The island has long been a jurisdiction of choice for aircraft financing transactions. Going forward, the continued positive outlook in the global aircraft finance sector means that protecting the interests of secured parties over aircraft and engines is crucial.

Aircraft finance amends

In this regard, Bermuda recently amended the Mortgaging of Aircraft and Aircraft Engines Act 1999 (Act) to remove the requirement that an aircraft or aircraft engine must be owned by, leased or chartered to, or otherwise in the lawful possession of a company incorporated in Bermuda to be made security for a loan. The Act, together with ancillary regulations made under the Act, provide for the establishment and maintenance of a register of aircraft mortgages and aircraft engine mortgages.

Prior to the amendment, mortgages could only be registered against Bermuda-registered aircraft and aircraft engines if such aircraft or aircraft engine were either owned by, or otherwise in the possession of, a Bermuda incorporated company. On 2 June 2017, the Mortgaging of Aircraft and Aircraft Engines Amendment Act 2017 (Amendment Act) amended the Act to remove such requirement.

The amendments to the Act now allow security for loans or other valuable consideration to be made by qualified registrants over:

  • aircraft registered on the Bermuda register (or capable of being registered); and
  • aircraft engines if: (a) the engine is attached to an aircraft registered on the Bermuda register (or attached to an aircraft capable of being registered) or (b) the engine is for such aircraft and is owned by, or leased to, the owner of such aircraft.

The Amendment Act follows amendments that were made to the Air Navigation (Overseas Territories) Order that took effect on 1 January 2015 (Amended ANOTO). The amendments to the Amended ANOTO expanded the list of persons and corporations eligible to register an aircraft on the Bermuda register of aircraft to include:

  • Commonwealth citizens or nationals of any European Economic Area (EEA) state;
  • bodies incorporated in any other part of the Commonwealth and having their registered office or principal place of business in the United Kingdom or any other part of the Commonwealth; and
  • undertakings formed in accordance with the EEA state having their registered office, central administration or principal place of business within the EEA.

However, despite the Amended ANOTO there remained a Bermuda policy that continued to stipulate that a Bermudian company was required in the structure for the purposes of registration. It was the removal of the policy at the end of 2015 that resulted in parties being in a position to take advantage of the Amended ANOTO.

On 27 July 2016, Royal Assent was received in respect of the Bermuda International Interests in Mobile Equipment (Cape Town Convention) Act 2016. The International Institute for the Unification of Private Law, commonly known as UNIDROIT, has now confirmed that the Cape Town Convention on International Interests in Mobile Equipment and the Protocol to the Convention on International Interests in Mobile Equipment on Matters Specific to Aircraft Equipment will be extended to Bermuda, effective January 2018.

The Cape Town Convention facilitates aircraft finance by standardising transactions involving moveable property with respect to “aircraft objects” (airframes, aircraft engines and helicopters) by the creation of an electronic international registry of “international interests” that are recognised by those states that have implemented the Convention and to provide various default remedies to a creditor (including in the context of insolvency) should the need arise.

These latest initiatives by Bermuda underline the importance to the island of having a modern legislative framework to facilitate aircraft financing transactions.

Article first published in the Royal Gazette, July 2017

Share
Twitter LinkedIn Email Save as PDF
More Publications
10 Jul 2024

Bermuda – Women in Hamilton: Cathryn Minors

Appleby Counsel Cathryn Minors knew she wanted to be a lawyer from the age of 13 and that self-belie...

10 Jul 2024

Bermuda – Women in Hamilton: Josephine Noddings

Appleby Counsel Josephine Noddings says Bermuda gives access to the some of the best minds in the re...

5 Jul 2024

Balancing innovation and stability: Bermuda Monetary Authority’s stance on affiliate investments

A new approval process for affiliate investments forms a key part of the Bermuda Monetary Authority�...

2 Jul 2024

Bermuda: Good Chance Cat Bond Issuance Hits $20bn in 2024

Significant catastrophe bond issuance at the halfway point of 2024 means it’s already the third hi...

27 Jun 2024

Bermuda: Crypto Assets in Trusts and Foundations

Published in association with STEP, Crypto Assets in Trusts and Foundations features an in-depth e...

24 Jun 2024

High-level overview of Bermuda Monetary Authority’s three-tiered capital system

Insurers and reinsurers are faced with uncertainties relating to the timing and scale of future loss...

10 Jun 2024

Bankruptcy & Restructuring – Planning for Failure

The sudden collapse of Lehman Brothers in September 2008 sent shockwaves around the globe. As the la...

4 Jun 2024

Bermuda’s cybersecurity law transformation is well underway

We are almost six month into 2024, and this year has already been transformative for IT and cyber se...

23 May 2024

Regulatory oversight is key for Bermuda’s insurance sector

Bermuda’s thriving insurance and reinsurance sector requires effective regulatory oversight if it ...

9 May 2024

It is all about the data

All successful enterprises have a voracious appetite for data. The advanced abilities of IT systems ...