Aicraft Title & Registrations

18. Are foreign law-governed security agreements (e.g., mortgages) recognized in this location in order to validly create a security interest over an aircraft registered in the national registry of this location? If so, are there any formalities/requirements to bear in mind?

Austria

Foreign law-governed security agreements are basically recognized in Austria in order to validly create a security interest over an aircraft. A signed contract is required, but no legalization or notarization. 

However, in regard to mortgages, the law of the state of the registration of the aircraft basically has to be applied, which might have different legal requirements to be effective (delivery of the mortgaged aircraft to the mortgagee). 

Colombia

According to the Colombian Commercial Code, there are several liens that are ranked prior to the mortgage. These credits listed in article 1905 are in order of priority below:  

1. taxes owed to the government levied by aircraft; 
2. crew’s last month wages; 
3. the compensation owed due to assistance during the lien;  
4. the expenses to preserve the aircraft in good shape while the process is going on; and   
5. compensation for damage caused by the aircraft in the last year and that is not covered by insurance. 

Germany

No, a German registered aircraft may be levied only by a mortgage registered in the German Aircraft Mortgage Register.  

India

Yes, foreign law–governed security agreements are recognized in India in order to validly create a security interest over an aircraft registered in India. Indian law, in general, recognizes the freedom of the parties from different jurisdictions to choose the proper law of contract.  

Israel

Yes. Such security agreements shall be registered in Israel in the same manner as a mortgage that is subject to the laws of the State of Israel will be registered (see question 13 above). 

Kenya

Foreign law-governed security agreements are recognized in Kenya. Kenyan contract law is based on the fundamental principle of freedom to contract which gives the parties the right to agree on a choice of law that would govern the performance of the contract and dispute settlement that may arise from performance or non-performance of the contract. Where the parties to a contract expressly stipulate that the contract shall be governed by a particular law, that law will be the law of the contract. The courts of Kenya will observe the choice of the said foreign law as the governing law of the contract, provided that the choice of law was made in good faith and not for extraneous purposes or to perpetuate fraud or any other illegal purpose and that there is no objection on the grounds of public policy.  

That said, it is important to note that in the case of Blue Sky One Ltd v Mahan Air (the Blue Sky case)6 which would have persuasive authority in Kenya, the English High Court confirmed that the validity of an English law aircraft mortgage is to be determined by the law of the place where the aircraft is situated (the lex situs) on the date the English law aircraft mortgage is executed. In addition, the court held that in determining whether the mortgage was valid, one has to look at the domestic law of the lex situs rather than the contractually agreed governing law of the mortgage. Kenya recognises an English law aircraft mortgage. The effect of the Blue Sky Case is that Kenyan law will be the law governing the validity of the mortgage if the aircraft is situated in Kenya at the time the aircraft mortgage is executed. 

Malta

Foreign law-governed security agreements are recognised in Malta to validly create a security interest over an aircraft registered in the national registry of Malta on the condition that such security interests are registered in accordance with the ARA. Any foreign security interests will be enforceable in Malta and shall have the status and all rights and powers specified in the ARA. 

The choice of the laws of a foreign country to govern a security agreement would be recognised and given effect to as a valid choice of law in any action in the courts of Malta in accordance with the provisions of Regulation 593/2008/EC of the European Parliament and of the Council on the law applicable to contractual obligations (Rome I) of 17 June 2008 (“Rome I Regulation”).  The Rome I Regulation applies to contracts concluded after 17 December 2009.  It should be noted; however, that:  

1. in terms of the said Regulation there are certain instances where other laws may prevail irrespective of the choice of governing law (including in the case of overriding mandatory provisions or the public policy of the forum). In particular (i) where all other elements relevant to the situation at the time of the choice are located in a country other than the country whose law has been chosen, the choice of the parties does not prejudice the application of provisions of the law of that other country which cannot be derogated from by agreement; and (ii) where all other elements relevant to the situation at the time of choice are located in one or more Member States of the European Communities, the parties’ choice of applicable law other than that of a Member State shall not prejudice the application of provisions of Community law, where appropriate as implemented in the Member State of the forum, which cannot be derogated from by agreement; 
2. in certain instances the Rome I Regulation also imposes limits on the autonomy of the will of the parties to select the applicable law in contract. 

In the event of a default of any term or condition referred to in such security agreement, upon giving notice in writing to the debtor, the holder of a security interest shall:  

• have the power to terminate the security agreement and take possession or control of the aircraft to which the security agreement relates; or 

• apply to the court to authorise or direct either of the above acts.   

We express no opinion as to the choice of a foreign law to govern obligations falling outside the scope of the Rome I Regulation. 

Furthermore, the ARA holds that a foreign mortgage shall be recognised as a mortgage, nowithstanding that it is not entered on a registered aircraft if: 

1. the mortgage in question was validly recorded in the registry of the aircraft’s registry or any other registry of the country under whose laws the aircraft is documented;  
2. such registry is a public registry; 
3. the mortgage attached to the aircraft is granted an equivalent and preferential status as a mortgage registered under the ARA; and  
4. the mortgage may be discovered upon a search of such registry.  

Mexico

To the extent that the laws of the relevant country allow the creation of security agreements over collateral located and further registered in Mexico, it would be possible for such security to be recognized in Mexico. However, this is not an advisable scenario since enforcement of such security might potentially be impractical or inapplicable as a consequence of practical registration issues and therefore it would lack public notice to third parties. In that sense, it is strongly advisable for securities to be created pursuant to Mexican laws over collateral located in Mexico in order to be valid and fully enforceable.  

Norway

As a general note, foreign law-governed security agreements are recognized and would be registered in the Norwegian Civil Aviation Registry as long as the mortgage fulfils the formality requirements more particularly described under question 13. 

In accordance with section 3-43 of the Civil Aviation Act, such rights are recognised in Norway, if they are validly established in accordance with the law of a convention state where the aircraft was registered at the time the security agreement was agreed, and moreover, was published in a public register. 

If the mortgage rights are established under foreign law and the aircraft was abroad, the rules apply to the country the aircraft was registered in at that time. If the mortgage rights are established under foreign law, while the aircraft was registered in Norway, Norwegian law applies. If so, the foreign agreement must meet the requirements set out in Norwegian law. 

In regards to international security rights, Norway is at part of the Cape Town Convention (2001), see section 3-53 of the Civil Aviation Act. 

Pakistan

Yes, foreign law-governed security agreements are recognized in Pakistan provided such international interests are duly registered with the international registry in compliance with the Cape Town Convention. If executed in Pakistan, such agreements are required to be stamped at the applicable stamp duty at or prior to execution and each party’s signature to the agreement is required to be witnessed by two adult males or one adult male and two adult females.  

Panama

A mortgage on an aircraft would be deemed to be an act of commerce under the laws of the Republic of Panama, and the parties thereto may choose the applicable law to govern the terms thereof. The Aeronautical law states that all foreign acts and contracts relating to foreign aircraft undertaken in accordance with local laws will be valid in Panama. However, the laws of the Republic of Panama would govern the aircraft mortgage in respect of particular requirements which should appear therein, as well as its registration and the effect thereof. 

The courts of the Republic of Panama will generally uphold a choice of law clause, save as stated above. However, a court may refuse to enforce any terms which are contrary to the public policy of the Republic of Panama. 

Peru

According to Peruvian Law mortgage, the duly registered has priority over any lien. 

Philippines

Yes. Philippine laws generally allow the parties to choose which law shall govern their agreement or their contracts provided that it is not contrary to law, morals, public policy, or public order. However, such agreements, to be registrable, must be authenticated either at the Philippine Consular Office or the Philippine Embassy where the agreement was executed. If the country where executed is also a signatory to the Hague Convention on the Apostille, an apostille should also suffice in lieu of consularization. 

Poland

Yes, foreign law-governed security agreements are recognized, provided that those securities have been created in accordance with their applicable law before registering the aircraft in Poland and provided they are disclosed in the Polish aircraft registry.  

Without prejudice to the generality of the foregoing, it must be stressed that, to our knowledge, there is no record of any instances or even attempts to enforce foreign-law securities on aircraft in Poland. However, important, and often deep differences between national securities and enforcements regimes may raise a number of issues making enforcement of foreign-law securities more complicated, lengthy and, possibly, not effective. For this reason, we normally advise our clients to obtain local securities to ensure their practical enforceability in lieu of, or in addition to foreign collaterals, e.g., NY-law mortgages.  

Portugal

Any mortgage on an aircraft registered in Portugal must be created and governed by Portuguese law. Said mortgage shall only be effectively constituted and enforceable upon registration with the National Aircraft Registry. 

Romania

In accordance with the Romanian Aeronautical Code, a mortgage or a security over the aircraft must be constituted in accordance with the law of the state where the aircraft is registered and must be registered in the Registry of securities of the respective State. Thus, if the aircraft is registered in Romania, a mortgage or security shall be constituted in accordance with the Romanian law and shall be registered in the Registry for security held by RCAA. 

Serbia

Yes, foreign law governed security agreements (e.g., mortgages) are recognised in Serbia. It should be noted that any mortgage attached to an aircraft registered in Serbia may only be established in accordance with the Serbian procedural rules, irrespective of the law applicable to the mortgage agreement itself.

Slovenia

This should be assessed on a case-by-case basis, matters relating to mortgages and international recognition of rights and security interests over an aircraft are assessed in accordance with the law governing the obligations and property relations in aviation and in accordance with an international treaty. 

South Africa

Generally, yes. These are subject to conflict of laws principles. Foreign law-governed mortgages may be registered with the SACAA.

Sweden

Sweden does recognize foreign agreements and liens stemming from such agreement provided that they are registered in accordance with the Cape Town Convention as well as legally issued decisions of enforcement. Thus, if there’s a lien registered internationally upon a Swedish registered aircraft, which in turn is subject to a lien registered in the Swedish Rights registry, the internationally registered lien will have priority provided that it has been registered before the right registered in the Swedish Rights registry. However, this is only true for rights registered in Sweden before Sweden’s entry to the Cape Town Convention on March 1st, 2006. Rights that are registered in the Swedish Rights registry after that date is always subsequent to an international registration.  

Switzerland

Mortgages on a Swiss registered aircraft must be governed by Swiss law, be in writing, and must state the maximum amount in Swiss Frances secured thereby. However, a mortgage agreement may also contain other contractual terms which, in theory, could be governed by another law. 

The Bahamas

A foreign law–governed security agreement will be recognized to validly create a security over an aircraft registered in The Bahamas. As Stated in the response to question 12 above, no document affecting title to, or any interest in, such registered aircraft engines, propellers, rotors, appliances, or spare parts shall be valid, except between the parties thereto, unless it is recorded in that system. A Bahamian Court, in deciding an issue with respect to a security document which provides for a foreign governing law, will uphold the choice of a foreign governing law. 

USA – Miami

Yes. The U.S. recognizes the International Registry as an additional place for filing of interests, including prospective interests, in certain airframes, helicopters, and aircraft engines. The U.S. lodged declarations under Sections 39(1)(a) -(b), 54(2) of the Convention and Sections XIX, XXX (1) (including Articles VIII, XII and XIII) of the Aircraft Protocol.

The protocol specifically provides for the issuance by a debtor of an IDERA and explains that the person designated in an IDERA is the only person entitled to exercise the remedies including the deregistration and export of an aircraft. IDERAs must be in the form attached to the Protocol to the Cape Town Convention. The IDERA must be signed by the owner that holds the Certificate of Registration and filed for recording with the FAA Registry. The IDERA must be executed in connection with a security instrument that is filed for recording with the FAA Registry.

USA – Oklahoma City

Yes, foreign law-governed security agreements are recognized in the U.S. The creation, validity, and priority of a security interest is governed by local law. Perfection of a security interest in a U.S.-registered airframe requires that the instrument creating the security interest be filed for recordation with the FAA registry, even if the instrument is governed by foreign law. A foreign law-governed security instrument must comply with the FAA’s recording requirements (as discussed above).

The FAA may also record a foreign law-governed security instrument against eligible engines and propellers so long as the instrument has a U.S. “nexus.” The U.S. nexus requirement may be satisfied in a number of ways, including the involvement of a U.S. debtor or creditor.