The primary purpose of an IDERA is to protect the rights of the party holding an interest in the aircraft (such as a mortgagee or lessor) by allowing them to remove the aircraft from the register without the consent of the aircraft owner in cases of non-payment or breach of contract. This provides a level of security to financial institutions, ensuring that they can take swift action to recover their assets if necessary.

On 6th July 2021, amendments to the Aviation Registration Act (Chapter 503 of the Laws of Malta) came into effect, aligning Maltese legislation with EU Regulation 2018/1139 and clarifying aircraft registration procedures. The key changes included:

1. Aircraft Definition: The definition now covers unmanned aircraft subject to EASA certification, including those operated autonomously or remotely.
2. Registration Data: More detailed data requirements for both the registered person and aircraft owner are now formalized for clarity.
3. IDERA & Power of Attorney Recording: Details of IDERAs and powers of attorney must be recorded in the Malta Aircraft Register. Only one IDERA or power of attorney may be recorded per aircraft, and all relevant parties must be listed.
4. Director General’s Obligations: The Director General must consult with stakeholders when making corrections to the register or certificate of registration, particularly when dealing with mortgages or IDERAs.
5. Cancellation of Aircraft Registration: The process for cancelling registration due to an IDERA or power of attorney is streamlined, requiring consent from the relevant parties, including mortgage holders.
6. Director General’s Discretion on Exemptions: The Director General has the discretion to exempt certain aircraft from registration marks or fireproof plates, while still requiring evidence of ownership and compliance with EU regulations.

These amendments aim to improve the efficiency and clarity of aircraft registration and related procedures in Malta.

A few months after the introduction of these amendments, in a landmark ruling on 8th November 2021, the Maltese First Hall, Civil Court, presided by Hon. Justice Robert G. Mangion, upheld the enforceability of IDERAs under Maltese aviation law. The case involved Air X Charter Limited and Air X Aircraft Finance I Limited (the plaintiffs), who sought to block the de-registration of their aircraft, which were subject to IDERAs held by Avmax Aircraft Leasing Inc. and the Bank of Utah due to unpaid lease obligations caused by the COVID-19 pandemic.

The court confirmed that the Maltese Aircraft Registration Act, in alignment with the Cape Town Convention, mandates the implementation of IDERAs, which give creditors (such as Avmax and the Bank of Utah) the irrevocable right to de-register aircraft without the debtor’s consent. The court emphasized that even if the de-registration harms the business or employment of third parties, this does not justify obstructing the creditor’s rights.

The plaintiffs failed to prove they had met the terms of a Memorandum of Understanding (MOU) with Avmax and did not demonstrate valid grounds to block the IDERAs. The court also refused to honour an interim Canadian court ruling, as it was not bound by non-EU decisions. The decision reinforced the rights of creditors under IDERAs, highlighting their special status in aviation law, and rejected the plaintiffs’ request for a prohibitory injunction.

This landmark judgement strengthens the legal framework around IDERAs, emphasizing their enforceability and the limited ability of debtors to challenge their exercise in Malta.

In a decree delivered on 24th May 2023, the Maltese First Hall, Civil Court, presided by Hon. Justice Audrey Demicoli, reinforced this ruling. The 2023 case involved Hi Fly Limited (the Operator), Flypop Limited (the Sub-Lessor), and UMB Bank (the Owner Trustee), where the Owner Trustee sought to de-register an Airbus A330 under an IDERA due to the sub-lessor’s termination of the lease agreement following the Operator’s default on payments.

The Operator challenged the de-registration, claiming the Sub-Lessor acted in bad faith and that the termination was unjustified. The Operator sought a warrant of prohibitory injunction to prevent the Maltese Transport Authority from proceeding with the de-registration.

However, the court, following the precedent set in the Air X Charter case (2021), reaffirmed that once an IDERA is granted, the holder (or their certified designee) has the legal right to enforce the de-registration, regardless of the Operator’s claims of bad faith or the negative impact on its business. The court emphasized that the Cape Town Convention and the Aircraft Protocol, incorporated into Maltese law, require strict adherence to the enforcement of IDERAs. The court rejected the request for an injunction, asserting that the de-registration of the aircraft was not within the Operator’s rights to obstruct, even if it harmed its interests.

This ruling further solidifies Malta’s position as a jurisdiction that adheres to the Cape Town Convention, upholding the rights of creditors under IDERAs, and reinforcing Malta’s reputation as a leading jurisdiction for aircraft registration and enforcement of international aviation agreements. The court acted swiftly by lifting the provisional injunction within two weeks, showing Malta’s commitment to its legal obligations under international aviation law.

For more information on securities that can be registered over a Maltese registered aircraft, contact us on [email protected]