Aircraft Registry - Ministerial Response - 23 January 2013

Findings

Comments

1

It has been proven elsewhere, in  comparable  jurisdictions  to Jersey,  that  a  successful Aircraft  Registry  project  can lead  to  significant  economic benefits, through the economic flow  generated  from  the wealthy  individuals  and corporations  registering  their aircraft  and  then  accessing  a range  of  supporting  services that can be sold to them.

The  latest  statistics  received,  from  2007, indicate  that  sales  of  aircraft  were  on  the increase.  No  further  statistics  have  been received post the economic downturn.

That said, it is recognised that a registry will add to the Jersey proposition for high value businesses,  or  wealthy  residents  considering re-locating to the Island. The Register will be an  additional  tool'  that  the  Island  and  its financial services sector can use to stimulate extra business.

2

Launched in May 2007, the Isle of  Man  Aircraft  Registry announced the achievement of registering its 500th aircraft by June  2012  and  has  generated significant amounts of revenue for  locally  based  associated industry.

Companies that register aircraft in the Isle of Man are in a unique position which enables them  to  become  VAT-registered.  Through complicated,  legal,  financial  structures, companies  can  claim  back  the  VAT  on  the purchase.

Jersey is not in such a position, and will need to  determine  its  own  unique  selling proposition.

Findings

Comments

3

The concept of establishing an Aircraft  Registry  in  the Channel  Islands  has  been championed  to  the  States  of Jersey  by  some  private stakeholders  since  at  least 2005.

4

By January 2010, the Aircraft Registry had been identified as a  potential  winner'  by  the Economic  Development Department  in  Jersey  and Commerce and Employment in Guernsey,  as  part  of  their project  to  identify  areas  of common  interest  which  could deliver  improvements  in service or cost saving through the  efficiency  gains  of  joint working.

Discussions  are  currently  ongoing  with Economic  Development  and  Guernsey's Commerce  and  Employment  Department. Officials  from  both  Islands  are  working together to seek to identify the best way to proceed  and  hope  to  be  able  to  make  an announcement on a final decision very shortly.

Discussions  with  the  Director  of  Civil Aviation  and  officials  from  Commerce  and Employment  have  concluded  that  it  is  not insurmountable for Jersey to get up to speed on  the  project,  as  much  of  the  legislative changes are the same in both jurisdictions.

5

It  is  clear  that  the  Aircraft Registry  project  in  Guernsey has  been  successful  in achieving  significant  progress, but Jersey's part in the project has been subject to criticism for quite the opposite.

6

Since 2005, Jersey has failed at a  number  of  key  moments  in the Aircraft Registry project to either  recognise  or  seize  the opportunity  to  deliver  the momentum required to achieve significant progress.

That  is  not  accurate  and,  in  any  event,  the economic  climate  today  is  significantly different to that in 2005.

7

The announcement of the new partnership agreement between SGI Aviation and the States of Guernsey in May 2012 marked a  significant  point  in  the Aircraft  Registry  project,  and the  context  of  Jersey's  role within it.

Noted, please see Comment' in response to Point 4 above.

Findings

Comments

8

The  desire  to  see  Jersey continue  to  pursue  a  joint Channel  Islands  Aircraft Registry  was  a  conclusion  of the  overwhelming  majority  of the  stakeholders  that  engaged with  the  Panel  during  the Review.

Noted, this echoes the view of the Minister and the Department.

9

Given the initiative established by Guernsey, it is likely that a Channel  Islands  Aircraft Registry would be administered from  Guernsey.  As  an administrative  function however, whether it is located in  Guernsey  or  Jersey  is relatively immaterial. It is the potential  to  access  the associated  business  flowing from  the  establishment  of  a Channel  Islands  branded  and marketed  Registry  which  is most important.

Agreed.

10

During  negotiations  with Guernsey,  the  Minister  for Economic Development linked the  development  of  a  joint Channel  Islands  Aircraft Registry based in Guernsey to a joint  Channel  Islands Category 1  Shipping  Registry based in Jersey.

It  is  the  Public  Services  Department  in Guernsey  who  has  responsibility  for  the Guernsey Category 2 Shipping Registry.

Economic Development's counterparts are the Commerce and Employment Department.

11

The Panel understands that the States  of  Guernsey  do  not presently  intend  to  pursue  the development of a joint Channel Islands  Category 1  Shipping Registry, requiring a change of approach from the Minister for Economic Development to this and  the  Aircraft  Registry projects.

The Public Services Department in Guernsey have  intimated  that  they  have  no  desire  to move  to  a  joint  Channel  Islands  Category 1 Shipping Registry. Therefore, there appears to be no barrier to Jersey considering a move to Category 1 in isolation, creating a Category 1 Channel Islands Registry to be based in Jersey.

Findings

Comments

12

Whilst  accepted  that  in principle  it  may  be  possible, there  is  little  enthusiasm  for Jersey  to  piggyback'  on  a Guernsey  Aircraft  Registry, whereby Jersey would play no active role in the Registry but would  seek  to  take  advantage of  proximity  and  attract associated  business  and economic flow.

Noted,  please  see  Comment  in  response  to Point 4 above.

13

Administrative costs, liabilities in the event of an accident, tax, and the lack of a unique selling point were all highlighted to the Panel as issues that would need to be addressed for an Aircraft Registry to be a success.

This  point  is  noted;  however,  please  see Comment in response to Point 4 above.

14

Whilst  the  UK  Air  Accident Investigation  Branch  is  likely to  be  the  designated  chief investigating  authority  in  the event of an accident involving a Channel  Islands  registered aircraft,  a  clear  position  to mitigate potential liability and cost implications to the States of Guernsey and Jersey has yet to  be  established,  with consideration  being  given  to insurance.

Noted, but this will be considered in the round, as  outlined  in  the  Comment  in  response  to Point 4 above.

15

As Jersey has GST set at 5% and  Guernsey  has  no comparable tax, it is clear that Jersey  faces  a  significant competitive  disadvantage  to Guernsey  which,  unresolved, would  appear  to  seriously undermine Jersey's chances of generating associated economic activity  from  an  Aircraft Registry.

This has been noted, and we are confident this can be resolved.

Findings

Comments

16

There appears to have been a lack of urgency and momentum generated  by  the  Minister  for Economic  Development  to explore  ways  of  resolving  the GST  issues.  There  is  some encouragement  that  the Minister  for  Treasury  and Resources  has,  nevertheless, begun  preliminary  work  on identifying  the  issues  his Department  faces  and  the possible  solutions  to  be examined.

The  Minister  for  Economic  Development welcomes the intervention of the Minister for Treasury and Resources in identifying the GST issues and examining possible solutions.

However,  the  Minister  for  Economic Development  strongly  refutes  the  allegations that  there  has  been  a  lack  of  urgency  in exploring ways of resolving the GST issues. Senior Officers from Economic Development have  met  Senior  Treasury  Officials  on 2 occasions in October and November 2011 to discuss this exact same issue.

17

The  issue  of  competitive disadvantage to the Isle of Man and other Registries presented by  VAT  is  a  challenge,  but does  not  appear  to  be insurmountable.  The  Channel Islands  Strategic  Case  report established  that,  due  to  the different VAT regimes, it was likely  that  different  clients would  be  attracted  to  the Channel  Islands  Registry  than those  using  the  Isle  of  Man, depending upon their place of business  and  planned  base  of activity for their aircraft.

This will form part of the unique selling point for the registry.

18

There  is  some  concern  about the  reliance  on  business  case figures from pre-2008 that may now  be  outdated  given  the recent nature of the local/global economy.  However,  there remains a confidence amongst a number of stakeholders about the  underlying  business  case and  the  health  of  markets relevant  to  a  Channel  Islands Aircraft Registry.

This concern has been raised on a number of occasions.  However,  the  number  of  aircraft registered in the Isle of Man has continued to increase,  in  part  due  to  new  ownership structures that have been developed.

Findings

Comments

19

Allowing  the  registration  of aircraft  under  fractional ownership  offers  the  potential for  a  genuine  unique  selling point  of  a  Channel  Islands Aircraft  Registry,  but  the relevant  work  assessing  the potential associated risk has yet to be undertaken.

This will be one of the issues that will need to be considered as part of the discussions on the registry.

20

It is envisaged that, initially, a limited  amount  of  technical expertise  both  directly  and indirectly  associated  with  an Aircraft  Registry  would  be required to be brought in from outside the Island. However, in addition to some immediate job opportunities  for  local  people, others could be created through training and apprenticeships.

This will be considered as part of the longer term plan for a registry.

21

The  Panel  acknowledges  and welcomes  the  expansion opportunities at the airport that have been identified as part of the  development  of  proposals to incorporate Jersey's harbours and  airport,  including additional hangar facilities.

The  incorporation  has  now  been  agreed  in principle by the States.

22

From  an  aviation  safety regulatory perspective, it would be  highly  desirable  that  the required  aviation  regulations are  developed  as  a  single, coherent  and  consistent  code applicable  throughout  the Channel Islands.

That would be the Minister's preferred option.

23

A  Channel  Islands  Aircraft Registry requires new primary and  secondary  legislation  to enable  the  delegation  of  the performance  of  State responsibilities for running and regulating  aircraft  registration from the UK to the DCA. The need  for  legislative  changes applies not only to Jersey and Guernsey, but also the UK.

That is correct.

Findings

Comments

24

There appears to be confidence that the necessary law drafting can  be  delivered.  The Economic  Development Department  has  secured  the required law drafting time and budget,  and  Guernsey  law drafters  have  undertaken  an initial  review  and  scoping  of the  legislative  changes, estimating  that  the  process  to draft,  consult  and  enact  the necessary  legislation  will  take around  18 months  from  the start of the project.

That is correct.

25

Although  there  is  a  greater potential  for  delay  in implementation  and  a  higher draw on legal resources costs, the most appropriate solution to establish  the  required legislative  framework  for  a Channel  Islands  Aircraft Registry  is  for  parallel legislation that is as identical as is practical to be passed in both Islands.

There may be a legal way around this, and it will be explored.

26

Both Guernsey and Jersey have work  outstanding  to  establish suitably  developed  Securities Interest  legislation  providing the  necessary  safeguards around  lending  to  stimulate confidence in investing through a  Channel  Islands  Aircraft Registry.

The Security Interests (Jersey) Law 2012 was sanctioned by the Privy Council on 10th July 2012,  and  registered  in  the  Royal  Court  on 27th July 2012, but is yet to be brought into force  (this  will  happen  by  means  of  an Appointed Day Act). Further Security Interests legislation  is  currently  being  developed. Specific requirements for aircraft and ships are now being considered by the team responsible for the delivery of the respective registries.

27

While it may not be practical for  Jersey  to  sign  up  to  the Cape  Town  Convention,  the Panel  acknowledges  the Minister  for  Treasury  and Resources' sentiment that there should be no activity associated with the Aircraft Registry that detracts  from  Jersey's reputation as a quality financial services jurisdiction.

Wholeheartedly in agreement.

Recommendations

To

Accept/ Reject

Comments

Target date of action/ completion

1

To  establish  an  appropriate single point of responsibility for  the  cross-Departmental and  cross-Island  Aircraft Registry project, the Minister for  Economic  Development should,  through  the  Chief Minister,  engage  with Director  of  Civil  Aviation with a view to him assuming project  management responsibility  on  behalf  of the  Economic  Development Department.

ED

Accept

A  draft  Terms  of Reference  has  been developed  by  the Director  of  Civil Aviation.  EDD  has nominated  a  senior officer  to  lead  on  the project  and  a  legal representative  from  the Law  Officers' Department  has  been identified.  A  final decision will be made on the way forward for both Islands in November.

November 2012

2

The  Minister  for  Economic Development  must,  without delay,  seek  to  engage  with the  Minister  for  Commerce and  Employment  in Guernsey,  and  its  strategic partner  SGI  Aviation,  to formally  secure  Jersey's position  in  a  joint  Channel Islands Aircraft Registry.

ED

Accept

This  is  the  route Economic  Development wishes to follow. A final decision will be made on the way forward for both Islands in November.

November 2012

3

Through  the  Project Manager,  the  Minister  for Economic Development will need to ensure that wherever the  Registry  is  based  for administrative  purposes,  the marketing  of  the  associated industry  opportunities available  to  clients  is impartial  and  equitable  to both Islands. There must also be  active  communication with  relevant  industries  in Jersey  to  promote  the opportunities  available  to them  to  engage  with  and benefit  from  the  Aircraft Registry project.

ED

Accept

December 2012

Recommendations

To

Accept/ Reject

Comments

Target date of action/ completion

4

The  work  being  undertaken by the Minister for Economic Development  to  develop  a Category 1  Shipping Registry  is  welcomed,  but should no longer be linked to negotiations  with  Guernsey on  Jersey's  role  within  a possible  Channel  Islands Aircraft Registry.

ED

Accept

This  is  no  longer  the case,  as  Guernsey's Public  Services Department  have indicated  that  they  do not wish to proceed with this initiative.

–

5

It  is  particularly  important that  work  is  undertaken  by the Aircraft Registry project team  to  establish  an acceptable  solution  to  both Islands in mitigation against possible  cost  liabilities associated  with  an  accident involving a Channel Islands registered  aircraft.  The potential  to  insure  against such an eventuality should be given  thorough consideration.

ED

Accept

This  will  form  part  of the  discussions  in  the establishment  of  the Terms of Reference

November 2012

6

The  Minister  for  Economic Development must engage at the earliest opportunity with the Minister for Treasury and Resources  to  achieve  a solution, satisfactory to both, to  overcome  the  clear competitive  disadvantage undermining  Jersey's position in a Channel Islands Aircraft Registry.

ED

Accept

While  the  Minister concurs  with  this,  the Minister would also like to  reiterate  that  senior officers  from  his Department  have  held several  meetings  with senior  officials  from Treasury and Resources to discuss this issue, and have  entered  into  new discussions  owing  to changes  in  personnel within this area.

December 2012

7

It  will  be  necessary  for  the Minster  for  Economic Development to establish up- to-date figures relating to the target  market(s)  of  the Channel  Islands  Aircraft Registry  and  the  impact,  if any,  this  may  have  on projected economic flow and

ED

Agreed

December 2012

Recommendations

To

Accept/ Reject

Comments

Target date of action/ completion

the  business  case.  Indeed, this may be required quickly to assist negotiations with the Minster  for  Treasury  and Resources  regarding  a solution over the GST issue.

8

With  the  agreement  of Guernsey,  the  Minister  for Economic  Development should  request  the  Director for  Civil  Aviation  to undertake the necessary work to  establish  a recommendation on the issue of  allowing  fractional ownership within a Channel Islands Aircraft Registry.

ED

Further  background work  will  be  required before  commitment  is made  to  this.  This  will form part of the Terms of  Reference  for  the Working Group.

January 2013

9

Limited inward migration for certain  key  technical positions  may  be  necessary and  acceptable  in  the  short term as the Aircraft Registry project  develops.  However, the  Minister  for  Economic Development must develop a longer  term  plan  in conjunction  with  relevant industry  representatives  and States  Departments  that  is consistent with Strategic Plan priorities  to  manage  inward migration  and  encourage employment  opportunities for the locally qualified.

ED

Agreed

This will be fleshed out with  the  Working Group.  However,  the Minister  is  fully  aware of  the  States  Strategic Plan  priorities  and  is  a member  of  the  Skills Executive,  and  their priorities.

January 2013

10

In  setting  up  the  legislative framework  for  a  Channel Islands Aircraft Registry, the Minister  for  Economic Development should ensure a collaborative  approach, through the Aircraft Registry project leadership, to develop parallel legislation that is as identical as is practical to be passed in both Islands.

ED

Agreed

Subject to both:

• possible  legal shortcuts that would allow  legislation  in one  jurisdiction  to be  acceptable  in another;
• a final decision will be made on the way forward  for  both Islands  in December.

December 2013

Recommendations

To

Accept/ Reject

Comments

Target date of action/ completion

11

In  the  event  that  Jersey cannot  be  a  signatory,  the Minister  for  Economic Development  must  ensure that  the  updated  Securities Interest  legislation  is  at  the very  least  compatible  with the principles established by the  Cape  Town  Convention on International Interests.

ED

Agreed

The  Security  Interests legislation  relating  to aircraft will form part of the  new  Aircraft Registry legislation.

February 2013