Following recommendations made by a legal group commissioned by the Ministry for Infrastructure, Transport and Communications (MITC) the Maltese Government is proposing to ratify and implement the Cape Town Convention on International Interests in Mobile Equipment and the Aircraft Protocol thereto (which taken together are commonly referred to as the Cape Town Convention).
The decision was taken on the back of a wider objective which the Government has set for itself, namely to mirror the success achieved in the maritime sector by building an aircraft registry of repute and attracting foreign aircraft owners and operators to register their aircraft in Malta. Indeed, draft legislation has already been produced to this end and a bill entitled The Aircraft Registration Act has been made available for public consultation and is at its final drafting stages.
So how does the Cape Town Convention help the cause? Put simply the intent behind the Convention is to facilitate the acquisition and financing of aircraft. It seeks to do this in a number of ways and the Convention is credited with five key objectives. Firstly, it provides for the creation of so-called "international interests" in aircraft which essentially are rights that owners, lessors, lessees or financiers have in relation to aircraft and which are given recognition in the various contracting states (hence "international interests"). Secondly, the Convention establishes an International Registry which, true to the technological era we are living in, is an electronic registry fully accessible on-line. The Registry, which is physically located in Ireland, provides right holders the faculty of having their international interests over aircraft registered publicly thus giving notice to third parties. Furthermore, registration has the effect of preserving priority over certain unregistered interests and over creditors generally in case of insolvency of the aircraft owner or operator. Thirdly, the Convention seeks to provide creditors with a range of remedies for enforcement of their rights or interests over aircraft including means for speedy interim relief, at times without the necessity of judicial intervention. More generally, the fourth and fifth objectives of the Convention are to ensure that the particular needs of the aircraft finance sector are met and to provide financiers and creditors in the aviation market greater confidence when granting credit. In practise it has also had the benefit of making credit cheaper to obtain, hence of benefit also to borrowers be they owners or operators of aircraft.
Undoubtedly, therefore, ratification of the Cape Town Convention will go some way into making Malta a more attractive jurisdiction for the registration of Aircraft. To date the European leader in so far as aircraft registration is concerned is Ireland with more than 1100 aircraft on its books. Ireland has been a member of the Cape Town Convention since it came into effect on 1 March, 2006 and was in fact the first European country to ratify it. Since then the only other European countries to have ratified the Convention are Albania and Luxembourg (in February and October 2008 respectively). Interestingly, in August, 2009 the European Community also "ratified" the Convention as a "regional economic integration organisation" in accordance with Article 48 of the Convention itself, but the Community's power to bind Member States is limited only to certain aspects covered by the Convention and accordingly in order to give fuller effect to the Convention individual Member States will need to ratify the Convention separately.
And this is where things become interesting. Assuming that the Convention is ratified soon, as is the Government's current intention, Malta will be the first EU Member State to accede to the Cape Town Convention since the European Community's ratification. It will only be the fourth country in the whole of Europe to have done so. Turn the spot-lights on. Malta already provides a very attractive package to foreign investors and has positioned itself as a preferred jurisdiction for the holding of assets and investments. With its attractive personal and corporate tax regime, a full imputation system of corporate tax providing shareholders with substantial tax refunds on distributions of dividends, an excellent holding regime, VAT exemptions for lessors and operators and a wide network of double taxation treaties, Malta is in with the heavy-weights. Add to this Malta's EU and Eurozone membership, its geographical location, reliable legal framework, a highly competent professional and technical workforce and an efficient IT infrastructure. The ingredients are right and possibly, as the world seems to be making its way out of the financial crisis and prospects for 2010 looking good, so is timing.
The new aircraft registration law and the ratification of the Cape Town Convention alone will not necessarily do the trick however. Additional fiscal incentives mirroring those available to shipping companies should be considered and, if appropriate, implemented together with the proposed legislative changes. Furthermore, on a more practical or logistical level the current set up of the Aircraft Registry, currently housed within the Department of Civil Aviation's premises in Luqa, will require additional resources and space, possibly a total relocation. The effort and investment are justified because the potential for success in making Malta a centre for aircraft registration is real.
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