Aviation Finance & Leasing 2024 Comparisons

The transfer of title to an aircraft may be subject to the payment of fees of up to XAF1 million (approximately USD1,635).

The transfer of title to an aircraft while the aircraft is located in Chad is subject to the payment of a tax of XAF5,000 (approximately USD8).

While this is not mandatory, it is advisable for a sale agreement written in a foreign language to be accompanied by a French translation made by a Chadian sworn translator.

A sales agreement and a bill of sale may constitute a “transfer of ownership” of an aircraft or engine.

The letter of the law does not specify whether they extend to the inclusion of all installed parts.

Under the Chadian Civil Aviation Code, the transfer should be recorded in a written document (ie, sale agreement) and the transfer of ownership must be registered on the Aircraft Register to be enforceable against third parties.

It is worth noting that the following documents can be considered as proof of ownership of an aircraft.

• An original sale agreement between the purchaser (the applicant) and the seller of the aircraft, showing that the transfer of ownership has been completed.
• A fully paid commercial invoice (which must be made out on the seller’s letterhead or stamped with the seller’s number and date, as well as the seller’s name, address and company registration number). Eventually, a bill of sale issued by the civil aviation authorities of the state where the aircraft comes from.
• Title of ownership recognised by Chadian civil law (eg, a judgment).
• In the case of an aircraft built by an amateur constructor, a certificate drawn up on plain paper by the applicant, establishing that they are the constructor and owner of the aircraft.

The parties are free to choose the law governing their contract. Therefore, it is possible for a bill of sale to be governed by a foreign law (including English or New York law). Such agreement should be recognised in Chad.

Even if the law is silent on this matter, it is recommended that a bill of sale written in a foreign language should be accompanied by a French translation made by a Chadian sworn translator, in order to be enforceable against a domestic party.

Bills of sale should be registered with the Chadian Civil Aviation Authority (“ADAC”).

The following are mandatory for the registration of aircraft in Chad:

• the initial certificate of registration of the aircraft;
• the deregistration certificate or certificate of non-registration;
• airworthiness documents;
• tax or customs certificates (in the case of new registrations);
• the sale agreement duly signed by the parties or their legal representatives; and
• the original proof of ownership (eg, bills of sale) of the aircraft.

The period for completion of registration is estimated to be five working days but this is subject to administrative delay.

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

The transfer of title to an aircraft while the aircraft is located in Chad is subject to the payment of fees of XAF5,000 (approximately USD8).

The authors are not aware of any taxes payable for executing and/or delivering a bill of sale or consummating the sale of the ownership interest in an entity that owns an aircraft or engine, including where title to such aircraft or engine is transferred while it is (i) over international waters, or (ii) in transit to/from Chad.

The authors are not aware of any types of operating/wet/finance leases or leases concerning only engines or parts that are not permissible nor recognised.

It is permitted for a lease involving a domestic party or an asset in Chad to be governed by a foreign law.

As long as it is established in the lease agreement, there are no material restrictions imposed on domestic lessees making rent payments to foreign lessors in US dollars.

The Ministry of Finance is in charge of foreign exchange control approval in Chad. All Chadian banks must report all the foreign exchange operations of their clients (including the lessee) to the Ministry of Finance. In practice, a bank will require from its client all information the bank deems relevant for a specific foreign exchange operation. Upon receipt of this information from its client, the bank will liaise with the Ministry of Finance to request an authorisation (if necessary) or to file a declaration. However, the payment of rents is normally considered as current operations (operations courantes) as opposed to capital transactions (transactions en capital), and therefore no approval should be required.

The leasing of an aircraft to an entity in Chad is subject to the payment of a registration tax of 3% of the annual value of the lease.

The administrative fees of registration of the aircraft lease with the ADAC should lead to the payment of a fee amounting to XAF50,000 (approximately USD82).

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

There is no requirement for mandatory terms to be in a lease governed by English or New York law. That said, any lease registered with the ADAC should at least contain the following information:

• identification of the lessor and the lessee;
• the signature of the lessor and the lessee or their legal representatives;
• identification of the aircraft (ie, brand and model, registration number and serial number); and
• effective date and term of the lease.

Any payment under the lease is subject to an 18% withholding tax.

Tax “gross-up” is a common practice when it comes to the lease of an aircraft and the authors do not foresee any reason why a tax gross-up clause would not be effective.

The parties can agree in their contract that the lease may cover parts that are installed or replaced on an aircraft or engine after its execution. For the sake of accuracy, it is advisable to appendix the list of installed parts of the aircraft covered by the lease. If there is any modification to the list, an amendment of the list of parts should be made.

If it is legally proven that the engine is the property of a third party, there is no risk of annexation. For the avoidance of doubt, the use of nameplates is recommended to clearly identify the actual owner of the aircraft engines installed on an airframe.

The concept of trust is not expressly set forth in any legal provision. However, Chadian law gives free rein to the parties to establish the terms and conditions of their contract. This includes the rights to appoint an entity or an individual to represent and act on behalf of several parties driven by the same interest.

The authors do not foresee any issue regarding the notation of such interests on the Aircraft Register and believe that this is possible.

This constitutes evidence of the existence of the lease over the aircraft as well as a public notice warning third parties of the existence of the rights of the lessor or the owner.

An aircraft may be registered on the Aircraft Register in the name of the aircraft operator if that party is not also the owner and has lawful ownership of the aircraft (eg, a lease agreement). However, at the time of registration of the lease agreement, the owner’s title must also be filed on the Aircraft Register.

Any leases concerning aircraft should be registered with the ADAC. However, to date, there is no specific register for engine leases.

Any leases concerning aircraft should be registered on the ADAC’s register. This is not a mandatory requirement and is not subject to any consent from government authorities. However, it is always in the interest of a lessor that the ADAC or third parties be aware of the existence of a lease over an aircraft operated in Chad.

The following documents are required for the registration of leases:

• a form should be completed by the owner of an aircraft when leasing the aircraft;
• an original lease agreement;
• an original certificate of registration; and
• documents identifying the lessee(s) (eg, extract from the Register of Companies or tax identification number for Chadian companies) and an identity document (individual or company manager).

There is no requirement for a lease to be in a specific form or translated, served, certified, notarised or legalised under Chadian law. That said, any lease registered with the ADAC should at least contain the following information:

• identification of the lessor and the lessee;
• signature of the lessor and the lessee or their legal representatives;
• identification of the aircraft (ie, brand and model, registration number and serial number); and
• the effective date and term of the lease.

The leasing of an aircraft to an entity in Chad is subject to the payment of a registration tax of 3% of the annual value of the lease.

The registration of the lease with the ADAC should lead to the payment of a fee amounting to XAF50,000 (approximately USD82).

This is not applicable in Chad. There are no other alternative countries for the registration of aircraft under Chadian law.

The applicant should provide the original of the lease agreement and the original certificate of registration of the aircraft. However, power of attorney should be notarised. Apart from these, the authors are not aware of any other requirement.

A foreign lessor will not be required to pay any income or capital gains or other taxes upon leasing an aircraft or engine to a domestic lessee. However, any payment of rent made by the lessee to the lessor will be subject to a withholding income tax of 18%. This will be withheld by the paying entity (ie, the lessee). This is the reason why there are tax gross-up clauses in lease agreements.

No foreign lessor to any lease will be deemed to be resident, domiciled or carrying on business in Chad, or subject to any taxes in Chad as a result of its being a party to, or its enforcement of, the lease.

No liabilities in respect of aircraft or engine maintenance and operations should be imposed on a foreign lessor under a lease as a result of its being a party to such lease.

Only the lessee (as operator of the aircraft) is liable with respect to the use and operation of the aircraft for the duration of the lease. It is advisable to insert in the lease a statement specifying that the aircraft is under the care and custody of the lessee for the duration of the lease.

The retaining right is the right of a creditor to retain in its possession a debtor’s asset in the event of default and until full payment of the debts. This is applicable to movable assets and properties. Note that the retaining right is not subject to any agreement or registration formalities in order to be enforceable. The creditor’s security is materialised by its right to retain in its possession the asset that is the object of the dispute. For example, an aircraft maintenance service company is entitled to retain the aircraft in its possession if the aircraft operator fails to pay the maintenance fees.

In terms of ranking, employees’ salaries, court fees, legal fees (eg, bailiff’s fees), taxes and other state fees, suppliers’ debts secured by rights of detention (droit de rétention), mortgages and pledges (possessory and non-possessory pledges) take priority over a lessor’s rights under an aircraft or engine lease.

If an aircraft is registered in Chad, the aircraft is required to be placed with domestic insurance companies. Reinsurance can be subscribed with foreign insurance companies.

Aircraft operators must have insurance to cover their liability for damage to third parties, persons, baggage and goods.

Foreign reinsurance subscription is allowed.

There is no such concept under local law. The enforcement of such clause would be left to the discretion of the judge.

The assignment of insurances/reinsurances is permitted. However, this is subject to the consent of the insured party.

There are no restrictions on a lessor’s ability to:

• terminate an aircraft lease;
• re-export the aircraft; and/or
• sell the aircraft following such termination.

The letter of the law does not specify whether the aircraft needs to be physically located in Chad at the time of any such action.

On the basis of a deregistration power of attorney/irrevocable power of attorney granted by the lessee to the lessor, neither the consent of the former nor a court order would be required in order for a lessor to take physical possession of the aircraft.

A claim should be lodged by the lessor at the commercial court (first-instance level). Each party has to provide evidence to support its position and several hearings will be scheduled by the judge.

A summary judgment can be obtained in relation to the lease. However, this is only available if there is urgency and there is no possibility for the counterparty to challenge the request of the lessor (eg, any unpaid sums in relation to the execution of the lease).

The estimated period to obtain such a court order could be immediate or up to 30 days, depending on the specific injunctive relief requested to the court.

The parties are free to choose the governing law of the lease. In addition, they are entitled to choose to submit their disputes to a foreign court. Therefore, Chadian courts would uphold a foreign law as the governing law of an aircraft lease, as well as the submission to foreign jurisdictions if the parties agree to choose.

A waiver of immunity is also recognised.

Any foreign judgment (ie, final judgment of a foreign court or an arbitral award) can be enforced in Chad after an exequatur order by a Chadian court. An exequatur order is a decision of a Chadian court to enforce a foreign judgment in Chad after a final verification that such foreign judgment is not in breach of public order and good moral standards (ie, any decision that may constitute a threat to national defence cannot be enforced in Chad). The case will not be re-examined on its merits.

It is possible for a lessor under an aircraft lease to obtain a judgment in a foreign currency if the lease agreement sets forth this possibility.

Following an event of default, it would be possible for a lessor to recover default interest. However, following termination of the lease after an event of default – in particular, if the lessee fails to return the aircraft – it would be difficult, if not impossible, to charge additional rent.

That said, the repossession of the aircraft would be possible and the lessor could claim compensation for damage suffered on the basis of the failure of the lessee to return the aircraft.

Any non-resident party (ie, the lessor) might be asked by the court to deposit a guarantee or caution (cautio judicatum solvi) at the request of the resident party. The caution is an amount of money to be deposited in escrow with the aim to cover any potential damages in the event of refusal of the claimant’s claim. The amount is fixed under the discretionary power of the court and there is no maximum threshold. The court will return the caution to the non-resident party if the latter wins the dispute.

It is understood that the lessor will be required to comply with the mandatory notice period for termination of the aircraft lease if this is established in the lease agreement.

The lessee is not entitled to claim sovereign or other immunity from suit. In all cases, immunities can be waived.

Immunity of Execution

If the lessee is a private legal entity, neither the lessee nor any of its assets is entitled to immunity of execution on the grounds of sovereign immunity of execution.

The provision under the 1998 Organisation for the Harmonisation of Business Law in Africa (l’Organisation pour l’Harmonisation en Afrique du Droit des Affaires, or OHADA) Uniform Act on the organisation of simplified recovery procedures and measures of execution (the “Uniform Act on Measures of Execution”) only relates to immunities of execution of public legal entities. It seems to recognise that they are entitled to immunity of execution. Said provision adds that their debts can be offset against monies that third parties owe them. However, the Uniform Act on Measures of Execution does not shed any light on whether public legal entities are allowed to waive their immunity of execution (eg, via a provision to that end inserted into the lease agreement). The Uniform Act on Measures of Execution also does not expressly forbid the waiver of said immunity of execution.

Immunity of Jurisdiction

Although the authors are not aware of any piece of legislation in Chad that relates to immunity of jurisdiction of the lessee, it is understood that, in practice, the waiver of this immunity of jurisdiction (if any) by the lessee is considered in Chad as being possible and enforceable.

Chad has not adopted the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the “New York Convention”). However, any foreign judgment (including an arbitral award) can be enforced in Chad after an exequatur order by a Chadian court.

There are no other relevant issues.

The concepts of contractual assignment and novation are recognised under Chadian law.

To the extent that the assignment is limited to the assignment of the lessor’s rights and benefits under the lease, there are no specific formalities to follow in respect of the assignment. However, it is advisable to file a copy of the notice and acknowledgement of assignment (and the assignment subject to any confidential arrangement between the parties) in the ADAC document record book for information purposes. It is understood that the notice and acknowledgement of assignment (and the assignment subject to any confidential arrangement between the parties) are not subject to consent from a government authority.

The requirement pertaining to the lessee’s consent is generally subject to the provision of the lease.

In principle, there is no need to translate, certify, notarise or legalise an aircraft and/or engine lease assignment and assumption/novation. However, it is advisable for these assignments and assumptions/novations to be notarised/authenticated to be enforceable against a domestic party. In addition, should such enforcement be carried out via the Chadian judicial courts, a certified translation thereof into French by a Chadian sworn translator is required.

The lessor should file the lease assignment/novation with the ADAC. There are no specific formalities for the purpose of this filing, nor is the assignment subject to any government consent.

The authors are not aware of any taxes/duties payable in respect of an assignment/novation agreement.

Any transfer of the ownership interest of the entity (or the beneficial interest in the trust) would not be considered per se as a transfer of ownership of the aircraft.

The lessor, the owner or the mortgagee can deregister an aircraft. In this respect, a deregistration power of attorney from the lessee is required to facilitate the deregistration of an aircraft when this is required.

The lessee’s or the operator’s consent is required for the deregistration of the aircraft. A deregistration power of attorney should be delivered for this purpose. Note that if the aircraft is under a lease agreement, the deregistration of the aircraft is subject to the deregistration of the lease.

As explained in 2.8.1 Deregistering Aircraft in This Jurisdiction and 2.8.2 Lessee’s/Operator’s Consent, a deregistration power of attorney should be provided by the lessee to the lessor, mortgagee or owner to deregister the aircraft. In addition, a deregistration application should be filed with the original registration certificate, and if the applicant is not the last registered owner in Chad, the original bill of sale between the last registered owner and the applicant is also required.

As administrative delays are very common in Chad, it is difficult to ascertain the process duration. An estimate would be between 15 and 20 working days.

The ADAC does not provide advance assurances to an aircraft owner, mortgagee or lessor as to the prompt deregistration of the aircraft.

The deregistration of a lease should not be subject to any deregistration fees. In all cases, any potential administrative fees should not be significant.

A deregistration power of attorney provided by the lessee to the lessor, mortgagee or owner should be recognised in Chad.

Apart from the notarisation, the authors are not aware of any other documents required.

A deregistration power of attorney can be governed by foreign law.

The revocation of an irrevocable power of attorney should not be possible. Generally, the beneficiary of the power of attorney should give its consent. In this case, the written consent of the beneficiary is required for revocation purposes.

The lessee’s consent is required to export the aircraft. An irrevocable deregistration and export request authorisation duly executed by the lessee and the lessor and approved and signed by the ADAC is required.

It is understood that an export certificate of airworthiness is required to export an aircraft. The applicant should file an application with the ADAC. An export certificate of airworthiness is issued by the ADAC following an application made by the applicant (eg, the lessor) subject to a technical airworthiness assessment made by the ADAC (ie, the aircraft meets the airworthiness requirements of Chad, as well as the special requirements and conditions of the importing country, etc). The certificate can be issued in advance.

The fees are known at the time of filing with the relevant authorities.

The deregistration of an aircraft is subject to the release of the rights registered on that aircraft. If the aircraft is leased, the owner(s) must apply for deregistration of the lease.

Insolvency is regulated by the OHADA Uniform Act on insolvency proceedings (the “Uniform Act on Insolvency”). The OHADA Insolvency Act regulates all matters relating to insolvency law in all OHADA member states. Its purpose is:

• to organise pre-insolvency procedures of conciliation, preventative settlement and rehabilitative proceedings of reorganisation and assets liquidation so as to preserve the economic activities and employment of debtor companies, quickly rehabilitate healthy companies and liquidate distressed ones in such a way that the debtors’ assets will be maximised for the purpose of increasing receivables to be recovered by creditors and establish a specific order of payment to secured or unsecured collateral securities;
• to define rules applicable to judicial administrators; and
• to set proprietary and professional sanctions as well as criminal proceedings related to the default of the debtor, applicable to the debtor company’s top executives and individuals involved in the insolvency proceedings management.

To summarise, insolvency proceedings are under the control of the judge (juge commissaire) and the assets of the company are placed under the supervision of a judicial trustee (syndic), whose main responsibility is to act in the overall interests of the creditors as a whole (masse des créanciers).

A judgment from the commercial court confirms the starting of insolvency proceedings (jugement d’ouverture). Such judgment is published in the Companies Registry or Registre du commerce et du crédit mobilier (RCCM) and in the newspapers. A second publication should be made 15 days after the first publication. The two publications must contain a warning to creditors to produce their claims to the syndic. Creditors’ claims against the company must be declared to the syndic within two months following the second publication of the insolvency judgment. This period is extended to three months for creditors residing outside the national territory.

In principle, the declaration must contain the amount of the claim, its due date and the amount due. The declaration must also specify the type of security attached to the claim (if any). Creditors should also provide the syndic (to the extent possible) with any evidence of the existence of their claims. The syndic will provide the creditors with a receipt confirming that their declarations have been duly received by the syndic.

Note that insolvency proceedings suspend and prohibit any individual claim initiated by a creditor. Two situations may occur, as set out below.

• The juge commissaire may decide that the activities of the company must be continued (legal redress, or redressement judiciaire). In a legal redress, the directors/managers of a company are assisted by the syndic in the administration of the company. Any commitment or operation made by the directors/managers without the assistance of the syndic is not enforceable towards third parties.
• The juge commissaire may decide that the activities must be terminated (liquidation). In the event of a liquidation, the directors/managers of a company are removed from their duties. Only the syndic is allowed to represent the company during the liquidation.

The lessee can lodge a declaration of cessation of payment with the commercial court and request the initiation of insolvency proceedings. The cessation of payment and the insolvency proceedings (ie, a judicial restructuring or a winding-up) can also be requested by the creditors or the court itself. In theory, three scenarios are possible:

• self-declaration; or
• request by the creditors; or
• request by the court.

Co-operation on Overseas Proceedings

In the event of an international insolvency proceeding, the competent court may co-operate as far as possible with foreign courts or foreign representatives, either directly or through the syndic.

In addition, the competent court will be entitled to (i) communicate directly with foreign courts or representatives, or (ii) request information or assistance directly from them.

In all cases, the local courts must comply with the provisions of the Uniform Act on Insolvency.

There is no specific provision under local law for adopting co-ordination principles (most notably, the American Law Institute and International Insolvency Institute Guidelines Applicable to Court-to-Court Communications in Cross-Border Cases 2001, and the INSOL International (International Association of Restructuring, Insolvency and Bankruptcy Professionals) Global Principles for Multi-Creditor Workouts 2000).

Recognition of Proceedings Opened Within the OHADA Area

The Uniform Act on Insolvency is applicable for the recognition of foreign proceedings.

It is understood that judgments opening and closing insolvency proceedings, as well as those that settle disputes arising from such proceedings in a member state (eg, Chad), are recognised and enforceable in the territory of the other member states.

Recognition of Decisions Pronounced Outside the OHADA Area

A foreign representative can file an application with the court of a member state (eg, a Chadian court) for the recognition of foreign proceedings. The application must include the following documents:

• a certified copy of the decision opening the foreign proceedings and appointing the foreign representative;
• a certificate from the foreign court attesting to the opening of the foreign proceedings and the appointment of the foreign representative; or
• in the absence of the documents referred to in the first two bullet points, any other evidence of the opening of the foreign collective procedure and of the appointment of the foreign representative that may be accepted by the competent court.

All supporting documents provided for the recognition must be written in, or translated into, the official language(s) of the relevant member state.

The competent court must verify the various conditions listed in the OHADA Uniform Act on Insolvency for the recognition of foreign insolvency proceedings.

In the event that the lessee is declared insolvent by a Chadian court, the judgment pronouncing the insolvency proceedings suspends and prohibits all individual claims that order the lessee to pay an amount of money or terminate an agreement following an event of default. The repossession of the aircraft will be affected by the insolvency proceedings. The lessors could be allowed to use the deregistration power of attorney or an irrevocable deregistration and export request authorisation (IDERA) if it complies with the procedure of declaration mentioned in 2.9.1 Overview of Relevant Laws and Statutory Regimes Governing Restructurings, Reorganisations, Insolvencies and Liquidations.

For this purpose, the lessor must specify in its declaration that it intends to exercise its droit de revendication, or reclamation right.

A lease is not automatically terminated upon the issuance of an insolvency judgment. The following scenarios may apply:

• the syndic may decide to continue the lease subject to the payment of the rent; or
• the syndic may decide to terminate the lease, in which case, the lease is terminated by simple notice given by an extrajudicial act.

The lessor is required to comply with the procedure of declaration mentioned in 2.9.1 Overview of Relevant Laws and Statutory Regimes Governing Restructurings, Reorganisations, Insolvencies and Liquidations. In addition, the lessor must specify in its declaration that it intends to exercise its reclamation right.

The unsecured lender may run the risk of not being paid in full. Indeed, when the debtor’s assets are not sufficient to ensure the payment of the insolvent creditors, including the lender, the latter will be considered as any other ordinary creditor to be paid in equal parts with the existing assets of the debtor.

In the case of legal redress, the debtor must propose an arrangement with creditors. This arrangement can usually impose moratoria. In all cases, the lease will not automatically be terminated when the insolvency judgment is pronounced.

The syndicmay decide to continue the lease subject to payment of the rent or to terminate the lease. In the latter case, the lease is terminated by a simple notice given by an extrajudicial act.

The lessee can lodge a declaration of cessation of payment with the commercial court and request the initiation of insolvency proceedings. The cessation of payment and the insolvency proceedings (ie, either a judicial restructuring or a winding-up) can also be requested by the creditors or the court itself. In theory, three scenarios are possible:

• self-declaration; or
• request by the creditors; or
• request by the court.

Please refer to 2.9.1 Overview of Relevant Laws and Statutory Regimes Governing Restructurings, Reorganisations, Insolvencies and Liquidations.

See 2.9.1 Overview of Relevant Laws and Statutory Regimes Governing Restructurings, Reorganisations, Insolvencies and Liquidations and 2.9.5 Other Effects of a Lessee’s Insolvency.

Chad is not a member state of the Convention on International Interests in Mobile Equipment (the “Convention”) and the related Protocol on Matters specific to Aircraft Equipment (the “Protocol”). However, the Chadian Civil Aviation Code provides that the Convention and Protocol are applicable and enforceable in Chad.

No declarations under the Convention or the Protocol have been made, to the best of the authors’ knowledge.

The letter of the law is silent on how the IDERA should be submitted to or recorded in the ADAC’s register, but it is recommended that the IDERA be filed with the ADAC.

The authors are not aware of any experience of local courts on the enforcement of the Convention or the Protocol.

Chad is a party to the 1948 Geneva Convention on the International Recognition of Rights in Aircraft. Chad is not a party to the 1933 Rome Convention on the Unification of Certain Rules relating to the Precautionary Arrest of Aircraft.

A loan between a non-resident entity and a resident borrower is permitted under Regulation No 02/18/CEMAC/UMAC/CM relating to foreign exchanges in the Economic and Monetary Community of Central Africa (Communauté économique et monétaire de l’Afrique centrale or CEMAC) that is applicable in Chad.

The loan is subject to a declaration to the Bank of Central African States (BEAC) and the minister of finance 30 days prior to any payment/first drawdown under the loan. The declaration may take the form of a simple letter.

See 3.1.1 Restrictions on Lending and Borrowing.

In practice, after filing the declaration (a simple letter), the borrower should receive a letter from the minister of finance authorising the borrower to move forward with the transaction. Without this authorisation letter, the borrower’s local bank will refuse to process any transfer of funds from the non-resident bank. In the event that the first drawdown occurs before the minister’s authorisation is obtained, the funds will be kept by the borrower’s local bank for eight days and will be transferred back to the non-resident bank at the expiry of the said period if the borrower is unable to provide the authorisation letter from the minister.

Local borrowers are permitted to grant security to foreign lenders.

The concept of downstream, upstream and cross-stream guarantees is not expressly set forth in any legal provision. However, the closest concept under Chadian law is that of cautionnement.

Pledges over shares are recognised under the OHADA Uniform Act organising securities (the “Uniform Act on Securities”).

There is no specific provision under Chadian law on negative pledges.

If the parties proceed with the registration at the tax office, the facility agreement could be subject to a registration fee of 1% of the facility amount.

While the concept of agency and the role of an agent (such as a facility agent) under a syndicated loan does not exist per se in Chad, from a practical perspective, this concept is recognised. In addition, the parties are free to establish the terms and conditions of their contract. This includes the right to appoint an entity or an individual as agent.

There is no specific provision for debt subordination under local law.

The transfer or assignment of all or part of an outstanding debt under an English or New York law-governed loan may be permissible and recognised in Chad.

Usury is prohibited in Chad. However, the law does not set out a maximum threshold beyond which an interest rate is considered usurious. In Chad, each category of loan has its own effective global rate beyond which an interest rate is considered usurious. In practice, the effective global rate is agreed between the lender and the borrower. In light of the above, usury is unlikely to occur, but any interested party can always contest the effective global rate that has been agreed if it can provide evidence that the rate is actually usurious.

The typical forms of security and recourse that would be granted in an aviation finance transaction domestically are mortgages.

The authors understand that only the securities provided in the Chadian Civil Aviation Code can be taken over an aircraft or related collateral such as engines.

The concept of a trust is not expressly set forth in any legal provision in Chad. However, the Chadian Civil Code gives free rein to the parties to establish the terms and conditions of their contract. This includes the right to appoint an entity or an individual to represent and act on behalf of several parties driven by the same interest.

The borrower can assign its rights to an aircraft or under an aircraft lease to a security trustee pursuant to a security assignment or a mortgage.

The assignment of rights and benefits under a contract (eg, an aircraft lease), without also assigning the attendant obligations of the lessor, is possible.

As the parties are free to choose the law governing their contract, it is permitted and enforceable for security assignments or guarantees to be governed by English or New York law.

The security assignment must be executed by the lessor (as assignor) and the security trustee (as assignee).

A separate notice and acknowledgement of the assignment will need to be executed by the assignor, the assignee and the assigned party (ie, the lessee).

In addition, the Chadian Civil Aviation Code provides that any security (including a security assignment) must be notified to the ADAC for registration on the Aircraft Register.

If an English or New York law-governed security assignment were to be taken in respect of an aircraft registered in Chad, no specific domestic security instrument would need to be taken in addition by a financier.

It is recommended, however, that the foreign law-governed security assignment be registered with the ADAC.

It is possible for an English or New York law-governed security assignment or domestic law security instrument to be registered with the ADAC. This would result in the payment of a fee amounting to XAF50,000 (approximately USD82).

The transfer of security interests over an aircraft can be recognised.

If the identity of the secured parties under a security assignment were changed after its execution, the authors are of the view that the security interests would not be jeopardised.

There is no specific provision on parallel debt structures under Chadian law.

A secured party under a security assignment would not be deemed to be resident or domiciled in Chad and is not subject to any taxes as a result of its being a party to, or its enforcement of, a security assignment.

A mortgage over an aircraft or engine would be perfected when it complies with the provisions of the Chadian Civil Aviation Code and is registered with the ADAC.

Securities over aircraft are expressly provided under Chadian law (eg, by a mortgage). They should be registered with the ADAC.

Security over a bank account would be perfected when it complies with the provisions of the Uniform Act on Securities and is registered with the tax office and the RCCM.

The Uniform Act on Securities does not set forth any specific provisions on liens. However, the closest concepts under Chadian law are the retaining right and the possessory pledge.

The retaining right is the right of a creditor to retain in its possession a debtor’s asset in an event of default and until full payment of the debt. This is applicable to movable assets and properties. Note that the retaining right is not subject to any agreement or registration formalities in order to be enforceable. The creditor’s security is materialised by its right to retain in its possession the asset that is the object of the dispute. For example, an aircraft maintenance service company is entitled to retain the aircraft in its possession if the aircraft operator fails to pay the maintenance fees.

There is no specific timeframe to carry out the discharge of a lien or mortgage over an aircraft. As administrative delays are common in Chad, the average timeframe may be up to six months.

The mortgage should be registered on the ADAC’s register. The interests of an aircraft mortgagee or security trustee may be noted on the Aircraft Register. This constitutes evidence of the existence of the right over the aircraft as well as a public notice warning third parties of the existence of the rights of the aircraft mortgagee or security trustee.

See 3.3.1 Third-Party Liens for information about the retaining right.

A potential purchaser of an aircraft should verify with the Aircraft Register that the aircraft is free of encumbrances.

There is no specific provision on this under local law.

There is no specific provision on this under local law.

The parties are free to choose the governing law of the lease. In addition, they are entitled to choose to submit their disputes to a foreign court. Therefore, Chadian courts would uphold a foreign law as the governing law of a finance or security document, as well as the submission to foreign jurisdictions if the parties choose this.

Any foreign judgment (ie, a final judgment of a foreign court or an arbitral award) can be enforced in Chad after an exequatur order by a Chadian court. An exequatur order is a decision of a Chadian court to enforce a foreign judgment in Chad after a final verification that such foreign judgment is not in breach of public order and good moral standards (ie, any decision that may constitute a threat to national defence cannot be enforced in Chad). The case will not be re-examined on its merits.

A secured party can take possession of the aircraft to enforce a security agreement/aircraft mortgage without the consent of the lessee or the operator. In principle, the repossession of the aircraft should be made pursuant to judicial proceedings, particularly when the provision of the lease is not clear.

On another note, the secured party can also use the deregistration powers of attorney as an instrument for repossession purposes.

A claim should be lodged by the secured creditor at the commercial court (first-instance level). Each party has to provide evidence to support its position and several hearings will be scheduled by the judge.

Regarding recourses, there are three levels of jurisdiction in Chad: first-instance court, court of appeal and court of cassation.

A summary judgment can be obtained in relation to the lease. However, this is only available if there is an urgent need and there is no possibility that the counterparty will challenge the request of the creditor (ie, there are no unpaid sums in relation to the execution of the finance or security document).

It is possible for a secured party under a security agreement/aircraft mortgage to obtain a judgment in a foreign currency.

Any non-resident party (ie, the secured party) might be asked by the court to deposit a guarantee (cautio judicatum solvi, or caution) at the request of the resident party. The caution is an amount of money to be deposited in escrow with the aim to cover any potential damages in the event of refusal of the claimant’s claim. The amount is fixed under the discretionary power of the court and there is no maximum threshold. The court will return the caution to the non-resident party if the latter wins the dispute.

Note that administrative delays of court proceedings are common in Chad.