Registration of Security Interests over Aircraft


A mortgage may be registered in the Aircraft Register by way of security for the payment of a debt, and in the case of bankruptcy/insolvency of the owner of an aircraft, all actions and claims to which the aircraft may be subject shall have preference on the aircraft over all other debts of the owner’s estate;

Prior to the registration of a mortgage:

  • Any creditor may register his privilege or charge on any part, appurtenance or accessory of an aircraft; and
  • A seller reserving ownership rights on an aircraft or on any part thereof may register his interest in the register of the aircraft.

A registered mortgage is an executive title where the debt it secures is certain, liquidated and due or where the maximum secured sum is expressly stated in the mortgage instrument and recorded in the register.

A foreign mortgage may be recognised as a mortgage with the status and all the rights and powers specified under Maltese law subject to certain conditions.

Any security over the aircraft does not extend to any engine attached to the airframe which is not also owned by the airframe owner.

A registered mortgage will entitle the mortgagee, in the event of default on the part of the mortgagor, to the following remedies, upon giving notice in writing to the debtor, without the need of the leave of any court:

  • take possession of the aircraft;
  • sell the aircraft or any share in respect of which the mortgage is registered;
  • apply for any extensions, pay fees, receive certificates and generally do all things in the name of the owner in order to maintain the status and validity of the registration of the aircraft;
  • lease the aircraft with a view towards generating income therefrom;
  • receive any payment of the price, lease payments, and any other income which may be generated from the operation and management of the aircraft;
  • procure the de-registration of the aircraft; and
  • procure the export and physical transfer of the aircraft from the territory where it is situated.

SPECIAL PRIVILEGES ON AIRCRAFT

The debts listed below enjoy priority and any debts secured by a mortgage shall rank after such debts:

  • Judicial costs incurred in respect of the sale of the aircraft and the distribution of the proceeds thereof pursuant to the enforcement of any mortgage or other executive title;
  • Fees and other charges due to the Director General arising under applicable law of Malta in respect of the aircraft;
  • Wages due to crew in respect of their employment on the aircraft;
  • Any debt due to the holder of a possessory lien for the repair, preservation of the aircraft to the extent of the service performed on and value added to the aircraft;
  • The expenses incurred for the repair, preservation of the aircraft to the extent of the service performed on an value added to the aircraft; and
  • Wages and expenses for salvage in respect of the aircraft.

SECURITY REGISTERED IN THE INTERNATIONAL REGISTRY OF MOBILE ASSETS

Malta is signatory to the Cape Town Convention on International Interests in Mobile Equipment and also to its Aircraft Protocol.  This multilateral international convention provides for a centralised system and procedure for the registration of aircraft ownership, liens, leases and contracts, thereby providing financiers of Malta-registered aircraft with the ability to enforce their registered security rights over such aircraft in each jurisdiction signatory to the Convention. It also establishes the right of owners of aircraft to grant an Irrevocable De-Registration and Export Request Authorization (IDERA) to a secured party.

The convention applies to the following aircraft:

  • Airframes that are type certificated to transport either at least 8 persons including crew or goods over 2759 kilograms (6050 pounds);
  • Helicopters that are type certificated to transport at least 5 persons including crew or goods over 450 kilograms (990 pounds);
  • Jet propulsion aircraft engines with at least 1750 pounds of thrust or its equivalent; and
  • Turbine-powered or piston-powered aircraft engines with at least 550 rated take-off horsepower or its equivalent.

INTERNATIONAL INTERESTS REGISTRABLE IN THE INTERNATIONAL REGISTRY IN TERMS OF THE CAPE TOWN CONVENTION.

Interests in airframes, helicopters or aircraft engines which are:

  • granted by the chargor under a security agreement; or
  • vested in a person who is the conditional seller under a title reservation agreement; or
  • vested in a person who is the lessor under a leasing agreement;

may be registered in the International Registry and shall be regulated by the National Implementing Law contained in the First Schedule to the Malta Aircraft Registration Act.

The general rule is that an international interest takes a prior ranking over national security interests registered in the National Aircraft Register and that such international interest has full legal force and effect in Malta. Consequently, it is not necessary to re-register in the Maltese National Aircraft Register any registered international security interest. Nonetheless a creditor may choose to have its international interest recorded in the National Aircraft Register subject to the rule that the international interest shall be enforceable on its own merits and shall always prevail over the security registrations in the National Aircraft Register in case of any conflict or discrepancy.  Furthermore once an international interest has been registered in the International Registry, it is possible for a prohibitory notice to be filed in the National Aircraft Register which effectively prohibits the registration of security interests in the national register without the express consent of the creditor in question.

REGISTRABLE PRIVILEGES

Registrable privileges are privileges which, once registered in the International Registry, enjoy preference and status of such right in relation to the aircraft only if the claim is created by the owner of the aircraft or a person authorised by him. These privileges are the following:

  • Taxes, duties and/or levies due to the Government of Malta in respect of the aircraft; and
  • Wages and expenses for assistance or recovery in respect of the aircraft.

For further information about how GVZH Advocates can help you with your aviation law requirements kindly contact us on transport@gvzh.com.mt