There are no stamp taxes or duties that arise solely by virtue of the execution of a sale agreement while the subject asset of that sale agreement is located in England; however, a domestic party may be liable to pay value-added tax in connection with the sale or purchase of an aircraft or engine upon transfer of title and may also incur tax liabilities in connection with the importation of an aircraft or engine into the United Kingdom.
Certification, notarisation, and legalisation are not required for an English law-governed contract to be enforceable against a domestic party.
There is no requirement for a foreign language contract to be translated into English in order to be enforceable against a domestic party; however, if there is a risk of misunderstanding between the parties as to the agreed terms, it is advisable to have the parties also execute an English translation of the relevant agreement. That said, in practice it would be highly unusual for a domestic party to enter into a sale agreement that was not prepared in the English language.
A transfer of title is typically constituted by way of a dated bill of sale which has been signed and released by a duly authorised signatory of the seller of the asset.
The bill of sale should state that title to the aircraft and/or engine is being transferred together with all parts, equipment, installed devices and relevant documentation, including technical records and manuals. A generic reference to “all parts” will typically encompass the auxiliary power unit (APU). For the sake of clarity, the manufacturer’s serial numbers of the airframe and all engines should be expressly stated. Title may also be transferred by simple physical delivery of the relevant asset; however, a bill of sale is the more common form of title-transfer mechanism as future purchasers will expect to be provided with a continuous chain of title documentation back to the manufacturer. Failure to provide evidence of an uninterrupted chain of title may negatively impact upon the commercial value of the asset.
Provided that the entity in question holds both legal and beneficial title to the asset, the sale of an ownership interest in a company that owns an aircraft or engine will effectively be recognised as a sale of that aircraft or engine. It is recommended that parties always obtain specific tax advice in respect of such a “non-metal” transfer.
Under English law a bill of sale may be governed by the law chosen by the parties thereto, provided the selection is sufficiently clear from the circumstances of the case or expressly stated on the face of the document. It is typical for bills of sale for aircraft and engines to contain an express governing law clause. The position of the English courts is that in relation to the proprietorial aspects of the title transfer, this must be effected in accordance with the domestic laws of the jurisdiction where the relevant asset is situated (the “lex situs”) when the bill of sale is executed (ie, signed and delivered). If an aircraft or engine is physically located in England at the time of delivery, title of transfer under an English law governed bill of sale will be recognised.
The bill of sale must be duly executed (ie, signed and delivered) and it should be in writing, both for the purpose of certainty and for the purpose of maintaining a documented chain of title. As a matter of both contract and property law, the bill of sale must contain on the part of the title-holder an obligation to bind itself to transfer title to the designated transferee.
There are no specific requirements in this regard.
There are no local law consent, filing or registration requirements for English law-governed bills of sale. If the aircraft constituting the subject of the sale is UK-registered, it is advisable to inform the United Kingdom Civil Aviation Authority (the CAA) of a change in ownership by filing a Form CA1.
There is no stamp duty payable in England on the sale of an aircraft or engine located in England, over international waters or en route to or from England. A fee of USD100 is payable for the registration of a transfer of title constituting a sale under the Cape Town Convention. A domestic party may incur corporation tax liabilities on the sale of an aircraft and VAT may be charged on the sale or supply of an aircraft, although commercial aircraft are generally zero-rated for VAT.
The parties are generally free to select whatever terms they wish and to determine their respective rights and obligations.
The parties are generally free to select the governing law of the lease, but the choice should be either expressly stated in the document or easily ascertainable by the circumstances of the case. If the choice is not clear the governing law will default to the law of the country with which the lease is most closely connected. In practice, the governing law selected for cross-border leasing of commercial aircraft is typically English or New York law. There are certain limited circumstances in which the parties’ chosen law may be overridden, such as:
There are no such restrictions.
Other than in relation to sanctions' legislation, there are no foreign exchange controls in operation or restrictions on the transfer of proceeds or rent payments.
There are no fees, charges or stamp duties payable in respect of the execution of a lease in England or on a domestic party to a lease as a result of an original or copy of that lease being brought into England.
There are no specific requirements for a lessor to be licensed or qualified in England in order to lease an aircraft or engine to an English lessee. However, this should not be confused with any wider analysis of what general licences or authorisations a lessor may need in its own jurisdiction to carry out its business.
There are no such mandatory terms required.
As a general rule, such provisions are permissible and enforceable.
In the case of replacements, it would be typical for a lease to specify that such parts must be unencumbered and of the same or equivalent type, value, condition and utilisation or modification status as the parts being replaced. In the case of temporary substitutions, it would be commonplace for the lease to provide that parts can only substituted without the prior written consent of the lessor when this is done pursuant to a pooling or interchange arrangement customary within the airline industry and that removed parts may not be removed or pooled in such a manner that a loss of title to that part occurs.
Although there is no specific English case law on this point, it is generally thought that, because engines are identifiable as distinct from an airframe and can be removed from an airframe and replaced, the degree of annexation is negligible. Engine-owners and mortgage-holders will typically require lessees to attach identification plates to engines in order to notify third parties of their interests.
Trusts and owner trustee concepts are recognised in lease agreements.
Registration on the United Kingdom Civil Aviation Register may be made in either the name of the owner or the operator of the aircraft, provided that the person is a “qualified person”. The UK Civil Aviation Register is not a register of ownership and accordingly registration does not constitute proof of ownership of an aircraft. It is typical for an aircraft-operator to register as a “charterer by demise” and for the Certificate of Registration issued by the CAA to record that status without the name of the owner of the aircraft appearing on the Certificate. In such a case, the CAA will retain the name of the owner on file but will not make it available to the public. Ownership and leasehold interests that fall within the Cape Town Convention may be registered against an aircraft object at the International Registry.
See 2.3.1 Notation of Owner’s/Lessor’s Interests on Aircraft Register.
There is no specific register at the CAA or any other domestic register, such as Companies House; however, a lease constituting an “international interest” in a Cape Town Convention aircraft object is registrable on the International Registry.
It is not possible to register or file a lease with the CAA and leases are not subject to the consent of any domestic government entities.
This is not applicable in England and Wales.
This is not applicable in England and Wales.
The United Kingdom is not party to any ICAO 83-bis arrangements.
A Form CA1 must be submitted by either the owner of the aircraft or the charterer by demise eligible to register the aircraft. Full guidance can be obtained on the CAA website.
The lessor will not be required to make any such payments.
The circumstances of being a party to, or enforcement of, the lease will not result in the lessor being deemed resident, domiciled, carrying on business or subject to taxes in the United Kingdom.
Generally, no liabilities in respect of aircraft or engine maintenance and operations can be imposed on a foreign lessor under a lease as a result of its being a party to that lease. Under section 76(2) of the Civil Aviation Act 1982, an aircraft-owner has strict liability for loss and damage caused by an aircraft to third persons and property; however, by section 76(4) of the same Act, liability will transfer to a charterer by demise where the aircraft is chartered for a period of more than 14 days. It is also commonplace to exclude or restrict such liability by an appropriate contractual provision and to require an indemnity from the lessee.
See 2.4.3 Engine Maintenance and Operations.
See 2.4.6 Priority of Third Parties’ Rights.
There are third parties’ rights that will take priority over a lessor’s rights under an aircraft or engine lease, whether or not that lease/lessor is registered in the national aircraft register, for example:
There is no domestic or captive insurance regime in the United Kingdom applicable to aviation assets.
Any aircraft flying in the United Kingdom must carry the minimum amount of liability insurance as required by EU Regulation EC785/2004. Further details on EU limits can be found by visiting the CAA website. Hull insurance policies are generally arranged on an agreed-value basis.
Reinsurances can be placed outside England and Wales up to 100% coverage, although given the global pre-eminence of the Lloyd’s of London insurance market, this would be unusual in practice.
Despite limited case law in this field, such clauses are generally considered effective as a matter of English law.
Assignments of insurances/reinsurances are permitted; however, they are more typical in instances where the relevant cut-through clause is not enforceable and accordingly are not always used in transactions with English lessees.
Outside of bankruptcy and subject to other applicable laws and the quiet-enjoyment terms applicable under a specific lease, there are no specific limitations on the ability to exercise remedies. The aircraft need not be physically located in the United Kingdom; however, if it is located in a third country, the procedural local laws of that country will typically govern the exercise of remedies.
Provided the relevant lease accords such rights (and as a matter of practice they invariably do) English law will permit a lessor to exercise self-help remedies without the need for a court order, to the extent that the lessor is able to do so peaceably and lawfully. In circumstances where the lessee does not co-operate with the lessor’s exercise of such rights, it is common practice for a lessor to apply for a possession order.
There are no specifically designated courts per se; however, aviation disputes are most commonly heard before the Commercial Court of the Queen’s Bench Division of the High Court in London.
A lessor can obtain a summary judgment, or equitable or other injunctive relief, pending final resolution of judicial proceedings to enforce an aircraft lease under a highly accelerated process. In some limited circumstances, this will require that the claimant post a security or bond to secure the defendant against damage that it might suffer if the seizure is found to have been unfounded, although this is often dealt with by way of the claimant providing an indemnity for damages. The court may be reluctant to grant injunctive relief if the defendant would be likely to suffer, as a result of disruption to its business through the seizure of an aircraft, unquantifiable damage for which it could not be adequately compensated if the claimant’s case were to fail.
In practice, the governing law of cross-border aircraft lease agreements is commonly expressly stated in the lease agreement as English or New York law. English courts will uphold the law chosen by the parties to govern the lease; however, the Rome I Regulation (EC) No 593/2008 and Rome II Regulation (EC) No 864/2007 permit the parties' choice of law to be overridden in certain limited circumstances, such as where all the other elements of the lease agreement are located in a country which is not the country of the selected governing law and that country’s laws cannot be derogated from.
This depends entirely on which foreign court or arbitral panel issued the judgment or award. For several countries, statutory provisions allow for the enforcement of a judgment in England and where no Regulation or Act is applicable, a foreign judgment may be enforced under common law.
A lessor under an aircraft lease can obtain a judgment in a foreign currency, provided that the debt accruing under the aircraft lease is expressed in that currency. The sum will be converted to sterling on the date that the court authorises enforcement of the judgment.
As a general rule, there are no such limitations, provided that the level of default interest or additional rent is not so extortionate as to be categorised as a penalty. Case law on penalties continues to evolve and it is not possible to state definitively the boundaries of penalty territory; however, a secondary obligation which imposes a detriment on the contract-breaker out of all proportion to any legitimate interest of the innocent party in the enforcement of the primary obligation is likely to be construed as a penalty.
Other than the security described in 2.6.4 Summary Judgment or Other Relief, which may apply in the event of injunctive relief being claimed, generally, a lessor under an aircraft lease is not required to pay taxes or fees in a significant (ie, non-nominal) amount in connection with the enforcement of a lease.
There are no mandatory notice periods with which a lessor must comply if it terminates an aircraft lease which relates to an aircraft operated domestically or which is leased by a domestic operator.
Sovereign immunity can generally be waived and may not even be applicable in relation to purely commercial activity. Lease agreements often feature such waivers.
The United Kingdom acceded to the New York Convention on 23 December 1975. The procedure for an enforcement of an award under the New York Convention is the same as for a domestic award and there are certain limited grounds where a domestic court may refuse to enforce the award, such as where, in doing so, it would be contrary to public policy.
There are no other relevant issues that a lessor should be aware of in relation to the enforcement of its rights that we wish to raise.
The concepts of contractual assignment and novation are recognised, although it should be noted that English law recognises the assignment of rights only and not obligations. It should further be noted that obligations are not assigned under a novation; they are replaced.
The lessee’s consent is not required as a matter of English law in order for a novation agreement or deed to be held valid by a domestic court; however, typically, a lease will provide that any transfer or assignment of the lessor’s interest is subject to certain requirements - the most common of which being that the lessee will not suffer any increased obligations or diminution of its rights as a result of the novation or assignment. Accordingly, it is standard practice to add the lessee as a party to the novation or assignment as a means to remove any doubt as to whether or not those requirements have been satisfied. There are no mandatory terms that need to be included in an English law-governed novation or assignment; however, these documents are regularly drafted in the form of a deed in order to circumvent any possible argument regarding failure of consideration.
The lease assignment or novation need not be certified, notarised or legalised to be enforceable against a domestic party. In practice, these documents are invariably prepared in the English language when there is a domestic party.
There is no local law filing or registration requirement; however, it is advisable to inform the CAA of any change in ownership by filing a Form CA1. It is further recommended that all international interests that arise in respect of UK-registered aircraft be registered on the International Registry following the discharge of any obsolete registrations.
There are no taxes or duties payable in respect of an assignment and assumption/novation agreement, or as a consequence of an original or copy of any such agreement being brought into England and Wales, either physically or electronically.
In general, where there is no assignment or novation of the actual lease it would not require lessee consent or participation. In practice, however, new insurance, tax certifications and financing consents are usually required.
The operator of the aircraft as the registered owner (or “charterer by demise”) is the only party who can request deregistration of an aircraft from the UK aircraft register unless an irrevocable deregistration and export request authorisation (IDERA) has been filed in favour of an authorised party such as a mortgagee or lessor. Deregistration is typically carried out within three working days, although it can be expedited on a same-day basis for an additional fee.
Deregistration of an aircraft pursuant to the request of the authorised party named in the IDERA does not require the consent of the registered owner (or “charterer by demise”) noted on the CAA aircraft register.
A Form CA54 will need to be completed and submitted by the party in whose favour the IDERA has been issued (the “authorised party”). No fee is payable unless a same-day expedited service is requested.
Typically, the deregistration process will take three working days unless the same-day service is requested.
As a matter of law, the CAA is required to co-operate with the authorised party in the IDERA and carry out its functions pursuant to the Civil Aviation Act 1982 in an expeditious manner. It must cancel the registration of the aircraft named in the recorded IDERA as soon as is reasonably practicable if it is satisfied that the authorised party is entitled to request deregistration.
No, there are no significant costs/fees/taxes chargeable with regard to the deregistration per se, which is construed as distinct from the certification required for the export of an aircraft.
As a matter of practice, deregistration powers of attorney have now largely been superseded by the use of IDERAs. There is no guarantee that the CAA will recognise a deregistration power of attorney; however, in order for a deregistration power of attorney to be effective in English law, it must be executed as a deed. In the case of an IDERA, the lessee must complete a Form CA50 and submit it to the CAA for issue and recordation of the IDERA, together with the requisite filing fee of GBP108.
No further documents are needed in addition to the IDERA.
It is not a requirement for a deregistration power of attorney to be governed by the laws of England and Wales.
A deregistration power of attorney may be revoked by the authorised party, who may also designate a replacement authorised party as its certified designee.
In the case of an aircraft subject to a charter by demise, the CAA may agree to notify the lessee before the deregistration is affected, but it has no legal obligation to do so and does not need to obtain the consent of the lessee before effecting the deregistration. The authorised party named in the IDERA will need to revoke the IDERA before the aircraft can be deregistered and exported.
An Export Certificate of Airworthiness confirming the aircraft conforms to the type certificate data sheet and is in a condition for safe operation will be needed, together with a valid certificate of airworthiness, permit to fly or other airworthiness document. The CAA “Service Standard” for the processing of instructions for an application is 15 working days from receipt of the correctly completed application and clearance of the required fee.
The costs of the certificates described in 2.8.12 Aircraft Export Permits/Licences are not insignificant and are levied by reference to the weight of the subject aircraft. Full details can be seen on the CAA website.
The CAA might refuse to grant the mortgagee or lessor the necessary operating licence, certificate of airworthiness or other consents needed for the continued flight or export of the aircraft. Under English law, statutory rights of detention may also apply to the aircraft in respect of unpaid taxes, airport and air navigation charges, and in connection with crimes such as drug trafficking, terrorism and breach of UN sanctions.
As a matter of English law, an IDERA (which is expressed to be irrevocable) and which secures a proprietary interest of the authorised party or the performance of an obligation owed to the authorised party will not be revoked by the dissolution or winding-up of the grantor, provided that the authorised party still holds the proprietary interest or the obligation remains unperformed.
The lease may be set aside if it is found to have been entered into at an undervalue, in circumstances where it has been entered into no later than two years preceding the onset of the insolvency and the lessee was unable to pay its debts at the time of execution or became unable to pay its debts as a consequence of its entry into the lease. In the case of an administrative order, the lessor may no longer have the right to continue to receive rent, as this will fall to the discretion of the English courts and/or the administrator. The lessor will be prevented from repossessing the aircraft in the absence of the express consent of the administrator or the permission of the court. In the case of a liquidation, the liquidation will not have the effect of terminating the lease and if the liquidator chooses not to perform the lessee’s obligations, the lessor will be entitled to rely on its contractual remedies. If the liquidator disclaims the lease, it will forfeit entitlement to possession of the aircraft and the lessor will be entitled to claim damages resulting from that disclaimer. Where a winding-up order is made, and provided that no court action is necessary, the lessor will be able to repossess the aircraft. If the lease involves an international interest over the aircraft, the lessor will likely have the benefit of creditor protections under the UK Cape Town Convention Regulations, which provide that upon an “insolvency-related event” occurring, the debtor must either return the asset to the creditor prior to the expiry of a 60-day waiting period or cure the breach and agree to perform all future obligations under the relevant agreement within the 60-day waiting period. Failing this, the creditor may exercise self-help remedies in order to repossess the relevant asset.
The obvious risk for an unsecured creditor is that of non-payment and little chance of recovery of any portion of the loan. Remedies available to a lender will differ significantly, depending on the relevant insolvency procedure, which under English law spans administrative receivership, administration and liquidation through to various schemes of arrangement.
Under the recently enacted Corporate Insolvency and Governance Act 2020, companies other than those subject to: (i) to formal insolvency proceedings; or (ii) to a moratorium, company voluntary arrangement or administration in the prior 12 months, may request a moratorium, which will initially last 20 business days (subject to extension by an extra 20 business days (without creditor consent) and up to one year (with creditor consent), or as approved by a court order, on creditor action where the company is, or is likely to become, unable to pay its debts, and the moratorium would result in the rescue of the company as a going concern. Importantly for lessors and lenders, however, two such exceptions are lease rent due, and amounts for goods and services supplied, during the moratorium – these sums must continue to be paid otherwise the moratorium will be brought to an end. In addition, where a creditor has a registered “international interest” the moratorium will not apply after the 60-day waiting period referenced in 2.9.2 Other Effects of a Lessee’s Insolvency.
A compulsory liquidation may be achieved by a court order initiated by a petition submitted by the company’s directors, shareholders or creditors. A voluntary liquidation may be achieved by a resolution of its members, with the creditors able to nominate a liquidator. Administration may be achieved by the company’s directors or creditors applying to the courts for an administration order. An out-of-court procedure is also available to the company’s directors and qualifying floating charge-holders to initiate an administration by filing notice of an appointment of an administrator with the court and prior qualifying floating charge-holders.
Leases are commonly drafted in such a way that the mere circumstance of lessee insolvency proceedings (subject to the expiry of certain grace periods) will confer a contractual entitlement on the lessor to terminate the leasing of the relevant asset and repossess it.
If a winding-up order is made against the lessee, the lessor will be able to repossess the aircraft, provided that no court action is necessary. That said, a court would in all likelihood grant permission to a lessor to commence proceedings to repossess the aircraft. The provisions of the Insolvency Act 1986 may serve to impede the return of a security deposit or maintenance reserves if the relevant payment was made two years or less in advance of the lessee entering into insolvency.
Both the Convention on International Interests in Mobile Equipment (the Convention) and the related Protocol on Matters specific to Aircraft Equipment (the Protocol) came into force domestically on 1 November 2015. AEP codes are not required and lessors are able to attend to filings themselves.
In England and Wales, the declarations made under the Convention or the Protocol are Cape Town Convention Articles: 39 (1) (a)-(b), 39(4), 52 (1), 53, 54 (2) and Articles XXIX, XXX(1).VIII, XXX(1). XII, XXX(1). XIII, XXX(2) and XXX(3) of the Protocol.
See 2.8.7 Deregistration Power of Attorney.
There is no known recent case law in the English courts enforcing the Convention or the Protocol.
The United Kingdom is a signatory to both the Geneva Convention and the Rome Convention, but has not ratified or acceded to either and consequently their terms do not apply under English domestic law.
There are no restrictions on foreign lenders financing an aircraft locally; however, withholding taxes may apply in the absence of an available exemption under an applicable tax treaty. Domestic borrowers are subject to all applicable English laws, but no additional restrictions apply to the use of loan proceeds from foreign lenders.
There are no such consents or controls requiring compliance.
Borrowers are permitted to grant security to foreign lenders.
All such guarantees are permitted, and adequate consideration is a requirement for all such guarantees. As guarantees are typically provided by the parent or another party related to the borrower, the benefit of the loan being disbursed to the borrower is typically the consideration referenced in the guarantee. Particular care should be given to consideration for upstream guarantees, as courts will look to see what benefit the subsidiary received in guaranteeing its parent’s debt, such as the amount of debt proceeds which were contributed to the subsidiary. If a bankruptcy court determines that the guarantor did not receive adequate consideration for its guarantee, the court may void the guarantee as a fraudulent conveyance.
It is advisable for a lender to take share security over a domestic special-purpose vehicle that owns the financed aircraft, however it would be unusual to rely only on a share charge and not also take security over the aircraft by way of a mortgage.
Negative pledges are recognised under English law.
There are no such restrictions or requirements.
The concept of agency and the role of an agent (such as the facility agent) under a syndicated loan is a well-established concept under English law.
Contractual and structural methods of debt subordination (the latter achieved by way of the junior lender issuing a loan to a holding company of the senior lender’s borrower) are permissible and recognised.
Secondary debt trading in the aviation market is well-established in England and Wales, and such transfers and assignments of all or part of an outstanding debt are commonplace.
There are no usury laws in effect in England. Excessive default interest may be construed as a penalty and therefore unenforceable in circumstances where the requirement to pay it constitutes a secondary obligation which imposes a detriment on the contract-breaker out of all proportion to any legitimate interest of the innocent party in the enforcement of the primary obligation.
Typical forms of security and recourse granted in an aviation finance transaction domestically would be a share charge over the borrower, a mortgage over the aircraft, assignments of airframe and engine warranties, a lease security assignment, parent guarantees, assignments of insurances, account charges over lease rental, security deposit and maintenance reserves accounts.
All types of security are recognised and typically enforceable under English law.
Trusts and security trustees are recognised and are well-established concepts under English law.
It is permissible and commonplace for a borrower to assign to a security trustee, pursuant to a security assignment or a mortgage, its rights to the aircraft or under an aircraft lease, including in relation to insurances.
It is possible to assign the rights and benefits of the lessor under an aircraft lease pursuant to an assignment. It is not possible to assign obligations as a matter of English law; this could only be achieved by way of a novation.
A security assignment or a guarantee need not be governed by domestic law to be enforceable, provided that the law of the stipulated jurisdiction recognises the valid creation of the relevant security interest.
A security assignment granted by a company incorporated in England must be registered at Companies House within 21 days of its creation or it will be void against other creditors, liquidators and administrators of the company. Under s 136 of The Law of Property Act 1925, notice of the assignment must also be provided to the contract counterparty. While it is good practice to request an acknowledgment of receipt of that notice from the counterparty, this is not a prerequisite for perfection. There is no legal requirement for a security assignment to be translated, certified, notarised or legalised to be enforceable against a domestic counterparty.
There are no additional security instruments that are required and no domestic instruments or local law filings that are necessary as a prerequisite to making a Cape Town filing.
In theory, a New York law-governed security assignment could be registered domestically if issued by an English company, although it would be commonplace to see an English law-governed assignment.
The transfer of security interests over an aircraft and/or engines is recognised, provided that this is in accordance with the transfer provisions set forth in the underlying security instrument.
To the extent that a security trustee is used as the assignee and the security assignment contemplates that the secured parties may change from time to time, security interests will not be jeopardised.
Parallel debt structures are not commonly used in England.
The secured party would not be deemed resident, domiciled, carrying on business or subject to taxes in the United Kingdom by virtue of its being party to, or enforcing, a security assignment.
For an English law aircraft mortgage to be recognised as effective by an English court, the aircraft must be physically located in England (or airspace over England), or another jurisdiction where the domestic laws of that other jurisdiction would recognise an English law mortgage as an effective means by which to create such security at the time that the security is created (lex situs rule). Any mortgage of a UK-registered aircraft may be registered in the Aircraft Mortgages Register maintained by the CAA as evidence of the mortgage, although this is not required for the purposes of perfection. There is no separate mortgage register maintained in respect of engines or spare parts. If the mortgagor is a company registered in England, it will also be necessary to register the mortgage at Companies House within 21 days of its creation.
There are no material differences between the form of security (or perfection) taken over an aircraft and that taken over spare engines.
Security over a bank account is perfected by the secured party obtaining “control” over the relevant account. In practice, this is typically done in two ways. First, by having the secured party be the bank with which the bank account is maintained and including appropriate provisions in relation to the account in the security agreement. Second, by entering into a tripartite account pledge agreement or account control agreement between the account bank, the borrower/account holder and the secured party, pursuant to which the account bank agrees to grant the secured party control over the account following notification of the occurrence of an event of default under the related security agreement.
Third-party liens are recognised and may take priority over aircraft ownership or security interests. The amount claimed must be due and payable. Fleet liens are recognised in England. Local authorities which own or manage UK airports, the CAA, and HMRC, amongst numerous other agencies, all have the right to seize, detain and sell aircraft for unpaid debts. The priority of such rights is also retained under the Cape Town Convention as applied in the United Kingdom, without the need for any registrations on the International Registry.
It is impossible to state any average; however, it is possible to discharge a lien or mortgage on a same-day basis.
The interests of a mortgagee over a UK-registered aircraft may be noted on the Aircraft Mortgage Register maintained by the CAA. A mortgage so registered will take priority over all other mortgages and charges over the aircraft registered earlier in time.
Statutory rights of detention or non-consensual preferential liens can arise over an aircraft and/or on a “fleet-wide” basis As just one example, the Secretary of State has the ability to detain and sell any aircraft operated by a lessee defaulting on its EU Emission Trading Scheme payment obligations.
A potential purchaser of an aircraft could search the CAA Aircraft Mortgage Register and the Cape Town International Registry to verify that an aircraft is free of encumbrances.
The type of security interest a lender holds will determine how it can enforce its security and whether it can do so without a court order. Certain methods of enforcement are only available to the holders of specific types of security interest, although, in some cases, this can be varied by terms agreed in the security document creating the security interest.
Security assignments usually contain specific and often highly negotiated provisions on when the debt becomes payable and when security can be enforced by the secured party. These provisions will determine when the right to enforce arises. Even if defaults (including non-payment defaults) have occurred under the related lease or facility agreement, additional steps may need to be taken by the lessor or lender (such as the giving of a notice, expiry of a grace period or the exercise of discretion) before the debt can be accelerated or security enforced.
If not otherwise governed by express terms, the secured party can enforce rights arising by operation of law. These include an application to the court for a foreclosure order, an exercise of a power of sale and an exercise of a right to appoint a receiver of income.
Generally, domestic courts will uphold a foreign law as the governing law of a finance or security document, and the submission to a foreign jurisdiction, except where, for example, this would be incompatible with public policy in England and where the elements of the contract to be performed are located in a country other than England and that country’s laws cannot be derogated from by contract.
See 2.6.6 Domestic Courts’ Recognition of Foreign Judgments/Awards, which applies equally here.
A secured party can take physical possession of the aircraft to enforce a security agreement/aircraft mortgage without the lessee’s or operator’s consent, provided that power is set out in the relevant agreement and the security party is able to do so peacefully. However, a court order will often be sought as a means to circumvent any argument by the lessee as to trespass or breach of the lessee’s right to quiet enjoyment of the aircraft in circumstances where the lessee opposes the repossession.
See 2.6.3 Specific Courts for Aviation Disputes, which applies equally here.
All of these options are available via the English courts. Default judgment is typically available where the mortgagor fails to acknowledge the mortgagee’s claim form by issuing notice of an intention to defend. Summary judgment would be available where the mortgagor has no material prospect of defending the claim. Injunctions may be appropriate where there is a possibility that the aircraft will be removed from England or dealt with in such a manner as to impair its value. See 2.6.4 Summary Judgment or Other Relief which applies equally here.
See 2.6.7 Judgments in Foreign Currencies which applies equally here.
Other than counsel fees, a secured party is not typically required to pay taxes or fees in a non-nominal amount in connection with the enforcement of a security agreement/aircraft mortgage.
There are no other relevant issues that a lender should be aware of in relation to the enforcement of its rights.
There are no other relevant issues that we wish to raise.
There are no new legislative proposals that we are currently aware of.