Malta: Aviation Finance & Leasing

Malta deposited a notification of adherence to the 1944 Chicago Convention on International Civil Aviation on the 5th January 1965, and acceded to the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention) on the 22 June 2000.

It also acceded to the Convention on International Interests in Mobile Equipment and to the Protocol to the Convention on International Interests in Mobile Equipment in Matters Specific to Aircraft Equipment, on the 16 November 2001.

Malta has not signed or ratified the 1948 Convention on International Recognition of Rights in Aircraft (the Geneva Convention) and the 1933 Convention for the Unification of Certain Rules Relating to the Precautionary Arrest of Aircraft (the 1933 Rome Convention).

Malta has declared, pursuant to subarticle 2 of Article 54 of the Cape Town Convention, that all remedies available to the creditor under the Cape Town Convention or the Aircraft Protocol which are not expressed under the provision thereof to require application to the Court, may be exercised without leave of the Court or other Court action, thereby permitting self-help/ non-judicial remedies.

Malta has also made a declaration pursuant to subarticle 1 of Article XXX of the Aircraft Protocol, in order to apply Article XIII of the Aircraft Protocol (De-Registration and Export Request Authorisation).

Given that Malta is a Member State of the European Union it did not make any declarations in terms of Article VIII (Choice of Law) of the Aircraft Protocol - it is however considered to have equivalent status in terms of the Rome I Regulation on the law applicable to contractual obligations (EC Regulation 593/2008) (the "Rome I Regulation"). Furthermore, as a Member State of the European Union Malta has neither made a declaration in terms of Article XI (Remedies on Insolvency) of the Aircraft Protocol, though national law reflects the terms of Alternative A, with the "waiting period" being a period of 30 calendar days commencing on the date of the occurrence of the insolvency-related event.

Article 46 of the Aircraft Registration Act (Chapter 503 of the laws of Malta) gives the force of law in Malta to the Cape Town Convention and the Aircraft Protocol.

This Article also ensures that the Cape Town Convention and the Aircraft Protocol prevail over any other law in case of conflict.

a. Lease

The choice of the laws of Malta to govern a lease agreement would be recognised and given effect to as a valid choice of law in any action in the courts of Malta in accordance with the provisions of the Rome I Regulation. The Rome I Regulation applies to contracts concluded after 17 December 2009. It should be noted, however, that:

(a) in terms of the said Rome I Regulation there are certain instances where other laws may prevail irrespective of the choice of governing law (including in the case of overriding mandatory provisions or the public policy of the forum). In particular (i) where all other elements relevant to the situation at the time of the choice are located in a country other than the country whose law has been chosen, the choice of the parties does not prejudice the application of provisions of the law of that other country which cannot be derogated from by agreement; and (ii) where all other elements relevant to the situation at the time of choice are located in one or more Member States of the European Communities, the parties' choice of applicable law other than that of a Member State shall not prejudice the application of provisions of Community law, where appropriate as implemented in the Member State of the forum, which cannot be derogated from by agreement;

(b) in certain instances the Rome I Regulation also imposes limits on the autonomy of the will of the parties to select the applicable law in contract.

b. Security document (for example, mortgage)

A choice of governing law to govern a security document would be recognized and given effect to as a valid choice of law in any action in the courts of Malta in the same way as a lease agreement would - hence our replies to the previous question apply here too.

It is customary for creditors of aircraft registered in Malta to take a Maltese law mortgage over the aircraft.

This ensures that details of the mortgage are registered on the Maltese aircraft register (i.e. where the aircraft is registered) and allows the creditor to benefit from rights of priority.

From a Maltese law perspective, a foreign mortgage is recognized as a mortgage with the status and with all the rights and powers specified in the Aircraft Registration Act only if, inter alia, such mortgage has been validly recorded in the registry of aircraft or other register of the country under whose laws the aircraft is documented. Though Maltese law would still recognise an international interest as arising from a foreign law mortgage, it is relatively easy to have a local law mortgage registered in Malta, and it is therefore customary for this route to be adopted in order to ensure that the creditor benefits to the fullest extent from the provisions of Maltese law.