MALAYSIA Law and Practice Contributed by: Shelina Razaly Wahi and Vincent Chan Siew Onn, Abdullah Chan & Co
operated by a Malaysian air operator would need to be registered with CAAM. 2.3.8 Requirements for Documents Concerning Registration CAAM does not require any document to be notarised and/or authenticated before it will accept and process the registration of an aircraft. Documents that are not in Bahasa Malaysia, or in a foreign language other than English, will need to be officially translated into the English language. 2.4 Lessor’s Liabilities 2.4.1 Tax Requirements for a Foreign Lessor A foreign lessor that is deemed to be a tax resident of Malaysia would be subject to income tax upon leasing an aircraft or engine to a Malaysian lessee. The obligation to deduct withholding tax on payments made to a foreign lessor is on the lessee. Failure to withhold accordingly would result in a penalty being imposed on the lessee/payer. 2.4.2 Effects of Leasing on the Residence of a Foreign Lessor Being a party to, or attempting to enforce, or enforcing a lease, does not deem a foreign lessor to be a resi - dent, domiciled or carrying on business in Malaysia. 2.4.3 Engine Maintenance and Operations There are no liabilities in respect of aircraft or engine maintenance and operations imposed on a foreign lessor under a lease as a result merely of the foreign lessor being a party to such lease. 2.4.4 Damage or Loss Caused by an Asset Pursuant to the Civil Aviation Act 1969, where material damage or loss is caused by an aircraft in flight, taking off or landing, or by any person in any such aircraft, or by any article falling from any such aircraft, to any person or property on land or water, damages shall be recoverable from the owner of the aircraft in respect of such damage or loss, without proof of negligence or intention. 2.4.5 Attachment by Creditors A creditor of a domestic lessee could attach an aircraft leased to that domestic lessee but owned by a differ -
ent entity in the event a creditor was able to obtain a court order that would permit such attachment: for example, if a creditor were to obtain a monetary judg - ment and then sought to enforce the monetary judg - ment by way of a writ of seizure. 2.4.6 Priority of Third Parties’ Rights There are certain liens that will take priority over a les - sor’s rights, although liens are generally not registrable in the Aircraft Register. This includes liens in favour of airline employees for unpaid wages, liens or other rights of an authority of Malaysia relating to taxes or other unpaid charges and liens in favour of repairers of an aircraft object in their possession to the extent of service or services performed. 2.5 Insurance and Reinsurance 2.5.1 Requirement to Engage Domestic Insurance Companies Obtaining insurance from any party other than a licensed general insurer (ie, licensed pursuant to the Financial Services Act 2013) requires the prior approv - al of the BNM. In practice, domestic insurance com - panies would provide insurance coverage and the domestic insurance companies would then reinsure the insurances with foreign insurance companies – in respect of the liability and hull insurances. 2.5.2 Mandatory Insurance Coverage Requirements Article 50 of the Montreal Convention 1999, which mandates state parties to require a carrier to maintain adequate insurance covering the carrier’s liability, has been incorporated into Malaysian law pursuant to the Carriage by Air Act 1974. 2.5.3 Placement of Insurance Outside of Jurisdiction Pursuant to the Financial Services Act 2013, except with the prior written approval of the BNM, no person shall enter into or cause to be entered into, a contract of general insurance of such description as may be prescribed by the BNM with an insurer other than a licensed general insurer. At the moment all licensed general insurers are Malaysian entities. Reinsurances may be placed outside Malaysia.
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