands for valuable consideration are required to be licensed to do so by the CAACI.
1.7 Are airports state or privately owned?
Airports in the Cayman Islands are state-owned.
1.8 Do the airports impose requirements on carriers flying to and from the airports in your jurisdiction?
Airports in the Cayman Islands prescribe and regulate conditions of use, as well as charges. Users of airports are subject to charges, which are regulated by the Cayman Islands Airports Authority under the Airport Regulations (1995 Revision), the Airports (Security Tax) Regulations (2016 Revision), the Airports Authority (Charges) Regulations, 2008 and the Airports Authority Law (2005 Revision).
1.9 What legislative and/or regulatory regime applies to air accidents? For example, are there any particular rules, regulations, systems and procedures in place which need to be adhered to?
There are extensive laws, regulations and guidelines that regulate the reporting and investigation of accidents and incidents that are applicable in the Cayman Islands. These include the following:
- ICAO Annex 13 Aircraft Accident and Incident Investigation.
- The Civil Aviation Act 1982 (Overseas Territories) Order 2001 – Article 75.
- Memorandum of Understanding between the Governor and the UKAAIB 2006.
- Civil Aviation (Investigation of Air Accidents and Incidents) Regulations, 2016.
- Air Navigation (Overseas Territories) Order 2013 – Articles 5, 7, 174, 175.
- Overseas Territories Aviation Requirement (OTAR) Part 13 Occurrence Reporting (OTAR 13 Issue 4 dated April 2012).
- Overseas Territories Aviation Circular (OTAC) 13-1 Occurrence Reporting (OTAC 31-1 Issue 4 dated July 2015).
The Manual of Aircraft Accident and Incident Reporting – Part I and Part II issued by the CAACI sets out in detail a summary of the legislation, regulations and guidelines relating to aircraft accident and incident reporting.
The Civil Aviation (Investigation of Air Accidents and Incidents) Regulations, 2016 provide for the Governor of the Cayman Islands to, amongst other things, appoint a chief investigator to carry out investigations into accidents involving aircraft involved in civil aviation. Accidents, Serious Incidents and Incidents (each as defined in ICAO Annex 13 Aircraft Accident and Incident Investigation) are required to be reported and investigated.
1.10 Have there been any recent cases of note or other notable developments in your jurisdiction involving air operators and/or airports?
We are not aware of any cases dealing specifically with air operators and/or airports.
2 AIRCRAFT TRADING, FINANCE AND LEASING
2.1 Does registration of ownership in the aircraft register constitute proof of ownership?
The registration of title to an aircraft on the Aircraft Register maintained by the CAACI constitutes proof of title to the aircraft. However, such evidence is not conclusive.
2.2 Is there a register of aircraft mortgages and charges? Broadly speaking, what are the rules around the operation of this register?
The CAACI maintains an aircraft mortgage register (the "Mortgage Register") in accordance with the Mortgaging of Aircraft Regulations, 1979 (the "Mortgaging Regulations"), thereby offering a system for obtaining the priority and perfection of security interests over aircraft. Registration on the Mortgage Register constitutes express notice to all persons of all facts appearing on the Mortgage Register.
The Cape Town Convention came into force in the Cayman Islands on 1 November 2015 pursuant to the International Interests in Mobile Equipment (Cape Town Convention) Law 2015 (the "Cape Town Law"). As a result, there exists a dual system for perfection and priority of security over Cayman Islands registered aircraft for entities that qualify as follows:
- where there is a registerable 'international interest' under the Cape Town Convention (as defined in the Cape Town Law), any such international interest in respect of an aircraft may be recorded on the international registration facilities established under the Cape Town Convention (the "International Registry") for aircraft that meets the requirements under the Cape Town Convention. In circumstances where an international interest has been registered against an aircraft that is registered with the CAACI in accordance with the Cape Town Convention, priority of a mortgage over that aircraft will be determined solely by the filings on the International Registry. No additional registrations are required with the CAACI in relation to a mortgage over such aircraft; or
- if the Cape Town Convention does not apply, then the priority of a registered mortgage against the particular Cayman Islands registered aircraft will be determined in accordance with registration on the Mortgage Register pursuant to the Mortgaging Regulations.
It is also possible to file a priority notice with the CAACI by filing the applicable documentation and paying the applicable fee. If the relevant mortgage is filed within 14 days of the date of such a priority notice, it will be deemed to have priority from the time when the priority notice was registered.
2.3 Are there any particular regulatory requirements which a lessor or a financier needs to be aware of as regards aircraft operation?
As mentioned in question 1.1, the Aircraft Register is primarily for aircraft undertaking private use operations and a separate air operator's certificate must be obtained before undertaking commercial operations.
Taking physical possession of the aircraft is permitted under Cayman Islands law. Cayman Islands law recognises self-help remedies in the context of security interests in aircraft (often over the shares of the aircraft owning vehicle) without the need to obtain a court order (subject to any liens and other statutory detention or retention rights of third parties); however, it is open to the relevant enforcing party to seek a court order.
Permission of the CAACI is not required prior to pursuing remedies on enforcement. However, possession via either a transfer of title or change of details of the entity registered with the CAACI will require the cooperation of the CAACI (and as such compliance with any transfer requirements of the CAACI).
2.4 As a matter of local law, is there any concept of title annexation, whereby ownership or security interests in a single engine are at risk of automatic transfer or other prejudice when installed 'on-wing' on an aircraft owned by another party? If so, what are the conditions to such title annexation and can owners and financiers of engines take pre-emptive steps to mitigate the risks?
While there is no concept of title annexation under Cayman Islands law, Cayman Islands law recognises the concept of accession which is similar to annexation.
Based on the example above, where an engine owned by one party is installed 'on wing' of any aircraft owned by another party, it is common market practice for relevant parties to require entry into a contractual 'recognition of rights' agreement (which is typically governed by English law) as a condition to installing an engine on a different airframe. As noted previously, while aircraft engines are not capable of being registered with the CAACI, relevant parties are able to make filings on the International Registry under the Cape Town Convention in relation to engines.
2.5 What (if any) are the tax implications in your jurisdiction for aircraft trading as regards a) valueadded tax (VAT) and/or goods and services tax (GST), and b) documentary taxes such as stamp duty; and (to the extent applicable) do exemptions exist as regards non-domestic purchasers and sellers of aircraft and/or particular aircraft types or operations?
The Cayman Islands currently has no form of income, corporate or capital gains tax and no estate duty, inheritance tax or gift tax. Customs duty may apply to an aircraft which is brought into the Cayman Islands from any other jurisdiction unless the Collector (as defined in the Customs Law (2017 Revision) (the "Customs Law")) has exercised his discretion pursuant to section 21(1) of the Customs Law to permit the import of such aircraft free of duty, for retention in the Cayman Islands on a temporary basis with a view to its subsequent exportation, for a period not exceeding six months or such extended period as the Collector may authorise.
2.6 Is your jurisdiction a signatory to the main international Conventions (Montreal, Geneva and Cape Town)?
The Cayman Islands are not signatory to the Montreal Convention or Geneva Convention.
Cape Town Convention
The Cape Town Convention came into force in the Cayman Islands on 1 November 2015 pursuant to the International Interests in Mobile Equipment (Cape Town Convention) Law 2015.
The Chicago Convention
While the Cayman Islands are not signatory to the Chicago Convention of 1944 on International Civil Aviation, certain provisions thereof are reflected in the ANOTO.
2.7 How are the Conventions applied in your jurisdiction?
Cape Town Convention
The UK government ratified the Cape Town Convention with UNIDROIT on 27 July 2015. The Cape Town Convention entered into force for the UK, and by extension the Cayman Islands, on 1 November 2015.
The Cayman Islands Government passed enabling legislation entitling the Cayman Islands to international recognition as a territorial unit of a contracting state to the Cape Town Convention and to recognition of the declarations deposited by the UK government on behalf of the Cayman Islands government with the International Institute for the Unification of Private Law acting as depository pursuant to Article 62(1) of the Cape Town Convention and Article XXXVII(1) of the Protocol – UNIDROIT.
As mentioned in question 2.6, the Cayman Islands are not a signatory to the Chicago Convention, but certain provisions thereof are reflected in the ANOTO.
2.8 Does your jurisdiction make use of any taxation benefits which enhance aircraft trading and leasing (either in-bound or out-bound leasing), for example access to an extensive network of Double Tax Treaties or similar, or favourable tax treatment on the disposal of aircraft?
No, the Cayman Islands do not make use of any taxation benefits which enhance trading and leasing.
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.