No stamp duty or comparable public payment obligation exists under Latvian law.

Under Article 13(2) of the Civil Procedure Code, a party must provide the court with a Latvian translation of any document it relies upon, irrespective of the nationality of the respondent.     

Drawing on the German model, Latvian property law necessitates both a substantive contract (like a sales agreement) and the execution of a real contract. The latter is realised through the physical transfer of the asset to the new owner, which marks the transfer of title per Article 987 of the Civil Code. This physical transfer is regarded as fulfilled once the documents that evidence it, such as a bill of sale or acceptance certificate, are executed.

Without a clear asset description, Article 1505 of the Civil Code dictates that the asset includes all elements that are typically provided in standard practice. For example, a general reference to an aircraft implies the transfer of engines, auxiliary power units (APUs), and documentation.

It is important to note that Latvian law does not allow for aircraft or engine title transfer through changes in corporate ownership.

According to the principle of party autonomy under private international law, parties have the freedom to determine the law governing their contractual documentation, including the bill of sale. Both English and New York law are fully recognised and enforceable in Latvia.

Under Article 13(2) of the Civil Procedure Code, a party must provide the court with a Latvian translation of any document it relies upon, irrespective of the nationality of the respondent.     

The filing of a bill of sale is mandatory for both initial and subsequent ownership change registration at the civil aircraft registry, which is maintained and operated by the Civil Aviation Authority (CAA). No other requirements for filing with or seeking consent or approval from any public authority exist.

No stamp duty or comparable public payment obligation exists under Latvian law.

Parties are free to lease any asset related to an aircraft, including engines. However, the civil aircraft registry only records data about the aircraft as a whole. In practice, the CAA will, upon a justified request, add information about engine ownership or lease to the aircraft file. However, the CAA will not give any legal effect to this information.

The principle of party autonomy under private international law also extends to the choice of governing law over contractual documentation, irrespective of the nationality of the party or the location of the asset. 

There are no restrictions on domestic lessees making payments in USD or any other currency, except where limited by applicable sanctions regimes.

There are no prohibitions under Latvian law regarding exchange control laws or regulations, or in terms of limiting the repatriation of proceeds, except where limited by applicable sanctions regimes.

No stamp duty or comparable public payment obligation exists under Latvian law.

Latvian law does not specify any qualification requirements for lessors.

The principle of party autonomy under private international law also extends to the choice of the contents of the contractual documentation. Therefore, there are no requirements under Latvian law to provide additional or specific provisions for their validity in Latvia.

The principle of party autonomy under private international law also extends to the choice of the contents of the contractual documentation, so gross-up provisions will be recognised. 

The principle of party autonomy under private international law also extends to the choice of the contents of the contractual documentation, as well as the governing law. As a result, any issues related to items replaced or added after the contract’s execution will be determined by the applicable law of the contract.

Latvian law recognises separate ownership of any item installed on or forming part of the aircraft. As a result, regardless of the nature of the applicable Latvian law provision (private or public), separate title status will be appropriately observed. However, complications may arise in public law situations when an authority seeking enforcement on a debtor’s aircraft may not realise that there are separate title aspects over one or more engines. Regular monitoring of the asset’s fate or other standard measures, such as installing plates onboard aircraft indicating separate engine ownership, are recommended.

Latvian law, consistent with other civil law countries, generally does not enforce specific trust connotations. Instead, it formally recognises the actions and title of the trustee (as the registered and acting owner) only.

The Latvian civil aircraft registry contains information on the legal owner and operator (lessee) of the aircraft. If the lessor entity differs from the legal owner, this information is derived from the lease agreement, which is also filed in the registry.

Latvia employs a declaratory registry system, necessitating parties to register their titles and interests in the aircraft. However, the act of registration itself does not constitute the establishment of the title or interest.   

The Latvian civil aircraft registry mandatorily collects and records information concerning the legal owner and operator (lessee) of the aircraft. If the lessor entity differs from the legal owner, this information is derived from the lease agreement, which is also filed in the registry.

Consequently, the Latvian system functions as an owner’s registry as opposed to an operator’s registry, and aircraft registration can only be in the name of a legal owner.

Aircraft leases must be recorded in the civil aircraft registry. However, for engine leases, the Latvian civil aircraft registry only records data related to the entire aircraft. In practice, the CAA will, upon a justified request, add information about engine ownership or lease to the aircraft file. However, the CAA will not give any legal effect to this information.

Aircraft leases must be recorded in the civil aircraft registry. Any subsequent material changes (including, the creation of leases or security interest) must be recorded in the civil aircraft registry within five 5 days from the effective date when that particular change occurred (Article 12 of the Aviation Law).

Under the cited provision, the lessee (operator) is obliged to notify of any changes in the existing lease agreement, while any other changes in or over the aircraft (including, lease assignments or novations) must be notified by the owner. 

Since the civil aircraft registry operates on a declaratory basis rather than a constitutive one, the failure to report any changes does not impact the title or interests. Although no explicit penalties are stipulated for non-compliance, parties typically adhere to this requirement. This is because deviations could potentially prompt further inquiries by the CAA.

No specific formalities are necessary for lease registration in the civil aircraft registry. Given that English is an accepted language in international commercial aviation, the CAA will typically waive the requirement for lease document translations into Latvian. 

Under Latvian law, no stamp duty or comparable public payment obligation is required. Likewise, no specific lease registration fee is mandated for lease-related filings to the civil aircraft registry.

Ireland and Malta are the most popular jurisdictions for both commercial and business aircraft registration.

The CAA requires either original or duly certified (notarised and apostilled) copies of public documents issued in other jurisdictions, in particular, the deregistration confirmation certificate, export certificate of airworthiness, or (non-revenue) special flight permit. 

For private documents, the authority will normally accept the submission of scanned copies only, reserving the right to request original or duly certified (notarised and apostilled) copies for inspection if necessary.  If a party is making filings through an agent, the submission of a power of attorney in original or duly certified form is also required.

A lessor is only subject to tax liabilities in Latvia if they are considered to have a taxable presence in the country. Having lease arrangements with local lessees, regardless of how frequent they are, does not automatically create a taxable presence.

A lessor is only subject to tax liabilities in Latvia if they are considered to have a taxable presence in the country. Having lease arrangements with local lessees, regardless of how frequent they are, does not automatically create a taxable presence.

The principle of party autonomy under private international law also extends to the choice of the contents of the contractual documentation. In a typical aircraft lease, the lessee is responsible for any claims, liabilities, or costs incurred by the lessor/owner. There is no additional liability, including, strict liability otherwise imposed under Latvian law upon the lessor/owner by virtue of operating the aircraft/engines. 

The principle of party autonomy under private international law also extends to the choice of the contents of the contractual documentation. In a typical aircraft lease, the lessee is responsible for any claims, liabilities, or costs incurred by the lessor/owner/financier. There is no additional liability, including, strict liability otherwise imposed under Latvian law upon the lessor/owner/financier by virtue of operating the aircraft/engines. 

Latvian law recognises separate ownership of a debtor’s assets and those of its counterparties. Therefore, under the applicable Latvian law, a leased asset cannot be seized for the benefit of the lessee’s creditors based on private or public law principles.

On 1 September 2021, Latvia made two subsequent declarations to the Cape Town Convention that came into effect.

• Declaration under Article 39(1)(a): Latvia recognised two customary preferred non-consensual liens under Article 39(1)(a), namely, regarding outstanding airport, air navigation and similar charges, as well as the repairperson’s lien.
• Declaration under Article 40: Latvia subjected certain domestic non-consensual liens to the registration system. These liens are any rights recorded in the civil aircraft registry pursuant to a lawful decision of an administrative or judicial body.

There is no legal mandate in Latvia for insurance to be placed with domestic providers.

Mandatory requirements stem from Regulation No 785/2004 of the European Parliament and of the European Council of 21 April 2004 on insurance requirements for air carriers and aircraft operators in respect of (i) carrier liability and (ii) third-party liability.

There are no restrictions on the scope of reinsurance or the jurisdiction of reinsurance providers.

No limitations exist in respect of “cut-through” clauses (endorsements).

No restrictions apply to the assignment of insurances or reinsurances.

Latvia made an original declaration under Article 54(2) of the Cape Town Convention, as well as a subsequent declaration made under Article XIII of the Aircraft Protocol. Latvia has also amended its insolvency laws to reflect the Aircraft Protocol Article XI, Alternative A scenario, providing a 60-calendar day waiting period.

Latvia made an original declaration under Article 54(2) of the Cape Town Convention, as well as a subsequent declaration made under Article XIII of the Aircraft Protocol. Latvia has also amended its insolvency laws to reflect the Aircraft Protocol Article XI, Alternative A scenario, providing a 60-calendar day waiting period.

Aviation dispute resolution falls under the remit of general courts. Only specific issues are assigned, under the Civil Procedure Code, to the Economic Court as a first (trial) level court. This court has specialised jurisdiction over the following matters commonly encountered by the international aviation financing and leasing community:

• reinsurance;
• financial collateral arrangements; and
• investment and ancillary services.

Since Latvia is a Cape Town Convention member state, the respective provisions governing the matter are those enshrined in the treaty.

The principle of party autonomy under private international law also extends to the choice of the contents of the contractual documentation, as well as the governing law. Accordingly, the Latvian courts will respect the choice of foreign law and foreign dispute resolution venue (including, arbitration), as well as the sovereign immunity waiver in accordance with provisions of public international law.

EU Judgments

Latvia applies the provisions of Regulation (EU) No 1215/2012 of the European Parliament and of the Council of 12 December 2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters.

Non-EU Judgments

Recognition and enforcement of a foreign judgment without retrial or rehearing of the merits of the case is governed by Articles 637(2) and 644 of the Civil Procedure Code. These provisions are roughly similar to the grounds referred to in Article 45(1) of the above-cited Brussels Regulation 1215/2012 (Recast).

Foreign Arbitral Awards

Latvia is a member state of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York, 10 June 1958).

Should a dispute fall under the jurisdiction of Latvian courts, these courts will permit judgments in a foreign currency if the currency is stipulated in the agreement, or if a well-substantiated request is submitted to the court explaining the reasoning for a foreign currency decision. However, the court will also indicate the equivalent amount in euros.

The principle of party autonomy under private international law also extends to the choice of the contents of the contractual documentation, as well as the governing law. Accordingly, such limitations will depend on the terms and conditions of the lease, as well as the provisions of the applicable law, including regarding any limitations on recovering or charging a particular form of interest or rent.

No stamp duty or comparable public payment obligation exists under Latvian law.

If recourse to Latvian courts is made, the amount of court fees depends on the nature of the application (Article 34(1) in the Civil Procedure Code):

• For substantive claims/counterclaims, the fees start from 15% of the claimed amount (or a minimum of EUR70) for claims up to EUR2,134.00, up to EUR8,715.00 plus 0.6% of any amount exceeding EUR711,435.00 for claims exceeding this amount.
• For an application for recognition and enforcement of a foreign arbitral award, the fee payable is 1% of the awarded amount, capped at EUR285.00.

The principle of party autonomy under private international law also extends to the choice of the contents of the contractual documentation, as well as the governing law. Accordingly, the mandatory notice periods will depend on the terms and conditions of the lease, as well as the provisions of the applicable law.

Contractual clauses waiving sovereign immunity (from suit, enforcement, or attachment) will be acknowledged in accordance with public international law.

Latvia is a member state of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York, 10 June 1958).

There are no other relevant issues that a lessor should be aware of in relation to the enforcement of its rights.

The concepts of contractual assignments and novations are recognised in the jurisdiction.

The principle of party autonomy under private international law also extends to the choice of the contents of the contractual documentation, as well as the governing law. The assignment/novation of leases under foreign laws will depend on the terms and conditions of the lease, as well as the provisions of the applicable law.

Under Article 13(2) of the Civil Procedure Code, a party must provide the court with a Latvian translation of the documents it relies upon, irrespective of the nationality of the respondent. No other formalities for enforcement procedures specifically against domestic parties exist.     

Aircraft leases must be recorded in the civil aircraft registry. Any subsequent material changes (including, the creation of leases or security interest) must be recorded in the civil aircraft registry within five 5 days from the effective date when that particular change occurred (Article 12 of the Aviation Law).

Under the cited provision, the lessee (operator) is obliged to notify of any changes in the existing lease agreement, while any other changes in or over the aircraft (including, lease assignments or novations) must be notified by the owner. 

Since the civil aircraft registry operates on a declaratory basis rather than a constitutive one, the failure to report any changes does not impact the title or interests. Although no explicit penalties are stipulated for non-compliance, parties typically adhere to this requirement. This is because deviations could potentially prompt further inquiries by the CAA.

No stamp duty or comparable public payment obligation is required under Latvian law.

Likewise, no specific lease-related registration fee is required when filing a lease in the civil aircraft registry. However, lease assignment or novation, which typically involves transferring the title to a new legal owner, may entail re-registration costs according to the fee schedule of the CAA.

The Latvian system operates on an owner’s registry model, recognising the direct legal title holder of the aircraft, as indicated in the Certificate of Registration. Changes in corporate ownership of the title-holding entity will not alter the legal title to the aircraft under Latvian law.

The same applies if there is a change in the beneficiary owner in a trust setting, but the legal owner of the aircraft (the trustee) remains the same. This is because Latvian law, like other civil law countries, typically does not enforce trust-specific implications. It will only formally recognise the actions and title of the trustee (as the registered and acting owner). 

With regards to the enforcement of an irrevocable deregistration and export request authorisation (IDERA), the respective provisions of the treaties will apply. Latvia has made a subsequent declaration under Article XIII of the Aircraft Protocol.

In other scenarios, only the legal aircraft owner can carry out deregistration, provided written consent from any security holder is obtained (where applicable). If the aircraft is deemed non-airworthy and is scheduled for retirement, the usual deregistration fee of EUR80 is waived.

Under the Latvian owner’s registry system, the lessee’s consent for deregistration is not required.

With regard to the enforcement of an IDERA, the respective provisions of the treaties will apply. Latvia has made a subsequent declaration under Article XIII of the Aircraft Protocol.

In other scenarios, the mortgagee:

• would need to enforce the collateral and either register the aircraft in its own name or sell to another party who would then be recognised and registered as a new owner; or
• act under an ordinary (non-IDERA) deregistration power of attorney, which should ideally be notarised and apostilled.

With regard to the enforcement of an IDERA, the respective provisions of the treaties will apply. Latvia has made a subsequent declaration under Article XIII of the Aircraft Protocol.

In other scenarios, deregistration can be carried out by:

• the legal owner of the aircraft, upon making an application to the CAA  (together with written consent from the security holder in or over the aircraft, if any); if the aircraft is deemed non-airworthy and is scheduled for retirement, the usual deregistration fee of EUR80 is waived;
• the mortgagee, who:
1. would need to enforce the collateral and either register the aircraft in its own name or sell to another party who would then be recognised and registered as a new owner; or
2. act under an ordinary (non-IDERA) deregistration power of attorney, which should ideally be notarised and apostilled.

For IDERA enforcement, deregistration will take five working days.

In other scenarios, deregistration normally takes two to three weeks, unless an applicant can justify the need for expediting the process.

Assurances for prompt and identifiable deregistration of aircraft are provided only in the context of IDERA, in accordance with Article XIII of the Aircraft Protocol, which is further implemented through the Cabinet of Ministers Regulations No 195 “On IDERA filing, acceptance, revocation, and deregistration of aircraft” (1 April 2021).

The deregistration fee is EUR80. If the aircraft is deemed non-airworthy and is scheduled for retirement, the fee is waived.

An ordinary (non-IDERA) deregistration power of attorney should ideally be notarised and apostilled.

A notarised and apostilled, ordinary (non-IDERA) deregistration power of attorney should suffice for enforcement, without requiring any additional internal corporate documentation from the principal or agent. The only exception arises when a non-Latvian corporate entity is appointed as the agent. In such cases, the CAA will also require the submission of an original or a notarised (and apostilled) copy of a public document validating the signatory’s rights to act on behalf of the respective corporate entity agent. 

The principle of party autonomy under private international law also extends to the choice of the governing law. There are no limitations on the freedom to choose such applicable law.

The law (of agency) applicable to the deregistration power of attorney would determine the issue concerning the revocability of the mandate. Typically, the CAA presumes the power of attorney to be a legitimate authorisation to act on behalf of the principal, particularly when it includes a clear statement that an authority is not required to investigate the factual or legal basis for such purported authorisation.

With regards to the enforcement of an IDERA, the respective provisions of the treaties will apply. Latvia has made a subsequent declaration under Article XIII of the Aircraft Protocol.

In other scenarios, deregistration can be carried out by:

• the legal owner of the aircraft, upon making an application to the CAA  (together with written consent from the security holder in or over the aircraft, if any); if the aircraft is deemed non-airworthy and is scheduled for retirement, the usual deregistration fee of EUR80 is waived;
• the mortgagee, who:
1. would need to enforce the collateral and either register the aircraft in its own name or sell to another party who would then be recognised and registered as a new owner; or
2. act under an ordinary (non-IDERA) deregistration power of attorney, which should ideally be notarised and apostilled.

The lessee’s consent is not required (given Latvia’s owner’s registry system). However, the CAA usually requires access to the aircraft when issuing any form of special flight permit, including the Export Certificate of Airworthiness (ICAO Airworthiness Manual (Doc 9760)). 

Upon deregistration, the CAA will issue the standard deregistration confirmation, and if specifically requested, an Export Certificate of Airworthiness (ICAO Airworthiness Manual (Doc 9760)).

The whole deregistration process takes two to three weeks (in a non-IDERA enforcement context). If an IDERA is being enforced, deregistration takes up to five working days.

While not specifically envisaged, the owner/operator can proactively engage with the aviation authority officers to ensure that the whole process is completed (and the export documentation issued) within a preferable timeframe.

The nominal deregistration fee is EUR 80, which is waived if the aircraft is non-airworthy and scheduled for retirement.   

The fee for the issuance of an Export Certificate of Airworthiness is calculated based on the maximum take-off weight (MTOW) of the aircraft (as specified in the schedule of fees established by the CAA). For an Airbus A321 with an MTOW of 93,000 kg, the fee would be EUR820, while any aircraft with an MTOW in excess of 100,000 kg would fall into the highest tier, attracting a fee of EUR1,130.00. 

The application for deregistration must include these confirmations:

• Latvian nationality and registration marks have been removed from the aircraft; and
• the Mode S transponder address code has been deactivated.

Insolvency law is the principal legislation governing the restructurings and bankruptcies of non-financial corporate entities.

There are two types of proceedings:

• restructuring; and
• bankruptcy.

Restructuring is a procedure initiated solely by the debtor (company), aiming to alleviate its current liabilities and establish a recovery plan in an arrangement with its creditors. 

Bankruptcy proceedings, initiated by either the debtor (company), whether voluntarily or mandatorily, or by a creditor or group of creditors, focus on the recovery and realisation of the company's assets, facilitating proportional settlement with creditors and subsequent mandatory wind-up.

Latvia observes the provisions of Regulation 2015/848 of the European Parliament and of the Council of 20 May 2015 on insolvency proceedings, mandating acknowledgment and co-operation within the territorial scope of that regulation, including distinguishing and understanding the impacts of main and territorial (secondary) insolvency proceedings.

With regards to the enforcement of an IDERA, the respective provisions of the treaties will apply. Latvia has made a subsequent declaration under Article XIII of the Aircraft Protocol. Latvia has also amended its insolvency laws to reflect the Aircraft Protocol Article XI, Alternative A scenario, providing a 60-calendar day waiting period.

In scenarios not covered by the Cape Town Convention:

• Under Article 64(1)(2) of the Latvian Insolvency Law, the administrator has discretion to determine whether to temporarily continue the business. If the administrator chooses to return any third-party-owned asset, this would imply termination of the lease arrangement (Article 94(2)). If the administrator intends to temporarily continue the business with the leased aircraft, the lessor/owner will still be allowed to rely on the deregistration power of attorney. The administrator could alternatively seek annulment (avoidance) of one or more lease arrangements, if the transaction(s) turned out to be significantly detrimental to the overall interests of the debtor and those were concluded within four months of the opening of the insolvency proceedings (Article 96(1)(1)).
• The actual effect of the deregistration power of attorney in restructuring proceedings will depend on how the underlying transaction to which that mandate relates (the lease) will be acknowledged in a restructuring plan to be approved by the creditors at large.     

With regard to the enforcement of an IDERA, the respective provisions of the treaties will apply. Latvia has made a subsequent declaration under Article XIII of the Aircraft Protocol. Latvia has also amended its insolvency laws to reflect the Aircraft Protocol Article XI, Alternative A scenario, providing a 60-calendar day waiting period.

In scenarios not covered by the Cape Town Convention:

• During insolvency proceedings, the situation will be treated as the debtor holding third-party property. The extent to which the business is temporarily continued is at the administrator's discretion (Article 64(1)(2) of the Insolvency Law), which could lead to a return of the property and therefore a termination of the lease arrangement (Article 94(2)). Alternatively, the administrator has the right to terminate an unfulfilled contract if the counterparty does not comply with the demand to meet obligations in an accelerated manner. As a protective measure, the counterparty can lodge a creditor’s claim to cover contract rejection losses. Moreover, the administrator can pursue annulment (avoidance) of one or more lease arrangements if these transactions are found to be significantly detrimental to the debtor’s interests and were concluded within four months of the initiation of insolvency proceedings (Article 96(1)(1)).
• The actual effect of the deregistration power of attorney in restructuring proceedings will depend on how the underlying transaction to which that mandate relates (the lease) will be acknowledged in a restructuring plan to be approved by the creditors at large. Also, for two months after the opening of the proceedings, a party is barred from invoking payment acceleration, suspension (on the part of the counterparty), termination, or other types of adverse clauses in the agreement to the detriment of the lessee on grounds of the initiation of the proceedings themselves (Article 37(1)(9)).

Aircraft as a Collateralised Asset

In the context of an IDERA enforcement, the respective provisions of the treaties will apply. Latvia has made a subsequent declaration under Article XIII of the Aircraft Protocol. Latvia has also amended its insolvency law to reflect Aircraft Protocol Article XI, Alternative A scenario.

In scenarios not covered by the Cape Town Convention:

• in insolvency proceedings:
1. the secured creditor will be barred from seeking enforcement on the collateral within two months of the initiation of insolvency proceedings (Article 63(1)(4) of the Insolvency Law);
2. the administrator could seek annulment (avoidance) of one or more transactions, including, the security granting arrangement, if the transaction(s) turned out to be significantly detrimental to the overall interests of the debtor and those were concluded within four months of the initiation of insolvency proceedings (Article 96(1)(1));
3. any powers of attorney granted in respect of an asset owned by the debtor will terminate (Article 102(1)); and
4. under restructuring proceedings, there is a prohibition on enforcing collateral during the initial two-month period after proceedings have been initiated (unless a supervising court finds substantial harm to the creditor) (Articles 37(1)(2) and 37(2));
• with respect to the guarantor’s continuing guarantee and indemnity obligations:
1. in insolvency proceedings, it depends if the administrator decides to temporarily continue the business in full or in part (Article 64(1)(2)); if the intent is to bring some business relation to an end: 
1. the administrator could seek annulment (avoidance) of one or more transactions, including, the security granting arrangement, if the transaction(s) turned out to be significantly detrimental to the overall interests of the debtor and those were concluded within four months of the initiation of insolvency proceedings (Article 96(1)(1)); or
2. the safeguarded party must proceed with lodging a conditional creditor’s claim;
2. in restructuring proceedings, the actual effect will depend on how the arrangement will be acknowledged in a restructuring plan to be approved by the creditors.

Restructuring Process

During the default two-month period, there is an automatic stay concerning:

• judgment enforcement (except employment-related);
• collateral enforcement, unless a supervising court finds substantial harm to the creditors;
• suspension of further loan (credit) interest in excess of statutory interest rate (currently set at 6% annually) or the European Central Bank rate on the main refinancing operations (MRO), whichever is higher;
• suspension of further payment default interest rate in excess of statutory interest rate (currently set at a fixed rate of 8% in addition to the variable European Central Bank rate on the MRO); 
• suspension of further penalty interest (liquidated damages); and
• prohibition to invoke ipso facto clauses.

Insolvency Process

The following major stays are automatically granted concerning:

• suspension of further loan (credit) interest;
• suspension of further statutory payment default interest (currently set at a fixed rate of 8% in addition to the variable European Central Bank rate on the MRO – Articles 1765(1) and 1765(2) of the Civil Code); 
• suspension of further penalty interest (liquidated damages); and
• collateral enforcement (during the initial two-month period).

There are two types of collective proceedings governed by the insolvency law:

• Restructuring, which is a voluntary process, initiated by the debtor, with the objective of resuming normal business operations through an arrangement with the creditor.
• Insolvency, which is initiated by (i) the debtor voluntarily or mandatorily (depending on the underlying cause) or (ii) a creditor (voluntarily), with the objective to repossess and sell the debtor’s property to settle the creditors’ claims. 

There is one type of voluntary proceeding (governed by the Commercial Code):

• Liquidation, in which a liquidator is appointed to compile all outstanding claims, fulfil them, and ultimately dissolve the company.

In IDERA enforcements, the respective provisions of the treaties will apply. Latvia has made a subsequent declaration under Article XIII of the Aircraft Protocol. Latvia has also amended its insolvency law to reflect the Aircraft Protocol Article XI, Alternative A scenario (providing a 60-calendar day waiting period).

In scenarios not covered by the Cape Town Convention:

• in insolvency proceedings, no prohibition against standard ipso facto clauses is provided; and   
• in restructuring proceedings, for two months after the initiation of proceedings, a party is barred from invoking payment acceleration, suspension (on part of the counterparty), termination, or other types of adverse clauses in the agreement to the detriment of the lessee on grounds of the initiation of the proceedings themselves (Article 37(1)(9)).

In IDERA enforcements, the respective provisions of the treaties will apply. Latvia has made a subsequent declaration under Article XIII of the Aircraft Protocol. Latvia has also amended its insolvency law to reflect the Aircraft Protocol Article XI, Alternative A scenario (providing a 60-calendar day waiting period).

In scenarios not covered by the Cape Town Convention (applicable to insolvency proceedings only), it depends on whether the administrator decides to temporarily continue the business in full or in part (Article 64(1)(2) of the Insolvency Law). If a decision to stop is adopted: 

• The administrator is entitled to terminate an executory contract, if the counterparty does not comply with the demand for the discharge of the obligations in an accelerated manner. The counterparty is entitled to lodge a creditor’s claim to the extent of rejection of the contract. Alternatively, the matter could be viewed as a third-party property being in possession by the debtor, and the administrator may elect to return the property implying a termination of the lease arrangement (Art. 94(2)).
• The administrator could seek annulment (avoidance) of one or more transactions, if the transaction(s) turned out to be significantly detrimental to the overall interests of the debtor and they were concluded within four months of the initiation of insolvency proceedings (Article 96(1)(1)). Otherwise, the lessor must proceed with lodging a creditor’s claim.

Latvia became a Member State of the Cape Town Convention and the Aircraft Protocol through accession on 1 June 2011. There is no mechanism of mandatory or voluntary entry points through which to make respective filings in the International Registry.

Both treaties have been integrated into the national legal system through a specific statute. These provisions take precedence over any conflicting national law based on the lex specialis principle (a law governing a specific subject matter (lex specialis) overrides a law governing only general matters (lex generalis)).

An initial mandatory declaration was made under Article 54(2) of the Cape Town Convention. As of 1 September 2021, Latvia has made subsequent declarations under Articles 39(1)(a) and 40 of the Cape Town Convention, and under Article XIII of the Aircraft Protocol.

On 1 September 2021, a subsequent declaration made by Latvia under Article XIII of the Aircraft Protocol came into effect.

In addition to the general statute integrating the respective treaties into domestic law, specific amendments have been made to the Aviation Law addressing IDERAs. Also, dedicated regulatory rules were adopted by the Cabinet of Ministers Regulations No 195 (1 April 2021) “On IDERA filing, acceptance, revocation, and deregistration of aircraft”. According to these rules:

• IDERAs are lodged, certified designee confirmation letters under IDERAs are recorded, and deregistration upon enforcement is procured within five working days.
• Reflecting industry practice for engine pooling or substitution on any particular operating aircraft, the enforcement of IDERA is also granted if the actual engines differ from those referenced in the IDERA at the time of original filing.
• The application of IDERA enforcement must be accompanied by a deregistration fee of EUR80. The issuance of the Export Certificate of Airworthiness will require a separate request and payment in that regard. The fee is calculated based on the MTOW of the aircraft. For an Airbus A321 with an MTOW of 93,000 kg, the fee would be EUR820, while any aircraft with an MTOW in excess of 100,000 kg would fall into the highest tier, attracting a fee of EUR1,130.00.

The courts have not yet dealt with issues surrounding the Cape Town Convention or the Aircraft Protocol.

Latvia is not a state party to either the 1933 Rome Convention or the 1948 Geneva Convention. 

No restrictions exist in respect of foreign lender transactions, including regarding the borrowers under those transactions.

There are no exchange control or similar mechanisms, with the exception of applicable international sanctions, including those of the European Union.

There are no restrictions on borrowers in relation to the nationality of parties involved in financing transactions, except as may be limited by applicable international sanctions, including those of the European Union.

No limitations or special conditions exist in respect of provision of guarantees in favour of any related, affiliated, or otherwise connected entity. 

If a domestic special purpose vehicle is established for financing purposes, it is advisable for the lender to follow the usual practice in determining the requisite security package, including, considering the creation and perfection of a domestic pledge over the respective shares in the domestic special purpose entity. The pledge over shares in a legal entity is established through a commercial pledge, being governed by a dedicated piece of legislation (Commercial Pledge Law) and providing a public registration mechanism (and so perfecting the pledge with respect to third parties).   

The concept of a negative pledge is fully acknowledged under Latvian law. In terms of perfecting the contractual negative pledge commitment (assumed by the borrower for the benefit of the respective lender) towards any third party (other lenders), it suffices that the commercial pledge agreement (filed at the commercial pledge registry) establishing the current security prohibits the issuing of any further security over the relevant asset without the consent of the protected lender (Article 27(1) of the Commercial Pledge Law). 

No restrictions or limitations are imposed regarding intercreditor arrangements. As a default rule, the priority of security is established in the order of the registration of respective commercial pledges (Article 27(2) of the Commercial Pledge Law). In terms of perfecting the subordination of security among various lenders, the respective intercreditor agreement among affected lenders must be filed with the commercial pledge registry (Article 27(4) of the Commercial Pledge Law).

Latvian law recognises the syndicated loan arrangement, as well as the various parties and their roles involved in such a scheme, including the administrative agent, collateral or security agent, or documentation agent.

Besides the standard corporate-related subordination implications (such as a secured creditor preference over unsecured creditors or (preferred or common) equity holders in case of winding-up), Latvian law does not impose any limitations on the nature of contractual arrangements that the respective lenders may wish to implement. When a security over a company’s assets is established (through the respective filing and registration in the dedicated commercial pledge registry), any changes in respect of security priority must be reflected accordingly in the same registry to ensure their full validity against good faith third parties (Article 27(4) of the Commercial Pledge Law).

The principle of party autonomy under private international law extends to the choice of applicable law to govern the contractual documentation, so assignment or transfer arrangements governed by English or New York law will be recognised.

The Latvian Civil Code, in Article 1764, contains a general provision against usury that prohibits the charging of exorbitant interest rates that breach fair business practices. For B2B transactions, the courts only consider extreme cases of excessive interest rates as falling under this prohibition, based on commonly accepted business practices.

In cases where domestic security is involved, collateral over the aircraft or shares in a special purpose entity is created and perfected in the form of a commercial pledge. This is governed by a dedicated statute, which provides a public registry for recording and perfecting the security interests of third parties.

When Latvian property law applies, the concept of a mortgage, defined as title transfer by way of security, is interpreted as a sequence of ownership changes.

In terms of domestic security arrangements, the concept of a trust does not exist. A security trustee can be a party under a domestic security arrangement, but the recognition extends only to the trustee as an entity in the respective financing-related arrangement, not to the full implications distinguishing between beneficial and legal ownership.

The principle of party autonomy under private international law extends to the choice of the contents of the contract and ancillary documentation, so assignment of rights is permissible, including those stemming from a lease agreement (covering also the insurance proceeds).

When Latvian property law applies, the concept of a mortgage, defined as title transfer by way of security, is interpreted as a sequence of ownership changes.

The principle of party autonomy under private international law extends to the choice of the contents of the contract and ancillary documentation, so assignment of rights only (in contrast to novation) is permissible.

The principle of party autonomy under private international law extends to the choice of applicable law to govern the contractual documentation, so security assignment and guarantee contracts will be recognised.

When Latvian property law applies, the concept of a mortgage, defined as title transfer by way of security, is interpreted as a sequence of ownership changes.

If a domestic security is to be established, it is done through a commercial pledge mechanism, which is governed by a dedicated statute and envisages a structure of a public registry to perfect the security interest towards third parties. The agreement establishing the security would need to be filed together with the substantive agreement whose proper performance the asset is securing. There are no mandatory clauses to be included in the security agreement to make the security valid.

On the formalities side, the documents require translation into Latvian. All filings in the commercial pledge registry must be made through electronic means and all documents must be signed with a qualified electronic signature. 

A domestic law security instrument is required only when the safeguarded party prefers the creation of an additional, local security. Since Latvia is a Member State of the Cape Town Convention and Aircraft Protocol in the OECD Aircraft Sector Understanding (ASU) export credit premium rate discount version (implying, the implementation of IDERA and Article XI, Alternative A scenario with a 60-calendar day waiting period), the Cape Town remedies will be otherwise unaffected.

The fees payable upon registration (perfection) of the respective domestic security (that is, in the form of a commercial pledge) amount to EUR42.68.

When Latvian property law applies, the concept of a mortgage, defined as title transfer by way of security, is interpreted as a sequence of ownership changes.

The principle of party autonomy under private international law extends to the choice of applicable law to govern the contractual documentation. The security registration will be permissible to the extent the domestic law recognises the respective concept of rights in rem. Under Latvian law, collateral over company assets or specifically the aircraft is established through a commercial pledge mechanism, which provides for a public commercial pledge registry perfecting the security interest towards third parties.

When Latvian property law applies, the concept of a mortgage, defined as title transfer by way of security, is interpreted as a sequence of ownership changes.

The principle of party autonomy under private international law also extends to the choice of the contents of the contract and ancillary documentation, so the security transfer is generally permissible. When establishing domestic security, local security (commercial pledge) assignments and novations must be registered with the commercial pledge registry to ensure their validity against third parties. Under Article 35(1) of the Commercial Pledge Law, the security assignment is automatically effected upon the assignment of the underlying obligation that the particular commercial pledge safeguards. 

The matter would be governed by the applicable law of the respective assignment or the respective security as right in rem. If a domestic security were involved, the permissible (automatic) changes in the identity of the chargee, under Commercial Pledge Law, would only be recognised upon:

• business sales or company mergers and demergers involving the previous chargee (Article 20(6));
• novation of the security agreement from the previous chargee to the new chargee (Article 20(5)); or
• assignment of the substantive obligation, the performance of which the pledge safeguards (Article 35(1)).

As Latvia is a typical civil law country, it does not recognise the concept of a trust. Instead, parallel debt structures are typically utilised in scenarios where a lender opts to establish a domestic security. This is facilitated by a dedicated mechanism – a commercial pledge, regulated by a special law and providing for a public registry that secures the interest of the parties involved.

As a general principle, the secured party is subject to tax liabilities only when it is deemed to have a tax presence in Latvia. The mere existence of security assignments does not constitute a tax presence.

When Latvian property law applies, the concept of a mortgage, defined as title transfer by way of security, is interpreted as a sequence of ownership changes.

In turn, domestic security over an aircraft will be effectuated through a dedicated mechanism – a commercial pledge, regulated by a special law and providing for a public registry that secures the interest of the parties involved.

Domestic security over an aircraft and corporate property is effectuated through the same dedicated mechanism – a commercial pledge. The only difference pertains to aircraft collateral, where, in addition to the general commercial pledge registry, the established security is also documented in the domestic civil aircraft registry.

As Latvia is a member of the EU, a security interest over a bank account is established through a financial collateral mechanism in accordance with the provisions of Directive 2002/47/EC of the European Parliament and of the Council of 6 June 2002 on financial collateral arrangements.

Under the Cape Town Convention, Latvia has made the following subsequent declarations:

• Declaration under Article 39(1)(a), Latvia recognised two customary preferred non-consensual liens under Article 39(1)(a), namely, regarding outstanding airport, air navigation and similar charges, as well as the repairperson’s lien; and
• Declaration under Article 40: Latvia subjected certain domestic non-consensual liens to the registration system. These liens are any rights recorded in the civil aircraft registry pursuant to a lawful decision of an administrative or judicial body.

In different circumstances, two statutory liens come into play:

• a right to retain any commercial movable asset until the owner settles its monetary debt (Article 399 and 400 of the Commercial Code), which is not applicable if the holder is obliged to actively utilise the asset in a certain way, and is subordinated to a perfected security (commercial pledge) over the aircraft and to another right in rem established earlier; the lien would include a typical repairperson’s lien; and
• a tax lien (Article 26.1(1) of the Law on Taxes and Duties: Art 26.1(1)(4) of this law expressly authorises the tax authority to effectuate a statutory lien over an asset that is in the possession of a third party (such as the chargee); in practice, tax liens are generally considered to have priority over other security titles, yet the tax authority will normally consider the factual or financial impact of the intended tax lien on the interests of the third party.

Domestic security over an aircraft can be effectuated through a dedicated mechanism – a commercial pledge, regulated by a special law and providing for a public registry that secures the interest of the parties involved. All filings, including the chargee’s application to lift the commercial pledge from the publicly available commercial pledge registry, are made electronically and the process will take roughly five working days on average. Under Article 48(3) of the Commercial Pledge Law, a chargee is obliged to file the respective discharge application within five days of the termination or expiry of the security interest. 

Domestic security over an aircraft generally and the corporate property is effectuated through the same dedicated mechanism – a commercial pledge mechanism, regulated by a special law and providing for a public registry that secures the interest of the parties involved. The only difference pertains to aircraft collateral, where, in addition to the general commercial pledge registry, the established security is also documented in the domestic civil aircraft registry.

In relation to trusts, Latvian law does not recognise the trust as a conceptual legal structure. Instead, the law will only recognise the acts and title or interest of the trustee. This means that the trustee will be treated as the registered and acting owner or chargee of the aircraft, and there will be no acknowledgment, under Latvian law, of any holder of the respective beneficiary interest in the trust setting.

Under the Cape Town Convention, Latvia has made the following subsequent declarations:

• Declaration under Article 39(1)(a), Latvia recognised two customary preferred non-consensual liens under Article 39(1)(a), namely, regarding outstanding airport, air navigation and similar charges, as well as the repairperson’s lien; and
• Declaration under Article 40: Latvia subjected certain domestic non-consensual liens to the registration system. These liens are any rights recorded in the civil aircraft registry pursuant to a lawful decision of an administrative or judicial body.

In different circumstances, two statutory liens come into play:

• a right to retain any commercial movable asset until the owner settles its monetary debt (Article 399 and 400 of the Commercial Code), which is not applicable if the holder is obliged to actively utilise the asset in a certain way, and is subordinated to a perfected security (commercial pledge) over the aircraft and to another right in rem established earlier; the lien would include a typical repairperson’s lien; and
• a tax lien (Article 26.1(1) of the Law on Taxes and Duties) – Article 26.1(1)(4) of this law expressly authorises the tax authority to effectuate a statutory lien over an asset that is in the possession of a third party (such as the chargee); in practice, tax liens are generally considered to have priority over other security titles, yet the tax authority will normally consider the factual or financial impact of the intended tax lien on the interests of the third party.

Domestic security over an aircraft is effectuated through a dedicated mechanism – a commercial pledge, governed by a special law and providing for a public registry perfecting the security interest in respect of third parties. As part of the perfection of the security over the aircraft, the public body maintaining and operating the general commercial pledge registry will also forward the note to the domestic civil aircraft registry. Consequently, a prospective purchaser should check the specific aircraft’s records in the domestic civil aircraft registry.

Security assignments, as well as loan and guarantee agreements, are equally eligible for a fast-track non-contentious enforcement procedure under Section 50 of the Civil Procedure Code if:

• primary obligations are secured by a commercial pledge (evidenced by a record in the public registry); or
• there is a notarised and apostilled time-limited agreement providing for monetary payment (such as a guarantee).

The court will issue an enforcement decision within seven days. The debtor is allowed to challenge the enforcement decision within six months, including by seeking a suspension order over continuing enforcement actions.

As to whether a security trustee can enforce its rights under a security assignment pursuant only to a notice and acknowledgement executed by that lessor and the relevant lessee, this aligns with common practices for security assignments governed by English or New York law. Latvian law does not impose extra requirements in this respect, and the matter will be governed by the law chosen to apply to the assignment.

The principle of freedom to choose applicable law is observed in line with Regulation 593/2008 of the European Parliament and of the Council of 17 June 2008 on the law applicable to contractual obligations (Rome I), as well as Latvian law.

With respect to the freedom to choose the preferred dispute resolution forum, Latvia observes Regulation 1215/2012 of the European Parliament and of the Council of 12 December 2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (recast). Under Latvian law, the same principle is observed for non-EU jurisdictions.

Enforcement of Judgments

With respect to intra-EU judgments, Latvia observes Regulation 1215/2012 of the European Parliament and of the Council of 12 December 2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (recast). For non-EU jurisdictions, the same effect follows from Articles 637(2) and 644 of the Civil Procedure Code – the provisions governing the recognition and enforcement of third-country judgments, which closely align with the grounds referred to in Articles 45(1) of the Brussels Regulation 1215/2012 (Recast)).

Enforcement of Foreign Arbitral Awards

Latvia is a member state of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York, 10 June 1958).

In scenarios not covered by the Cape Town Convention, a chargee under a commercial pledge (a mechanism through which a domestic security over an aircraft is established and perfected by recording it in a public registry to ensure validity against third parties) will be entitled to take possession of the collateral upon the debtor’s default (Article 36(1) of the Commercial Pledge Law).

Aviation dispute resolution falls under the remit of general courts. Only specific issues are assigned, under the Civil Procedure Code, to the Economic Court as a first (trial) level court. This court has specialised jurisdiction over the following matters commonly encountered by the international aviation financing and leasing community:

• reinsurance;
• financial collateral arrangements; and

• investment and ancillary services.

In scenarios not covered by the Cape Town Convention, a fast-track non-contentious enforcement procedure under Section 50 of the Civil Procedure Code can be employed for the enforcement of:

• primary obligations that are secured by a commercial pledge (evidenced by a record in the public registry); or
• a notarised and apostilled time-limited agreement providing for monetary payment (such as a guarantee).

The court will issue an enforcement decision within seven days. The debtor is allowed to challenge the enforcement decision within six months, including by seeking a suspension order over continuing enforcement actions.

Should a dispute fall under the jurisdiction of Latvian courts, these courts will permit judgments in a foreign currency if the currency is stipulated in the agreement, or if a well-substantiated request is submitted to the court explaining the reasoning for a foreign currency decision. However, the court will also indicate the equivalent amount in euros.

A fast-track non-contentious enforcement procedure under Section 50 of the Civil Procedure Code can be employed for the enforcement of:

• primary obligations that are secured by a commercial pledge (evidenced by a record in the public registry); or
• a notarised and apostilled time-limited agreement providing for monetary payment (such as a guarantee).

The court will issue an enforcement decision within seven days. The debtor is allowed to challenge the enforcement decision within six months, including by seeking a suspension order over continuing enforcement actions.

The court fee payable upon filing a fast-track submission is 2% of the claimed amount, capped at EUR500.

Under Latvian law, when the described fast track procedure is chosen by the creditor, it replaces the court-assisted repossession of collateral(Article 36(2) of the Commercial Pledge Law). 

There are no other relevant issues that a lender should be aware of in relation to the enforcement of its rights.