The Cape Town Convention and its Importance for the Aviation Industry in Malta

This international treaty, which is designed to streamline the regulation of movable assets, has brought Malta’s legal framework in line with that of other signatories, placing the country in an advantageous position. The Convention and its Protocol, specifically aim to improve the financing and leasing of aircraft by providing a clear and standardised legal framework for securing interests in aircraft and engines. 

The Cape Town Convention and the Aircraft Protocol

The Cape Town Convention and the Aircraft Protocol is a global treaty designed to standardise and strengthen the legal framework for the financing, leasing and registration of aircraft assets. It provides creditors with internationally recognised rights and remedies in cases of default or insolvency, such as repossession and the ability to deregister and export aircraft efficiently. 

Why Malta’s Adoption is Significant

By implementing the Convention in 1st February 2011, Malta strategically positioned itself as a prominent player in the global aviation sector. Malta has long been known for its competitive and attractive legal framework, particularly in the area of aircraft registration. By adopting the Convention, Malta aligned its domestic laws with internationally accepted practices, fostering an environment that is both business-friendly and globally integrated. 

How the Cape Town Convention Benefits Malta 

The implementation of the Convention brought several advantages to Malta:

 

• Enhanced Competitiveness

Malta’s alignment with international standards provides it with a significant competitive advantage over other jurisdictions. By adopting globally recognised frameworks like the Convention, Malta has established itself as a reliable and stable hub for aircraft registration. This creates an appealing environment for global aviation investors and businesses who seek a jurisdiction that offers not only regulatory certainty but also a high level of legal and financial security.

Malta’s adherence to international best practices assures investors that their interests will be protected under a transparent and efficient legal system, making Malta an attractive destination for registering aircraft and conducting aviation-related transactions. As a result, the country has become a preferred choice for businesses seeking a secure and well-regulated environment in which to operate. 

 

• Increased Investment

The introduction of the Convention brought a wave of innovation to Malta’s aviation financing landscape, aligning its legal framework with international standards. Malta’s aviation legislation, originally based on English law, incorporated novel concepts that had not previously been recognised under civil law, such as security interests, irrevocable mandates, and security by title transfer. These changes provided new avenues for aircraft financing, making it easier for financial institutions and investors to secure interests in aircraft. 

Furthermore, before the Convention and the Aircraft Registration Act offered limited remedies for mortgagees, such as possession, sale and administrative actions like applying extensions or receiving certificates. Post-implementation, the Convention provided more flexible remedies, including leasing the aircraft to generate income, managing aircraft revenue, and cancelling an interest registration, all without judicial approval. 

Indeed, the combined enforcement of the Convention, its Protocol, and the Aircraft Registration Act created a robust legal framework that has attracted increased investment to Malta’s aviation sector, making financing more accessible and driving the growth of the industry. 

 

• Protection for Creditors

The Convention and its Protocol play a vital role in protecting creditors within the aviation sector by offering a clear legal framework for enforcing rights in the event of default. Creditors are given priority over aircraft assets, allowing them to swiftly repossess or take possession of the aircraft without judicial intervention, minimizing time and costs. The Convention also provides international enforcement through an accessible global registry, ensuring creditors can easily assert their rights regardless of location. 

 

• Streamlined Aircraft Registration

The implementation of the Convention has transformed aircraft registration in Malta by modernising the legal framework and aligning it with international best practices. The Convention introduced mechanisms that simplify the registration process, making it more efficient for operators, lessees and financiers. In fact, it iiallows for faster and more secure registration of aircraft while offering greater flexibility in financing and leasing structures. 

A Step Forward for Malta’s Aviation Industry

Since adopting the Convention, Malta has seen a significant increase in aircraft registrations, especially within the leasing and financing sectors. Its dedication to upholding international standards has positioned the country as a prime destination for global aviation businesses seeking to capitalise on the benefits the Convention provides.  

Article written by Dr. Claudia Borg, Lawyer
 

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