Cayman Islands Transport Law Review 2018

Partners Richard Munden and Nick Dunne and associate Edward Rhind, in collaboration with Law Business Research, have provided their insight for the Cayman Islands chapter of the Transport Finance Law Review 2018.

Despite having a small domestic transport market, the Cayman Islands has a high profile in international transport finance transactions, particularly for commercial aircraft and ships. The authors would conservatively estimate that each year in excess of US$4 billion dollars of new aircraft and ship deliveries are financed using Cayman Islands structures.

The Cayman Islands is a popular jurisdiction for structuring such deals for a number of reasons including: (1) offering the political and economic stability of a British overseas territory that has been a leading financial services jurisdiction for several decades; (2) a combined common law and statute-based legal system that reflects many principles of the laws of England and Wales with case law from the English courts being persuasive (although not binding) in the courts of the Cayman Islands; (3) the Cayman Islands currently has no income tax, corporate tax or capital gains tax and no withholding tax is imposed in the Cayman Islands on any cash flows; (4) the Cayman Islands boasts a substantial and sophisticated financial and legal services sector and many professionals in the sector have extensive experience from other leading financial centres; and (5) the Cayman Islands government works closely with the private sector to implement changes to practice and legislation to promote the competitiveness of the jurisdiction in respect of both established and new products. Most financing structures involve a Cayman Islands special purpose vehicle (SPV), typically a Cayman Islands exempted limited company, and this is discussed further below.

In addition to the use of Cayman Islands financing structures for transport assets situated or registered outside the islands, the Cayman Islands is often the preferred state of registry for ships (commercial and yachts) and private aircraft; the respective registers are maintained by government agencies (the Maritime Authority of the Cayman Islands and the Civil Aviation Authority of the Cayman Islands) rather than private entities or private-public enterprises. Each registry has the reputation for being professional, responsive and flexible and providing effective oversight of compliance by registered assets and users with applicable rules and conventions. Major financial institutions and other lenders that participate in aircraft and ship finance for assets registered with these authorities benefit from regulatory oversight to support residual value and a registration system to determine priority of security interests. Other alternative sources of finance are also having an increasing role in the market.

 

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CAYMAN ISLANDS
Nick DunnePartnerT +1 345 814 4548nick.dunne@walkersglobal.com
Edward RhindAssociateT +1 345 914 4296Edward.Rhind@walkersglobal.com