CAYMAN ISLANDS Law and Practice Contributed by: Sarah Humpleby, Alexandra Franklin, Peter Kendall and Sam Hall, Walkers
2.4.6 Priority of Third Parties’ Rights There are a limited number of third-party rights which would take priority over a valid security interest cre - ated in favour of a secured party. These are: • the right accorded to any party by statute to detain the aircraft, for example: (a) the lien granted in favour of the Cayman Islands Airports Authority (CIAA) in respect of airport fees and charges pursuant to the Air - ports Authority Act (as amended); and (b) a lien granted in favour of the CAACI in respect of the CAACI’s fees and charges pursuant to the Civil Aviation Authority Act (as amended); or • certain rights arising by operation of common law, for example, a possessory lien in respect of work done on the aircraft (whether before or after the creation of the mortgage) on the express or implied authority of any party lawfully entitled to posses - sion of the aircraft (examples of such liens are the seller’s lien, banker’s lien and repairer’s lien). 2.5 Insurance and Reinsurance 2.5.1 Requirement to Engage Domestic Insurance Companies It is not mandatory that all or part of the insurance be placed with domestic insurance companies unless the aircraft is ordinarily based in the Cayman Islands, in which case, local insurance could be used. Insur - ance is typically placed with the international insur - ance markets in London and New York. 2.5.2 Mandatory Insurance Coverage Requirements No mandatory insurance coverage requirements are imposed. 2.5.3 Placement of Insurance Outside of Jurisdiction The question of insurance and reinsurance will depend on the requirements of the parties to the transaction, and in particular, on the jurisdiction of the lessee. 2.5.4 Enforceability of “Cut-Through” Clauses There are no Cayman Islands statutory provisions relating to “cut-through” clauses. The Cayman Court
1969”) which states that, in essence, there are certain circumstances where: • material loss or damage caused to any person or property as a result of an aircraft while in flight, taking off or landing can result in damages being recoverable without “proof of negligence or inten - tion or other cause of action, as if the loss or dam - age had been caused by the wilful act, neglect, or default of the owner of the aircraft”; and • a legal liability can be created “in some person other than the owner to pay damages in respect of the said loss or damage, the owner shall be enti - tled to be indemnified by that other person against any claim in respect of the said loss or damage”. As a result, the owner can seek indemnification from the operator of the aircraft. A passive owner will typically rely on the exemption under Section 76 (4) of the UK Civil Aviation Act, 1982 (as extended to the Cayman Islands by the Civil Avia - tion Act 1982 (Overseas Territories) (No 2) Order 2001), which states that if an owner has bona fide demised, let or hired out the aircraft for more than 14 days, and no member of the crew is employed by the owner, Section 40 (2) of the CAA 1969 will take effect as if ref - erences to the owner are substituted with references to the person to whom the aircraft has been demised, let or hired out. 2.4.5 Attachment by Creditors The lessee may have allowed certain liens to accrue against the aircraft (eg, a possessory lien arising from a third party having worked on the aircraft to improve its condition). A lien constitutes an unassignable personal right of the lienor to detain the chattel until their claims for payment against the owner have been satisfied. Accordingly, a creditor with a lien over the aircraft may be able to detain the aircraft until the relevant outstanding debt is settled. See 2.4.6 Priority of Third Parties’ Rights .
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