Bermuda is an overseas territory of the United Kingdom. As such, the Register of Aircraft is governed by a UK statute, the Air Navigation (Overseas Territories) Order 2013 (ANOTO). Air Safety Support International, a wholly owned subsidiary company of the Civil Aviation Authority of the United Kingdom, acts as the oversight regulatory body for the Overseas Territories of the United Kingdom in relation to aviation matters.


i The regulator

Most matters relating to aviation are dealt with by the Bermuda Civil Aviation Authority in Bermuda (BCAA), which is a government quango with a statutorily appointed board of directors responsible for the performance of the BCAA in accordance with applicable law. The functions of the BCAA include all issues relating to the licensing, certification and regulation of aircraft, flight crew and aerodromes, together with air navigation services, aviation security, management of the Bermuda Air Terminal, participation in the operation of the Bermuda International Airport and all matters concerning the economic regulation of air transport and the development of air services. The BCAA is ranked as a Category 1 Aviation Regulatory Authority by the US Federal Aviation Administration.

The BCAA is subject to the Overseas Territories Aviation Requirements (OTARs) which are similar to those of the EASA, the FAA and Transport Canada and are based on ICAO standards.

ii Registration of aircraft

Aircraft can be registered in Bermuda in either the private or the commercial transport category.2 Aircraft can only be registered in the commercial category where the aircraft is to be operated in a jurisdiction with which Bermuda has an agreement under Article 83 bis of the Convention on International Civil Aviation (Chicago, 1944) (the Chicago Convention) to which the United Kingdom (representing Bermuda) is party. Under Article 83 bis agreements, certain functions and duties normally carried out by a state of registry are transferred to an operator's state. The BCAA retains airworthiness oversight; an attractive position for lessors and owners as they receive the asset on return with a complete maintenance history, in English, to a very high standard.

Requirements for registration of aircraft are fully set out in the ANOTO. This includes who is considered to be a qualified person for registration. Such qualified persons are:3

  1. the Crown in right of Her Majesty's government in the United Kingdom or in right of the government of Bermuda;
  2. United Kingdom nationals;
  3. Commonwealth citizens;
  4. nationals of any European Economic Area State;
  5. bodies incorporated in any part of the Commonwealth and which have their registered office or principal place of business in any part of the Commonwealth; or
  6. undertakings formed in accordance with the law of a European Economic Area State and which have their registered office, central administration on principal place of business within the European Economic Area

The BCAA uses the Aircraft Information and Records System (AIRS), which is essentially an electronic filing and record-keeping system to be used by authorised persons during the initial registration of the aircraft and to renew certificates and licences while the aircraft remains registered in Bermuda. Registration applications are made on AIRS by authorised and certified users, which includes certain personnel of Bermuda law firms.

Aircraft registered on the Bermuda Register will be subject to various technical directives concerning their maintenance and operation. Such requirements are fully detailed in separate notices available on the BCAA's website at www.bcaa.bm. The only requirements external to the BCAA are those relating to the Class 6 Aircraft Radio Licence which, under statute, is administered by the Bermuda Regulatory Authority.

The Register of Aircraft forms the official public record relating to the registration of an aircraft and the particulars recorded in it are the only details that are publicly available. All other records related to the owner, aircraft, etc., are treated as confidential.

The Register of Aircraft will include the following particulars:

  1. the registration certificate number;
  2. the aircraft's nationality mark and the registration mark assigned to it;4
  3. the name of the constructor of the aircraft and its designation;
  4. the aircraft serial number;
  5. the name and address of the registrant; and
  6. relevant dates such as that of registration, change of ownership, cancellation of registration, etc.
iii Fees

Unlike other jurisdictions, the BCAA has only one principal registration fee and that is for the certificate of airworthiness, calculated by reference to the maximum take-off mass of the aircraft. This fee is payable prior to the initial registration and annually thereafter.

iv Security and aircraft mortgages

Parties to an aircraft financing may agree what governing law they want for an aircraft mortgage and the norm is to use the same governing law as the loan documentation. As a matter of Bermuda law, there is no need to register a mortgage to provide perfection. However, aircraft mortgages and aircraft engine mortgages can be registered under the Mortgaging of Aircraft and Aircraft Engines Act 1999 and related regulations. The relevant registers are maintained by the BCAA. Registration ensures priority over any non-registered mortgages or subsequently registered mortgages.

Fees for registration are set on a sliding scale up to a maximum of US$800. Mortgages are filed on AIRS and a PDF copy of the executed and dated mortgage must be filed with the statutory registration form.

It is also possible for the priority of a mortgage to be fixed by filing a priority notice with the BCAA pursuant to which the priority of a yet to be executed mortgage can be a fixed for a 14-day renewable period. On such an entry being made, and the mortgage being registered within 14 days thereafter (excluding public holidays), the mortgage will be deemed to have priority from the date of registration of the Priority Notice.5

All information on the Mortgage Register is deemed to be in the public domain. As such all parties are deemed to have express notice of the information contained within the Register.

Where a charge under a security document has been granted by a Bermuda incorporated company, it is also possible to register the charge with the Bermuda Registrar of Companies. A charge granted by a non-Bermuda company over assets situate in Bermuda may also be registered with the Bermuda Registrar of Companies. Registration will ensure priority over any subsequently registered charge or unregistered charge over the same assets.

v Liens

While not definitive, it is believed that only the following aircraft liens exist under Bermuda law:

  1. seller's lien – under the Bermuda Sale of Goods Act 19786 an unpaid seller may have a lien over the aircraft to the extent the buyer fails to pay the purchase price;
  2. possessory lien – a common law lien that requires that the lienholder has continuous possession of an aircraft on which it has bestowed labour authorised by the owner that has improved the aircraft in some way; and
  3. contractual lien (including pledge) – a lien created by contract, for example, the owner of an aircraft may pledge it to a creditor as security for a debt, or a lien may arise as a result of a person expending labour on an aircraft that improves its value in some way in accordance with a contractual agreement (such as frequently occurs in respect of aircraft repairs).

The law in Bermuda with respect to salvage liens is unclear, since Bermuda has no statutory provision similar to the UK Civil Aviation Act 1982, Section 87. It is uncertain whether an aircraft salvage lien can be asserted in Bermuda and whether the maritime salvage liens established by the Bermuda Wreck and Salvage Act 1959 and the Bermuda Merchant Shipping Act 2002 would be extended to apply to aircraft.

It is not possible to register liens in Bermuda. Generally, an aircraft lienholder will not have to apply to the Bermuda courts to enforce its lien since it will have a statutory right,7 or one arising by way of contract, to undertake such actions. An exception is a possessory lien where the lienholder has no general right to sell an aircraft without the consent of the court.

vi Rights of detention

As well as aircraft liens, there are various statutory rights of detention exercisable over aircraft. Under Bermuda law, persons are granted a right to detain and, in some cases, to sell (or cause to be forfeited) aircraft in certain circumstances such as:

  1. non-payment of airport charges;
  2. contravention of certain licensing and air navigation provisions of the ANOTO;8
  3. forfeiture under Bermuda customs law. Forfeiture of an aircraft may occur if an aircraft has been adapted and used for the purpose of smuggling or concealing goods;
  4. crimes:
    • terrorism: under the Aviation Security and Piracy (Overseas Territories) Order 2000 certain sections of the United Kingdom Aviation Security Act of 1982 were extended to Bermuda.9 Under the Anti-Terrorism (Financial and Other Measures) Act 2004, the Bermuda courts may make forfeiture orders with respect to any property of a person convicted of financing terrorism that is intended to be, or is suspected might be used, for the purposes of terrorism. This would include aircraft; and
    • drug trafficking: if an aircraft is used for drug trafficking purposes or purchased from the proceeds of crime, a court can order the aircraft to be forfeited;10 and
  5. war or national emergency: when a state of war or national emergency exists, the Governor of Bermuda has broad powers to make regulations pursuant to the Emergency Powers Act 1963 which includes, inter alia, the power to make regulations that authorise the taking of possession or control of any property.
    vii Judgment enforcement rights

    The courts of Bermuda would recognise as a valid judgment, a final and conclusive judgment, in personam, obtained in foreign courts against a Bermuda company under which a sum of money is payable (other than a sum of money payable in respect of multiple damages, taxes or other charges of a like nature or in respect of a fine or other penalty) and would give a judgment based thereon provided that:

    1. such courts had proper jurisdiction over the parties subject to such judgment;
    2. such courts did not contravene the rules of natural justice of Bermuda;
    3. such judgment was not obtained by fraud;
    4. the enforcement of the judgment would not be contrary to the public policy of Bermuda;
    5. no new admissible evidence relevant to the action is submitted prior to the rendering of the judgment by the courts of Bermuda; and
    6. there is due compliance with the correct procedures under the laws of Bermuda.

    A final and conclusive judgment in the superior courts of certain foreign jurisdiction11 against a Bermuda company based upon the finance documents under which a sum of money is payable (not being in respect of multiple damages, or a fine, penalty, tax or other charge of similar nature) would, on registration in accordance with the provisions of the Judgments (Reciprocal Enforcement) Act 1958 be enforceable in the Supreme Court of Bermuda against the Bermuda company without the necessity of any retrial of the issues that are the subject of such judgment or any re-examination of the underlying claims; however, where the foreign judgment is expressed in a currency other than Bermuda dollars the registration will involve the conversion of the judgment debt into Bermuda dollars on the basis of the exchange rate prevailing at the date of such judgment as is equivalent to the judgment sum payable. The present policy of the Bermuda Monetary Authority is to give consent for the Bermuda dollar award made by the Supreme Court of Bermuda to be paid in the original judgment currency.


    Bermuda is an important jurisdiction for the complex cross-border finance structures often established for aircraft. Political and economic stability, recognised systems for international financial transparency and information exchange, a respected and consistent judicial system (where the Privy Council is the final court of appeal), a favourable legislative framework and tax regime, no exchange control or currency restrictions, and a strong commercial aircraft registration capability make Bermuda a popular jurisdiction for ownership, financing and securitisation structures.

    Historically, one of the reasons for the success of Bermuda as a jurisdiction for commercial aircraft financing is owing to the Article 83 bis agreements under the Chicago Convention, especially the Article 83 bis agreement with Russia. Russian operators needing new aircraft often need financing from Western-based lenders and export credit agencies. Such lenders do not wish the security to be Russian-law governed. In addition to the other benefits Bermuda offers as enumerated above, the lenders appreciate the fact that Bermuda courts follow English common law principles (which includes recognition of the equitable right of redemption under a mortgage unlike civil law jurisdictions) and are likely to recognise and enforce English or New York law governed security documents. The foreign operators are happy to use Bermuda, which they view as a neutral jurisdiction through which to finance the aircraft.

    Bermuda vehicles are also regularly used in both 'off-balance sheet' financing structures, where the owner of the aircraft is an 'orphan' and 'on-balance sheet' structures where the owner will own the aircraft directly in its own name.

    Off-balance sheet structures are often used for asset-backed securitisations (ABS). Although many ABS transactions involve a special purpose vehicle (SPV) that is directly owned by a parent, often a transaction will require an 'orphan' SPV, meaning that it is not part of the originator's corporate group. By selling the asset to the orphan SPV, the asset is removed from the originator's balance sheet. When an orphan structure is required, the SPV is incorporated with all the shares issued to a trustee (also offshore) pursuant to a charitable or purpose trust. A Bermuda purpose trust is of particular benefit in an ABS transaction structured in this manner, as the purpose trust is established to fulfil purposes rather than in favour of beneficiaries, while a charitable trust has charities as the beneficiaries (where, depending on circumstances, a conflict of interest may arise).

    Bermuda has in place legislative bankruptcy and corporate structures that are particularly suited to establishing the bankruptcy remoteness of the SPV often used for commercial financing structures. As long ago as 1990 Bermuda enacted the Trusts (Special Provisions) Act enabling the creation of trusts for a broad range of non-charitable purposes and since that time Bermuda has developed a practice establishing purpose trusts.

    One of the areas where a number of such trusts have been used is aircraft financing. In the typical financing structure, a Bermuda exempted company is incorporated to act as owner and lessor or as lessee and sub-lessor of the aircraft. The location of the company in a tax-neutral and flexible jurisdiction may offer certain protections against the bankruptcy of other involved parties (such as the operator) and facilitates innovative and cost-effective methods of asset finance, often utilising cross-back tax benefits.

    The issue that then arises is how the shares of the SPV should be held. It is often the case that it is not possible or desirable for any of the parties to the transaction to own the company or include the company as a balance sheet asset. In the past, one solution was to use a charitable trust as the shareholder. The purpose trust, however, provides certain distinct advantages.

    With a charitable trust, the duties of the trustees are to invest the trust funds so that the return for charities is maximised and to make appropriate distributions. These duties can conflict with the requirements of the parties to the transaction. With a purpose trust, the duties are to fulfil the stated purposes that accord with the intentions of the parties. These purposes are normally to:

    1. promote the incorporation of the Bermuda exempted company;
    2. subscribe for the shares of the company;
    3. hold those shares;
    4. support the company in pursuing the activity of the particular transaction in question; and
    5. enter into any agreements that may be appropriate in connection with the transaction.

    The trustee may also charge the shares of the Bermuda exempted company by way of security.

    The main advantages of the purpose trust are twofold. First, the duties of the trustees of a purpose trust are clear, being to fulfil the stated purposes. The duties of trustees of a charitable trust are to maximise the benefits for the charity or charitable purposes. Depending on circumstances, a conflict of interest may arise whereby it is in the interests of the party establishing the structure to minimise the profit of the trust's assets. Ideally, it is usually desired that the company only declare enough dividend to fund its ongoing expenses. The use of a purpose trust, where the stated purposes are to promote the use of Bermuda exempted companies to meet the needs of the arrangements by subscribing for the shares of one or more such companies, holding those shares and supporting the efficient operation of the company or companies, avoids such a conflict.

    Secondly, Bermuda, like most jurisdictions that follow English common law principles, would grant a common law jurisdiction to the Attorney-General (or a similar public official) to enforce charitable trusts that are not being properly administered for the benefit of charity. While we are not aware of any instance where the Attorney-General in Bermuda has sought to enforce a charitable trust that has been used in a commercial structure, the risk cannot be entirely discounted in any jurisdiction where such enforcement powers exist. In the case of purpose trusts, the legislation expressly provides for the selection of a person to enforce the obligations under a purpose trust. This person may be a representative of an interested party to the structure or transaction or any independent professional. The Attorney-General may only become involved to appoint an enforcer where the trustees are aware that the person designated by the trust instrument to enforce the trusts is not able to do so. A well-drafted trust instrument will normally provide for a mechanism to appoint successors to the original enforcer to ensure this problem never arises. In any event, the interest of anyone seeking to enforce the trust will be to ensure that the purposes are complied with, not that charitable benefits are maximised.

    At the end of the financing period when the loan has been repaid, the orphan SPV will sell the aircraft for a nominal fee to the operator. The SPV is then liquidated and the purpose trust is terminated.


    Owing to increased regulations by the European Union following the introduction of the Market Abuse Regulation (MAR), companies looking to list debt have been looking for alternate markets outside the EU.

    The Bermuda Stock Exchange (BSX) has become a popular alternative for companies looking to list debt associated with aircraft finance as it avoids the onerous and costly conditions imposed by MAR but still offers the high level of market protection that investors are accustomed to.

    Some of the advantages of listing on the BSX are as follows:

    1. it is the world's largest offshore fully electronic securities exchange;
    2. it is internationally respected and recognised by UK, US, Irish, Canadian and Australian tax authorities and regulatory bodies;
    3. it is an affiliate member of the International Organisation and Securities Commissions;
    4. it is flexible, responsive and sensitive to confidentiality requirements;
    5. it is well placed between Europe and the US, which provides real-time same-day access to both markets; and
    6. it is designated as a 'recognised exchange' by HM Revenue and Customs (UK) and Revenue – Irish Tax and Customs.

    There are two more BSX listings of ABS notes, which are due to close in the first half of 2018 and the third quarter respectively. There are also more in the pipeline.


    i Securitisations and capital markets

    The use of Bermuda SPVs for aircraft portfolio securitisations has remained popular. In March 2018, Avolon Holdings Limited (Avolon), the international aircraft leasing company, did a senior notes offering using its wholly owned subsidiary Avolon Holdings Funding Limited. The offering, which priced on 1 March 2018, comprised US$500 million aggregate principal amount of 5.5 per cent senior notes due in 2023, at par. Avolon used the net proceeds from this offering for general corporate purposes, which may include the future repayment of outstanding indebtedness.

    Einn Volant Aircraft Leasing Holdings Limited is a joint-venture project between Caisse de dépôt et placement du Québec, a leading institutional asset manager, and GE Capital Aviation Services, and was used to create a US$2 billion global aircraft financing platform, involved in the acquisition of modern fuel-efficient aircraft from a diverse set of global airlines to be leased back under long-term leases.

    Wings Capital Partners LLC launched its US$480 million ABS secured against 19 aircraft on lease to 17 lessees in 14 countries. There were three series of notes issued by WAVE 2017-1 LLC and WAVE 2017-1 Limited: US$393.3 million Series A notes, the US$57.84 million Series B notes and the US$28.92 million Series C notes. The notes represented Wing Capital Partners LLC's inaugural securitisation.

    Castlelake, LP, as sponsor and servicer, and Castlelake Aircraft Structured Trust 2017-1 (CLAS 2017-1), as borrower, funded US$785.5 million in Class A, B and C asset-backed loans. The transaction, which priced on 7 July 2017, is backed by a fleet of 43 aircraft and one aircraft engine, leased to 15 lessees across 11 countries. This transaction represents the fourth ABS for Castlelake. Sky Aviation Leasing International Limited (Sky), acted as servicer and S-JETS 2017-1 Limited (S-JETS) a Bermuda company, acted as issuer in connection with Sky's US$780.8 million debut ABS deal, pursuant to which S-JETS issued US$657,800,000 Series A notes, US$81 million Series B notes and US$42 million Series C notes. The transaction was backed by a fleet of 21 aircraft on lease to 16 airlines in 13 countries with an initial total value of approximately US$990 million. Upon closing the notes were listed on the BSX.

    Merx Aviation had its inaugural aviation ABS comprising of US$506.5 million in three tranches of notes secured on a portfolio of 25 aircraft. The issuer was MAPS 2018-1 Limited, a Bermuda company. The proceeds from the notes will also be used to refinance the original AABS Limited (AABS) asset-backed secured term loan aircraft ABS transaction, which closed in January 2013 and was renamed MAPS 2018-1 Limited pursuant to this transaction. Of the 25 aircraft in this portfolio, 19 were also securitised in the AABS portfolio. Merx owned the equity in the AABS transactions and is now taking over the servicing of those 19 aircraft.

    ii Azerbaijan

    Bermuda is best known for the Article 83 bis agreement it has with Russia. However, in the past three years, a dormant Article 83 bis treaty with Azerbaijan was reactivated with a number of new aircraft and engines being financed through Bermuda SPV structures for different Azerbaijani operators.


    The UK government ratified the Convention on International Interests in Mobile Equipment and the associated Aircraft Equipment Protocol (known together as the Cape Town Convention) in November 2015. Bermuda's domestic legislation, the Bermuda International Interests in Mobile Equipment (Cape Town Convention) Act 2016, was passed in August 2016 but only came into force on 1 January 2018 once the United Kingdom extended the Cape Town Convention to Bermuda. Although Bermuda is an overseas territory of the United Kingdom, it was able to elect which declarations it wished to make under the Cape Town Convention. It elected to adopt Alternative A, which is one of the conditions required to comply with the OECD Aircraft Sector Understanding in order to obtain a discount on export credit financing. Now that the Cape Town Convention has been extended to Bermuda and is in force, Bermuda borrowers are be able to take advantage of the better interest rates charged by export credit agencies and financiers are able to ensure their security interests granted by such SPVs are registered on the International Registry.

    The Cape Town Convention applicable to Bermuda does not apply to any rights or interests that predate the coming into effect of the legislation in Bermuda on 1 January 2018 and such prior rights or interests will retain any priority they previously had under the laws of Bermuda.

    It is now possible for an irrevocable deregistration and export request authorisation (IDERA) to be granted by the registrant of the aircraft on the Bermuda Register naming another entity as an authorised party and filed with the BCAA. If the IDERA has been filed with the BCAA, then the authorised party is the only entity entitled to deregister the aircraft from the Bermuda Register. If the operator of the aircraft is not the registrant, then the BCAA will not accept an IDERA from the operator. The BCAA will only accept an IDERA from the registrant of the aircraft itself.


    1 Julie McLean is a director and Angela Atherden is an associate at Conyers Dill & Pearman Limited.

    2 As at 21 May 2018, the BCAA records indicate a total of 845 aircraft on the Register with 110 aircraft registered in the private category and 735 aircraft in the commercial transport category.

    3 Article 16(1) of the ANOTO.

    4 The mark consists of five letters commencing with the nationality mark VP-B or VQ-B and followed by the two letters assigned to the specific aircraft.

    5 Mortgaging of Aircraft (Procedures) Regulations, Section 10(2).

    6 'Goods' are defined to include all personal chattels (Sale of Goods Act 1978 Section 1(1)).

    7 Under Part V of the Sale of Goods Act 1978.

    8 Article 8 of Part IX of the ANOTO.

    9 See Schedule 1, Article 2.

    10 Misuse of Drugs Act 1972 and Proceeds of Crime Act 1997.

    11 Australia, Bahamas, Barbados, Dominica, Grenada, Guyana, Jamaica, Leeward Islands, Nigeria, St Lucia,
    St Vincent and the United Kingdom.