The risks of non-compliance

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In less than 700 hours, Part-NCC will apply to the non-commercial aircraft operations in Europe. However, a great number of business jet owners potentially concerned by this new regulation haven’t undertaken the necessary steps to check if they need to be compliant or started their compliance process. Some due to ignorance, others with a wait-and-see approach. Is this a good idea? Attorney Philippe Renz analyses their risks, if they do not clarify their situation by August, 25th.

Ramp checks in August?

Despite the constraining obligations imposed by the new regulation to owners, many of them haven’t reacted yet. It is true that most of the EASA NAAs have had difficulties to reach out and properly inform aircraft owners and other non-commercial operating structures on Part-NCC and its implications. Furthermore, practical and legal uncertainties surrounding its applications have apparently given the impression that its entry into force could be delayed. Nevertheless, Part-NCC becomes effective in the coming days and those owners believing that they can afford to wait for the first ramp check before to react might be soon disillusioned.

Indeed, many NAAs and their inspectors are eagerly waiting for the August deadline. They, who had, until now, little reasons to get on board business aircraft, will now not hesitate to find out who are behind these aircraft and to check if the operators have complied with all requirements and filed a declaration, and if not for what reasons. These days, some authorities have already started training, rigorously, their NCC ramp checks with VP- and M- registered aircraft whose operators must already comply with ICAO standards equivalent to Part-NCC. It is, therefore, obvious that the first NCC ramp checks will start in late August and owners need to be prepared.

Also read: How to comply with Part-NCC requirements

What are the risks of a non-compliance?

Like a commercial operator suddenly losing its management personnel (Postholders) would be immediately grounded for safety reasons, a non-commercial operator that do not have its operating structure in place might face the same treatment from EASA NAAs. However, because NCC operators are not subject to certification but to declaration and because the system is new, it is more likely that the authorities may not ground the aircraft immediately but leave a couple of days or a few weeks more to achieve compliance. Furthermore, owners caught with no operating structure at all or who have undertaken too little to be compliant risk administrative and criminal sanctions, such as fines, the same for their pilots for complicity. And the more the situation of non-compliance will continue, the more sanctions might be heavier and be extended to the pilots’ licenses.

A persisting situation of non-compliance can also have consequences on the relations between owners and the entities that insure and finance their aircraft. These may indeed terminate their agreements with owners, not covering their risks and claiming for damages. Moreover, if they do not declare their flight activities on time, as they should have done, owners risk losing the advantage of freely determine the principal place of business of their operators, what can be a disadvantage and have major consequences for the licenses of their pilots.

Determine your principal place of business

Owners of business jets often operated and/or based in Europe are potentially concerned by Part-NCC. Therefore, they should define what is the principal of business of the operator of their aircraft to determine whether the regulation applies to them or not. Different criteria are taken into consideration to determine the principal place of business, including the location from which the operational control of the operator is exercised. The European regulation will then apply, only if this principal place of business is located within one of the EASA member states. For owners having their business in different countries or continents, it might well be that the principal place of business be justifiable or be set up in different countries, with the full respect of the law.

Due to the new operational obligations imposed by Part-NCC, many owners are obliged to reorganise and to set up an operating structure independent from the holding structure of the aircraft that sometimes cannot fit such operating purpose. By establishing the operating structure, owners might have to consider aspects or constraints of corporate, tax and labour law, in particular, what could then incite or oblige them to declare their principal place of business in one country rather than another, in the most favourable country within or out of the EASA member states. However, owners being late in determining the principal place of business, and making insufficient efforts to be compliant with Part-NCC, run the risk that the authorities will decide, for them, where their principal place of business shall be, based on the locations where the aircraft are generally based, or force owners to choose this place in such a short period of time that will not enable them to conduct a thorough analysis of the various options available.

The impact on non-EASA pilot licenses

Owners of aircraft registered in third countries who can justify their principal place of business outside of EASA member states would be well advised to ensure that such justification is acceptable from a European regulation point of view, before EASA NAAs check their aircraft and decide, for them, that their principal place of business is in an EASA country. Otherwise, they might face serious licensing issues for their pilots. Indeed, the pilots of foreign aircraft are often not holders of EASA licenses and if the principal place of business of the operator they work for is located in an EASA member states, these pilots will have to comply with the EASA Part-FCL licensing system from April 2017. What would mean, in particular, that pilots of multi-engine multi-crew aircraft shall pass all ATPL theory exams prescribed by the EU regulations, regardless of their existing foreign ATLP and regardless of their flight experience. This is very constraining and no grandfather rights will be granted.

Even if the entry into force of these Part-FCL requirements for holders of third country licenses has been postponed three times by EASA, from 2014 to 2017, all signals indicate today that a further delay will probably not take place. Indeed and in particular, several countries have already begun to implement these new obligations and the UK — which will most certainly remain an EASA country in the future — will impose it from August 25th, for pilots receiving any remuneration or other valuable consideration for their services. This is the reason why the owners concerned cannot afford to wait before analysing their situations in detail.

US registered aircraft are particularly concerned

To conclude, it is worth mentioning that owners of N- registered business jets based in Europe — about 250 aircraft — will be particularly concerned by the new regulation. Firstly, on the operational level because FAR 91 is by far not compliant with Part-NCC. Secondly, because the licensing requirements for pilots are sometimes very different, in particular for holders of ATPL licenses. Thirdly, because N- registered aircraft are not submitted to a continuing airworthiness management, which is mandatory under Part-NCC. Finally, owners who must declare their flight activities in an EASA member state and have to set up a new operational structure, independent from the holding structure of the aircraft, will be limited by the regulatory practice of the US Federal Aviation Administration (FAA) and will probably need to find alternative solutions. Therefore, they too have a great interest to analyse their situation in detail, and reorganise, if needed, before Part-NCC enters into force. In less than 700 hours.

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