CAYMAN ISLANDS Law and Practice Contributed by: Sarah Humpleby, Alexandra Franklin, Peter Kendall and Sam Hall, Walkers
2.10.5 Other Conventions The Cayman Islands is not a party to the 1948 Geneva Convention on the International Recognition of Rights in Aircraft, nor to the 1933 Rome Convention on the Unification of Certain Rules relating to the Precaution - ary Arrest of Aircraft. The Cayman Islands is also not a signatory to the 1999 Montreal Convention nor the 1944 Chicago Conven - tion on International Civil Aviation. 3. Aircraft Debt Finance 3.1 Structuring 3.1.1 Restrictions on Lending and Borrowing There are no restrictions on foreign lenders financ - ing an aircraft locally or on borrowers using the loan proceeds. 3.1.2 Effect of Exchange Controls or Government Consents There are currently no foreign exchange controls or foreign exchange regulations under Cayman Islands law. 3.1.3 Granting of Security to Foreign Lenders Typically, a Cayman Islands borrower would be an exempted company, and there would be no restric - tions on granting security to foreign lenders. 3.1.4 Downstream, Upstream and Cross-Stream Guarantees Such guarantees are permissible under Cayman Islands law, provided that the company granting those guarantees is permitted to do so under its memoran - dum and articles of association. It is important to note that the directors of Cayman Islands companies have a fiduciary duty to act in the best interests of the company. It is considered good practice to obtain the consent of the shareholders where there is any ques - tion as to the corporate benefit of such guarantees. 3.1.5 Lenders’ Share in Security Over Domestic SPVs It is advisable for a lender to take share security over a domestic special-purpose vehicle which owns the financed aircraft; such security typically takes the form
official liquidation proceedings in the Cayman Islands, it is generally the case that the terms of the lease (which cannot be disclaimed) would provide for the procedure for repossession of the aircraft, remedies for loss of rent and provisions in respect of forfeit by the lessee of the security deposit and any mainte - nance reserves. 2.10 Cape Town Convention and Others 2.10.1 Conventions in Force The Convention and the Protocol (together, the “Cape Town Convention”) have been in force in the Cayman Islands as of 1 November 2015, pursuant to the Inter - national Interests in Mobile Equipment (Cape Town Convention) Act, 2015 (the ”CTC Act”). The Cayman Islands are not designated as an “entry point” under Article XIX of the Protocol. 2.10.2 Declarations Made Concerning Conventions Declarations made under the Convention are in Arti - cles 39 (1), 39 (4), 53 and 54 (2). Declarations made under the Protocol are in Articles XXX(1), XXX(2), XXX(3). 2.10.3 Application of Article XIII of the Protocol on Matters Specific to Aircraft Equipment Where a debtor has issued an IDERA, substantially in the form annexed to the Protocol, it may be submitted to the CAACI for recordation. 2.10.4 Enforcement of Conventions There is no known recent case law in the Cayman Islands enforcing the Convention or the Protocol. Secured creditors have recently been assisted with the deregistration and export from the Cayman Islands of three aircraft, pursuant to IDERAs granted in respect of them. This appears to be the only example of IDE - RA deregistration/export post-implementation of the Cape Town Convention in the Cayman Islands. The priority and effectiveness of a right or interest cre - ated by any document capable of registration within the meaning of, and to the extent provided by, the Cape Town Convention will, if Cayman Islands law applies, be determined in accordance with the Cape Town Convention.
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