Aviation Finance & Leasing 2024 Comparisons

Under Panamanian law the transfer of an aircraft or engine while this is located within Panamanian territory is subject to payment of transfer of movable asset tax at a rate of 7% unless the aircraft or engine is located in a tax-free zone at the time of the transfer.

In order to be enforceable in Panama, the sale agreement must be translated into Spanish by an official translator in Panama and the signatures of the parties must be certified by a notary public and legalised according to the 1961 Hague Convention on the Apostille.

The transfer of the title to an aircraft or engine is achieved when the bill of sale or the sale purchase agreement is registered at the Public Registry Office. Unless expressly excluded, the transfer includes all installed parts including, for example, the auxiliary power unit.

Panamanian law recognises the principle of freedom of the parties to subject their contractual agreements to foreign laws. The transfer of title to an aircraft or engine physically delivered in Panamanian territory may be validly subjected to English or New York law. If the bill of sale is executed outside Panama, the signatures of the parties must be certified by a notary public and legalised according to the 1961 Hague Convention on the Apostille. Thereafter, the bill of sale must be translated into Spanish by an official translator in Panama, protocolised in a notarial deed and registered with the Public Registry Office.

If the bill of sale is executed outside Panama, the signature of the parties must be certified by a notary public and legalised according to the 1961 Hague Convention on the Apostille. Thereafter, the bill of sale must be translated into Spanish by an official translator in Panama, protocolised in a notarial deed and registered with the Public Registry Office.

Formalities

The signatures in the bill of sale must be certified by a notary public and legalised according to the 1961 Hague Convention on the Apostille in the place of execution. Thereafter, this must be translated into Spanish by an official translator in Panama and filed with the Public Registry. Registration at the Public Registry may take from five to ten days.

Requirements

An appraisal certificate issued by the Civil Aeronautics Authority (AAC) is required to complete registration. Obtaining the appraisal certificate may take from 30 to 60 days.

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

The transfer of an aircraft or engine located within Panamanian territory is subject to payment of transfer of movable assets tax at a rate of 7% and may be subject to payment of capital gains tax at a rate of 10% unless the transfer takes place while the aircraft or engine is within a tax free zone. The transfer of an aircraft or engine in international waters is exempted from payment of transfer tax.

All type of leases on aircraft, engines or parts are permitted.

Panamanian law recognises the principle of freedom of the parties to subject their contractual agreements to foreign laws. Leases involving a domestic party or an asset situated in Panama may be validly subjected to foreign law. If the lease is executed outside Panama, the signatures of the parties must be certified by a notary public and legalised according to the 1961 Hague Convention on the Apostille. Thereafter the lease must be translated into Spanish by an official translator in Panama, protocolised in a notarial deed and registered with the Public Registry Office.

The US dollar is legal tender in Panama. There are no restrictions imposed on domestic lessees making rent payments to foreign lessors in US dollars.

There are no exchange controls in Panama.

The execution of a lease in Panama by a domestic party or an original lease executed outside Panama being brought into Panama, either physically or electronically, is subject to payment of stamp duties in the amount of USD0.10 for each USD100.00 of the value of the lease. However, where such amount has been paid in respect of notarial paper for the deed whereby the aircraft lease has been recorded with the Public Registry, no additional amounts are required to be paid

Lessors do not have to be licensed or otherwise qualified in Panama to do business with a domestic lessee.

The lease must include the name and particulars of the parties, the description of the aircraft, the duration of the lease and the rent payable. There are no other mandatory terms required to be in a lease.

Tax and other withholding gross-up provisions are legal, valid and binding and enforceable against the lessee. The lessor remains liable before tax authorities if the lessee fails to pay taxes imposed on lessor.

A lease may include parts that are installed or replaced on an aircraft or engine installed after its execution. It is advisable to execute a lease amendment or side letter to capture parts installed after execution.

Ownership of engines which are delivered with the aircraft is assumed to be vested in the aircraft owner. If engines are owned by a third party, a statement to that effect must be expressly contained in title documents. There is no register of engines at the Public Registry. Title to engines may be registered at the Mortgage on Movables Assets Section of the Public Registry Office when a mortgage on the engines is recorded therein.

Trusts and the role of an owner trustee under a lease are fully recognised under Panamanian law.

The interest of the owner and/or lessor of an aircraft must be registered at the Public Registry Office and at the AAC. Registration of the bill of sale at the Public Registry Office vests title upon the owner.

Title in the name of the owner must be registered with the Public Registry Office. It is not possible to register title in the name of the operator when the operator is not the owner. The operator must obtain from the AAC a certificate of registration which will show that title is registered in the name of the owner and that lessee is the operator.

Leases on aircraft are registered at the Aircraft Section of the Movable Assets Section of Public Registry Office and are filed with the Aeronautical Registry of the AAC.

Leases must be recorded with the Aircraft Section of the Movable Assets Section of the Public Registry Office and filed with the Aeronautical Registry of the AAC to obtain the certificate of registration of the aircraft.

Registration of the lease at the Aircraft Section of the Public Registry Office is for notice to third parties and is a prerequisite for the issuance by the AAC of the certificate of registration of the aircraft.

The execution and delivery of an aircraft’s and/or an engine’s lease are not subject to any consent from any government entity.

There is no specific form for the lease but it must include the names and details of the parties, a full description of the aircraft, the duration, the amount of the rent and the terms agreed by the parties. The lease may be executed in any language. If executed in a foreign language, an official translation into Spanish by an official translator in Panama is required for registration purposes. The lease must be protocolised in a notarial deed and recorded with the Public Registry Office. If the lease is executed outside Panama, the signature of the parties must be certified by a notary public and the signature of the notary public must be legalised according to the 1961 Hague Convention on the Apostille. Registration at the Public Registry Office is required for notice to third parties and is a prerequisite for issuance of the certificate of registration by the AAC showing the lessor as owner and the lessee as operator.

Registration of the lease with the Public Registry Office is subject to payment of notarial fees, stamp tax and Public Registry Office registration fees based on the amount of the rent and the duration of the lease.

The United States of America and Colombia are the most popular jurisdictions in which to register aircraft that are habitually based in the Republic of Panama.

All documents to be recorded with the Public Registry Office and the AAC must be original or a certified copy. Documents in a foreign language must be translated into Spanish by an official translator in Panama. Documents executed outside Panama must be certified by notary public and the signature of the notary public must be legalised according to the 1961 Hague Convention on the Apostille.

Payments of rent to a foreign lessor are subject to payment of income tax by way of withholding by the lessee unless an exception is granted through a tax treaty.

The lessor is severally liable for such tax and would be responsible for payment in the event that the lessee fails to make the withholding.

Foreign lessors are not deemed to be resident, domiciled or carrying on business in Panama as a result of being a party to, or enforcing, a lease on an aircraft registered in Panama.

Liability in respect of the aircraft and engine maintenance and operations is generally imposed on the lessee unless otherwise agreed in the lease agreement.

The owner or lessor under a lease, or a financier financing the asset on lease, is not liable under the doctrine of strict liability or any other similar domestic doctrine as a result of damage or loss caused by the assets unless there is gross negligence or wilful misconduct on the part of such owner or lessor or financier.

Creditors of a domestic lessee do not have the right to attach an aircraft leased to it and owned by a different entity. Such creditors can only attach assets owned by the domestic lessee.

Panamanian law grants a possessory lien to the person that has executed work on movable assets such as an aircraft, giving such person the right to retain the asset until it receives payment. A possessory lien is granted to the repair and maintenance provider for unpaid services performed on an aircraft, whether or not such lease/lessor is registered in the national aircraft register.

Panamanian insurance law requires that insurances be placed with domestic insurance companies to the extent that these are available.

Panamanian aviation law requires that operators obtain insurance for the damages they may cause to third parties on the ground, crew, users and in general any damages that may be caused as a consequence of the operation of an aircraft.

Domestic insurance companies may take out reinsurance with foreign insurance companies provided that these are registered with the Foreign Reinsurance Companies Registry of the Insurance and Reinsurance Superintendency of Panama.

Cut-through clauses in insurance/reinsurance documents are permitted and enforceable.

Assignments of insurance and reinsurance are permitted.

There are no restrictions on a lessor’s ability to (i) terminate an aircraft lease, (ii) re-export the aircraft and/or sell the aircraft following such termination except for those contained in the lease agreement. The aircraft does not need to be physically located in the Republic of Panama at the time of termination of the lease, re-exportation or sale of the aircraft.

There are no self-help remedies in the Republic of Panama. If the lessee refuses to return the aircraft, the lessor must obtain a court order.

There are no specific courts that are competent to decide aviation disputes. Aviation related claims must be filed before the Panamanian civil circuit courts.

A summary judgment is not available in proceedings in Panama. Notwithstanding this, a lessor may apply to the court for cautionary measure in the form of an injunction preventing a lessee from taking certain actions relating to the asset or in the form of an attachment on the physical asset or its title.

Domestic Courts will uphold:

• foreign law as governing law of an aircraft lease as a valid choice of law and will enforce this in any action in the courts of the Republic of Panama, provided that these do not contravene the public policy of the Republic of Panama;
• the submission to a foreign jurisdiction agreed in a lease agreement; and
• a waiver of immunity by the parties as permitted by the applicable laws.

Court Judgments/Orders

Any judgment or order given by a foreign court may be enforced in the Republic of Panama by suit on the judgment, and the judgment/order will be recognised and accepted – and therefore enforceable – by the courts of the Republic of Panama, without retrial or examination of the merits of the original action, by instituting exequatur proceedings in the courts of the Republic of Panama upon determination by such courts that:

• the courts of the judgment country would in similar circumstances recognise a final and conclusive judgment of the courts of the Republic of Panama;
• the judgment has been issued as a consequence of an action “in personam”;
• the judgment was rendered after personal service on the defendant as ordered by a judge of a competent jurisdiction;
• the cause of action upon which the judgment was based does not contravene the public policy of the Republic of Panama;
• the documents evidencing the judgment are in authentic form according to the laws of the relevant foreign country and have been duly legalised by a consul of the Republic of Panama or pursuant to the 1961 Hague Convention on the Apostille; and
• a copy of the final judgment has been translated into Spanish by a licensed translator in the Republic of Panama.

Arbitration Awards

A final conclusive judgment of a foreign arbitration award issued by a foreign arbitration tribunal rendered against a Panamanian company will generally be recognised and enforced in the courts of the Republic of Panama. Such an award may only be refused if one of the following circumstances occurs.

• At the request of the party against whom it is invoked, if the said party proves before the General Business Court of the Supreme Court of Justice one of the following:
1. One of the parties to the arbitration agreement was under some incapacity under the law applicable to it, or the said agreement is not valid pursuant to the law to which the parties subjected it or, if no provision was made in this regard, pursuant to the law of the country in which the award was rendered.
2. The party against whom the award is invoked was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was unable, for whatever reason, to present its defence.
3. The award refers to a dispute which was not contemplated by the arbitration agreement or which did not fall within the terms of the submission to arbitration or contains decisions which go beyond the scope of the arbitration clause or the submission to arbitration. If, however, the provisions of the award which refer to the matters submitted to arbitration can be separated from those which have not been submitted to arbitration, the former may be recognised and enforced).
4. The constitution of the arbitral tribunal or the arbitral proceedings did not conform to the agreement entered into between the parties or, if there is none, it did not conform to the law of the country in which the arbitration was held.
5. The award has not yet become binding on the parties or has been set aside or stayed by a court of the country in which it was made or pursuant to whose law it was made. If a court has been asked to set aside the award pursuant to the applicable law, the competent court to whom the application for recognition and enforcement is addressed may, if it considers it appropriate to do so, defer its decision and at the request of the party seeking recognition and enforcement it may also order the other party to provide appropriate and adequate guarantees.
• If the court finds:
1. that pursuant to the Arbitration Law the subject matter of the dispute may not be resolved through arbitration; and/or
2. that the recognition or enforcement of the award would be contrary to Panamanian international public policy.
• If the following documents are not provided with the enforcement petition:
1. duly authenticated original or certified copy of the arbitration award;
2. duly authenticated original or certified copy of the arbitration agreement; and
3. official translation into Spanish if the language of the arbitration proceedings is other than Spanish

The lessor under an aircraft lease may obtain a judgment in a foreign currency.

Subject to what is agreed in the lease agreement, there are no limitations on a lessor’s ability to recover default interest or to charge additional rent following termination of the lease for default, including where the lessee fails to return the aircraft.

The lessor is not required to pay taxes under an aircraft lease in connection with the enforcement of such lease in Panama. Stamp tax in the amount of USD0.10 for each USD100.00 or fraction of the value of the aircraft lease must be paid for enforcement in Panama. However, where such amount has been paid in respect of notarial paper for the deed whereby the aircraft lease has been recorded with the Public Registry, no additional amounts are required to be paid.

There are no mandatory notice periods for the lessor’s termination of the lease. Termination notice periods are generally regulated in the lease.

The lessee is not entitled to claim sovereign immunity from suit of proceedings under the laws of the Republic of Panama.

Panama has adopted the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the “New York Convention”).

Please refer to 2.6.6 Domestic Courts’ Recognition of Foreign Judgments/Awards for further discussion of the recognition and enforcement of foreign arbitral awards.

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

Panamanian laws recognise the concepts of contractual assignment and novation.

A lease assignment and assumption agreement governed by New York or English law will be held valid by domestic courts to the extent that such laws are not contrary to the public policy of the Republic of Panama. The consent of the lessee will be required if provided in the lease. It is advisable to obtain the consent of the lessee to facilitate registration with the Public Registry. There are no mandatory terms required to be included in such agreement. The assignment and assumption agreement must be recorded with the Public Registry Office, which will require for registration the complete identification of the parties and the aircraft and a certificate of existence of the assignee if this is not already registered at the Public Registry.

Aircraft lease assignment and assumption/novation agreements must be translated into Spanish by an official translator in Panama, notarised and legalised according to the 1961 Hague Convention on the Apostille (if executed outside Panama) and recorded with the Public Registry Office.

Aircraft and/or engine lease assignment and assumption/novation agreements must be registered with the Public Registry Office and filed with the AAC. No governmental consents are required for such registration.

The assignment and assumption/novation agreement must be translated into Spanish by an official translator in Panama, protocolised into a notarial deed and recorded with the Public Registry Office. Registration may take from five to fifteen days.

Once recorded with the Public Registry a copy of the aircraft lease assignment and assumption/novation agreement must be filed with the AAC with an application for a new certificate of registration of the aircraft showing the assignee as owner.

There are no government applications or consents required as a prerequisite to the execution and delivery of an aircraft and/or engine lease assignment and assumption/novation in relation to an aircraft registered domestically.

Stamp tax in the amount of USD0.10 for each USD100.00 of the value of the assignment and assumption/novation agreement must be paid for enforcement in Panama. However, where such amounts have been paid in respect of the notarial paper of the deed whereby the assignment and assumption/novation agreement was registered with the Public Registry Office, no additional amounts must be paid.

The laws of the Republic of Panama will recognise the transfer of the ownership interest of the entity owning an aircraft with the legal tittle remaining with that entity.

Owners, operators and holders of deregistration powers of attorney and any third persons authorised by these may request the deregistration of an aircraft in the Republic of Panama. A petition must be filed with the AAC to deregister the aircraft. If the petition is filed by the owner lessor, the AAC will request evidence of termination of the lease.

Owner, mortgagee or lessor may apply for the deregistration of the aircraft without the lessee’s or operator’s consent. If lessee or operator refuse to deliver the aircraft, the owner, mortgagee or lessor must file judicial proceedings to obtain a court order.

Owner, mortgagee or lessor must provide the deregistration power of attorney and/or irrevocable deregistration and export request authorisation (IDERA).

The deregistration process may take from two to four weeks. If lessee or operator refuse to deliver the aircraft the deregistration process may take from six to twelve months.

The AAC does not provide advance assurances to aircraft owners, mortgagees of lessors for the prompt deregistration of aircraft.

There are no significant costs/fees/taxes chargeable in respect of the deregistration of aircraft. The cost of deregistration is USD100.00. The cost of the airworthiness certificate for export is USD1,000.00. However, if the lessee refuses to deliver the aircraft owner, lessor or mortgagee must initiate judicial proceeding before Panamanian civil circuit courts to obtain a court order and must bear the costs of such proceedings.

Deregistration powers of attorney should be recognised. These must be translated into Spanish by an official translator in Panama, notarised and if issued outside Panama legalised according to the 1961 Hague Convention on the Apostille. Registration with the Public Registry Office is not mandatory.

There are no additional documents required for the enforceability of the deregistration power of attorney.

Deregistration powers of attorney may be governed by domestic or foreign laws.

Regulations in the Civil Code of Panama provide that powers of attorney are revocable. Panamanian maritime laws recognise the validity of irrevocable powers of attorney for the enforcement of a ship mortgage through the private sale of a vessel. There are no provisions under aviation laws of Panama recognising the irrevocability of powers of attorney. Panama is a signatory of the Cape Town Convention and Protocol whereby IDERAs are permitted. The recognition of the irrevocability of an IDERA under the Cape Town Convention remains to be tested.

The consent of lessee is not required to export the aircraft. However, if the lessee refuses to deliver the aircraft, the owner, mortgagee or lessor must obtain a court order. Owner, mortgagee or lessor must obtain an IDERA and a deregistration power of attorney to increase the likelihood that it will be able to export the aircraft. The aircraft does not need to be in Panama at the time of deregistration and/or export.

The ACC does not issue export permits/licenses. ¬

The AAC does not charge costs/fees/taxes in respect of the export of an aircraft.

There are no other significant practical issues that an aircraft owner or mortgagee or lessor should be aware of in respect of the deregistration of an aircraft in the Republic of Panama.

Law 12 of 2016 (the “Insolvency Law”), which establishes the insolvency proceedings regime and related provisions, regulates restructurings, reorganisations, insolvencies and liquidations in the Republic of Panama.

The Insolvency Law establishes and regulates two types of proceedings, reorganisation and liquidation, both of which may be voluntary or involuntary.

The Insolvency Law contains provisions on cross-border insolvency, based on the UNCITRAL Model Law on Cross-Broder Insolvency.

These provisions are applicable to cases in which:

• a foreign court or a foreign representative requests assistance in the Republic of Panama in connection with a foreign proceeding;
• assistance is requested in a foreign state in connection with a proceeding conducted under the Insolvency Law;
• a foreign proceeding and a bankruptcy insolvency proceeding in the Republic of Panama are being processed simultaneously with respect of the same debtor; and.
• creditors or other interested parties, located in a foreign state, have an interest in requesting the commencement of a proceeding or in participating in a proceeding in the Republic of Panama, which is being processed in accordance with the Insolvency Law.

Generally, a power of attorney would be deemed terminated when so stated in the document itself by affixing a term or if the grantor revokes it. A liquidation proceeding would not cause a power of attorney to be deemed void or terminated.

During a reorganisation proceeding, the lease would remain in place allowing the parties to renegotiate its terms. During the financial protection period, the lessor may not initiate any executory proceedings save for a default cause by the reorganisation itself and the aircraft would only be deemed as the property of its registered owner.

The liquidator/administrator may review and establish the priority of creditors during the process.

The main risk would be firstly that the assets are not sufficient to cover the repayment of the credit, making it impossible to recover, and secondly that the credit, once subjected to the insolvency process, is not recognised or is rated at a level of priority that makes it impossible to recover.

The Insolvency Law establishes a financial protection period granted to the debtor who submits to the process, during which time its liquidation may not be requested or declared, nor may executive proceedings, executions of any kind, restitution of assets or foreclosures be initiated against it.

This period starts from the date of the order decreeing the opening of the reorganisation process until the confirmation of the reorganisation agreement.

Panama’s Insolvency Law establishes that a domestic lessee may undergo a reorganisation proceeding or a court ordered liquidation. This liquidation is the process by which the sale or realisation of the debtor’s assets is carried out, with a view to the distribution of the proceeds among the debtor’s creditors.

The Insolvency Law contains provisions allowing the unilateral termination due to ipso facto defaults. An ipso facto default clause agreed by the parties in a lease agreement would be recognised and enforceable in Panama.

Upon the judicial winding up or liquidation of the domestic lessee, the court would order the return of the aircraft to its registered owner, while the amounts due as lease would become part of the assets of the insolvency proceedings. The provisions set forth in the lease agreement would regulate the handling of the security deposit and any maintenance reserves.

The Convention on International Interest in Mobile Equipment (the “Convention”) and the related Protocol on Matters specific to Aircraft Equipment (the “Protocol”) have been adopted and are in force in the Republic of Panama. Panamanian law does not require local entities to apply authorised entry point codes in Panama.

The Convention

In respect of Article 13(1)(a), (b) and (c) of the Convention, the words “speedy relief” shall be taken to mean seven working days and, in respect of Article 13(1)(d), the same words shall be taken to mean 20 working days.

In respect of Article 39 of the Convention, the following non-consensual rights and interests shall prevail over an international interest registered in accordance with the Convention:

• any sums due from or capable of being demanded from the debtor by way of salaries, pensions and other social security benefits and employment allowances owed in respect of employees of that debtor;
• any sums due from or capable of being levied from the debtor by way of fiscal and parafiscal contributions owed in respect of employees of that debtor;
• any sums due from or capable of being levied from the debtor, by way of taxes, duties or contributions payable to the Panamanian State or to the decentralised bodies that collect such revenue, in accordance with Panama’s internal laws; and
• the right of the Republic of Panama to arrest, attach or confiscate mobile equipment and aircraft equipment in the event of breach of the customs or criminal laws of the Republic of Panama.

The Republic of Panama declares that the rights or interests covered by this declaration shall prevail over an international interest registered before the date of the deposit of its instrument of ratification in respect of the Convention and the Protocol.

Likewise, it declares that none of the provisions of the Convention shall affect the right of the Panamanian State, a State entity, an intergovernmental organisation or a provider of public services to arrest or detain an object under the laws of the Republic of Panama for payment of amounts owed to such entity, organisation or provider directly relating to those services in respect of that object.

Finally, the Panamanian State states that these declarations do not pose an unacceptable risk to the holders of registered rights.

As to Article 50 of the Convention, the Convention and the Protocol shall not apply to any transaction which is an internal transaction in relation to the Republic of Panama with regard to all those types of objects falling within the sphere of application of the Convention or the Protocol.

As to Article 53 of the Convention, in accordance with the internal laws of the Republic of Panama, the relevant courts are as follows:

• ordinary courts;
• administrative courts;
• the AAC;
• those advisory bodies exercising supervisory functions in respect of financial institutions and insurance companies (superintendencies); and
• arbitral tribunals,

subject to the powers vested in them by the internal laws of the Republic of Panama.

Pursuant to Article 54(2) of the Convention, any remedies available to the creditor under any provision of the Convention and the Protocol which are not there expressed to require application to the court may be exercised without leave of the court.

The Protocol

In respect of the Protocol the Republic of Panama has made the following declarations.

• As to Article XXX(1) of the Protocol, it will apply Articles VIII, XII and XIII of the Protocol.
• As to Article XXX(2) of the Protocol, it will apply Article X of the Protocol.
• As to Article XXX(3) of the Protocol:
1. it will apply the entirety of Alternative A of Article XI of the Protocol to all types of insolvency proceeding, as defined in the Convention; and
2. the waiting period under Article XI shall not exceed 60 days.

Article XIII of the Protocol applies in the Republic of Panama. IDERAS are submitted with the AAC.

We are not aware of any precedents before the courts of Panama in relation to parties enforcing the Convention or Protocol.

Panama is a party to the 1948 Geneva Convention on the International Recognition of Rights in Aircraft.

There are no restrictions on foreign lenders financing an aircraft or on borrowers using the loan proceedings under the laws of the Republic of Panama.

There are no exchange controls or government consents that would be material to any financing or repatriation of realisation proceeds under a loan, guarantee or security document in the Republic of Panama.

Borrowers are permitted to grant security to foreign lenders.

Downstream, upstream and/or cross-stream guarantees in favour of lenders are permitted under Panamanian law. These guarantees are not subject to registration. No consideration or corporate benefit is required. 

It is advisable for lenders to take security over domestic or foreign special purpose vehicles that own the financed aircraft. Pledge of shares are recognised under Panamanian law.

Negative pledges are recognised under Panamanian law.

There are no material restrictions or requirements imposed on intercreditor arrangements.

The concept of agency and the role of an agent under a syndicated loan are recognised under Panamanian law.

Subordination agreements between lenders are permissible and recognised subject to priorities determined by operation of the law.

The transfer or assignment of all or part of an outstanding debt under English or New York law-governed loan is permissible and would be recognised under Panamanian law.

There are no usury or interest limitation laws under the laws of the Republic of Panama.

The typical form of securities and recourse granted in aviation finance are aircraft mortgages, pledges of shares, guarantees issued by parent companies, assignment of insurances and rights in general.

There are no types of security that cannot be taken over an aircraft or related collateral.

The concept of a trust and the role of a security trustee is recognised under Panamanian laws.

A borrower may assign to a security trustee, pursuant to a security assignment or a mortgage, its rights to the aircraft under an aircraft lease.

It is possible to assign only the rights and benefits, without also assigning the attendant obligations of the lessor, under an aircraft lease.

Security assignments and guarantees may be governed by English or New York law.

Foreign law-governed security assignments are not subject to registration in Panama. In case of enforcement in Panama, the security assignment must be translated into Spanish by an official translator in Panama, notarised and legalised according to the 1961 Hague Convention on the Apostille.

In addition to English or New York law-governed security assignment in respect of an aircraft, financiers must take an aircraft mortgage. Registration of the aircraft mortgage with the Public Registry Office is required for validity and the creation of the lien on the aircraft. The cost of registration of the mortgage is USD100.00 plus USD2.50 for each USD1,000.00 or fraction thereof of the amount secured by the mortgage with a cap of USD51,250.00.

English or New York law governed security assignments cannot be registered domestically. Security in the form of a mortgage over the aircraft must be registered with the Public Registry Office.

The transfer of a security interest over an aircraft or engines should be recognised in Panama. The transfer of the security in the form of a mortgagee must be recorded with the Public Registry Office.

If the identity of the security agent that is registered in Panama as lender changes, this must be recorded with the Public Registry. If the identity of the secured parties changes without changing the identity of the security agent that is registered in Panama, there is no need for registration of the change and the interest of the secured parties will not be jeopardised.

“Parallel debt” structures may be used domestically.

A secured party under a security assignment will not be deemed to be resident, domiciled, carrying on business or subject to any taxes as a result of it being a party to – or the enforcement of – such security assignment.

A domestic law mortgage is perfected through its execution by the parties, its translation into Spanish by an official translator in Panama if executed in a foreign language, protocolisation in a notarial deed and registration with the Public Registry Office. If executed outside Panama, the signature of the parties must be certified by a notary public and the signature of the notary public must be legalised according to the 196 Hague Convention on the Apostille.

There is no difference between the form of security, or perfection thereof, taken over an aircraft and that taken over spare parts; both are governed by the law on mortgages on movable assets.

Security over bank accounts is typically taken in the form of pledge on the account whereby the bank acts as depository of the funds.

A possessory lien is granted to repair and maintenance providers for unpaid services performed on an aircraft. This lien covers only the aircraft that receives the services and is valid for the work actually done. The service provider may retain the aircraft until it receives payment.

Airport and navigation fees and amounts due in respect of salaries and other contributions owed to the flight crew create a lien over the aircraft regardless of who is the owner or operator.

The discharge of a mortgage must be executed by the mortgagee and registered with the Public Registry Office. Registration may take from five to fifteen days provided that the aircraft and the parties are up to date in payment of all fees due to the AAC and the Ministry of Economy and Finance.

Mortgages on aircraft are registered at the Aircraft Section, Movable Assets Section of the Public Registry Office and filed with the Aeronautics Registry of the AAC. Mortgages on engines are registered at the Mortgage on Movable Assets Section of the Public Registry Office. There is no register for charges. Registration of mortgages at the Public Registry Office creates a preferred lien over the aircraft and/or engine.

An aircraft may be detained for failure to comply with legal requirements or when the aircraft is used in illegal activities, or in the case of war, national catastrophe or suspension of constitutional rights. There are no provisions in respect of statutory rights of detention or non-consensual preferential liens on a fleet wide basis.

A potential purchaser may search the records of the Aircraft Section, Movable Assets Section of the Public Registry Office to verify if the aircraft is free of encumbrances.

The enforcement of a security assignment is not a significantly different process to the enforcement of loans or guarantees.

A security trustee may enforce its rights under the security assignment pursuant to a notice and acknowledgement executed by the lessor and lessee.

Domestic courts will uphold foreign law as the governing law of a finance or security document to the extent that such laws are not contrary to public policy in Panama. Domestic courts will recognise the submission to a foreign jurisdiction.

See 2.6.6 Domestic Courts’ Recognition of Foreign Judgments/Awards.

A secured party may not take physical possession of the aircraft to enforce a security agreement/aircraft mortgage without the lessee’s or operator’s consent. In the absence of consent from the lessee or operator, the secured party must obtain a court order to take possession of the aircraft.

Enforcement actions under a security agreement/aircraft mortgage must be filed before the civil circuit courts of Panama.

Summary and/or executory proceedings are available to secured parties, which may also request an attachment on the aircraft or other assets belonging to the debtor. For the attachment, the court may request the posting of security in the amount of 30–40% of the claimed amount.

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

Secured parties are not required to pay taxes in connection with the enforcement of a security agreement/aircraft mortgage. Stamp duties in the amount of USD0.10 for each USD100.00 of the value of the security agreement/aircraft mortgage are required for enforcement. Notarial paper fees paid in respect of the aircraft mortgage are deducted from the stamp duties payable for enforcement of the mortgage.

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