Aircraft Registration (Jersey) Law 201-

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A decision made 28 April 2014:

Decision Reference: MD-E-2014-0033
Decision Summary Title :	Draft Aircraft Registration (Jersey) Law 201-		Date of Decision Summary:	24th April 2014
Decision Summary Author:	Strategic Policy Manager		Decision Summary: Public or Exempt?	Public
Type of Report: Oral or Written?	Written		Person Giving Oral Report:	n/a
Written Report Title :	Report to Draft Aircraft Registration (Jersey) Law 201-		Date of Written Report:	4th April 2014
Written Report Author:	Strategic Policy Manager		Written Report : Public or Exempt?	Public
Subject: Approval of the draft Aircraft Registration (Jersey) Law 201- for lodging
Decision(s): The Minister approved the draft Aircraft Registration (Jersey) Law 201- for lodging, and directed that the document should be lodged au Greffe so as to allow the Law to be debated by the States.
Reason(s) for Decision: In order to establish and subsequently deliver the Jersey Aircraft Registry, and its services, it is necessary to have the requisite legislative framework - Aircraft Registration (Jersey) Law 201- which falls under the responsibility of the Minister for Economic Development. In addition, consequential amendments or replacement of existing legislation relating to air navigation, rules of air safety and security that are required as a result of the establishment of the Registry and which falls under the aegis of both the Minister for External Relations and Treasury and Resources Minister have been prepared. Separate Ministerial Decisions will be prepared to cover these areas. The Attorney General has confirmed that the Draft Law is compliant with the European Convention on Human Rights.
Resource Implications: To fulfil the functions and responsibilities of the Registrar of Aircraft as detailed in the Aircraft Registration (Jersey) Law 201- it will be necessary to recruit and appoint a Registrar.
Action required: Forward the signed Ministerial Decision to the Greffe; Forward the draft Aircraft Registration (Jersey) Law 201- and report to the Greffe to be lodged; and request the Greffier of the States to arrange for the projet to be lodged 'au Greffe’
Signature: Senator AJH Maclean		Position: Minister for Economic Development
Date Signed:		Date of Decision (If different from Date Signed):

Aircraft Registration (Jersey) Law 201-

Introduction

The Aircraft Registration (Jersey) Law 201- (AR(J)L201-) forms the major part of the aviation legislative bundle for the establishment and delivery of the Jersey Aircraft Registry (JAR). The following report gives a précis of the development to date of the JAR as well as highlighting the salient points of the AR(J)L 201-.

In September 2013, the Minister for Economic Development made a policy decision to establish a Jersey Aircraft Registry (JAR) for the registration of aircraft, aircraft engines, aircraft mortgages and subsequently aircraft engine mortgages.

The structure, which has been chosen, is similar to that of the highly successful Isle of Man Aircraft Registry, in its functions. In this model, the Registrar’s office remains directly under the responsibility of the Minister, whilst the airworthiness surveys, aircraft inspections, continuing airworthiness technical advice and flight operations advice are outsourced to an experienced, competent, efficient and reliable supplier of service-oriented regulatory services practices.

To enable the establishment and functioning of the JAR, it is necessary to introduce primary and secondary legislation whilst revoking an existing Order in Council. Accordingly, the Minister for Economic Development, along with the Minister for External Affairs and Treasury and Resources Minister propose the introduction of the following pieces of legislation:

Aircraft Registration (Jersey) Law 201-
Civil Aviation(Amendment of Law) (Jersey) Regulations 201-
Public Finances (Transitional Provisions – States Trading Operations) (Amendment) (Jersey) Regulations 201-
States of Jersey (Transfer of Functions No. 7) (Economic Development to External Relations) (Jersey) Regulations 201-
Air Navigation (Jersey) Law 201-

And the revocation of:

Air Navigation (Jersey) Order 2008

It must be noted that only (i) falls under the aegis of the Minister for Economic Development. Points (ii), (iv) and (v) fall under the responsibility of the Minister for External Relations and point (iii) is the responsibility of the Minister for Treasury and Resources. Point (vi) is for information purposes, as the Order in Council was created by the UK Privy Council and as such the States of Jersey are not required to do anything about this.

Background

Since 2011, a number of reports have been commissioned that looked at strategic outline cases for either a Jersey Aircraft Registry or else a joint aircraft registry with Guernsey. Both reports indicated significant income generation for the Islands, with estimates ranging from as much as £17 million to over £30 million, these figures being based on the pre-economic downturn of 2008. Recent statistics, however, from a number of the larger aircraft manufacturers are more encouraging in terms of new aircraft being built/ordered.

Following the findings of the Reports, a political decision was made to work towards establishing an aircraft registry to capture the economic opportunities provided by this large market and to do so in conjunction with Guernsey to successfully further the political aims of greater inter-Island collaboration. However, following lengthy discussions over a number of years between Jersey and Guernsey as to the various models such a collaborative project could adopt, the decision was made by the Minister for Economic Development and the Commerce and Employment Minister, in August 2013, to proceed individually.

As a consequence, Guernsey proceeded with the establishment and subsequent launch of its own aircraft registry in December 2013. In Jersey, the Minister for Economic Development formally announced Jersey’s intention to establish the Jersey Aircraft Registry in September 2013 (MD-E-2013-0089), with a target launch date of the end of Q2, 2014.

To draw up suitable terms of reference, co-ordinate the project and meet the anticipated target date, a Working Group (Jersey Aircraft Registry Working Group) (JARWG) was established, chaired by the Assistant Minister for Economic Development, Deputy James Baker and consisting of key stakeholders from both the public and private sector. In addition, the former Director of Civil Aviation for the Isle of Man, who established the Isle of Man Registry and who now heads up the Aviation Division of Appleby, was contracted to advise on the development of the JAR.

After extensive JARWG discussions, detailed Law Drafting Instructions, under MD-E-2013-0103, were drawn up for the necessary introduction of a package of new legislation to create new laws, amending existing provisions and revoke out-of-date orders where necessary. The main piece of legislation to enable the aircraft registry to function, the draft AR(J)L 201- was distributed to Jersey Finance members as a closed consultation and to other stakeholders for comment in February 2014.

A review was then held, in early March, with a representative from the UK Department for Transport, to consider the draft AR(J)L 201- and other related legislation in an effort to provide comfort to the Ministry of Justice as to the content and objectives and thus hopefully speed the later Royal Assent process. It should be noted that the JAR will at all times remain a sub-registry of the UK.

Subsequently, a meeting was held with independent legal representatives, from a number of local law firms, to finalise the finer details of the framework for the creation and subsequent enforcement of mortgages on tangible moveable assets over both aircraft and aircraft engines. The concept over a tangible moveable has not existed before and the creation of the charges registry is seen as potentially one of the largest and most significant income streams for the Island.

At this juncture, the business case for the JAR is still in the final stages of construction and will include the evaluation of pricing points aligned to the JAR’s Unique Selling Points (USPs). In any event, publication of the business case prior to debate could potentially damage the JAR in that its competitors would be able to estimate its competitive position and respond accordingly.

However, by way of an update, the Invitation to Tender for the Aircraft Technical Service was advertised the week of 17 March and it is anticipated that the preferred provider will be selected during the week of 28 April. It is assumed that the contract should be cost neutral to both parties once the Register is well established and the revenue generating opportunities for the Service Provider are likely to grow in value in line with increased numbers of aircraft and ancillaries on the Register. There are unlikely to be any upfront costs for the States of Jersey to meet with respect to the Service Provider, save possibly the synchronisation of IT systems.

A scheme of charges is currently being developed and will be agreed with the preferred provider as to how much they will be paid and what the client will be charged. Estimations of the number of aircraft, aircraft engines, aircraft mortgages and aircraft engine mortgages to be registered (and their annual re-registrations) are currently being considered as is the likely income streams from these activities. Other income generation will include revenues from intermediaries for the creation of financial structures, and technical services, for example, aircraft maintenance, and hangar space should the aircraft reside in Jersey. Consideration will also be given to the creation of job opportunities for professionals and craftsmen.

From the Jersey proposition perspective, the JAR will form part of a suite of offerings, including an enhanced shipping registry, targeting potential high wealth residents and businesses moving to the Island, as well as being opened up to aircraft owners globally.

AR(J)L201-

General

The ARJL201- is the principal Law which allows the JAR to function. It sets out provisions dealing with:

the appointment, functions and powers of the Registrar;
the registration of aircraft, aircraft engines, aircraft mortgages and aircraft engine mortgages;
the enforcement of aircraft mortgages and aircraft engine mortgages;
the registration of births and deaths;
miscellaneous provisions;
qualified persons;[1] and
classification of aircraft [2].
Included in the provisions are relevant offences and penalties for contravention.

Part 1 (‘Interpretation’) defines “aircraft,” “aircraft engine,” “aircraft mortgage” and “aircraft engine mortgage” for the purposes of the JAR. It should be noted that the decision was taken to include the option to register an “aircraft engine” separately from an “aircraft” in order for Jersey to take advantage of the specifically engine-related sale and leasing sectors. This has been identified as a USP for the JAR and allows for potential income generation without the usual regulatory needs attaching to registering an aircraft – particularly the requirement for the person applying to register to be a “qualified person.” It should be understood that, in its present form, a Jersey registered aircraft shall not fly for the purposes of commercial air transport or aerial work except in the case of a transfer of functions under Article 83 [3](bis) of the Chicago Convention.

The concept of an “aircraft mortgage” and “aircraft engine mortgage” is completely new to the Island as Jersey Norman customary law does not permit the creation of mortgages over ‘tangible movables [4]’. Accordingly, there is express reference in the Law that customary rules and the Loi 1880 sur la propriete fonciere shall not apply [5]. Work being undertaken to amend the Security Interests (Jersey) Law 2012 (‘SIL12’) is presently looking to include ‘tangible movables’ and bring them under the governance of SIL12. However, after discussions between policy and legal advisers, it was concluded that this should be continued as a separate work stream from the JAR. This decision was taken in the interests of both expediency and providing a simple framework for the end-user and remains more consistent with the approach taken for the registration of Jersey ships (also outside the scope of SIL12).

Accordingly, provisions under the ARJL201- permit the registration of a mortgage in the form of a hypothec over a Jersey registered aircraft or a Jersey registered engine. Also included is the ability to register foreign law mortgages, although not expressly stated. The decision to adopt a ‘hypothec’ rather than an English-style mortgage was to allow title to remain with the mortgagee. Included in these provisions is thus an appropriate definition of “mortgage agreement” as well as the appropriate enforcement powers (see Part 4), both of which have been closely based on SIL12 and the Security Interests (Jersey) Law 1983.

It is predicted that the major income stream from the registry will come not from aircraft/engines registrations but from the ability to create and enforce Jersey mortgages in this context.

The Registrar: (Articles 2-8)

The Registrar of Aircraft shall be appointed by, and may be removed by, the Minister. He or she shall be responsible for administering the registration of aircraft, aircraft engines, aircraft mortgages and aircraft engine mortgages.

The Registrar’s functions, ancillary powers and powers to apply to the Royal Court for directions (in determining any question of fact, law or procedure) are set out.

The Registry: (Articles 9- 38 & Schedule 1)

Only a “qualified person” may hold a legal or beneficial interest in a Jersey registered aircraft. A “qualified person” is defined as a natural or legal person from the EEA, Commonwealth Countries [6] and Switzerland (see Schedule 1)[7]. An individual does not have to be a “qualified person” to hold a legal or beneficial interest in an aircraft engine.

There are also other restrictions on the registration and use of a Jersey registered aircraft. These include where the aircraft is already registered in another jurisdiction,[8] could more suitably be registered elsewhere or where it would not be in the public interest for the aircraft to be registered in Jersey.

The form of application for the registration of an aircraft, engine, mortgage,[9] or priority notice [10] is provided for at Part 3. Also included are relevant provisions governing the discharge of mortgages;[11] indemnities provided by the States;[12] the creation of nationality/registration marks; public access; opening hours; the form of certificates of registration; amendments; rectification and cancellation of register entries.

Liability:

The ARJL201- provides that, subject to Article 38 (‘Indemnities’), no person or body shall be liable in damages for anything done or omitted in the discharge or functions under the Law unless it can be shown that the act or omission was done in bad faith.

This article applies to the Minister and the Registrar (and relevant officers, servants and agents).

Regulation-making powers of the States:

There are various Regulation-making powers of the States which are set out below:

General provisions concerning registration of aircraft: (Article 24)

The States may adapt or modify any provision of Part 3 (‘Registration’) as it deems necessary or expedient for the purpose of providing for the temporary transfer of aircraft to or from the Register. This may be done either generally or in relation to a particular case or class of cases.

Information required by the Registrar: (Article 59)

The States may require any person to provide the Registrar (in such form and at such times as may be prescribed), the information which the Registrar may reasonably require for the exercise of his functions.

Power to give effect to the Cape Town Convention: (Article 63)

The States may give effect to the Convention on International Interests in Mobile Equipment and the associated Protocol [13].

Regulations: (Article 65)

The States may make other such provision as it thinks fit for carrying the Law into effect. It may amend Article 1 (‘Interpretation’) and Part 2 (‘Appointment, Functions and Powers of the Registrar’); create offences and penalties (not to exceed imprisonment for two years and a fine) and make consequential and incidental amendments.

Order-making powers of the Minister for Economic Development:

Annual renewal procedure: (Article 10)

The Minister may provide that the registration of aircraft and aircraft engines is subject to an annual renewal procedure. It should be noted that the Order would not apply to annually renewing the registration of the aircraft mortgage.

The Order would specify information to be provided, the procedure to be followed, sanctions and remedies and the prescribed annual renewal fee.

Restrictions on registration and use of registered aircraft: (Article 19)

The Minister may provide for additional exceptions to the provision that a Jersey registered aircraft shall not fly on any flight for the purpose of commercial air transport or aerial work.

Nationality mark and registration mark of aircraft: (Article 21)

The Minister may prescribe the nationality mark and registration mark to be assigned by the Registrar for a registered aircraft. The nationality mark assigned id ‘ZJ’ followed by three characters, save the use of ‘I’, ‘O’ or ‘S’[14]

Service of documents: (Article 57)

The Minister may make provision for the service of documents to be effected by means in addition to or instead of the methods described.

Amendment of Schedules: (Article 64)

The Minister may by order amend the Schedules. Schedule 1 sets out what is meant by “Qualified Persons.” Schedule 2 sets out “Classification of Aircraft”.

Orders: (Article 66)

The Minister may by Order prescribe any matter which is to be prescribed under the Law or Regulations.

[1] Those eligible to register an aircraft.

[2] General classification.

[3] Allows for an agreement to be made between ICAO contracting States which transfers some regulatory and oversight functions from one State to another.

[4] See Article 29.

[5] See Article 29.

[6] Channel Islands are included in the Commonwealth.

[7] It should be noted that Article 23 provides that the registration of an aircraft which is the subject of an undischarged aircraft mortgage entered on the register does not become void (as it otherwise would) in the event that a person other than a qualified person becomes entitled to a legal or beneficial interest in the registered aircraft.

[8] And that registration does not cease by operation of law.

[9] Aircraft mortgages and aircraft engine mortgages as between themselves rank in order or registration, the first in time having priority.

[10] Preferred debts and preferred liens have priority over aircraft mortgages and aircraft engine mortgages. The ARJL201- defines “preferred debt” as any taxes or fees owed to the States in respect of that aircraft or engine and “preferred lien” means any lien created by the detention of an aircraft for unpaid fees including airport fees, route charges and charges for working on an aircraft or aircraft engine.

[11] In the interests of mortgagee protections, it should be noted that the procedure at Article 15 (‘Cancellation of registration of aircraft or aircraft engine’) does not include the ability to cancel a mortgage.

[12] Subject to the list of exceptions, a person who suffers loss directly resulting from an error or omission of the Registrar or any person authorised to perform a function of the Registrar – subject to Article 24 of the Public Finances (Jersey) Law 2005 – may be indemnified.

[13] Signed by the UK on 16th November 2001.

[14] The Ministry of Defence (MOD) use the mark ‘ZJ’ followed by either three numbers, or two characters. The MOD are content to assign the mark ‘ZJ’ however the letters of ‘I’, ‘O’ and ‘S’ are not to be used to prevent confusion with the numbers of ‘1’, ‘0’ and ‘5’. This still yields 17,549 permutations.