Aviation Finance & Leasing 2024 Comparisons

Upon the execution of a sale and purchase agreement, the seller is required to pay the absolute rights transfer tax. The tax rate amounts to 2.5% of the purchase price.

From the Serbian law perspective, a sale and purchase agreement does need to be notarised in order for it to be enforceable against the domestic party. However, a translation of the sale and purchase agreement is only necessary if it were to be used before the authorities in Serbia including, but not limited to, the courts. If a sale and purchase agreement were to be governed by a foreign law, its validity would be assessed from the perspective of the governing law.

Under Serbian law, a duly executed sale and purchase agreement would present the basis for the transfer of title to an aircraft from one party to another. The transfer would be perfected through its entry in the aircraft register. If the sale and purchase agreement were to concern the sale of the entire aircraft such agreement would automatically entail the sale of all of its integral parts including engines. The sale and purchase agreement may also have as its subject the sale and purchase of an individual part of an aircraft, eg, the engine.

Further, the sale of ownership interest in an entity that owns an aircraft or engine will not effectively be recognised as a sale of such aircraft or engine itself, as long as the sold entity remains the owner.

Serbian law would in principle recognise the transfer of title to an aircraft that is registered in a foreign register if such transfer of title was governed by English or New York law.

A bill of sale, governed by the foreign law, does not need to be translated, certified, notarised or legalised in order for it to be enforceable against the domestic party. However, translation of the bill of sale is necessary if it were to be used before the authorities in Serbia including, but not limited to, the courts.

If a bill of sale were to be registered in the Serbian Register, the following steps would be required.

Firstly, an aircraft can be registered in the Serbian Register if it is not registered with a foreign aircraft register and one of the following conditions is met:

• the aircraft owner (in whole or in part) is the Republic of Serbia, a legal entity or entrepreneur registered in the Republic of Serbia;
• the aircraft owner (in whole or in part) is a citizen of the Republic of Serbia, with a permanent residence in the Republic of Serbia or abroad, if the home airport of the aircraft is in the Republic of Serbia;
• the aircraft operator is a legal entity, entrepreneur or natural person whose corporate seat or permanent residence is in the Republic of Serbia; or
• the aircraft owner or operator is a foreign natural or legal entity, with the consent of the Ministry of Construction, Transport and Infrastructure.

The process of registering aircraft with the Aircraft Register consists of the following two phases.

• Applying to the Commercial Court in Belgrade for a resolution on the registration of aircraft (documentation needed: bill of sale, excerpts from the relevant registers and any other document that could be requested by the judge based at their own discretion).
• Filling out an application form and submitting it to the Civil Aviation Directorate, along with the court resolution.

There is no legally prescribed deadline, but the whole process is expected to take about one month.

See 1.1.1 Taxes/Duties Payable Upon Execution of the Sales Agreement.

All types of operating/wet/finance leases or leases concerning only engines or parts are generally permissible and recognised.

Contractual obligations between the parties to the lease agreement may be governed by a foreign law. However, issues of ownership over the aircraft and other proprietary rights are governed by the law of the land in which the aircraft is registered, and while the contractual obligations (such as the ones stemming from the lease agreement) can be governed by a foreign law, certain potential disputes that could stem from the lease agreement could be governed by Serbian law, if the aircraft is registered in Serbia (disputes concerning insolvency proceedings over the lessee, disputes over ownership over the aircraft and the like).

Rent payments may be made in US dollars.

There are no specific exchange control rules that would prevent rent payments under a lease or any repatriation of realisation proceeds.

The registration of the lease of an aircraft is optional. However, if it is registered, the fee for registration of the lessee with the Aircraft Register amounts from RSD4,330 (approximately EUR37) up to RSD17,220 (approximately EUR147), depending on the category of the aircraft.

The lessor does not have to be licensed or otherwise qualified in Serbia to do business with a domestic lessee.

There are no mandatory terms required to be in a lease governed by English or New York law.

Tax and other withholding gross-up provisions are permissible and enforceable.

The concluded lease can cover parts that are installed or replaced on an aircraft or engine after its execution.

There is no specific risk of title annexation in respect of aircraft engines installed on an airframe.

The concept of trust/trustee of an owner is not recognised under the Serbian law.

The aircraft lease may be registered in the Aircraft Register. Such registration is optional but advisable since in the case of registration the lease becomes a matter of public record.

The Aircraft Register contains information regarding both the owner and the operator of the aircraft, hence both the owner and the operator of the aircraft may be registered.

Information concerning leases are registered in the Aircraft Register. There is no separate engine-specific register in Serbia.

Registration of the lease with the Aircraft Register is optional, but preferable as if the lease is registered with the Aircraft Register it would be considered that third parties are familiar with the existence of the lease.

Registration of the lease of an aircraft may be initiated by the lessor or the lessee through the submission of the request of registration of the lease to the Aircraft Register alongside the lease agreement, certificate of airworthiness, corporate documentation and the court decision on registration of the aircraft. If the lessee is a foreign person/entity, the consent of the competent ministry is required. Additional documentation may be requested by the Aircraft Register. 

The estimated period for completion is one month.

A lease needs to be concluded in the form envisaged under its governing law. Under Serbian law, no additional requirements are needed. If the lease agreement were to be used before the Serbian authorities, a certified translation of the agreement would be needed.

See 2.1.5 Taxes/Duties Payable for Physical Execution of a Lease.

There are no popular alternative countries in which aircraft habitually based in Serbia are typically registered.

All documents submitted to the authorities (including but not limited to bill of sale or the lease agreement) have to be provided in the original or a certified copy and accompanied by the certified translation.

A foreign lessor is required to pay income tax on the income it gains through its permanent business unit in the territory of the Republic of Serbia, unless otherwise stipulated in a tax treaty. In other words, unless a foreign lessor has a permanent establishment in the Republic of Serbia, it is not required to pay income tax.

A foreign lessor may not be deemed to be resident, domiciled, carrying on business or subject to any taxes as a result of its being a party to, or its enforcement of, the lease.

Generally speaking, liabilities in respect of aircraft or engine maintenance and operations may not be imposed on a foreign lessor under a lease as a result of its being a party to such lease.

A lessee is liable for the damage that is caused by the aircraft to the property or health of third persons.

Creditors of a lessee may not attach an aircraft leased to it but owned by a different entity.

Under very limited conditions, it is possible that some third-party rights would take priority over a lessor’s rights under an aircraft lease through the legal institute of “right of retention” whereby the third party would retain the aircraft as a guarantee of due payment of, eg, repair and maintenance costs, warehousing, depository costs, etc.

There are no mandatory Serbian regulations which would dictate that insurance must be placed with a domestic insurance company.

Current insurance limitations are aligned with the Montreal Convention, which amount up to:

• RSD100,000 for injury and death;
• RSD4,150 per passenger for delay;
• RSD1,000 for baggage; and
• RSD17 for cargo.

The reinsurance of the aircraft abroad is not regulated under Serbian law. However, from a general legal regime one might conclude that such practice would not be against the applicable regulation.

“Cut-through” clauses are not valid in Serbia due to the limitations posed by the mandatory foreign exchange (FX) rules set out in Serbian legislation.

The assignment of insurance/reinsurance is allowed.

Pursuant to Serbian law, there are no specific restrictions on a lessor’s ability to terminate an aircraft lease, re-export the aircraft and/or sell the aircraft following such termination. Furthermore, it is not mandatory for an aircraft to be physically located in Serbia for either of the above-mentioned operations.

A court order would be required for a lessor to take possession of the aircraft from the lessee.

There are no specific courts for aviation disputes. If a dispute in relation to the aircraft were to arise, and if the Serbian courts were competent to decide on such dispute, the dispute would be adjudicated by the competent commercial court.

A lessor may request the establishment of an interim injunction prior to the final resolution of the judicial proceedings. As a result of such interim injunction, the aircraft could be taken away from the lessee until the completion of the proceedings.

In order for the court to render an interim injunction, the lessor would have to prove to the court both the existence of its claim and that it would incur damage if the interim injunction were not to be enacted. In practice, it usually takes around one month for a court to decide on such request.

Serbian courts in general uphold:

• a foreign law as the governing law of an aircraft lease;
• the submission to a foreign jurisdiction; and
• a waiver of immunity by the parties of such lease.

Serbian courts recognise and enforce a final judgment of a foreign court or an arbitral award without re-examination of the matter if the procedural prerequisites for enforcement of the judgment/award are met.

A lessor under the aircraft lease may obtain a judgment in a foreign currency. Enforcement of such judgment in Serbia, however, would have to be made in the local currency (RSD).

There are no statutory limitations on a lessor’s ability to recover default interest. A lessor may charge additional rent following the termination of the lease for default if such course of action is in line with the governing law and the concluded agreement.

A lessor under an aircraft lease is not required to pay taxes or fees in a significant (ie, non-nominal) amount in connection with the recognition and enforcement of such lease in Serbia.

If Serbian courts were to deliberate in a case that involves the application of Serbian law, the judge might potentially declare the mandatory notice period null and void if it is too short or if it creates an imbalance between the parties.

Under Serbian law, the lessee does not have any legal instrument with which it would be entitled to claim sovereign or other immunity from suit in the sense that such legal instrument would prevent it from being a party to the court or arbitral proceedings.

Serbia has adopted the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the “New York Convention”) and Serbian courts recognise and enforce foreign arbitral decisions. Grounds for refusal of the recognition of foreign arbitral awards correspond to those listed in Article V of the New York Convention and are not country specific.

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

Serbia recognises the concepts of contractual assignment and novation.

Pursuant to the Serbian law (assuming that a lessor transferring its rights under an aircraft lease is assigning or novating its rights under such lease to a new lessor), the lessor would be obliged to notify the lessee of such assignment. No consent of the lessee would be necessary in this regard. If the lessee intends to assign its rights to the other entity, it would need to notify the lessor of its intention and obtain the lessor’s consent. There are no mandatory jurisdiction-specific clauses that are required to be included in such assignment.

It is not necessary for an aircraft and/or engine lease assignment and assumption/novation to be translated, certified, notarised or legalised to be enforceable against a domestic party. However, the translation of the assignment agreement is necessary if it were to be used before the authorities in Serbia, including, but not limited to, the courts.

Registration of the lease in the Aircraft Register is not mandatory. However, if the lease is registered in the Aircraft Register, any assignment of the rights and obligations from such lease should also be registered in the Register. The procedure for registering the assignment of the lease is rather simple and involves submitting the assignment agreement and notifying the relevant authorities of the conducted assignment. No government applications or consents are required as a prerequisite to the execution and delivery of an aircraft and/or engine lease assignment and assumption/novation.

The registration fee for the assignment in the Aircraft Registry amounts to RSD4,330 (approximately EUR37).

The sole change of the ownership interest of the entity owning an aircraft would not warrant notification in the Aircraft Register.

A request for the deregistration of an aircraft may be submitted by either the owner or the operator of an aircraft. If such request for deregistration is submitted by the operator, a certified written statement of consent of the owner must be submitted along with the request for deletion. If such request for deregistration is submitted by the owner, a certified written statement of consent of the operator must be submitted along with the request for deletion.

The Registrar removes the aircraft from the Register ex officio if the aircraft is destroyed, permanently unusable, missing or completely unavailable or whose certificate of airworthiness is not valid for more than ten years.

Once the Registrar decides on the request for deregistration, it issues the resolution on deletion, along with a confirmation of the deletion and, if the aircraft is airworthy, the Civil Aviation Directorate issues an export certificate of airworthiness, based on which the aircraft may be registered with another aircraft register.

The aircraft owner may apply for the deregistration of the aircraft only with the prior consent of the lessee. 

In order for the aircraft to be deregistered from the Register, the owner or an operator would have to provide:

• a request for deregistration; and
• a statement of consent from the other party (owner/operator).

There is no statutory deadline on the duration of the deregistration process. However, one can expect that the process would be completed in several business days.

The aviation authority is not authorised to issue advance assurances to an aircraft owner, mortgagee or lessor as to the prompt deregistration of the aircraft.

The fee for deregistration of an aircraft amounts RSD5,160 (approximately EUR44).

A deregistration power of attorney does not present a necessary legal document under Serbian law (and Serbia is not a signatory to the Cape Town Convention). However, in practice, it is usually issued along with the lease. A deregistration power of attorney does not need to be translated, certified, notarised or legalised to be enforceable against a domestic party. However, the translation of the subject document is necessary if it were to be used before the authorities in Serbia including, but not limited to, the courts.

Since deregistration power of attorney is not mandatory/necessary by itself, there are no additional documents required in order to assure its validity.

A deregistration power of attorney may be governed by a foreign law but is, in practice, for practical reasons most often governed by the Serbian law.

Since a deregistration power of attorney is not statutorily regulated, there is no regulation on the possibility of revocation of the deregistration power of attorney. It follows that it may be revoked at any time like any other power of attorney.

The lessee’s consent would be necessary in order for the aircraft to be exported. A mortgagee is not entitled to export the aircraft under Serbian law.

An asset does not need to be located in Serbia at the time of deregistration and/or export.

Upon request, the Aircraft Register will issue the resolution on deletion, along with a confirmation of the deregistration. In practice, it takes several business days to obtain the necessary documents. When issued, the confirmation of the deregistration (ie, export certificate) is valid for an unlimited period of time. Therefore, it can be obtained at any time before the termination of the lease. In practice, since the confirmation of deregistration contains the exact time of the deregistration from the Serbian Register, it is usually obtained in advance so that it would be possible to commence with the procedure of registration of an aircraft in another foreign register.

If the aircraft is registered in the Aircraft Register, before the export of the aircraft, the deregistration of the aircraft must take place. In such scenario, the following fees are applicable:

• the fee for the resolution on deletion amounts to RSD5,160 (approximately EUR44); and
• the fee for the export certificate on airworthiness (required for the foreign registry where the aircraft will be registered) amounts to RSD4,330 (approximately EUR37).

There are no significant practical difficulties involved in deregistration as such. However, one should highlight that deregistration from the Aircraft Register and the registration with another register of aircraft must be punctually co-ordinated. In other words, the exact date and time of deregistration must coincide with the registration in a new register, so that any potential time difference between two registrations is avoided.

Serbia recognises two types of reorganisation/restructuring/insolvency/liquidation proceedings:

• corporate liquidation, which is regulated under the Company Law (Zakon o privrednim društvima, Official Gazette of RS Nos 36/2011, 99/2011, 83/2014, 5/2015, 44/2018, 95/2018, 91/2019 and 109/2021); and
• insolvency proceedings, which are regulated under the Law on Insolvency (Zakon o stečaju, Official Gazette of RS Nos 104/2009, 99/2011, 71/2012, 83/2014, 113/2017, 44/2018 and 95/2018).

As mentioned at 2.9.1 Overview of Relevant Laws and Statutory Regimes Governing Restructurings, Reorganisations, Insolvencies and Liquidations, Serbia recognises two types of such proceedings.

• Corporate liquidation – proceedings that may be initiated if the company is solvent and wants to terminate itself. This procedure is initiated by the company before the Business Register and in it the creditors are called upon to register their claims. From an operational standpoint, the company appoints the liquidation administrator who represents the company in the corporate liquidation proceedings. When the company provides proof that it has settled all creditor claims, it may request the deletion of the company (liquidation) from the Business Register.
• Insolvency proceedings – proceedings that may be initiated:
1. if the company has extended monetary difficulties;
2. if there is a danger that the company will become insolvent;
3. if the company is over indebted; or
4. if the company does not act in accordance with the reorganisation plan.

The insolvency proceedings are court proceedings in which the appointed insolvency administrator represents the insolvency debtor. Insolvency proceedings may lead to the reorganisation of the company or dissolution of its assets and subsequent liquidation.

In the case of parallel insolvency proceedings before the Serbian courts and courts of foreign jurisdiction, Serbian courts are statutorily obliged to co-operate with the foreign courts. This co-operation may entail:

• the appointment of the person that will take actions pursuant to the court’s instructions;
• the exchange of data;
• the co-ordination of managing of the assets of the debtor;
• the conclusion of the agreement on co-ordination between the courts; and
• the co-ordination of the proceedings.

A deregistration power of attorney is not regulated under Serbian law. However, from a general legal perspective, even if it is issued, the opening of insolvency proceedings would not have any effect on it.

When the insolvency proceedings are opened, the insolvency administrator is appointed and it is the insolvency administrator who, from that point onwards, manages the debtor. From that moment, the insolvency administrator is entitled to choose which contracts will remain in force and which will be terminated, and this includes the existing leases. If, for any reason, the lease is continued as of the moment of opening the insolvency proceedings, the insolvency estate will continue to be a party to the lease agreement and will be obliged to settle the rent.

If the lease agreement is terminated, the lessor is entitled to issue a request for the removal of the aircraft from the estate of the lessee and handover of the aircraft to the lessor.

The main risk for a lender if a borrower, a guarantor or an entity providing security becomes insolvent is that it would not be able to collect its receivable.

A moratorium is imposed at the opening of the insolvency proceedings and lasts for the duration of the proceedings; it encompasses all the obligations of the insolvency debtor apart from the obligations undertaken by the insolvency estate.

In Serbia, a lessee may be liquidated or placed in administration or receivership either at its own request or at the request of a third party (liquidator or a creditor).

Ipso facto default clauses are valid under Serbian law and often appear in practice. If the clause is activated, the lessor is entitled to issue a request for the removal of the aircraft from the estate of the lessee and the handover of the aircraft to the lessor.

If a domestic lessee is liquidated by a Serbian court ruling, the following generally occurs:

• the aircraft may be repossessed only if the lessor fails to take action in order to remove the aircraft from the insolvency estate;
• the lessor must register its debt to the insolvency administrator for rentals and other costs (if any) that became due before the opening of the insolvency proceedings;
• the lease security deposit will remain with the lessee as long as the lease is in force; and
• the maintenance reserves paid to the lessor (whether classified as reserves or supplemental rent) will remain with the lessor as long as the lease is in force.

The Cape Town Convention is not recognised in Serbia.

See 2.10.1 Conventions in Force.

See 2.10.1 Conventions in Force.

See 2.10.1 Conventions in Force.

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

In accordance with Serbian regulations, only banks are entitled to issue finance loans. The borrowers are entitled to use the loan in line with agreed terms of the loan.

In certain cases envisaged under the FX rules, the National Bank of Serbia should be notified of the financing or repatriation of realisation proceeds under a loan, guarantee or security document.

Borrowers are permitted to grant security to foreign lenders subject to certain FX restrictions.

Downstream, upstream and/or cross-stream guarantees are permitted in favour of lenders when they are made in line with the FX regulations. In certain cases envisaged under the FX rules, the National Bank of Serbia should be notified of the guarantees being issued.

It is a business decision whether a lender should take share security over a domestic special purpose vehicle that owns the financed aircraft. However, generally speaking, such action would be advised. A pledge of shares is recognised under Serbian law.

Negative pledges are recognised under Serbian law.

Intercreditor arrangements may be made; however, these arrangements produce effects solely between the creditors that concluded such arrangements.

The concept of agency and the role of an agent (such as the facility agent) under a syndicated loan is recognised in Serbia.

All valid methods of debt subordination are permissible and recognised.

It is possible to transfer or assign all or part of an outstanding debt under an English or New York law-governed loan.

There is no specific limit as to the amount of contractual interest that may be envisaged. However, the court is entitled to lower the amount of interest upon a party’s request if it assesses it to be exceedingly high. The assessment is performed on a case-by-case basis.

Typical forms of security and recourse granted in an aviation finance transaction in Serbia include promissory notes, pledges and bank guarantees.

All security types existent under the law may be taken over an aircraft or related collateral such as engines, warranties or insurances.

The concept of a security trustee is existent under Serbian law; however, the trustee should be registered as a security trustee in the relevant register.

The assignment of rights and obligations under the lease of aircraft is possible. However, any change on the side of the lessor would have to be reflected in the lease agreement (ie, the lease agreement should be annexed to reflect such change). If the lease agreement is registered with the Aircraft Register, the data in the Register would need to be changed.

The assignment of the rights and benefits only without also assigning the attendant obligations of the lessor under an aircraft lease is possible under Serbian law.

Pursuant to Serbian law, a security assignment or a guarantee may be governed by English or New York law.

Since securities present ancillary obligations in relation to the main contract, they can be assigned to the other party solely through the assignment of the entire agreement that they provide security for. If the security is registered with the Register in Serbia, the Register should be notified of the assignment. If the Serbian Register is notified of the assignment, a translation of the assignment agreement would be obligatory.

If an English or New York law-governed security assignment is taken in respect of an aircraft registered domestically, it would be advisable that such security be transferred to the domestic Aircraft Register.

In Serbia, there is no regulation that explicitly prohibits an aircraft, used in the Republic of Serbia, to be encumbered by a security established in a foreign country in accordance with the foreign law. The security on an aircraft that is registered in a foreign country can be “transferred” to the domestic Aircraft Register through registration of the aircraft itself.

The transfer of security interest is generally recognised under Serbian law.

If there are any changes in the identity of the secured parties, such change should be reflected in the contractual documentation.

“Parallel debt” structures are not recognised under Serbian law.

The secured party under a security assignment would not be deemed to be resident, domiciled, carrying on business or subject to any taxes as a result of its being a party to, or its enforcement of, such security assignment.

A domestic law mortgage over an aircraft is perfected by its registration with the Aircraft Register.

Security taken over spare engines is perfected through registration in the Pledge Register held by the Business Registers Agency.

Security of the pledge over bank accounts is perfected through registration in the Pledge Register held by the Business Registers Agency.

A third-party lien in relation to unpaid airport fees, navigation charges, customs duties, etc is not registered. In the case of repairers’ costs and similar liens, the creditor would be, under very limited conditions, entitled to the right of retention of the aircraft until their due debt is settled. A fleet lien is not envisaged under Serbian law. The right of retention is a statutory right and no specific legal action is needed in that regard.

The discharge of a lien or mortgage can be made within a day.

Serbia does not have a separate register of mortgages. Mortgages on the aircraft would be inscribed in the Aircraft Register. The inscription of the mortgage in the relevant register is a necessary prerequisite for the perfection of the mortgage. Serbia does not have a register of charges.

There are no statutory rights or non-consensual preferential liens on a “fleet-wide” basis.

A potential purchaser of an aircraft should search the Aircraft Register to verify that an aircraft is free of mortgages.

There are no significant differences in enforcing a security assignment as opposed to a loan or a guarantee.

If a security trustee is registered in the relevant register, it may enforce its rights under an aircraft lease.

In principle, Serbian courts will uphold:

• a foreign law as the governing law of a finance or security document; and
• the submission to a foreign jurisdiction.

Serbian courts will, if other procedural criteria for enforcement of the foreign arbitral award are met, recognise and enforce a foreign arbitral award without re-examination of the merits of the dispute.

The secured party cannot take physical possession of the aircraft to enforce a security agreement/aircraft mortgage without the lessee’s or operator’s consent.

Serbian courts are competent to decide enforcement actions under a security agreement/aircraft mortgage.

It is possible for a secured party to obtain an interim injunction, which would present a form of security. In order for the court to render an interim injunction, the lessor would have to prove to the court the existence of its claim and that it would incur damage if the interim injunction were not to be enacted. Issuance of bonds or similar guarantees in connection with the interim injunction would not be necessary.

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

A secured party would not be required to pay taxes or fees in a non-nominal amount in connection with the enforcement of a security agreement/aircraft mortgage.

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