There are no stamp or similar documentary taxes payable in Indonesia in respect of the execution or delivery of the engine sale agreement, except that it is subject to a nominal stamp duty of IDR10,000 per document. This must be paid when it is first used in the Republic of Indonesia and before it will be admissible as evidence in Indonesian courts. To be admissible as evidence, the document needs to be accompanied by a sworn translation thereof into Indonesian language prepared by a sworn translator licensed in Indonesia (this requirement can be met prior to submission as evidence before the Indonesian court).

For any tax advice, please consult with an Indonesian tax consultant on this matter.

An aircraft and engine purchase and sale agreement that does not involve an Indonesian party does not need to be translated, certified, notarised or legalised to be enforceable against an Indonesian party. However, it should be noted that, for the purpose of registration with the Indonesian Aircraft Registry, one of the prerequisite documents is evidence of aircraft ownership, which can be in the form of a bill of sale or affidavit of ownership for the aircraft (a copy of which needs to be legalised by a public notary, seller or the issuing institution).

From an Indonesian law perspective, the act(s) constituting “transferring title” would depend on the governing law of such transaction, which is evidenced in the form of a bill of sale or affidavit of ownership for the aircraft. Such sales are normally conducted outside Indonesia by non-Indonesian parties.

However, there is no separate registration for engines in the Indonesian Aircraft Registry. As a matter of practice, it is also advisable to put a nameplate identifying the lessor and the owner on the aircraft, engines and certain parts.

To the extent that, under the laws governing the bill of sale (and the relevant sale agreement) and the laws where each of the parties therein is incorporated, the seller has the capacity, authority and power to dispose of the aircraft and the aircraft has been physically accepted by the buyer from the seller, Indonesia should recognise title transfer by means of a bill of sale.

For the purpose of registration of an aircraft with the Indonesian Aircraft Registry, one of the prerequisite documents is evidence of aircraft ownership, which can be in the form of a bill of sale or affidavit of ownership for the aircraft (a copy of which needs to be legalised by an Indonesian public notary, seller or the issuing institution).

A bill of sale is not subject to any consent from any Indonesian government entity. For aircraft registration purposes, the Directorate General of Civil Aviation (DGCA) will need to be provided with, among others, a copy of the bill of sale (legalised by an Indonesian public notary, seller or the issuing institution) in favour of the aircraft owner. Therefore, delivery of the aircraft should already have occurred before the certificate of registration can be issued by the DGCA.

For any tax advice, please consult with an Indonesian tax consultant on this matter.

Provisions of the lease concerning only the engine or parts should be recognised and enforceable in Indonesia to the extent that they are also recognised and enforceable under the governing law of the lease.

Law No 1 of 2009 regarding Aviation as amended by Law No 6 of 2023 concerning the Stipulation of Government Regulation In Lieu of Law No 2 of 2022 concerning Job Creation as Law (the “Aviation Law”), which adopts the provisions of the Cape Town Convention, provides that a security agreement, title reservation agreement, and/or leasing agreement may be entered into based on the law of choice made by the parties to the agreement.

However, in practice, courts have been known not to apply the chosen law notwithstanding the fact that the choice of the parties was valid. The court’s reasoning in such circumstances is not always specified. In at least one instance of which the authors are aware, the court held that since it is an Indonesian court and its legal competence is in Indonesian law, it will apply Indonesian law. In another instance the court ruled that it had no jurisdiction since the parties to the transaction had chosen a foreign law. A major part of the reason is the lack of experience in adjudicating disputes governed by a substantive foreign law. The courts are also not used to relying on legal experts or legal opinions in respect of foreign law.

Provisions of the lease relating to rent payments in US dollars should be recognised and enforceable in Indonesia to the extent that they are also recognised and enforceable under the governing law of the lease.

Indonesia has limited foreign exchange controls. The Indonesian rupiah (which has the acronym IDR) has been, and in general is, freely convertible within or from Indonesia. However, to maintain the stability of the rupiah and to prevent the utilisation of the rupiah for speculative purposes by non-residents, Indonesia’s Central Bank, Bank Indonesia, has introduced regulations to restrict the movement of the rupiah from banks within Indonesia to:

• offshore banks;
• an offshore branch of an Indonesian bank; or
• any investment denominated in rupiah by foreign parties and/or Indonesian parties domiciled or permanently residing outside Indonesia,

thereby limiting offshore trading of existing sources of liquidity.

Pursuant to the regulation of Bank Indonesia concerning Transactions in Foreign Exchange Markets, cross-border remittances of rupiah through the Indonesian banking system are prohibited. The Regulation is intended to achieve and maintain stability of the rupiah by restricting or limiting the ability of local banks (including branches of foreign banks) operating in Indonesia to engage in certain rupiah and foreign currency credit, investment and derivative transactions of foreign exchange against the rupiah.

In addition, Bank Indonesia has the authority to request information and data concerning the foreign exchange activities of all people and legal entities that are domiciled, or who plan to be domiciled, in Indonesia for at least one year.

Further, there are, among others, the following requirements:

• the mandatory use of rupiah as the form of currency for any transactions carried out within the territory of the Republic of Indonesia – pursuant to the Currency Law (Law No 7 of 2011, as partially revoked by Law No 1 of 2023 and amended by Law No 4 of 2023) and Regulation of Bank Indonesia concerning the Mandatory Use of Rupiah Currency;
• to provide banks with the underlying transaction documents for the purchase of any foreign currencies against rupiah through a foreign exchange bank exceeding USD100,000 or its equivalent in other foreign currencies per month per customer – pursuant to the Regulation of Bank Indonesia concerning Transactions in Foreign Exchange Markets; and
• to provide banks with underlying transaction documents for any outgoing transfer in foreign currency exceeding an amount of USD100,000 or its equivalent in other foreign currencies, or to provide banks with general information for any transfer in foreign currency up to USD10,000 or its equivalent in other foreign currencies – pursuant to the Regulation of Bank Indonesia concerning the Monitoring of Foreign Exchange Flows of Banks and their Customers.

There is no consent required for the lessee to perform its obligations under a lease agreement. However, pursuant to the Law on Foreign Exchange Flow (Law No 24 of 1999) and the relevant Bank Indonesia regulations, a report relating to offshore financial assets and/or liabilities of the lessee should be filed by the lessee with Bank Indonesia. Relating to loan documents, Bank Indonesia enacted various regulations which are intended to, among others, regulate reporting on the flow of foreign exchange activities and withdrawal of foreign exchange from offshore loans. These regulations set out the following, among others.

• Foreign exchange generated from an offshore loan must be first withdrawn by the borrower through an Indonesian foreign exchange bank (the “Forex Bank”). This provision, however, is not applicable to leasing transactions (where the Indonesian lessee is not directly receiving loans from the offshore creditors).
• Offshore loan reporting obligations must be carried out by a borrower, covering offshore borrowing plan, initial reporting, as well as periodical reporting to Bank Indonesia and the Ministry of Finance (MOF). The reporting obligation to Bank Indonesia is carried out electronically and such reporting is also delivered to the MOF.

For any tax advice, please consult with an Indonesian tax consultant on this matter.

No licence is required for offshore lessors to extend a finance lease in Indonesia but, as a matter of practice, the lease is one of the prerequisite documents for registering aircraft in Indonesia, in which the name of the owner and the lessor of the aircraft will be recorded in the aircraft register.

While there is no particular form for a lease, to enable the registration of an aircraft with the DGCA, the term of the lease should be a minimum of two consecutive years and, during such period, the aircraft may not be registered in any other aircraft registration. For aircraft registration purposes, pursuant to DGCA Regulation No KP 311 of 2018 on Technical Guidance for Civil Aviation Safety Regulation Part 47 regarding Aircraft Registration Procedure, a copy of the lease should be legalised by a public notary.

However, when reviewing the lease for aircraft registration purposes, the DGCA would normally expect to see the following provisions included:

• complete identification of the owner, the lessor and the lessee;
• complete identification of the aircraft and the engine;
• effective and expiration dates of the lease;
• allocation of responsibilities between the lessor and the lessee; and
• insurance and maintenance programmes.

In respect of language requirement (note that this is a general requirement and not related specifically to the aircraft registration), Indonesian and English language versions of a contract involving an Indonesian party should be prepared and signed simultaneously. Although the Indonesian Language Law and the implementing regulation thereof do not prescribe any sanction for failure to have a bilingual agreement, based on the past practice of the courts, there is a risk that a contract between a foreign party and an Indonesian party could be annulled by an Indonesian court on the basis of the absence of the Indonesian version of the contract by the time the English version of the contract was signed.

For any tax advice, please consult with an Indonesian tax consultant on this matter.

If the lease covers “parts that are installed or replaced on an aircraft or engine after its execution”, such provisions and any amendments thereof should be recognised and enforceable in Indonesia to the extent that they are also recognised and enforceable under the governing law of the lease.

This would depend on the governing law of the lease.

In general, Indonesian law does not recognise the concept of trust except in capital market matters and in the banking industry. Therefore, if there is a trust arrangement, whereby the trustee will hold the aircraft in trust in favour of a beneficiary, from the perspective of Indonesian law, it is the trustee who will be deemed as the legal owner of the aircraft. Indonesian law will not recognise the beneficiary as the legal owner of the aircraft. Consequently, only the name of the trustee can be noted in the certificate of registration of the aircraft as the registered owner of the aircraft. The authors have observed a certificate of registration naming the owner with a note that the name stated is not acting in an individual capacity but solely as trustee of the owner.

A number of challenges have been brought by Indonesian debtors before Indonesian courts against the use of trust arrangements. However, the Supreme Court did not touch upon the issue of trust but decided the cases on the basis of other arguments presented by the Indonesian debtors.

The name of the owner and the lessor of the aircraft will be recorded in the aircraft register. However, only the name of the owner will appear in the certificate of registration of the aircraft.

Under Indonesian law, the aircraft register is not conclusive evidence of the legal owner of title of the aircraft. By registering the aircraft, such aircraft can be legally operated in Indonesia by an Indonesian operator in accordance with the Aviation Law.

Only the name of the owner will appear in the certificate of registration of the aircraft.

There is no separate register of leases in Indonesia, but a copy of the lease will have to be filed with the DGCA as a prerequisite for obtaining the certificate of registration.

There is no separate register of leases in Indonesia, but a copy of the lease will have to be filed with the DGCA as a prerequisite for obtaining the certificate of registration. For formalities of lease for aircraft registration purposes, see 2.2.1 Mandatory Terms for Leases Governed by English or New York Law.

Leases are not subject to any consent from a government entity (including any government applications).

For aircraft registration purposes, a copy of the lease documents to be filed with the DGCA should be legalised by a public notary. For requirements and formalities of lease for aircraft registration purpose, see 2.2.1 Mandatory Terms for Leases Governed by English or New York Law.

For any tax advice, please consult with an Indonesian tax consultant on this matter.

Under the Aviation Law, only an Indonesian registered aircraft can be operated in the territory of the Republic of Indonesia. Under certain circumstances and for a limited period, a foreign registered aircraft can be operated in the territory of the Republic of Indonesia after obtaining an approval from the Ministry of Transportation. A foreign registered civil aircraft can be operated by an Indonesian or foreign aircraft operator to and from overseas based on a bilateral agreement. Such foreign registered civil aircraft must comply with the airworthiness requirement stipulated by the Indonesian government. Further, one of the requirements for registration of aircraft in Indonesia is evidence of de-registration from or confirmation that the aircraft is not registered in another country.

For the purpose of registration of an aircraft, the prerequisite documents include evidence of aircraft ownership, which can be in the form of a bill of sale or affidavit of ownership for the aircraft, a copy of which needs to be legalised by a public notary, seller or the issuing institution. In addition, a copy of the lease should also be legalised by a public notary.

Further, a power of attorney that is signed outside Indonesia needs to be notarised by the local notary and further apostilled (if the relevant country is a member of the 1961 Hague Convention Treaty) or consularised by the nearest Indonesian Embassy or the consulate general.

For any tax advice, please consult with an Indonesian tax consultant on this matter.

The leasing of an aircraft engine to an Indonesian lessee will not of itself create a Permanent Establishment (PE) in Indonesia. For any tax advice, please consult with an Indonesian tax consultant on this matter.

No liability in respect of aircraft or engine maintenance and operations can be imposed on a foreign lessor under a lease, as a result of being a party to the lease, to the extent that the lease is structured as a dry lease and as long as the lessor has not caused or contributed in any material way by act or omission to the circumstances giving rise to the liability arising from such use of the aircraft and/or they are not involved in the operation of the aircraft.

Under Article 1367 of the Indonesian Civil Code, a person is only vicariously liable for the tortious acts of those under their supervision. This article applies to cases where the tortfeasor is a party who cannot exercise their own discretion and is subject to and dependent on the supervision and direction of a principal or is an agent of a principal. This article was originally conceived for minors, servants, subordinates and agents. Arguably, where there is bargaining power to control their own affairs, a cause of action under Article 1367 can be fashioned. In the event that the monitoring activities of lessor would not constitute direct supervision and direction of the lessee’s day-to-day affairs, the application of this article is unlikely.

To the extent that the aircraft is not owned by the lessee, creditors of the lessee should not be entitled to attach the aircraft.

In general, Indonesian law provides retention rights in relation to repair costs, salvage costs and craftsman costs. Further, the Indonesian government may detain an aircraft for unpaid taxes or charges related to the use of the aircraft and airport authorities may also detain an aircraft for unpaid charges related to the use of the aircraft.

Indonesian Insurance Law provides that any insurance object in Indonesia can only be insured and reinsured with domestic insurance and reinsurance companies, except when:

• no insurance company in Indonesia has the capability to bear the insurance risk or is willing to give insurance coverage; or
• the owner of the insured object is neither an Indonesian individual nor Indonesian legal entity.

Thus, as a matter of practice, for insurance and reinsurance to satisfy the Aviation Law requirements, an operator usually places insurance with domestic insurance companies and the reinsurance could be with a combination of Indonesian reinsurance companies (who may reinsure some of the risks with offshore reinsurance companies) and non-Indonesian reinsurance companies.

Pursuant to the Aviation Law, aircraft operators must insure the following:

• the operated aircraft;
• the crew and personnel of the operated aircraft;
• second party’s liability (persons or legal entities having a direct relation with the operation of the aircraft);
• third party’s liability (persons or legal entities not having a direct relation with the operation of the aircraft); and
• aircraft incident investigation and aircraft accidents.

Under the prevailing Indonesian regulatory framework, insurers in Indonesia are required to prioritise domestic reinsurance before placing risks abroad. This means that 100% foreign reinsurance placement is not automatically allowed. Insurers must demonstrate that domestic reinsurers cannot absorb the risk, and only then may they seek offshore coverage.

An insurance/reinsurance “cut-through” or “loss payee” clause is enforceable under Indonesian law to the extent that it does not contravene any applicable laws, regulations or public policy of Indonesia.

Under Indonesian law, it is not possible to assign contractual rights for purposes of security, except the right to payments or monies.

On a separate matter, if, under the assignment for security, the assigned object is insurance proceeds payable by the lessee or the lessee’s insurer to the lessor for security purposes, such assignment has to be made in the form of a fiduciary security assignment agreement governed under Indonesian law, drawn up before an Indonesian notary and in the Indonesian language and registered with the Fiduciary Registry Office (failing which (i) the security assignment over the insurance proceeds of the lessee may not be enforceable in Indonesia, and (ii) the assignee will not have a priority right (security right), which may be pertinent in the event of bankruptcy of the lessee or the insurance company). In addition, if there is removable equipment to be secured separately from the airframe, then the most common form of security over such movable assets is fiduciary security. For the latter, the fiduciary security can be registered if granted by an Indonesian entity.

Provided that the rental is not paid in advance by the lessee, then, generally, there is no restriction on a lessor’s ability to terminate an aircraft lease (including to sell the aircraft following the lease termination). Fundamentally, it depends on the terms of the lease. Note that, under the Indonesian Civil Code, termination of a contract (including a lease agreement) requires a court order, unless both parties to the contract have waived the applicable article under the Indonesian Civil Code. If the lease is governed by a foreign law, it is advisable that the lease contains a provision which specifically states that the termination of the lease can occur without the need of a court order. This is to prevent any issue if there is a challenge by the lessee on the unilateral termination by the lessor and such challenge is brought (for any reason) by the lessee before an Indonesian court.

To re-export an aircraft, the lessor will be required to obtain an export clearance from the Indonesian customs service and apply for certain licences (such as the security clearance, diplomatic clearance and flight approval).

The aircraft does not need to be physically located in Indonesia at the time of any such actions.

An “unfriendly” repossession may require a court judgment. Furthermore, with respect to the repossession of an aircraft, a deregistration of the aircraft would have to be applied for and would be granted upon fulfilment of all prevailing policies and administrative requirements of the DGCA. For export of the aircraft or of the equipment, customs, security and DGCA clearances are required.

The Aviation Law states that an Indonesian registered aircraft can be deregistered from the Indonesian Civil Aircraft Registry upon request of:

• the owner of the aircraft; or
• the creditor by virtue of a recorded irrevocable deregistration and export request authorisation (IDERA),

if the lessee is in default under its agreement and this deregistration process could be made without the need of a court order.

This will provide more protection for owners and/or creditors (including lessors) if they are to repossess the aircraft in the event of default by the Indonesian lessee.

Further, the Cape Town Convention also provides various forms of remedies that can be utilised by creditors (which include the owner, mortgagee or lessor) and one of them is to take possession of the aircraft in the event of default by its debtor. Pursuant to the declarations made by the Republic of Indonesia, such remedies can be utilised without court action and without the leave of the court.

However, due to the issuance of Government Regulation No 32 of 2021 on the Management of Aviation Activities (the “Aviation Government Regulation”), which contradicts the Aviation law, there is now uncertainty as to whether in the event of a default by a lessee, in a situation where the owner/lessor is not named as the authorised party under an acknowledged and recorded IDERA, such owner/lessor can repossess the aircraft without a court action. The regulation now requires a final and binding court ruling for a deregistration request by an owner due to a default by a lessee.

Additionally, a Ministry of Transportation Regulation issued in 2021 also requires that a deregistration request be submitted by:

• a creditor having international interest based on temporary ruling from the court; and
• a party who has won an arbitration award or court ruling in the event of a default.

It should be noted that, under the hierarchy of Indonesian laws and regulations, provisions under an implementing government regulation and/or ministerial regulation should not be contrary to and must be consistent with the Law they are designed to implement. In this case, the Aviation Government Regulation issued in 2021 and Ministry of Transportation Regulation also of 2021 should not contradict the Aviation Law. However, this inconsistency has to date not been rectified by the government nor considered by the Indonesian courts.

There are no specific courts to decide aviation disputes and disputes may be heard either in the District Court or, if the parties agree to arbitration, in the nominated arbitral forum.

Under Indonesian law in general (and not specifically related to transactions subject to the Cape Town Convention), a summary process may be available to a mortgagee or a beneficiary of an acknowledgement of indebtedness that is made in a notarial deed form.

Where the party bringing the lawsuit is a mortgagee, the District Court may simply pronounce an exequatur judgment. Where the party bringing the lawsuit is a beneficiary of an acknowledgement of indebtedness, the court may, in general, grant the party an expedited proceeding as well. However, such an expedited proceeding would only be granted if the underlying loan transaction is deemed straightforward and the acknowledgment of indebtedness is executed by the borrower upon the receipt of the relevant sum.

It is doubtful that the Indonesian court would grant such proceeding in aircraft financing transactions (where the borrower is usually not an Indonesian party). Even though the summary process may not be available to the lessor, the lessor may still exercise the remedies available under the Cape Town Convention (to the extent the relevant agreement is subject to the Cape Town Convention).

To the extent the relevant agreement is subject to the Cape Town Convention and the lessee has agreed to such remedies, the types of remedies that are available to the lessor in Indonesia under the Convention are as follows:

• preservation of the aircraft object and its value;
• obtaining possession, control or custody of the aircraft object;
• immobilisation of the aircraft object;
• permission to lease out the aircraft object or to manage it and to obtain the income therefrom; and
• if at any time the debtor and the creditor specifically agree, to sell the aircraft object and to apply the proceeds therefrom to meet the debts.

Pursuant to the declarations made by Indonesia with respect to the Cape Town Convention and the Aviation Law, the court order for interim relief shall be issued within the following timeframe:

• for preservation of the value, the obtaining of possession, control or custody and/or immobilisation of the aircraft objects, not more than ten calendar days from the date of filing the application; or
• in the case of a lease or the management of the aircraft objects and the income therefrom and the sale of the aircraft objects and the application of the proceeds therefrom, not more than 30 calendar days from the date of filing the application.

The Aviation Law does not set out detailed procedures as to how a creditor (in this case the lessor) should file the request with the court. The Aviation Law simply states that the creditor may file a request with the competent court (ie, the court where the lessee is domiciled or the aircraft is situated) to issue a court order for injunctive relief.

The types of interim relief stated above are relatively new under Indonesian Law and, therefore, the request for such relief may meet many technical impediments, and the exercise of such remedies may take much longer than the timeframes stipulated in the Aviation Law. Further, the authors are not aware of any published court decisions dealing with such reliefs and remedies provided under the Cape Town Convention.

In general, Indonesian courts should uphold and apply the law and jurisdiction chosen as long as the foreign law and jurisdiction chosen are not against public order.

Specifically for agreements that are subject to the Indonesian Aviation Law and the Cape Town Convention (namely security agreement, title reservation agreement and leasing agreement – each as defined in the Cape Town Convention), parties to such agreements are free to choose the law that will govern the agreements regardless of whether or not there is a connection between the parties or the transaction and the chosen law.

However, unless a bilateral treaty on the execution of foreign judgments exists between the Republic of Indonesia and the foreign country, any judgment obtained in the courts of such foreign country will not be recognised in the courts of Indonesia. In Indonesian proceedings, a judgment of foreign court could be offered, and accepted, into evidence and may be given such evidentiary weight as the courts of Indonesia may deem appropriate under the circumstances.

Under Indonesian law, the lessee has no immunity from suit, execution, attachment or other legal process for commercial transactions.

Judgments from a foreign court are not recognised or enforceable in an Indonesian court. The Indonesian courts would not enforce any other order including:

• judgment;
• foreign decree; or
• other executive act confiscating the aircraft regardless of the mortgagee’s security interest in it,

without a rehearing of the issues. However, in any Indonesian court proceedings, a judgment of a foreign court could be offered and accepted into evidence and may be given such evidentiary weight as the Indonesian court may deem appropriate under the circumstances.

As Indonesia has ratified the New York Convention on Foreign Arbitral Awards, arbitral awards rendered in foreign countries should be able to be enforced in Indonesia subject to compliance with certain conditions (as referred in 2.6.12 Enforcement of Foreign Arbitral Decisions).

If so requested, an Indonesian court may render a judgment in a currency that differs from legal tender in Indonesia. However, such a decision will be at the full discretion of the court.

As long as such matters are agreed between the parties under the lease agreement, the lessor should be able to recover any default interest following termination of the lease for default and also additional rent, with certain limitations such as the principle of good faith and reasonableness which could be applied by the court if challenged by the lessee during the proceeding.

For any tax advice, please consult with an Indonesian tax consultant on this matter.

There are no mandatory notice periods for the termination of an aircraft lease under Indonesian law. A lessor must comply with any contractual notice periods contained in the lease. Additionally, although a lessor may not be contractually required under a lease to issue default notices in the event of default(s) by the lessee, it is recommended under common practice for a lessor to first issue default notice(s) to the lessee prior to terminating an aircraft lease. Usually, a default notice would be issued up to two or three times with a reasonable period in between to show good faith on the part of the lessor.

Under Indonesian law, a lessee has no immunity sovereign or otherwise from suit, execution, attachment or other legal process for commercial transactions.

Indonesia has ratified the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. Arbitral awards rendered in foreign countries should be enforceable in Indonesia, provided that the award:

• is rendered in a country with which the Republic of Indonesia is bound by a treaty, either bilateral or multilateral, concerning the recognition and enforcement of international arbitral awards;
• arises out of a dispute which is “commercial” in nature under Indonesian law;
• is not contrary to public order in the Republic of Indonesia; and
• has been registered with and an exequatur (writ of execution) obtained from the Chairman of the District Court of Central Jakarta.

Other than as mentioned above, for the purpose of enforcing its rights in repossessing an aircraft and exporting it, should the aircraft come under its possession, the lessor should ensure that all documentation pertaining to importation of the aircraft and any tax payments/exemptions upon importation are within its possession to allow the lessor or its attorney to apply for an export clearance. The lessor will need to provide copies of such documentation to the customs authorities.

Indonesian law recognises the concept of contractual assignment and novation.

However, as a general rule under Indonesian law, it is not possible to assign contractual rights for purposes of security, except the right to payments or monies and other in-rem rights (such as intellectual property rights). Further, Indonesian law may also not recognise or enforce documents governed by a foreign law purporting (i) to create a security interest in assets located in the Republic of Indonesia, such as the relevant insurance proceeds (except for aircraft objects in accordance with the Cape Town Convention and the Aviation Law), or (ii) to assign rights under documents governed by Indonesian law or assign other contractual rights governed by Indonesian law. This is why a security assignment is typically governed by non-Indonesian law.

Assignments of aircraft leases governed by New York or English law should be recognised and held valid under Indonesian law. The question of whether a lessee’s consent is required to an assignment is a contractual matter for the parties and should be addressed in the aircraft lease.

It should be noted that, as it is not possible to assign contractual rights for purposes of security, except right to payments or monies, a security assignment cannot be governed under Indonesian law.

On a separate matter, if, under the assignment for security, the assigned object is insurance proceeds payable by the lessee or the lessee’s insurer to the lessor for security purposes, such assignment has to be made in the form of a fiduciary security assignment agreement governed under Indonesian law, drawn up before a notary in Indonesian language and registered with the Fiduciary Registry Office (failing which, (i) the security assignment over the insurance proceeds of the lessee may not be enforceable in Indonesia and (ii) the assignee will not have a priority right (security right), which will be pertinent in the event of bankruptcy of the lessee or the insurance company). In addition, if there is removable equipment to be secured separately from the airframe, then the most common form of security over such movable assets shall be fiduciary security. For the latter, the fiduciary security can be registered if granted by an Indonesian entity.

If the lease assignment/novation results in a change to the owner of the aircraft as stated in the certificate of registration of the aircraft, then the certificate will need to be amended naming the new owner as the owner of the aircraft. Further, if the assignment or novation above results in the requirement for the lessee to issue a new IDERA in respect of the aircraft, upon the issuance of the new certificate of registration, such new IDERA will have to be recorded by the DGCA (subject to cancellation of the existing IDERA). In addition, if there is an existing certified designee letter (CDL) granted by the authorised party named in the relevant IDERA and the transfer results in a change to the certified designee under a CDL recorded with the DGCA, the existing CDL needs to be revoked and a new CDL can be recorded with the DGCA. In such case, a copy of the lease assignment/novation which has been legalised by a public notary will need to be filed with the DGCA for the purpose of (i) issuing a new certificate of registration of the aircraft naming the new owner as owner of the aircraft and/or (ii) the registration of the new IDERA and/or CDL.

With regard to language requirement, see 2.2.1 Mandatory Terms for Leases Governed by English or New York Law.

There is no separate register of leases in Indonesia (see 2.3.4 Registration of Leases With the Domestic Aircraft Registry). However, if the lease assignment/novation results in a change to the owner of the aircraft as stated in the certificate of registration of the aircraft, change to the authorised party under the IDERA, and/or change to the certified designee under the CDL, see 2.7.3 Enforceability of Lease Assignments/Novations.

To the extent such assignment can be registered with the International Registry for the purpose of the Cape Town Convention, it should also be registered with the International Registry.

If the lease assignment or novation above results in change of the lessor, a notice should be filed with the DGCA informing it of the change of lessor so that such information can be updated by the DGCA in the Aircraft Register.

For any tax advice, please consult with an Indonesian tax consultant on this matter.

If the transfer results in the change of owner whose name appears on the certificate of registration of the aircraft, then the certificate of registration will need to be reissued naming the new owner as the owner of the aircraft. Further, if the assignment will result in a change of the “authorised party” under the IDERA that has been registered with the DGCA, such recorded IDERA must first be revoked and, upon the issuance of a new certificate of registration, a new IDERA should be subsequently recorded with the DGCA. In addition, if there is an existing CDL granted by the authorised party named in the relevant IDERA in favour of a secured party and the transfer results in a change to the certified designee under a CDL recorded with the DGCA, the existing CDL needs to be revoked and a new CDL can be recorded with the DGCA.

Pursuant to the Aviation Law, the owner as registered in the certificate of registration should be entitled to deregister the aircraft upon the occurrence of an event of default without a court order. However, as discussed in 2.6.2 Lessor Taking Possession of the Aircraft, due to the issuance of the Aviation Government Regulation, it is now unclear whether in the event of a default by a lessee where the owner does not hold an acknowledged and recorded IDERA, it can repossess the aircraft without a court order. Further, as a matter of practice, the granting of the deregistration approval may be deferred by the DGCA if such application for deregistration is disputed by the aircraft operator (ie, lessee).

In light of the Aviation Law and the Cape Town Convention, the authorised party specified in the IDERA should be able to request deregistration without any further consent of the lessee. In addition to the IDERA, it would be helpful if the owner or the lessor of the aircraft has secured a deregistration and export power of attorney and a deregistration consent from the lessee, consisting of (i) the statement of no dispute, to be signed by the owner and the aircraft operator; and (ii) the aircraft deregistration statement letter, to be signed by all parties involved in the lease transaction (based on forms prescribed by the DGCA). Pursuant to Ministry of Transportation Regulation No 52 of 2018 as amended, either the authorised party (under the IDERA) or the certified designee (in the event there is a recorded CDL) can apply for aircraft deregistration.

The Aviation Law does not require formal consent from the lessee for deregistration of the aircraft. However, as a matter of practice, the deregistration approval may be deferred by the DGCA if such application for deregistration is disputed by the aircraft operator (ie, lessee). Therefore, in practice, a mortgagee or lessor requires the co-operation of the lessee for the deregistration of the aircraft, which amounts to effective consent.

For the purposes of deregistration of the aircraft, the relevant party (eg, the creditor) must obtain a Deregistration Approval from the DGCA. Upon the issuance of the Deregistration Approval, the relevant party must complete Form 47-17 and provide other documents as required by the DGCA (such as a statement of no dispute and deregistration consent letter). The Director General will then deregister the aircraft in question from the Indonesian Aircraft Registry.

In addition, the relevant party should also obtain an Export Certificate of Airworthiness from the DGCA (to the extent required by the importing country), a Diplomatic Clearance from the Ministry of Foreign Affairs and a Security Clearance from the Air Force Base of the Republic of Indonesia (if the aircraft is flying out of Indonesia using non-Indonesian registration) as well as a Flight Approval from the DGCA. Prior to the export of the aircraft out of Indonesia, a Customs Clearance from the Directorate General of Customs and Excise should also be obtained.

Pursuant to the Cape Town Convention and the Aviation Law, the DGCA is obligated to deregister the aircraft within five working days as of the submission of the deregistration request enclosing the recorded IDERA. Further, other authorities in Indonesia will also be required to assist in the export of the aircraft out of Indonesia. Typically, the exercise of such remedies may take much longer than the timeframe stipulated in the Aviation Law.

If the deregistration is carried out with the full assistance of the lessee, in the authors’ experience, the deregistration and exportation process will only take one to two weeks.

Prior to the ratification of the Cape Town Convention, if requested, the Ministry of Transportation could issue such a statement of assurance. However, this is no longer provided following the ratification of the Cape Town Convention by Indonesia.

For deregistration of an aircraft using an IDERA recorded with the DGCA, the DGCA would usually not seek further evidence other than the original recorded IDERA itself and it will immediately process the deregistration once the original IDERA and deregistration application documents have been received. Per the Aviation Law, the DGCA should process the deregistration within five working days upon complete receipt of the required documents.

The associated costs for deregistration of the aircraft are mainly:

• official fees to the DGCA;
• legal fees;
• fees for processing customs clearance and other related licences; and
• costs for preservation of the aircraft pending its exportation.

The current official fee payable to the DGCA for deregistration of the aircraft is IDR3 million (approximately USD185 at the current exchange rate) per deregistration of an aircraft.

If signed abroad, a power of attorney in general has to be notarised and apostilled/consularised. A deregistration power of attorney issued by an Indonesian airline does not need to be certified or legalised to be enforceable, but is subject to the language requirement referred to in 2.2.1 Mandatory Terms for Leases Governed by English or New York Law.

In addition to being notarised and apostilled/consularised, translation of a document into Indonesian by a sworn translator is necessary if the document will be used as evidence before an Indonesian court. Any non-Indonesian language document will only be admitted as evidence before an Indonesian court once it has been translated by a sworn translator.

Although not specifically regulated and legally required, it is advisable that a deregistration power of attorney issued by an Indonesian airline to be enforced in Indonesia be governed under Indonesian law.

A power of attorney (except for recorded IDERA as mentioned below) will cease to exist upon the declaration of bankruptcy of the grantor. Therefore, it is advisable that, for agreements subject to the Cape Town Convention, the lessor should require the lessee to issue an IDERA naming the lessor as the authorised party and file the same with the DGCA for recording. In respect of the IDERA, the Aviation Law specifically states that the IDERA will survive a bankruptcy declaration or insolvency of its issuer.

If there is a recorded IDERA and/or CDL in place, the lessee’s consent should not be required to export the aircraft. However, in practice the lessee’s co-operation may be needed to export the aircraft out of Indonesia.

If required by the importing country, the authorised party under the IDERA must apply for an Export Certificate of Airworthiness (the “Export CoA”) to the DGCA, which must be submitted prior to submitting the deregistration application. Prior to the issuance of the Export CoA, the DGCA will normally conduct a physical inspection of the aircraft at its location, which (from a technicality point of view) may require the lessee’s co-operation.

See also 2.6.2 Lessor Taking Possession of the Aircraft.

Aircraft export permits/licences are issued in Indonesia. It is not possible to obtain an export permit in advance. There is no official timeline. As a matter of practice, it may take three to seven working days as of the submission of the complete application. In addition, the application for the export licence should be processed by a licensed special agent.

The associated costs for export of the aircraft include fees for processing customs clearance and other related licences, for which a customs agent licensed by the Customs Office must be appointed by the lessor. The estimated costs are between USD10,000 and USD12,000.

The lessee may delay the deregistration process that is being carried out by the lessor by disputing the lessor’s right to repossession of the aircraft. For example, the lessee could send an objection letter to the DGCA, objecting to the request for deregistration of the aircraft. This could significantly delay the whole process. However, this practice occurred prior to the enactment of the Aviation Law – there is a reasonable expectation that this should no longer occur following the enactment of the Aviation Law.

In addition, the lessee may, by their act or omission, put a halt to the export of the aircraft by failing to settle any of the customs requirements or to pay the required fees to the Airport Authority. In such cases, the Airport Authority may defer granting the aircraft a permit to leave the airport.

Companies incorporated in or resident in Indonesia can be liquidated pursuant to Law No 40 of 2007 as amended (the “Company Law”) and/or Law No 37 of 2004 (the “Bankruptcy Law”).

Under the Company Law

Pursuant to the Company Law, dissolution of a company shall occur if:

• resolved by the general meeting of shareholders (with a quorum of at least ¾ of total shares with valid voting rights and approved by at least ¾ of total votes validly cast at the meeting);
• the duration of establishment as stipulated in the articles of association has expired;
• determined by the court;
• the bankruptcy status has been revoked by a final and binding judgment of the Commercial Court, and the bankruptcy estate of the company is insufficient to pay the bankruptcy cost;
• a state of insolvency has commenced; or
• the business licence of the company is revoked so that the company is obligated to liquidate itself as stipulated in the applicable laws and regulations.

Under the Bankruptcy Law

There are two proceedings governed by the Bankruptcy Law:

• declaration of bankruptcy; and
• suspension of payment proceedings.

Under the Bankruptcy Law, the difference between a declaration of bankruptcy (voluntary insolvency) and the suspension of payment (restructuring) proceedings is as follows.

• In a declaration of bankruptcy, once a company is declared bankrupt by the court, a receiver (curator) will be appointed with a view to liquidating the assets of the bankrupt company. The bankrupt company is, however, entitled to propose a composition plan. If the composition plan is approved by the creditors, the bankruptcy proceedings will be lifted, and the company can resume its business in accordance with the approved composition plan.
• In a suspension of payment proceedings, an administrator will be appointed with a view to facilitating the company in jointly managing the assets and coming up with a composition plan. If the composition plan is approved by the creditors, the suspension of payment proceedings will be lifted, and the company can resume its business in accordance with the approved composition plan. If the composition plan is not accepted, the company will be declared bankrupt, and the assets of the company will be liquidated.

Based on the Bankruptcy Law, Indonesia maintains a structured approach to cross-border insolvency matters with specific protective mechanisms. The law contains provisions focusing primarily on preventing creditors from circumventing Indonesian proceedings rather than facilitating genuine co-operation. These provisions require creditors obtaining payments from foreign assets to reimburse the bankruptcy estate, including where creditors transfer claims or debts to third parties with the intention of obtaining preferential treatment or set-off opportunities in foreign jurisdictions that would not be permitted under Indonesian law.

The Bankruptcy Law maintains flexibility by not restricting international co-ordination principles such as INSOL International Global Principles, allowing application where parties consent to follow frameworks like the UNCITRAL Model Law on Cross-Border Insolvency. This was illustrated in 2024 by Singapore’s International Commercial Court’s recognition of Indonesian Suspension of Debt Payment Obligations (SOP) proceedings of PT Garuda Indonesia (Persero) Tbk. This recognition provides cross-border benefits, extending SOP protections to foreign assets, and facilitating global restructuring while protecting debtors from adverse actions across multiple jurisdictions during post-restructuring processes.

In respect of the IDERA, the Aviation Law specifically states that the IDERA will survive a bankruptcy declaration or insolvency of its issuer; while a deregistration power of attorney will not survive upon the declaration of bankruptcy.

In principle, the bankruptcy of a contract party does not result in the termination or expiry of the lease. The rights and obligations of the parties remain as set out in the lease. However, where the obligation of the receiver to perform under the lease conflicts with their duty to treat all unsecured creditors equally, the receiver has no obligation to perform and the contract counterparty will have to accept damages as an unsecured creditor.

Under Article 36 of the Bankruptcy Law, if at the time of bankruptcy declaration the bankrupt is party to an executory contract, the contract counterparty (non-bankrupt party) may request the receiver to confirm that it will perform the contract. If the receiver declines or does not respond within the prescribed time-period, the contract terminates by operation of law, and the remedy of the contract counterparty is to claim for damages. If the receiver states willingness to perform, then the counterparty can insist on security against performance by the receiver. The aim of Article 36 is to provide certainty for the counterparties on the continuance of executory contracts.

As mentioned above, where the obligation of the receiver to perform under the lease conflicts with their duty to treat all unsecured creditors equally, the receiver has no obligation to perform and the contract counterparty will have to accept damages as an unsecured creditor.

Pursuant to the Bankruptcy Law, upon the declaration of bankruptcy, there is a 90-day automatic stay period, during which the right of the lessor to repossess will be suspended.

The Aviation Law shortens the automatic stay period with respect to aircraft objects under the possession of a bankrupt debtor by providing that such period should be consistent with the Cape Town Convention, ie, 60 days.

Companies incorporated in or resident in Indonesia can be liquidated pursuant to the Company Law or the Bankruptcy Law.

Under the Company Law

Pursuant to the Company Law, dissolution of a company shall occur if:

• resolved by the general meeting of shareholders (with a quorum of at least ¾ of total shares with valid voting rights and approved by at least ¾ of total votes validly cast at the meeting);
• the duration of establishment as stipulated in the articles of association has expired;
• determined by the court;
• the bankruptcy status has been revoked by a final and binding judgment of the Commercial Court, and the bankruptcy estate of the company is insufficient to pay the bankruptcy cost;
• a state of insolvency has commenced; or
• the business licence of the company is revoked so that the company is obligated to liquidate itself as stipulated in the applicable laws and regulations.

Under the Bankruptcy Law

There are two proceedings governed by the Bankruptcy Law:

• declaration of bankruptcy; and
• suspension of payment proceedings.

The Indonesian legal framework prioritises a debtor’s ability to reorganise, and therefore favours restructuring and rehabilitation over the immediate termination of contracts upon a party’s insolvency.

In the case of an operating lease where the aircraft is not part of the lessee’s company assets, the lessor/creditor/owner should be able to repossess the aircraft and export the aircraft out of Indonesia by virtue of the recorded IDERA or CDL, subject to certain licences mentioned above.

In either bankruptcy or suspension of payment proceedings, the lessor may not be able to receive payments from the lessee. To mitigate risks that the security deposit and maintenance reserve be deemed as part of the insolvency estate of the lessee, they should be fully applied against the obligations of the lessee prior to a declaration of bankruptcy or the commencement of suspension of payment proceedings, and such application be notified by the lessor under the relevant lease agreement.

The government of the Republic of Indonesia ratified the Cape Town Convention (both the Convention and the Protocol) by virtue of Presidential Regulation No 8 of 2007 on 20 February 2007 (the “Presidential Regulation”). The Cape Town Convention is effective in Indonesia as of 1 July 2007.

Indonesia has not designated an entry point for the purpose of the registration of international interests with the International Registry.

Indonesia has made declarations under Article 39(1)(a) and (b), Article 40, Article 53 and Article 54(2) of the Convention.

Article XIII of the Protocol applies domestically in Indonesia. Registration of an IDERA is the responsibility of the authorised party. To register an IDERA with the DGCA, the authorised party under the IDERA should file an application with the DGCA attaching the prerequisite documents. Upon receipt of the complete application, the DGCA will review the application. If everything is in order, the DGCA will then register the IDERA as evidenced by the countersignature of the IDERA by an official of the DGCA in the original IDERA. The original IDERA which has been countersigned by the DGCA will then be provided to the authorised party named therein (or its proxy). Normally, the process takes approximately one to two weeks to complete.

To the best of the authors’ knowledge, provisions of the Convention and the Protocol have not been tested before Indonesian courts.

Indonesia has not ratified the 1948 Geneva Convention on the International Recognition of Rights in Aircraft or the 1933 Rome Convention on the Unification of Certain Rules relating to the Precautionary Arrest of Aircraft.

There are no specific restrictions on foreign lenders providing loans to finance aircraft purchases in Indonesia, subject to the following.

• Foreign exchange generated from an offshore loan must be first withdrawn by the borrower through an Indonesian foreign exchange bank. This provision, however, is not applicable to leasing transactions (where the Indonesian lessee is not directly receiving loans from the offshore creditors).
• Offshore loan reporting obligations must be carried out by a borrower, covering offshore borrowing plan, initial reporting, as well as periodical reporting to Bank Indonesia and the MOF. The reporting obligation to Bank Indonesia is carried out electronically and such reporting is also delivered to the MOF.

See 2.1.4 Exchange Controls.

Borrowers are permitted to grant security to foreign lenders.

Guarantees are permitted provided that they are in the commercial interests of the guarantor, and that there was or will be (as the case may be) a genuine, adequate and tangible corporate benefit in executing the documents and entering into the transactions contemplated thereunder.

It is advisable for a lender to take share security over a domestic special purpose vehicle that owns the financed aircraft. A pledge of shares is recognised under Indonesian law and could create a preference for the lender as a secured creditor over unsecured creditors, subject to compliance with prevailing law and regulations.

The concept of negative pledge is generally recognised under Indonesian law, particularly within the context of loan and financing agreements.

There are no material restrictions on intercreditor arrangements in Indonesia.

Syndicated lenders may, on the basis of agency law, appoint a security agent to act on behalf of the syndicate lenders pursuant to the security agency provisions contained in the relevant financing agreements. The role of the security agent can include (i) enforcing the rights of the syndicate lenders under the relevant financing agreements and (ii) applying the proceeds of any foreclosure proceedings in accordance with the provisions of the relevant financing agreements.

Debt subordination is primarily achieved through contractual arrangement, including intercreditor arrangements.

The transfer of debt under Indonesian law is recognised and is conducted through an instrument called a cessie under the Indonesian Civil Code. As far as Indonesian law is concerned, the transfer agreement must be made in writing and such transfer should be notified and acknowledged by the debtor.

There are no specific laws that prohibit charging interest on loans. However, if the obligations of the debtor and creditor are disproportionately imbalanced in a loan agreement, the court may intervene (at the request of the disadvantaged party) to govern the obligations of the prejudiced party or declare the contract void.

If the assigned object is insurance proceeds payable by the lessee or the lessee’s insurer to the lessor for security purposes, such assignment has to be made in the form of a fiduciary security assignment agreement governed under Indonesian law and drawn up before a notary in the Indonesian language and registered with the Fiduciary Registry Office (failing which (i) the security assignment over the insurance proceeds of the lessee may not be enforceable in Indonesia and (ii) the assignee will not have a priority right (security right), which may be very useful in the event of bankruptcy of the lessee or the insurance company). In addition, if applicable, a guarantee from a parent company of the lessee for the due and punctual payment and performance by the lessee of all the lessee’s obligations under or pursuant to the head lease agreement.

If there is removable equipment to be secured separately from the airframe, then the most common form of security over such movable assets shall be fiduciary security. For such purpose, the fiduciary security can be registered if granted by an Indonesian entity.

See 2.2.5 Recognition of the Concepts of Trust/Trustee.

As mentioned above, Indonesian law does not recognise the concept of trust except in capital market matters and in the banking industry. Therefore, if the security assignment results in the trustee holding the aircraft in trust, from the perspective of Indonesian law, the trustee will be deemed legal owner of the aircraft. Please see 2.2.5 Recognition of the Concepts of Trust/Trustee.

As a general rule under Indonesian law, it is not possible to assign contractual rights for purposes of security, except right to payments or monies and other in-rem rights (such as intellectual property rights).

The novation arrangement whereby the current lessor will transfer all of its rights and obligations under the lease to a new lessor (and the accompanying amendments to the lease) is permissible under Indonesian law provided that the lessee is a party to such novation arrangement.

Indonesian law may not recognise or enforce documents governed by a foreign law purporting (i) to create a security interest in assets located in the Republic of Indonesia, such as the relevant insurance proceeds (except for aircraft objects in accordance with the Cape Town Convention and the Aviation Law), or (ii) to assign rights under documents governed by Indonesian law or assign other contractual rights governed by Indonesian law. This is why a security assignment is typically governed by non-Indonesian law.

The formalities required depend on the governing law of such assignment. As far as Indonesian law is concerned, the assignment agreement must be made in writing in the Indonesian language and such assignment should be notified and acknowledged by the account debtor (in this case the lessee). The acknowledgement by the lessee should contain provisions detailing all the rights and benefits assigned by the lessor to the security trustee, so the lessee cannot argue that it is not aware of the assignment of certain rights and benefits.

Further, if the assignment results in a change of certain information recorded in the aircraft registry maintained by the DGCA, this change should be notified to the DGCA. In addition, to the extent the assignment can be registered with the International Registry for the purpose of the Cape Town Convention, it should be so registered.

A security assignment that does not involve an Indonesian party does not need to be translated, certified, notarised or legalised to be enforceable against an Indonesian party.

See 3.2.1 Typical Forms of Security and Recourse with regard to domestic law security instruments.

No domestic law security instruments and/or local law filings are required in order to make Cape Town filings, except for the filing of IDERA and CDL to, and recorded by, the DGCA.

For the registration of fiduciary security, notarial fee and registration cost based on the value of the secured asset shall apply. For IDERA registration, the official fee payable to the DGCA is IDR2 million (or approximately USD123). There is no fee for CDL registration with the DGCA.

There is no registration for the security assignment in Indonesia (except for the registration of fiduciary security over insurance and reinsurance proceeds under Indonesian law with the Fiduciary Registration Office).

To the extent the rights of the security trustee in respect of all relevant secured creditors claims are valid and enforceable under the governing law of the relevant document (which law, by virtue of Indonesian conflict of law rules, should be applied by Indonesian courts), from the perspective of Indonesian law, the transfer of such rights should be recognised in the courts of Indonesia.

The effect of changes in the identity of secured parties after a security assignment’s execution primarily depends on the governing law of the security assignment and the law where it is registered. From the perspective of Indonesian law, with respect to fiduciary security over insurance and reinsurance proceeds, an Indonesian court may refuse to recognise the interest of a new creditor in the assets secured by the fiduciary security over insurance and reinsurance proceeds if (i) the provisions of the existing fiduciary security over insurance and reinsurance proceeds have not been amended or supplemented to expressly identify such new creditor as the fiduciary grantee thereunder; and (ii) the fiduciary registration certificates in respect of the fiduciary security over insurance and reinsurance proceeds have not been updated to reflect the change of the creditors.

In general, Indonesian law does not recognise the concept of trust except in capital market matters and in the banking industry. Therefore, parallel debt structures are not recognised.

The security assignment should not of itself create a permanent establishment (PE) obligation on the secured party in Indonesia.

For any tax advice, please consult with an Indonesian tax consultant on this matter.

As mentioned above, the DGCA no longer maintains records of mortgages on aircraft registered in Indonesia.

Under Law No 42 of 1999 on Fiduciary Security, an aircraft cannot be subject to fiduciary security. However, a spare engine secured separately from the airframe can be subject to fiduciary security.

The most common form of security over a bank account is fiduciary security, which is governed under Indonesian law, drawn up before a notary in Indonesian language and registered with the Fiduciary Registry Office.

The creditors of the lessee are generally not entitled to attach an aircraft that is not owned by the lessee and they must therefore be classed as unsecured creditors.

In general, Indonesian law provides retention rights in relation to repair costs, salvage costs and craftsman costs. Further, the Indonesian government may detain an aircraft for unpaid taxes or charges related to the use of the aircraft and the airport authorities may also detain an aircraft for unpaid charges related to the use of the aircraft.

Specifically for aircraft subject to the Cape Town Convention, pursuant to the declarations of the government of the Republic of Indonesia under the Cape Town Convention, the government declares that nothing in the Cape Town Convention shall affect its right or that of any entity thereof, or any intergovernmental organisation in which Indonesia is a member, or other private or public services in Indonesia, to arrest or detain an aircraft object under its laws for payment of amounts owed to the government of Indonesia, any such entity, organisation or provider directly relating to the service or services provided by it in respect of that or another aircraft object. Therefore, the existence of any outstanding liens in respect of unpaid airport charges may prevent the lessor or the lender from repossessing the aircraft.

Further, the rights of the repairers of the aircraft in their possession and rights of the Indonesian government for unpaid taxes or charges related to the use of the aircraft may also prevent the lessor or the lender from repossessing the aircraft.

It may take up to two weeks to complete the cancellation of the mortgage recordation with the DGCA. Upon the review of the application, the DGCA will usually issue a statement letter confirming the cancellation of the mortgage recordation. This is only applicable to already existing mortgage recordation.

In the past the DGCA maintained a special registry book (the “Special Registry”) in relation to any mortgage on aircraft registered in Indonesia and having an Indonesian nationality mark (PK). The effect of such registration was more of a public notice. However, such Special Registry is no longer maintained by the DGCA. Based on recent experience, the DGCA would reject any application to record a mortgage on aircraft registered in Indonesia.

Statutory rights of detention or non-consensual preferential liens should only arise over the relevant aircraft, not on a “fleet-wide” basis.

As mentioned above, the DGCA no longer maintains records of mortgages on aircraft registered in Indonesia.

As with enforcing a loan or a guarantee, a court in Indonesia should give effect to a security assignment in accordance with its terms to the extent it is valid and enforceable under the governing law thereof.

Subject to the discussion at 2.2.5 Recognition of the Concepts of Trust/Trustee and provided that the Indonesian court accepts the governing law of the security assignment and the application of equitable principles, the security trustee should be able to enforce their rights.

In general, Indonesian courts should uphold and apply the law chosen where there is a connection between the parties or the transaction and the chosen law and the choice of law is not against public order, upon proof thereof.

Specifically for agreements that are subject to the Aviation Law and the Cape Town Convention (namely security agreement, title reservation agreement and leasing agreement – each as defined in the Cape Town Convention), parties to such agreements are free to choose the law that will govern the agreements regardless of whether or not there is a connection between the parties or the transaction and the chosen law.

Judgments from a foreign court are not recognised or enforceable in an Indonesian court. The Indonesian court would not enforce any other order including (i) judgment, (ii) foreign decree or (iii) other executive act confiscating the aircraft regardless of the mortgagee’s security interest in it, without a rehearing of the issues. However, in any Indonesian court proceedings, a judgment of a foreign court could be offered and accepted into evidence and may be given such evidentiary weight as the Indonesian court deems appropriate under the circumstances.

Indonesia is a party to the New York Convention and Foreign Arbitral Awards are recognised in Indonesia without re-examination, although enforcement of a Foreign Arbitral Award requires a court order from the District Court. See 2.6.12 Enforcement of Foreign Arbitral Decisions.

See 2.6.2 Lessor Taking Possession of the Aircraft with respect to a creditor.

There are no specific courts to decide on security agreement/aircraft mortgage enforcement actions; usually it is the court where the lessee is domiciled.

See 2.6.4 Summary Judgment or Other Relief.

If so requested, an Indonesian court may render a judgment in a currency that differs from legal tender in Indonesia. However, this will be at the full discretion of the court.

For any tax advice, please consult with an Indonesian tax consultant on this matter.

It is considered advisable that any assignment of lessor’s rights in favour of the lender for any aircraft financings (such as assignment of the lessor’s rights under the lease agreements or related documentations) be notified and acknowledged by the lessee. In addition, any assignment of existing fiduciary securities over insurance and reinsurance claims from the lessor to the lender for the purpose of financing must be registered with the Fiduciary Registration Office.