Aviation Finance & Leasing 2019

Last Updated August 01, 2019

Ireland

Law and Practice

Authors



Walkers is a global, integrated and market-leading financial services law firm that practices law across six jurisdictions and has ten offices across the Americas, EMEA and Asia. Walkers has 115 partners and 860 staff, providing 24/7 service to its clients. The Irish office provides market-leading Irish legal, tax, listing and professional services solutions to local and international financial institutions, investment managers, hedge funds, private equity groups and corporations. Expertise covers asset management and asset finance, corporate and M&A, employment, finance and capital markets, insolvency and dispute resolution, investment funds, real estate, regulatory and tax, as well as listings and fiduciary services. The firm's independent Corporate Services offering, Walkers Professional Services, provides a broad range of corporate, fiduciary and administration services to structured and asset finance vehicles.

VAT

Whether there will be any VAT payable on the sale of the aircraft will be determined by the physical location of the aircraft at the point of sale. If the aircraft is physically located in Ireland at the time of sale, the place of supply for Irish VAT purposes will be Ireland. As a result, the seller will be liable to account for any Irish VAT chargeable on the supply, at 23%. However, if the aircraft will be used outside the EU or by a transport undertaking operating for reward chiefly on international routes, Irish VAT will apply at 0%. The seller will be obliged to be registered for VAT in Ireland regardless of whether the 0% or 23% rate applies.

Stamp Duty

Irish stamp duty legislation provides an exemption in respect of the lease, transfer and sale of an aircraft, regardless of where the aircraft is located at the time of sale.

Customs Duties

No customs duty will be charged on the transfer of title of the aircraft where the aircraft is on the ground in Ireland and in free circulation in the EU.

Customs duties will only apply on the import of an aircraft into Ireland from outside the EU, or on the release of an aircraft in Ireland in circumstances where the aircraft is coming off a duty suspended procedure such as transit or inward processing.

As a matter of Irish law, translation, certification, notarisation or legalisation is not required for the enforceability of a sale agreement against an Irish party.

Transfer of title is legally effected upon delivery of the bill of sale, which will usually include engines installed on the airframe and installed parts on its face but does not set out the entire commercial agreement between the parties, which will usually be set out in the aircraft sale and purchase agreement.

If an aircraft registered in Ireland has a new owner, a change of ownership form should be filed in and lodged with the Irish Aviation Authority ("IAA") – a new Registration Certificate will be issued to the new owner upon filing the form. The aircraft shall not be flown until the Registration Certificate is issued by the IAA in the new entity's name and the Certificate is placed on board the aircraft.

The sale of the ownership interest in an entity that owns an aircraft or engine is effectively recognised as a sale of such aircraft or engine itself, to the extent that the entity in respect of whom the ownership interest is being transferred holds title to the aircraft or engine.

There is no formal legal requirement under Irish law that a bill of sale needs to be governed by Irish law. See discussion at 2.6 Lease Enforcement: Domestic Courts' Approach to Foreign Laws and Judgments, below.

Generally, the transaction documents used in aircraft sale transactions (including bills of sale) are well-established forms and do not present a difficulty from an Irish legal perspective.

As a matter of Irish law, translation, certification, notarisation or legalisation is not required for the enforceability of a bill of sale against an Irish party.

A bill of sale cannot be registered with the IAA or any Irish government entity.

It should be noted that if an aircraft registered in Ireland has a new owner, a change of ownership form should be filed in and lodged with the IAA – a new Registration Certificate will be issued to the new owner upon filing the form. The aircraft shall not be flown until the Registration Certificate is issued by the IAA in the new entity's name and the Certificate is placed on board the aircraft. The IAA recommends at least 20 working days from the receipt of all required items for the process to complete.

There are no government applications or consents required as a prerequisite to the execution and delivery of a bill of sale in relation to an aircraft or engine registered in Ireland.

VAT

Whether there will be any VAT payable on the sale of the aircraft will depend on the physical location of the aircraft at the point of sale. If the aircraft is physically located in Ireland at the time of sale, the place of supply for Irish VAT purposes will be Ireland. As a result, the seller will be liable to account for any Irish VAT chargeable on the supply, at 23%. However, if the aircraft will be used outside the EU or by a transport undertaking operating for reward chiefly on international routes, Irish VAT will apply at 0%. The seller will be obliged to be registered for VAT in Ireland regardless of whether the 0% or 23% rate applies.

Stamp Duty

Irish stamp duty legislation provides an exemption in respect of the transfer and sale of an aircraft, regardless of where the aircraft is located at the time of sale.

Until recently, the Irish Revenue Commissioners (Irish Revenue) had extended by concession the stamp duty exemption available in respect of the lease, transfer or sale of aircraft to also apply to the sale or transfer of shares in an aircraft-owning entity. It is understood that Irish Revenue have been reviewing historic concessions and that a number of recent applications for concessionary treatment have been refused by Irish Revenue. The position regarding the transfer of stock in an aircraft-owning entity is not entirely clear. Stamp duty on the sale of shares in an Irish aircraft-owning company may therefore be payable at the rate of 1%. The duty applies on the market value of the shares or the consideration paid, whichever is higher. Irish stamp duty should not apply to the transfer of shares where the consideration payable for such shares is EUR1,000 or less.

Customs Duties

No customs duty will be charged on the transfer of title of the aircraft where the aircraft is on the ground in Ireland and in free circulation in the EU.

Customs duties will only apply on the import of an aircraft into Ireland from outside the EU, or on the release of an aircraft in Ireland in circumstances where the aircraft is coming off a duty suspended procedure such as transit or inward processing.

Subject to the general legal principles of contract law, there are no types of operating/wet/finance leases or leases concerning only engines or parts that are not permissible or recognised in Ireland, as far as is known.

A lease involving either a domestic party or an asset situated in Ireland can be governed by a foreign law - see discussion at 2.6 Lease Enforcement: Domestic Courts' Approach to Foreign Laws and Judgments, below.

There are no material restrictions imposed on domestic lessees making rent payments to foreign lessors in US dollars.

Since 1 January 1993, there have been no foreign exchange controls in Ireland. Since the removal of exchange controls, the Financial Transfers Act, 1992 gives the Minister for Finance reserve powers to introduce restrictions on financial transfers between the State and other countries in the form of regulations and prohibition orders.

No taxes/duties are payable for executing a lease physically in Ireland, or as a consequence of an original or copy of a lease being brought into Ireland either physically or electronically.

A lessor does not have to be licensed or otherwise qualified in order to do business with a domestic lessee.

Generally, English or New York law-governed lease agreements (and ancillary documents thereto) follow well-established forms and do not present a difficulty from an Irish legal perspective.

Generally, such terms are permissible from an Irish law perspective. However, such provisions would need to be reviewed on a case-by-case basis, the enforceability of which will be a matter of the governing law of the lease.

The leasing of spare engines and other parts (including such parts as may become attached to the aircraft in the future) may be made a part of the aircraft lease. Spare parts may also be the subject of a separate lease. No special formalities are required.

This will be a matter for the governing law of the lease. Under Irish law, legal and practical risk can arise when engines become attached to other aircraft in accordance with pooling agreements or if they become subject to encumbrances. As a result, the lease will usually provide for such eventualities and may provide for a separate recognition of rights agreement to be entered into in favour of the lessor/owner/security trustee.

The concept of a trust and the role of an owner trustee under a lease are recognised in Ireland.

The purpose of registration is solely to establish the aircraft's nationality, thus determining the jurisdiction to whose regulations the aircraft will be subject and the person that will be responsible for the airworthiness and maintenance of the aircraft. The registration of an aircraft does not establish title to the aircraft, and does not constitute actual notice or constructive notice of ownership.

An aircraft can be registered domestically in the name of the aircraft operator if the operator is not also the owner, or in the name of the owner if the owner is not also the operator.

There is no specific register for leases concerning aircraft or engines. However, if the lease is registrable under the Convention on International Interests in Mobile Equipment and the related Protocol on Matters specific to Aircraft Equipment (together the “Cape Town Convention”), it can be registered on the International Registry as an international interest.

A lease (and a lessor’s interest therein) cannot be registered or filed in the domestic aircraft registry, and leases are not subject to any consent from any government entity.

As a matter of Irish law, translation, certification, notarisation or legalisation is not required for the enforceability of a bill of sale against an Irish party.

This question is not applicable.

This question is not applicable.

In order to register an aircraft, one must file a registration form, as can be found on the IAA website, with supporting evidence as set out in the form. As part of the supporting evidence, an Export Certificate of Airworthiness or EASA Form 52 or an original Certificate of Airworthiness and a valid ARC must be submitted.

A foreign lessor is not required to pay any income or capital gains or other taxes upon leasing an aircraft or engine to a domestic lessee if the foreign lessor and domestic lessee are unconnected third parties. Irish legislation contains secondary liability provisions that may need to be considered in certain group situations.

A foreign lessor could not be deemed to be resident, domiciled, carrying on business or subject to any taxes as a result of its being a party to or its enforcement of the lease, provided that it is not otherwise resident in Ireland or does not have a permanent establishment or other taxable presence in Ireland, or, if the lessor is so established in Ireland, that it does not act through a branch or agency in Ireland or other taxable presence in Ireland in respect of its acts.

Aircraft or engine maintenance and operations will be governed by the contractual provisions of the lease agreement, responsibility for which will typically reside with the lessee.

See 2.4 Lessor's Liabilities: Damage or Loss Caused by an Asset and 2.4 Lessor's Liabilities: Priority of Third Parties' Rights, below.

Under Irish law, the lessor/owner is primarily liable for loss and damage caused by an aircraft to third persons and property, though liability can be passed on to the lessee. However, as per s. 21(1) of the Air Navigation and Transport Act, 1936, the lessor/owner would be liable as if they were at fault for any material damage or loss caused to any persons or property from an aircraft while in flight, taking off or landing.

Both lessor and lessee are independently responsible for their own negligence in relation to the aircraft, both through their acts and through their omissions. Liability to this can be restricted or excluded via contract, but such terms will be subject to reasonableness and it is not possible to restrict or exclude liability for death or personal injury due to negligence.

The lessee may have allowed certain liens to accrue against the aircraft (eg, a possessory lien arising from a third party having bestowed labour on the aircraft so as to improve its condition). See 2.4 Lessor's Liabilities: Priority of Third Parties' Rights, below.

Under the Irish Air Navigation and Transport Acts, certain third parties are granted a right to detain and, in some cases, to sell (or cause to be forfeited) aircraft in certain circumstances, whether the aircraft is registered in Ireland or not. These include, for example, airport charges, air navigation charges, customs duties and unpaid tax.

Other common liens include those that arise in the context of storage, repair, maintenance or other services to aircraft, tax liens and judgement liens. The lessee, usually in breach of the terms of a lease, may have allowed certain liens to accrue against the aircraft – for example, a possessory lien arising from a third party having bestowed labour on the aircraft so as to improve its condition. A lien for the salvage of the aircraft may also arise.

Since liens are not capable of registration at the Irish CRO, and since there is no Irish aircraft mortgage register, liens may often arise unbeknownst to the lessor.

Pursuant to the Irish Aviation Authority (Nationality and Registration of Aircraft) Order 2015 and the Air Navigation and Transport Acts, 1936-2005 (as amended), the IAA and Dublin Airport Authority can  detain or restrict the use of an aircraft and, if necessary, sell it in certain circumstances – for example, where the aircraft is not in compliance with safety standards, where airport charges have not been paid or if the IAA considers it necessary to secure compliance with Statutes and Statutory Instruments.

Customs officers may detain an aircraft in respect of imported uncleared cargo remaining on board after a stipulated period until certain expenses for the safeguarding and removal of the goods have been paid. Furthermore, in the case of an item liable to forfeiture, any aircraft carrying it may also be liable to forfeiture, and the owner and commander of the aircraft may also be liable to a penalty. The Air Navigation and Transport Act, 1988 makes provision for enforcing the detention of such aircraft by authorised persons. A party who ignores such a detention order is guilty of a summary offence.

Revenue may seize and sell the aircraft for unpaid taxes owed by the owner.

Pursuant to s. 5 of the Criminal Assets Bureau Act, 1996 (as amended), the Criminal Assets Bureau may confiscate assets identified or suspected as deriving directly or indirectly from criminal conduct.

Pursuant to s. 4 of the Proceeds of Crime Act, 1996 as amended, the Irish High Court may (on application) make a disposal order in respect of property that constitutes directly or indirectly the proceeds of crime.

In an emergency, the IAA can give directions as to the use or possession of an aircraft.

It is not mandatory for all or part of the insurances to be places with domestic insurance companies.

The EU regulation setting out minimum levels of insurance requires that insurance cover exists for each and every flight, in compliance with the regulations.

Professional underwriters insurance can be placed outside of Ireland up to 100% coverage.

The general view is that “cut-through” clauses (under which a reinsurer undertakes a direct relationship of indemnity with the original insured under a reinsured policy) are not thought to be effective under Irish law on account of the doctrine of privity and under insolvency law.

Assignments of insurances/reinsurances are permitted.

The Irish courts recognise self-help remedies, and typically recognise and enforce contractual arrangements between the parties.

In addition to the self-help remedy under Irish law, the owner will have the remedies available to it under the Cape Town Convention, including taking possession of the aircraft without a court order and deregistering and exporting an aircraft by exercising its rights under an IDERA.

However, it should be noted that, in the majority of cases, the aircraft will not be located in Ireland and the lease is likely to be governed by English or New York law. The effectiveness of these actions will therefore be determined by general principles of enforceability under the governing law of the lease and in the jurisdiction in which the aircraft is located.

A termination of the lease should entitle the lessor to seek repossession of the aircraft as a matter of contract without a court order. It is important that the lessor strictly complies with such procedure, as may be set out in the lease, in order to validly take possession of the aircraft. If the lessee resists repossession, the lessor can apply to the court for an order of delivery up and possession of the aircraft.

The Irish Commercial Court is the forum for the determination of substantial commercial disputes in Ireland, and has jurisdiction in respect of a claim or counterclaim relating to any business document, contract and dispute where the claim involved is greater than EUR1 million.

For example, the Irish Commercial Court has previously accepted jurisdiction of substantive causes of action in disputes relating to registrations originating entirely outside Ireland under the provisions of the Cape Town Convention, which were given effect in Ireland pursuant to the International Interests in Mobile Equipment (Cape Town Convention) Act, 2005 – eg, PNC Equipment Finance LLC v Aviareto Limited and Link Aviation LCC (unreported, High Court December 17, 2012) and, more recently, Unicredit Global Leasing Export gmbh v Business Aviation Ltd. & anor [2019] IEHC 139.

If the lessor wishes to sue the lessee for the debt, this may done by way of summary summons. However, possession cannot be effected by way of summary judgment.

An injunction may be sought from the courts and, in extreme emergency, for example, the aircraft may be taken outside the jurisdiction; this can be done without notice to the other party to the proceedings.

The purpose of the injunction is to require a party to do (mandatory) or refrain from doing (prohibitory) some act. Injunctive relief is equitable in nature and is a remedy rather than a cause of action. Injunctions are generally sought to protect one's rights where those rights have been breached or where an imminent breach of those rights can be identified.

If an interim injunction is granted, it will be served on the other party along with the summons, the notice of motion and any affidavits submitted. The notice of motion will fix a date for the hearing of an interlocutory injunction at which both sides will be heard. If it declines to grant an interim injunction, then it could grant leave to the applicant to serve notice on the other party of its intention to apply for an interlocutory injunction, and the court may allow a shorter notice of that application than is usual.

The court must be satisfied of a number of elements prior to granting an injunction:

  • there must be a bona fide/genuine question to be determined;
  • damages must not be an adequate remedy; and
  • the balance of convenience must lie in favour of granting the injunction.

The lessor, as any applicant for injunctive relief, will be required to provide an undertaking and/or security for damages to the court against a wrongful claim.

For disputes within the EU, choice of law clauses are recognised pursuant to Regulation (EC) 593/2008 (the Rome I Regulation).

For non-EU disputes, the courts will generally recognise and respect choice-of-law clauses under common law rules.

Limited exceptions to the above general position arise where the courts may refuse to recognise choice of law clauses for public policy reasons, or where there are mandatory Irish law considerations – for example, with respect to consumer law matters.

For disputes within the EU, choice of jurisdiction clauses are recognised under the Brussels I Regulations as transposed into Irish law under the Civil and Commercial Judgments Regulations 2002 and, for disputes in proceedings commenced on or after 10 January 2015, Regulation (EU) 1215/2012 (the Recast Brussels I Regulation) as transposed into Irish law by the Civil and Commercial Judgments Regulations 2015.

Where the dispute involves parties domiciled in countries that are not signatories to the Recast Brussels I Regulation, its predecessor or the Lugano Convention, the common law rules of ‘most appropriate forum’ apply.

Limited exceptions to the above general position arise where the courts may refuse to recognise choice of jurisdiction clauses where there are mandatory Irish law considerations – for example, with respect to consumer law matters or for public policy reasons.

The means of enforcing a foreign court judgment depend mainly on the country or state that has handed down the judgment, and the nature of the judgment or order.

The process of enforcing judgments of EU Member States is governed by one of the following:

  • Regulation (EC) 44/2001 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters;
  • Regulation (EC) 805/2004 creating a European Enforcement Order for uncontested claims; or
  • Regulation (EC) 805/2004 on creating a European Enforcement Order for uncontested claims.

Depending on the applicable rules, an application must be made to the Master of the High Court. Once the foreign judgment is recognised, it is considered by the Irish court as if it had been delivered by a court in Ireland, and the usual methods of enforcement can be used.

For foreign judgments that fall outside the above rules, the lessor/mortgagor must issue fresh proceedings in Ireland to enforce the judgment. However, the plaintiff will be able to obtain summary judgment in a new action in Ireland on the grounds the defendant has no defence to the claim if the relevant judgment satisfies the following conditions:

  • it is for a debt for a definite sum of money;
  • it is final and conclusive; and
  • it is given by a court of competent jurisdiction.

However, the Irish Courts retain discretion to refuse to recognise and enforce a foreign judgment in the following circumstances:

  • it is impeachable on the grounds of jurisdiction, fraud, public policy or natural or constitutional justice, or the judgment has been obtained or alleged to have been obtained by the commission of a fraud, trick or deliberately misleading circumstances;
  • the procedures and rules of the court giving the judgment have not been observed;
  • it is inconsistent with a judgment of the courts of Ireland in relation to the same matter;
  • it is contrary to public policy or natural or constitutional justice of Ireland;
  • the Irish courts have no jurisdiction over the matter;
  • the jurisdiction of the court giving such judgment has not been exercised in circumstances an Irish court (as a matter of Irish law) will recognise as justifying enforcement of the judgment; and
  • enforcement proceedings are not instituted in Ireland within six years of the date of the judgment.

The enforcement of foreign arbitral awards in Ireland will be governed by the Arbitration Act, 2010.

A lessor under an aircraft lease can obtain a judgment in a foreign currency.

There are common law limitations. For example, a contractual provision conferring or imposing a remedy or an obligation following default may not be enforceable if it was construed by an Irish court as being a penalty, particularly if it involved enforcing an additional pecuniary remedy (such as a default or overdue interest) referable to such default; furthermore, recovery may be limited by laws requiring mitigation of loss suffered.

On the occurrence of an event of default by the lessee under the lease, the lessor will generally retake possession of the aircraft in accordance with the express terms of the lease. If damages are additionally claimed by the lessor, a summons may also be served.

Where the lessee is not prepared to hand over the aircraft willingly, the lessor will usually seek an injunction in which the Irish court will order the aircraft to be returned to its owner. It is unlikely that such an order will be made at the interlocutory stage; normally, the court would only be prepared to make an order detaining the aircraft pending the trial of the action.

While the actual cost payable to the State for the filing of injunctive papers is not great, the legal costs of the issue of injunctive proceedings can be significant, as it will most likely be time-sensitive and require a great amount of detail to be set out in the grounding papers.

The procedure for the termination of a lease is to be determined by the terms agreed between the parties in such lease.

Whether the lessee is entitled to claim any immunity from suit, execution, attachment or other legal process will depend on its actual identity. If the lessee is a sovereign body or other governmental organ (whether autonomous or quasi-autonomous), it may be able to claim sovereign immunity.

The New York Convention has force of law in Ireland by virtue of the Arbitration Act, 2010. Assuming the arbitration award of an arbitrator comes within the scope of the New York Convention, subject to the 2010 Act and the terms of the New York Convention, an Irish court would recognise and enforce an arbitral decision without any retrial or examination of the merits of such award, subject to certain exceptions.

There are no other relevant issues.

Ireland recognises the concepts of contractual assignment and novation.

Assuming that a lessor transferring its rights under an aircraft lease is assigning or novating its rights under such lease to a new lessor pursuant to a New York or English law governed assignment and assumption agreement or novation agreement (or deed), either agreement (or deed) will be held valid by a domestic court, assuming the assignment and assumption agreement or novation agreements constitute in all respects legal, valid and binding obligations of each party thereto enforceable under all the laws of New York and England. See discussion at 2.6 Lease Enforcement: Domestic Courts' Approach to Foreign Laws and Judgments, above.

The lessee's consent is not required under domestic law,but it may be required as a matter of contract.

Generally, the transaction documents used in aircraft finance are well-established forms and do not present a difficulty from an Irish legal perspective.

There are no mandatory terms that Irish law requires to be included in such agreement/deed.

Translation might be advisable if the contract was drafted in a language other than English; however, the absence of translation, certification, notarisation or legalisation will not affect the enforceability of the contract under Irish law.

This question is not applicable.

No taxes/duties are payable in respect of such assignment and assumption/novation agreement, or as a consequence of an original or copy of it being brought into Ireland either physically or electronically.

See discussion at 1.2 Transfer of Ownership: Registration, Filing and/or Consent from Government Entities, above.

The registered owner can apply for the deregistration of the aircraft. Where an IDERA has been lodged with the IAA, the "authorised party" specified in the IDERA can procure the deregistration of the aircraft.

To deregister (and export) an aircraft the following are required:

  • Formal request in writing, including the complete description of the aircraft, registration marks, make, model and serial number. This letter must be signed by the following:
    1. if the registered owner is an individual, the individual signs the request;
    2. if the registered owner is more than one individual, all individuals must sign (or send separate letters); and
    3. if the registered owner is a company, the letter must be signed by a current director of the company or the current company secretary (as per the current CRO print-out).
  • Proof that the aircraft's nameplate / fireproof plate has been removed.
  • Proof that the registration marks have been removed from the aircraft.
  • Proof that the aircraft's Irish Mode S code has been negated (if applicable).
  • Proof that the aircraft's Irish ELT code has been negated (if applicable).
  • If the aircraft is on an Irish AOC, it must be removed from the AOC prior to deregistration.
  • All fees outstanding must be paid in full for the aircraft.
  • If the aircraft has an IDERA lodged against it, the IDERA must be removed first.

An aircraft owner, mortgagee or lessor can apply for the deregistration of the aircraft without the lessee’s or operator’s consent.

Please see 2.8 Aircraft Deregistration and Export: Deregistering Aircraft in this Jurisdiction, above.

Assuming the deregistration tasks above have been completed to the satisfaction of the IAA, deregistration can be completed by the IAA in a matter of days. If the co-operation of the lessee is not forthcoming, this will result in the deregistration of the Aircraft being delayed until such point as the lessor has possession and completes the required deregistration tasks. Where an IDERA is invoked by the "authorised party" with respect to the deregistration and export of aircraft, the IAA may not condition the deregistration on actions within the control of the lessee, such as returning the original certificate of registration or airworthiness, or changing the aircraft’s transponder codes, etc, as this would frustrate the provisions of the Cape Town Convention.

Usually, interactions with the IAA will occur prior to the deregistration of the aircraft, and documentation can be prepositioned with the IAA to the fullest extent possible. Please see 2.8 Aircraft Deregistration and Export: Deregistering Aircraft in this Jurisdiction, above.

Where an Export Certificate of Airworthiness is required, the applicant should submit the prescribed fee, which is governed by Irish legislation (Irish Aviation Authority (Fees) Order, 2015) and calculated by reference to the weight of the aircraft.

The IAA will not record a deregistration power of attorney. The filing and recordation of an IDERA has largely replaced transaction-specific deregistration powers of attorney (the efficacy of which was questionable in Ireland) where the aircraft is registered in Ireland. A DPOA does not need to be translated, certified, notarised, legalised or lodged in advance.

See 2.8 Aircraft Deregistration and Export: Deregistration Power of Attorney, above.

A deregistration power of attorney does not have to be governed by the laws of Ireland.

If the DPOA is expressed to be irrevocable and is granted to secure an obligation, the grantor in practice should not be able to revoke it until the secured obligations are discharged.

Please see 2.8 Aircraft Deregistration and Export: Deregistering Aircraft in this Jurisdiction above, noting that the lessee's consent is not required.

Where the owner will not be the registered owner of the aircraft or where there is a mortgagee, at the time of negotiating the lease there should be a requirement included in the lease that an IDERA should be executed by the entity listed as registered owner with the IAA. So long as the IDERA is in effect, the “authorised party” can make a request to the IAA to deregister the aircraft, pursuant to the provisions of Article 15 of the Consolidated Text. There should also be provision made for the payment of a 'security deposit' by the lessee to cover any fees, costs or expenses associated with a breach of the lease agreement by the lessee.

The aircraft does not need to be located in Ireland at the time of deregistration and/or export. In order to take an aircraft outside Ireland, an Export Certificate of Airworthiness in respect of Aircraft may be required from the IAA.

Please see 2.8 Aircraft Deregistration and Export: Deregistering Aircraft in this Jurisdiction and 2.8 Aircraft Deregistration and Export: Costs, Fees and Taxes Relating to Deregistration above, noting that an export permit/licence is not issued by the IAA.

Please see 2.8 Aircraft Deregistration and Export: Costs, Fees and Taxes Relating to Deregistration, above. The 0% rate of VAT applies to the supply of an aircraft transported directly by or on behalf of the seller to a destination outside the EU, and to the supply of an aircraft that is dispatched or transported directly outside the EU by or on behalf of the purchaser where that purchaser is established outside of Ireland.

See 2.8 Aircraft Deregistration and Export: Deregistering Aircraft in this Jurisdiction, above.

The liquidation of an Irish incorporated lessee would not void or terminate the IDERA, and would usually lead to an event of default under the relevant lease agreement, pursuant to which the lessor/mortgagee could enforce its rights.

An Irish law governed power of attorney may, in limited circumstances, be revoked by the winding-up of the donor company. However, under Section 20 of the Powers of Attorney Act, 1996, a power of attorney will not be revoked by the winding-up or dissolution of the donor (except with the consent of the donee) if it is expressed to be irrevocable and is given to secure either a proprietary interest of the donee or the performance of an obligation owed to the donee, so long as the donee has that interest or the obligation remains undischarged.

The following transactions by a company that subsequently becomes insolvent are capable of being set aside.

Unfair Preference

Section 604 of the Companies Act, 2014 (the "Act") seeks to prevent companies from granting a preference to one creditor over another. A preference arises where a company enters into a transaction that puts a creditor in a better position than that creditor would have been in if the transaction had not taken place. Preferences that took place within six months before the company's liquidation can be set aside. This time limit is extended to two years where the disposal was in favour of a connected party. A connected party is any person who, at the time of the transaction was:

  • a director or shadow director of the company;
  • a director's spouse, parent, sibling or child;
  • a related company (this is very widely defined); or
  • any trustee of, or surety or guarantor for, the debt due to any person referred to above.

Improper Transfer

If a disposition by a company has the effect of perpetrating a fraud on the company, its creditors or members, the High Court can order the return of the property to the liquidator, examiner or receiver on any terms or conditions it deems fit (section 608 of the Act). In determining whether this order should be made, the court does the following:

  • considers whether it is just and equitable to do so;
  • looks at the effect of the transaction rather than the motives behind it; and
  • in exercising its just and equitable discretion, has regard to the rights of persons who have acquired an interest in the property that is the subject matter of the application, in good faith and for value. This is not limited to persons who take from creditors, and extends to those who are the direct recipients of the disposition.

Examinership

The effect of the appointment of an examiner is that the rights of the creditors, including secured creditors, are frozen for the period of the examinership, which is up to 70 days, extendable to 100 days, and also subject to the possibility of a further extension where the Court requires further time to consider the examiner's final report, which is usually only relevant where the examinership is complex. During this period, the lessor would not be able to recover the aircraft without the consent of the examiner.

Disclaimer of Onerous Contracts by Liquidator

Regarding whether the aircraft can be deemed part of the lessee’s property in a liquidation of the lessee, the general position in Ireland is that a liquidator of a company cannot obtain better title to an asset than that of the company prior to liquidation. Thus, if the aircraft is held as a lease, the liquidator will not be able to treat the aircraft as being owned by the lessee company.

However, Section 615 of the Act confers power on a liquidator, with leave of the court, at any time within 12 months of the commencement of the liquidation, to disclaim any property of the company being wound up which consists of, amongst other things,unprofitable contracts or any property that is unsellable or not readily saleable by reason of its binding the possessor to the performance of any onerous act or to the payment of money.

Repudiation of Certain Contracts by Company in Examinership

Under Section 537 of the Act, where proposals for a compromise or scheme of arrangement are to be formulated in relation to a company, the company may, subject to the approval of the relevant court, affirm or repudiate any contract under which some element of performance other than payment remains to be rendered both by the company and by the other contracting party or parties. While the Irish Courts have not specifically held that an aircraft lease would constitute a contract under which some element of performance other than payment remains to be rendered both by the company and by the other contracting party or parties, the Irish courts have held that an occupational lease of real property does constitute such a contract, and have made repudiation orders in respect of leases.

Any person who suffers loss or damage as a result of such repudiation order stands as an unsecured creditor for the amount of such loss or damage. Where the relevant court approves the affirmation or repudiation of a contract under this section, in giving such approval it may make such orders as it deems fit for the purposes of giving full effect to its approval, including orders as to notice to, or declaring the rights of, any party affected by such affirmation or repudiation.

In respect of the query as to whether the liquidator would/could impose the rights of any other creditors in priority to the lessor, to the extent that the lessor is due any outstanding payments under the lease, the lessor will rank as an unsecured creditor in the liquidation. Irish corporate insolvency law operates a waterfall of payments, with certain classes of preferential creditors ranking ahead of the unsecured creditor class. As such, the likelihood of the unsecured creditor classes receiving full payment or a substantial payment in respect of the outstanding amount due and owing to each unsecured creditor varies on a case-by-case basis, and is dependent upon the assets in the company and the liquidator's ability to realise said assets.

Please refer to 2.9 Insolvency Proceedings: Other Effects of Lessee's Insolvency, above.

Please refer to 2.9 Insolvency Proceedings: Other Effects of Lessee's Insolvency, above, in respect of the moratorium in examinership.

There is a moratorium on the commencement or continuation of legal proceedings against a company in liquidation, without first obtaining the consent of the Irish High Court to such proceedings.

Examinership

This is a procedure for the rescue of a company in financial difficulty and protection against its creditors. Where a company is or is likely to be insolvent and has not been wound up, a petition may be presented to the High Court (by the company, its directors, any creditor, or shareholders with a minimum 10% shareholding) seeking the protection of the court and the appointment of an examiner. If the court considers that the company has a reasonable prospect of survival as a going concern, it may appoint an examiner. For a period of 70 days from the date of the petition (which the court can extend to 100 days), the creditors of the company are prevented from taking action to enforce any security or other rights they hold against the company. Furthermore, no winding-up proceedings against the company can be commenced, and no receiver can be appointed. The examiner will prepare a report for the court on the viability of the company. The proposals developed for a scheme of arrangement by the examiner may involve a combination of new investment, a write-down of creditors’ claims and payment of a dividend to creditors over a period of time. The company will continue to trade during the period of examinership. The court will either confirm or reject the proposals made by the examiner. If the court decides to confirm the proposals, it will fix a date for their implementation, no later than 21 days from the date of confirmation, which is the date the company comes out of court protection and the role of the examiner ceases. If the proposals are not confirmed by the court, it can then make such an order as it deems fit, which is most likely to be an order for the winding-up of the company.

Liquidation

There are three types of winding-up:

  • Members’ Voluntary Winding-Up – for a members’ voluntary winding up, the company must be solvent (so it is not strictly an insolvency procedure). The members of the company must resolve by 75% majority to have the company wound up. The directors of the company must make a statutory declaration that they have made a full enquiry into the affairs of the company and, having done so, are of the opinion that the company can pay its debts in full within a period of 12 months from the commencement of the winding-up. Failure to do so may leave the directors open to personal liability in respect of the debts owed.
  • Creditors’ Voluntary Winding-Up – where a company is insolvent, the directors may convene a meeting of the members with a view to the members passing a resolution to wind-up the company and appoint a liquidator. A meeting must also be convened of all creditors of the company, to inform the creditors of the winding-up resolution passed by the shareholders. Once appointed, the liquidator realises all of the company’s assets and distributes the proceeds to the creditors.
  • Compulsory Winding-Up – the High Court has the power to order the winding-up of a company and appoint a liquidator. A creditor who is not paid monies due to it may present a petition to the High Court that the company is insolvent and unable to pay its debts as they fall due. The insolvency procedure in a compulsory winding-up differs in that the appointment of a liquidator arises not from meetings of members and creditors, but by order of the High Court. The obligation of the liquidator is to take control of all the company's assets, to realise the assets so as to discharge the company’s liability, and to pay the company's creditors.

Please refer to 2.9 Insolvency Proceedings: Other Effects of Lessee's Insolvency, above.

Please refer to 2.9 Insolvency Proceedings: Other Effects of Lessee's Insolvency, above.

The winding-up of the lessee or another insolvency event would usually constitute an event of default under the lease agreement, which would entitle the lessor to enforce its rights with regard to the return of the aircraft, dealing with the security deposit, maintenance reserves, etc. Where an examiner is appointed to the company, the lessor would not be able to repossess the aircraft without the consent of the examiner.

In a liquidation, the aircraft could not be attached by unsecured creditors of the lessee. The lessee only has a right to possession of the aircraft pursuant to the lease agreement, and its rights are subject to proprietary and security interests of the lessor and its secured creditors.

As noted above, if any outstanding lease rental payments were due to the lessor when the lessee was being wound-up, the lessor would claim as an unsecured creditor of the lessee and would rank behind the preferential creditors of an insolvent lessee.

The Cape Town Convention is in force in Ireland. The International Interests in Mobile Equipment (Cape Town Convention) Act, 2005 is the domestic legislation that enacted the Cape Town Convention. AEP codes are not necessary.

In accordance with Article 39 of the Cape Town Convention, Ireland has declared the following:

  • that when, under a law of the State, a non-consensual right or interest (other than a right or interest to which Article 40 of the Cape Town Convention applies) has priority over an interest in an object equivalent to that of the holder of a registered international interest, that right or interest has priority over a registered international interest, whether in or outside insolvency proceedings; and
  • that if the State or any State entity, or any intergovernmental organisation of which the State or any such entity is a member, or any private provider has provided a public service, nothing in the Cape Town Convention affects the right of the State, entity, organisation or provider to arrest or detain, in accordance with the laws of the State, an object for the payment of amounts owed to the State or any such entity, organisation or provider for those services in respect of that object or another object.

In accordance with subarticle 2 of Article 54 of the Cape Town Convention, it is declared that a creditor who wishes to exercise a remedy that is available to the creditor under a provision of the Cape Town Convention is not required to make an application to the High Court of Ireland for leave to exercise that remedy, unless the provision expressly requires the creditor to make such an application.

In accordance with Article XXX of the Aircraft Protocol, it is declared that Articles VIII, XII and XIII, and subarticle 3 of Article X, of that Protocol apply to and in respect of Ireland.

The practical steps are as follows:

  • the IDERA must be in the form specified in the Capetown Act, and must be signed by the aircraft registered owner in wet ink. Two signed copies of the IDERA must be submitted, one of which is retained by the IAA and the other is returned to the registered owner;
  • application to lodge the IDERA may be made by the registered owner, by submitting the fully completed and signed form in duplicate to the IAA; and
  • the IAA will process the applications as required by law. It is hoped that IDERAs that meet all the requirements, including using the correct format, will be returned to the registered owner duly annotated within ten working days.

Because of the International Registry’s establishment in Ireland, the Irish courts have exclusive jurisdiction to deal with certain disputes under the Cape Town Convention, in particular those seeking an amendment to or deletion of entries on the International Registry where the registrant refuses to do so. The Irish courts have showed willingness, in appropriate circumstances, to make orders directed to the International Registry to delete invalid or improper registrations. See 2.6 Lease Enforcement: Lessor Taking Possession of Aircraft, above.

Ireland is a signatory to the Geneva Convention but has not yet ratified it. It is not a signatory to the Rome Convention.

As far as is known, there are no such restrictions.

See 2.1 Overview: Exchange Controls, above.

There are no restrictions on granting security to foreign lenders.

Such guarantees are permissible under Irish law, provided the company granting such guarantees is permitted to do so under its constitution.

It is important to note that the directors of Irish companies have a fiduciary duty to act in the best interests of the company, and in doing so must have regard to the interests of the shareholders collectively.

Section 82(2) of the Act sets out the prohibition on an Irish company providing financial assistance for the acquisition of its own shares. Noting that the term "acquisition" in relation to shares is defined as meaning "by subscription, purchase, exchange or otherwise", the acquisition of shares frequently occurs within Irish aircraft acquisition and financing structures. The prohibition on financial assistance applies irrespective of whether the financial assistance is given directly or indirectly, with typical examples including the making of guarantees and the provision of security by a target company.

While a number of exceptions to the prohibition exist, including principal purpose, lawful incurrence of liability by a company and lending in the ordinary course of business, each transaction structure should be considered on a case-by-case basis. The principal exception to the prohibition is the summary approval procedure ("SAP") or 'whitewash' procedure contained in Chapter 7 of Part 4 of the Act. Activities that may otherwise amount to prohibited financial assistance, such as upstream guarantees, may be whitewashed or permitted if the procedure as set out in the Act is adhered to.

It is advisable for a lender to take share security over a domestic special purpose vehicle that owns the financed aircraft.

A share pledge by way of equitable charge and/or mortgage is the most typical type of pledge, and is granted by the deposit of the share certificates and signed undated stock transfer forms with the lender. The charging document will contain provisions that such deposit is made by way of security, and the terms on which such security may be enforced.

Negative pledge provisions are typically included in share security documents in Ireland; however, it is of note that a negative pledge cannot be specifically registered or noted with the CRO.

There are no material restrictions or requirements imposed on intercreditor agreements under Irish law. Intercreditor agreements are typically governed by English or New York law, depending on the governing law of the other transaction documents.

Agency is a recognised concept under Irish law.

Subject to general qualifications regarding enforceability, any method of subordination permitted by the transaction documents governed by English or New York law would be permissible and recognised under Irish law.

In the event of insolvency of the borrower company, leading to examinership or company voluntary arrangements, the debt owed to subordinated lenders may be written down, particularly if such debt is unsecured.

Subject to general qualifications as to enforceability, the courts of Ireland would recognise as effective a New York law or English law governed assignment that is effective under such law.

See 2.6 Lease Enforcement: Domestic Courts' Approach to Foreign Laws and Judgments, above.

.

There are no applicable usury or interest limitation laws in Ireland.

Aviation finance transactions would typically be governed by English or New York law. If the aircraft-owning entity is an Irish registered company, the typical forms of Irish law governed security that the aircraft-owning entity or its parent would be a party to include a charge over the shares in the aircraft-owning entity, a mortgage over the aircraft, an assignment of the benefit of the lease, and a charge over the accounts into which rent receivables, maintenance reserve and security deposits are paid, assuming that the accounts are in Ireland.

As far as is known, there are no restrictions under Irish law, noting that the registration and perfection requirements may differ – for example, see the comments above in relation to the registration of charges over bank accounts at 3.2 Security: Form and Perfection of Security Over Bank Accounts.

Any restrictions would arise under the governing law of the security documents (typically English or New York law) or the law of the jurisdiction in which such collateral is located.

The concept of trust and the role of a security trustee are recognised.

A borrower can assign its rights to the aircraft or under an aircraft lease (including in relation to insurances) to a security trustee, pursuant to a security assignment or a mortgage.

The common law position is that the burden of a contract cannot be assigned without the consent of the other party to the contract, in which event such consent will give rise to a novation.

A security assignment or guarantee can be governed by English or New York law, and is not required to be governed by Irish law in order to be enforceable, provided the law of the jurisdiction governing the security assignment or guarantee recognises a valid security assignment. See discussion at 2.6 Lease Enforcement: Domestic Courts' Approach to Foreign Laws and Judgments, above.

There are no statutory requirements relating to the terms of a security assignment under Irish law. On aircraft finance transactions, such security assignment will typically be governed by New York or English law. A common form of security assignment provided by an Irish incorporated company would contain the following:

  • the names and addresses of the parties;
  • recitals;
  • full particulars of the assigned property;
  • a covenant to pay;
  • charging provisions;
  • covenants, normally in respect of:
    1. carrying on the business in a proper and efficient manner;
    2. observing all pertinent regulations;
    3. insurance; and
    4. rent;
  • any further assurances, to enable the assignee to protect its interest;
  • a power of attorney to enable the assignee to perfect its interest (if necessary);
  • enforcement of security – details will be given of the circumstances in which the assignee can obtain possession of the assigned property and the assignee's rights in possession. Provision will be made for the appointment of a receiver;
  • notice provisions;
  • governing law clause; and
  • jurisdiction clause.

Under Irish law (and typically under the governing law of the security assignment), the assignor should provide notice of the security assignment to the other party to the underlying contract being assigned by way of security. An acknowledgement of such notice should be requested from such counterparty, although this is not a perfection requirement.

If the assignor is a company, then a Form C1 containing particulars of the security assignment executed on behalf of both the assignor and assignee should be filed in the CRO. Section 409 of the Act provides that particulars of a charge created must be received by the CRO within 21 days of the date of its creation.

Failure to register within 21 days of the creation of the security assignment by a company renders the security assignment void against the liquidator and any creditor of the company.

No additional domestic law security instruments will be needed. With respect to IR filings, where the security assignment creates a registrable assignment of associated rights under the Cape Town Convention, such assignment may be recorded on the IR established under the Cape Town Convention.

No additional domestic law security instrument or filings are required to be made in order to make Cape Town filings.

Registration of a Form C1 with the CRO, as noted at 3.2 Security: Formalities/Mandatory Terms to Create and Perfect Security Assignments above, costs EUR40.

An English or New York law governed security assignment or a domestic law security instrument granted by an Irish registered company can be registered domestically, as per the procedure outlined at 3.2 Security: Formalities/Mandatory Terms to Create and Perfect Security Assignments.

It is possible to transfer security interests over an aircraft by way of assignment of contractual rights or novation. In the event of a transfer of security interests, there are a number of considerations that are not specific to Irish law, such as whether consent from the security provider is required, the existence of covenants to pay the debt in favour of the transferor, and cross-collateralisation of the debt.

In the assignment of security interests that have previously been registered with the CRO, a Form C17 must be filed noting the change of charge holder. If the security interest is novated, a new security interest is deemed to be created and, as such, novation may require registration, depending on the type of interest.

A transfer of security interest can be registered and therefore recognised with the International Registry.

If the identity of the secured parties under a security assignment changes after its execution, the security interests are not jeopardised, provided the security assignment is in favour of a security trustee, and the security assignment (or related finance documents) contemplates that the secured parties may change from time to time.

"Parallel debt" structures are not typically used in Ireland.

A secured party under a security assignment would not be deemed to be resident, domiciled, carrying on business or subject to any taxes as a result of its being a party to or its enforcement of such security assignment, provided that the secured party is not otherwise resident in Ireland or does not have a permanent establishment or other taxable presence in Ireland, or, if the secured party is so established in Ireland, provided it does not act through a branch or agency in Ireland or other taxable presence in Ireland in respect of its acts.

As per 3.2 Security: Formalities/Mandatory Terms to Create and Perfect Security Assignments, above, if the mortgagor is an Irish incorporated company, then a Form C1 containing particulars of the mortgage executed on behalf of both mortgagor and mortgagee should be filed in the CRO.

Assuming that the mortgage satisfies the requirements for classification as an "international interest" pursuant to the Cape Town Convention, then IR filings can be made in respect of such mortgage.

There is no difference in the forms of security or perfection thereof taken over an aircraft or over spare engines.

Typically, charges are taken over Irish opened rent accounts, maintenance reserves accounts, or accounts into which supplemental rent, security deposits, insurance and sales proceeds are paid. In order to perfect the charge, the account bank must be notified of the charge. An acknowledgment of the notice would typically be obtained from the account bank, but this is not necessary for its perfection.

The Act exempts charges over cash, funds in a bank account or securities from CRO registration.

See 2.4 Lessor's Liabilities: Attachment by Creditors and 2.4 Lessor's Liabilities: Priority of Third Parties' Rights, above.

A security interest created by a company is released or discharged upon the execution and dating of the relevant deed of release or release agreement, and the release or discharge becomes effective at this point. The discharge is effected with the CRO by the submission of a Form C6 with the CRO, verifying the satisfaction of the secured debt. The filing of a Form C6 in respect of such a release or discharge will appear on Irish company searches within a number of weeks from when the Form C6 has been filed (this is an administrative matter for the CRO). There is no time limit on when a Form C6 should be filed in respect of a release or discharge of a mortgage, and it does not have an impact on the effectiveness of the release.

Aside from security registrations to be made at the CRO, there is no specific aircraft mortgage registry in Ireland, and it is not possible to note the interest of a mortgagee in the IAA's register of aircraft. The creation of a mortgage or charge over an aircraft by an Irish incorporated company must be registered in the CRO in accordance with section 409 of the Act, as noted in 3.2 Security: Formalities/Mandatory Terms to Create and Perfect Security Assignments, above.

See 2.4 Lessor's Liabilities: Attachment by Creditors and 2.4 Lessor's Liabilities: Priority of Third Parties' Rights.

A potential purchaser of an aircraft could search the International Registry and CRO to verify that an aircraft is free of encumbrances.

Enforcement will depend on the terms of each such instrument.

Subject to certain qualifications regarding recognition of the governing law of the security assignment by the Irish courts, and assuming all other necessary factors to bring proceedings against the lessee are in place (eg, cause of action, etc), an acknowledgement and notice of assignment would assist the security trustee in pursuing any action or claim against the lessee that may arise pursuant to a security assignment.

See 2.6 Lease Enforcement: Domestic Courts' Approach to Foreign Laws and Judgments, above.

See 2.6 Lease Enforcement: Domestic Courts' Approach to Foreign Laws and Judgments, above.

Enforcement will be determined by the provisions of the relevant security agreement.

Domestic Irish courts are competent to decide enforcement actions. See 2.6 Lease Enforcement: Domestic Courts' Recognition of Foreign Judgments/Awards, above.

See 2.6 Lease Enforcement: Summary Judgment or Other Relief, above.

A secured party under a security agreement/aircraft mortgage can obtain a judgment in a foreign currency.

A secured party is not required to pay taxes or fees in connection with the enforcement of a security agreement/aircraft mortgage.

There are no other relevant issues at this time.

This question is not applicable.

This question is not applicable.

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Walkers is a global, integrated and market-leading financial services law firm that practices law across six jurisdictions and has ten offices across the Americas, EMEA and Asia. Walkers has 115 partners and 860 staff, providing 24/7 service to its clients. The Irish office provides market-leading Irish legal, tax, listing and professional services solutions to local and international financial institutions, investment managers, hedge funds, private equity groups and corporations. Expertise covers asset management and asset finance, corporate and M&A, employment, finance and capital markets, insolvency and dispute resolution, investment funds, real estate, regulatory and tax, as well as listings and fiduciary services. The firm's independent Corporate Services offering, Walkers Professional Services, provides a broad range of corporate, fiduciary and administration services to structured and asset finance vehicles.

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