Review of Aircraft Mortgage Legislation

Overview

The Isle of Man Civil Aviation Administration, of which the Isle of Man Aircraft Registry is a part, maintains a Register of Aircraft Mortgages in accordance with the Mortgaging of Aircraft Order 1972 (as amended and applied to the Isle of Man) (hereon referred to as 'the Mortgaging of Aircraft Order'). Mortgagees of aircraft registered under the Mortgaging of Aircraft Order are afforded rights by the Civil Aviation (Aircraft Registration and Marking) Order 2022 that the aircraft must not be deregistered by the Aircraft Registry without their prior consent. The Aircraft Registry upholds and takes these obligations very seriously.

Given the age of the Mortgaging of Aircraft Order, we are seeking the views of stakeholders to inform our drafting of updated mortgaging of aircraft legislation and associated processes. This new legislation would replace the Mortgaging of Aircraft Order; however, it is planned that reserved rights would be applied to mortgages already registered. Consequential amendment would also need to be made to the Civil Aviation (Aircraft Registration and Marking) Order 2022.

Please note that there are no plans or proposals to change the following fundamental principles of aircraft mortgage registration:

• An aircraft mortgage may be registered
   
• The Aircraft Registry shall not deregister an aircraft that is subject to a mortgage that has been registered in good faith, without the prior consent of the mortgagee
   
• The registration of an IDERA under the Cape Town Convention has priority over the registration of an aircraft mortgage (notwithstanding grandfather rights for mortgages registered prior to the Cape Town Convention taking effect in the Isle of Man)

Aircraft mortgage registration versus Cape Town Convention

The uptake of aircraft mortgage registration has been variable since the establishment of the Aircraft Registry in 2007, as shown in the graph below which also shows the rate of recording an ‘IDERA’ for an aircraft since the applicability of the Cape Town Convention in the Isle of Man in 2018.

As can be seen, there continues to be a demand for mortgage registration and we often see dual registration under both the mortgage legislation as well as for IDERA under the Cape Town Convention.

The benefits from registering an aircraft mortgage are limited to ensuring that the aircraft is not deregistered by the Aircraft Registry without the prior consent of the mortgagee. Whilst the Cape Town Convention provisions secure similar rights, they also provide broader remedies including the ability to take possession or control of an object, sell or grant a lease of an object and collect or receive any income or profits arising from the management or use of the object.

We have noted that there are other jurisdictions where repossession remedies are included in their aircraft mortgage legislation. Given that the Isle of Man has implemented the Cape Town Convention, there are no proposals for the Island’s aircraft mortgaging legislation to be expanded to include such repossession remedies.

Engine Mortgages

We are aware that some jurisdictions offer the registration of engine mortgages. However, we feel that securing the rights of a mortgagee for their permission prior to the deregistration of an asset relies on an international standard that such assets must be registered in the first place. The registration of an aircraft (as required by the Chicago Convention) and the registration of an aircraft mortgage are mutual and have interdependency. There are no international standards mandating the registration of an aircraft engine.

It is also noted that the Cape Town Convention has applicability to and provides remedies with regard to aircraft engines. However, an IDERA can only be submitted for an aircraft – not for an engine.

Consequently, there are no proposals for the Island’s aircraft mortgaging legislation to be expanded to include the registration of an aircraft engine mortgage. However, there are no proposed changes at this time to the current ability specified by article 3 of the Mortgaging of Aircraft Order for the aircraft mortgage to include 'any store of spare parts for that aircraft'.

Why your views matter

We encourage responses from any persons or organisations associated with and affected by the registration of aircraft mortgages, including:

• Aircraft owners and operators
   
• Financial institutions, such as banks, credit unions, investment companies, etc
   
• Insurance companies
   
• Corporate service providers

Reasonable adjustments and alternative formats

The Department is committed to equal opportunities and our aim is to make our documents easy to use and accessible to all.

We will take steps to accommodate any reasonable adjustments and provide such assistance as you may reasonably require to enable you to access or reply to this consultation.

If you would like to receive this document as a paper copy, in another format or need assistance with accessing or replying to this consultation, please email caa@gov.im or telephone +44 1624 682358.

Responding to this consultation and questions

You can respond to this consultation online by clicking on the 'Online Survey' link below. If you have any questions please email caa@gov.im.

What happens next

All responses to the consultation will be carefully considered.

Any proposed substantive changes to the current Order will be subject to a further consultation.