We have highlighted below seven of the key reasons owners, financiers and operators regard the Cayman Islands as the jurisdiction of choice for aircraft registrations.
1. The Cayman Islands – Political Stability
The Cayman Islands provides a safe, stable and 'friendly flag' jurisdiction for registration of aircraft and boasts a highly developed legal s ystem and a respected system for perfecting security over aircraft.
As an overseas territory of the United Kingdom, the Cayman Islands benefits from a high level of political, social, economic and judicial stability, whilst at the same time exercising a high degree of autonomy, having been a stable parliamentary democracy since 1831.
The Cayman Islands enjoys a stable system of government, consisting of an 18 member Legislative Assembly elected by the people every four years which enables the Cayman Islands largely to self-govern on local affairs, and a Governor who is the formal representative of the UK government. The Governor has power over certain domestic issues (for example, controlling the Caym an Islands internal security matters, dissolving the legislature, assenting to laws and acting as a liaison between the Cayman Islands and the British government).
The Cayman Islands' main industries are financial services and tourism. The government's primary source of income is indirect taxation, such as import duty on certain goods and fees obtained from the operation, licensing and regulation of various entities in the Cayman Islands. The absence of any form of direct taxation in the Cayman Islands (such as income, sales or capital gains tax) fosters a favourable tax regime which has made the Cayman Islands an attractive jurisdiction in which to conduct cross-border global business.
Internationally, the Cayman Islands is ranked within the top 20 financial centres in the world. It boasts a GDP of US$47,864 per capita1 and is rated Aa3 by Moody's2.
The Cayman Islands is widely recognised as one of the leading non-OECD jurisdictions for compliance with, and cooperation on matters of anti-money laundering, tax information and financial regulation. It was one of the first jurisdictions to partner with the US and sign up to a Model 1 intergovernmental agreement with respect to FATCA, and was one of the early adopters of the OECD's Common Reporting Standard for the automatic sharing of tax information3. In addition, it is signatory to 36 bilateral agreements and arrangements on the exchange of tax information. In addition, it has entered into various treaties and implemented legislation to meet with internationally accepted anti-money laundering and due diligence standards. These advances have been balanced against preserving the privacy of clients wherever possible, and it should be noted that confidentiality of client information is protected under applicable common law and local statutes.
The political stability, highly developed legal system and infrastructure and its position as an international financial centre make the Cayman Islands the jurisdiction of choice for registration of aircraft.
2. The Legal System
The Cayman Islands is renowned as a leading international financial centre. This status has been achieved in part through its tax neutral environment within which a highly developed legal system based on English common law flourishes, with the Privy Council in England being the jurisdiction's final court of appeal, thus affording certainty and confidence to both owners and financiers of aircraft. A professional infrastructure complements the legal system, servicing and supporting a wide range of sophisticated transactions which attracts many of the world's leading financial institutions to use its corporate structures to undertake international financing transactions, amongst other features. The Cayman Islands has thus become a preferred jurisdiction for the incorporation of special purpose vehicles to own aircraft, and Cayman Islands special purpose vehicles are often used as owning entities on international asset financing transactions.
The laws of the Cayman Islands are deri ved from three sources: (i) statutes approved by the elected Legislative Assembly and assented to by the Governor; (ii) statutory instruments passed by the UK Parliament and extended by Order in Council to the Cayman Islands; and (iii) English common law (which is of persuasive authority).
The Air Navigation (Overseas Territories) Order 2013 (as amended) (the "AN(OT)O") is the primary legislation applicable to aviation in the Cayman Islands. The AN(OT)O is a UK statutory instrument which has been extended to all British Overseas Territories (including the Cayman Islands). It contains regulations relating to operational and airworthiness requirements for locally registered aircraft.
The Overseas Territories Aviation Requirements ("OTARs") supplement the provisions of the AN(OT)O. The OTARs are not themselves law, although some of the requirements contained in the OTARs specifically include provisions of the AN(OT)O. Thus, failure to comply with the OTARs may result in adverse consequences such as a breach of the AN(OT)O. A number of local statutes (many of which mirror the applicable legislation in the UK) have also been enacted, amongst other matters, to regulate aircraft registrations, air safety and mortgage registrations in the Cayman Islands.
The Civil Aviation Authority of the Caym an Islands ("CAACI") is the regulatory authority which is mandated by law to, inter alia, ensure that civil aviation in the Cayman Islands conforms to the standards and recommended practices of the International Ci vil Aviation Organization (ICAO) established by the Convention on International Civil Aviation, signed in Chicago on 7 December 1944.
Although legal proceedings in the Cayman Islands relating to locally registered aircraft and aircraft mortgages are not common, it bears noting that the Cayman Islands courts are able to deal competently with claims which may arise, such as the enforcement of aircraft mortgages, the detention of a mortgaged aircraft or the detention of other property of a mortgagor situated within the Cayman Islands (in lieu of the detention of an aircraft).
The British based system of registration for both aircraft and aircraft mortgages within a stable legal system based on English common law is another compelling reason to choose to register an aircraft and any associated aircraft mortgage in the Cayman Islands. This system of registration thus appeals to aircraft owners and financiers alike.
3. The Civil Aviation Authority of the Cayman Islands
Established in 1987, the CAACI is a statutory body with the powers and duties set out in the Civil Aviation Authority Law (2015 Revision) and exercised on its behalf by its Director General. The CAACI fulfils its duties effectively through a developed structure and a team of highly qualified professionals. Regulation and, as the case may be, licensing of aerodromes, aviation personnel and aircraft maintenance organisations all fall under its responsibility, as do conducting aircraft airworthiness surveys, providing commercial and economic regulation and maintenance of the Cayman Islands Aircraft Register (the "Aircraft Register").
The CAACI has a subsidiary office in London, UK, servicing Europe and the Middle East. The Cayman Islands office acts as head office servicing all other jurisdictions. W hilst the
CAACI maintains conventional business hours of 8:30 AM to 5:00 PM (GMT -5), Monday to Friday (save for local public holidays), it should be noted that the CAACI is willing to accommodate transactions which take place outside regular business hours where this may be necessary.
It is also important to note that the technical experts in the Flight Operations and Airworthiness sections of the CAACI are available outside of regular business hours to provide guidance to operators. In addition, the CAACI is available on a 24/7 basis to approve extensions or approvals that are required for Aircraft on Ground (AOG) situations.
The average time taken to effect an aircraft registration is between six to eight weeks and an aircraft mortgage registration can be effected within 24 hours. The CAACI has proven itself to be one of the most attenti ve of aviation authorities by routinel y working closely with applicants to assess and complete the registration requirements in order to meet established deadlines. In addition, wherever possible the CAACI deploys its highly qualified airworthiness surveyors to inspect aircraft at their home bases in order to fulfil the initial and annual registration requirements, thus preventing the need to reposition the aircraft.
The CAACI is also able to issue Letters of Authorisation (LOA) for operational and airworthiness approvals within a few days, as compared with other regulatory authorities where such approvals can take weeks or months.
The CAACI has developed a state-of-the-art electronic storage system and disaster recovery plan thereby ensuring continuity of the CAACI's services and the ability to recover in the e vent of natural disasters.
The CAACI provides an electronic document management system 'VP-C Online' which electronically manages all aircraft registration applications, certificates and authorisations. The system makes it easier for CAACI clients to apply for the various approvals that are required for both initial aircraft registrations and for continuing airworthiness requirements, including the renewal of documents. It is designed to streamline processes within the CAACI and allows licensed users access to their documents around the clock.
Although it demands the highest standards from its owners and operators, the CAACI holds itself to similarly high standards by offering responsive and efficient service. This has allowed it to enjoy a place of respect and recognition within the aviation industry internationally.
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1 Cayman Economy at a Glance 2016 https://www.eso.ky/caymaneconomyataglance.html
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