Aviation finance in the UK (England and Wales): overview

A Q&A guide to aviation finance in the UK (England and Wales).

This Q&A provides a high level overview of key practical issues including financing options for purchasing aircraft; registration and deregistration requirements; transfer of title; security, including aircraft mortgages; transfer of security; enforcement of security and repossession; and application of the Cape Town Convention.

To compare answers across multiple jurisdictions, visit the Aviation Finance Country Q&A tool.

The Q&A is part of the global guide to aviation finance. For a full list of jurisdictional Q&As visit www.practicallaw.com/aviationfinance-guide.

Contents

Financing options

1. What are the main options available for financing the purchase of an aircraft? How are aircraft purchases typically financed?

The main options available for financing the purchase of an aircraft are:

  • Cash.

  • Bank debts.

  • Capital market loans.

  • Export credit loans.

Some common financing structures include:

  • Loans secured by a mortgage.

  • Finance and operating leasing.

  • Pre-delivery payment financing.

 
2. What are the issues arising in relation to the various financing options?

Enforceability of aircraft mortgages

For an English law aircraft mortgage to be recognised as effective by an English court, the aircraft must be physically located in England (or airspace over England), or another qualifying jurisdiction, at the time that the security is created (lex situs rule). The lex situs rule determines whether a property interest (such as a mortgage) is effectively created over an asset.

An English law mortgage will most likely be recognised over an aircraft that is in international airspace but registered in a qualifying jurisdiction at the time of creation. "Qualifying jurisdiction" refers to any jurisdiction where domestic laws recognise an English law mortgage as an effective way of creating security. Advice should be taken in each case as to whether a particular jurisdiction is a qualifying jurisdiction.

Convention on International Interests in Mobile Equipment 2001 and Protocol on Matters Specific to Aircraft Equipment 2001 (Cape Town Convention)

On 1 November 2015, the Cape Town Convention entered into force in the UK. It was implemented by the International Interests in Aircraft Equipment (Cape Town Convention) Regulations 2015 (Cape Town Convention Regulations). Security (international interest) under the Cape Town Convention can only be created if either:

  • The debtor is located in a contracting state (in respect of airframes, helicopters and engines) at the time of conclusion of the agreement creating the international interest.

  • The airframe or helicopter is registered in a contracting state.

International interests are recognised regardless of whether the proprietary right was validly created or transferred under the common law lex situs rule (regulation 6(3), Cape Town Convention Regulations). However, the lex situs rule will continue to apply to transactions that are outside the scope of the Cape Town Convention.

 

Registration and deregistration requirements

Registration

3. What is the procedure for registration of an aircraft?

An application form for the registration of an aircraft (Form CA1) must be completed and sent (together with the requisite fee) to the UK Civil Aviation Authority (CAA), Aircraft Registration Section. The application must be submitted with either:

  • Evidence of insurance in accordance with Regulation (EC) 785/2004 on insurance requirements for air carriers and aircraft operators (as amended).

  • A declaration that the aircraft will not fly until evidence of insurance has been supplied to the CAA.

On receipt, the CAA may require other information to determine whether registration should be permitted, depending on the type of aircraft (for example, new, used, foreign or UK manufactured aircraft). In particular, the aircraft must meet the criteria for registration set out in the Air Navigation Order 2009.

There are no other consents required for the registration of an aircraft on the Register of Civil Aircraft maintained by the CAA. On registration, the CAA issues a certificate of registration.

The completed Form CA1 can be e-mailed or faxed to the CAA. There is no need to send any additional hardcopy version of the form.

 
4. What is the procedure for registration of aircraft mortgages?

Any mortgage over an aircraft registered on the CAA Register of Civil Aircraft should be registered in the Aircraft Mortgage Register maintained by the Civil Aviation Authority (CAA Aircraft Mortgage Register) in order to secure for the mortgagee the benefit of priority over subsequently registered mortgages (see Question 6, Aircraft mortgage).

An application form (Form CA1577) must be completed and sent to the CAA, accompanied by a copy of the mortgage deed (which the applicant must certify as being a true copy) and payment of the registration fee. A mortgage governed by foreign law over a UK registered aircraft can be registered on the CAA Aircraft Mortgage Register provided that it is accompanied with an English language translation, which the applicant must certify as being, to the best of its knowledge and belief, an accurate translation.

The CAA Aircraft Mortgage Register comprises the completed application form CA1577 together with the date and time of entry noted on it by the CAA. No consent of the mortgagor, prior mortgagees or official bodies (including the CAA) is required for registration of a mortgage on the CAA Aircraft Mortgage Register. There are no limitations on the type of person or company that can be a mortgagee.

Spare parts cannot be registered separately. However, a registrable mortgage can cover any spare parts (including engines). A mortgage created by a floating charge is not registrable, nor is an aircraft mortgage over a non-UK registered aircraft.

 
5. Can aircraft leases be registered? If so what is the procedure for registration of aircraft leases?

Aircraft leases are not registrable in the UK.

 
6. What is the effect of registration of:
  • An aircraft?

  • An aircraft mortgage?

  • An aircraft lease?

Aircraft

Interested parties can determine the identity of the registered owner of an aircraft by searching the Civil Aviation Authority's Register of Civil Aircraft (CAA Register of Civil Aircraft). Entry on the CAA Register of Civil Aircraft as a registered owner constitutes prima facie evidence of ownership of the aircraft. Additionally, evidence of ownership can reasonably be implied where a person or entity has mortgaged the aircraft and registered it on the CAA Aircraft Mortgage Register. This does not take into account circumstances such as fraud and misrepresentation, or reveal the interests of properly entitled third parties, such as holders of an aircraft lien (which cannot be registered on the CAA Aircraft Mortgage Register).

An aircraft registered on the CAA Register of Civil Aircraft must be operated in accordance with the provisions of the Air Navigation Order 2009, whether it is operating in the UK or elsewhere.

Aircraft mortgage

The principal effects of registration of an aircraft mortgage are as follows:

  • A registered mortgage (or priority notice in respect of such mortgage) will have priority over subsequent registered mortgages and unregistered mortgages, except for pre-October 1972 mortgages and mortgages registered before 31 December 1972. A registered mortgage will not have priority over possessory liens or statutory rights of detention.

  • All persons are deemed to have express notice of all facts appearing in the CAA Aircraft Mortgage Register (although the registration of a mortgage does not constitute evidence of its validity).

  • Registered mortgages are not affected by the terms of the Bills of Sale Acts 1878 and 1882, which govern the ability of an individual or non-corporate debtor to leverage property.

  • The CAA will indemnify any person suffering loss by reason of:

    • any error or omission in the CAA Aircraft Mortgage Register; or

    • any inaccuracy in a copy of an entry in the Aircraft Mortgage Register supplied by the CAA.

  • A registered mortgage will not have priority over an international interest in that aircraft registered with the electronic registry, which operates under the legal framework of the Cape Town Convention (International Registry), unless the mortgage was registered on the CAA Aircraft Mortgage Register before 1 November 2015.

Aircraft lease

Not applicable. Aircraft leases are not registrable in the UK.

 
7. What is the procedure for obtaining a certificate of airworthiness?

To obtain a certificate of airworthiness, the applicant must provide the following to the Civil Aviation Authority (CAA):

  • Details of the aircraft.

  • Approved organisation details.

  • Location of the aircraft for survey (if required).

The aircraft must be registered in the CAA Register of Civil Aircraft before the issue of any certificate of airworthiness.

Applications are completed on the CAA public website and passed on to the technical section for review. Further information to substantiate the application may be required and the maintenance organisation or continuing airworthiness maintenance organisations will usually be contacted for this information. On successful review of the application, the CAA will determine if a survey of the aircraft is required. When the application involves a European Aviation Safety Agency (EASA) aircraft, the CAA will advise on whether the application is to be processed as an airworthiness review certificate (ARC), re-validation or direct/indirect issue, which may require further information and assessment.

EASA aircraft

All EASA aircraft types that qualify for an EASA certificate of airworthiness are issued with a non-expiring certificate of airworthiness, which is validated annually with an ARC (Regulation (EC) 748/2012 on insurance requirements for air carriers and aircraft operators (as amended)). This annual validation involves either:

  • The issue of a new ARC.

  • An extension of the validity of the current ARC.

Non- EASA aircraft

Current UK regulations aligned British Civil Airworthiness Requirements: Section A (published by the CAA) with European regulations in August 2012. The changes apply to aircraft excluded from Regulation (EC) 216/2008 on common rules in the field of civil aviation, including aircraft listed in Annex II, commonly referred to as non-EASA aircraft.

For each non-EASA aircraft, the CAA will issue a:

  • Non-expiring certificate of airworthiness.

  • National airworthiness review certificate (national ARC).

  • Noise certificate (if required).

This is carried out when the current certificate of airworthiness is presented for renewal, if not already transitioned to a non-expiring certificate of airworthiness. After receipt of the non-expiring certificate of airworthiness and initial national ARC, the national ARC can be extended for two years, after which a full airworthiness review will be required before a new national ARC can be issued.

Timescales (EASA and Non-EASA)

The CAA service standard for the processing of applications is 15 working days from receipt of the correctly completed application and relevant fee.

During the application process, the applicant will be contacted to arrange a date for survey of the aircraft. A relevant certificate of airworthiness, national ARC, ARC and/or noise certificate (if required) will be issued when the aircraft has been shown to meet the applicable requirements and is deemed airworthy.

Same day service, under which the application documents for a certificate of airworthiness can be processed in a single day, is available at an additional cost.

 

Deregistration

8. What is the effect of deregistration of:
  • An aircraft?

  • An aircraft mortgage?

  • An aircraft lease?

Aircraft

Deregistration is effected by completing either a:

  • Section on the certificate of registration instructing the Civil Aviation Authority (CAA) to remove the aircraft from the CAA Register of Civil Aircraft.

  • Sale notification form, if the certificate of registration is not available.

Following deregistration, any certificate of airworthiness or permit to fly in force concerning the aircraft will be automatically suspended and revoked. Once an aircraft is removed from the CAA Register of Civil Aircraft, it can no longer fly while displaying its UK nationality and registration marks.

A deregistration certificate is not issued in the UK. Instead, the CAA provides a written confirmation to the registered owner that deregistration has taken place.

Where an aircraft is to be re-registered abroad, the CAA will also send fax confirmation to the new state of registration.

Aircraft mortgage

Discharge is effected by completing Form CA1577c (Discharge of Aircraft Mortgage), which must:

  • Be signed by or on behalf of the mortgagee.

  • Include evidence of discharge of the mortgage debt.

Following the submission of Form CA1577c, the CAA will amend the CAA Aircraft Mortgage Register to reflect the discharge of the mortgage.

Mortgages are deemed to have been discharged from the date and time of receipt of Form CA1577c by the CAA, and not when the mortgage itself was redeemed.

Once a mortgage discharge is entered on the CAA Aircraft Mortgage Register, the CAA will inform all parties to the mortgage by e-mail or letter.

Aircraft lease

Not applicable. Aircraft leases are not registrable in the UK.

 

Transfer of title

9. How is legal title to an aircraft transferred?

Airframe

A sale and purchase agreement commonly includes provisions regarding the:

  • Agreement to buy and sell the aircraft.

  • Condition of the aircraft at completion of the sale.

  • Inspection procedures.

  • Closing procedures to effect transfer of title.

  • Buyer and seller obligations before and/or after closing of the sale.

  • Allocation of risk of damage.

  • Destruction of the aircraft.

  • Termination rights.

Under English law, transfer of title to tangible movable property requires both the:

  • Parties' agreement that title is transferred.

  • Transfer of physical possession or delivery of possession of the property from seller to purchaser.

A transfer is typically effected by way of an aircraft bill of sale.

The bill of sale records the title transfer for registration purposes, but does not reveal the entire terms of the commercial transaction. The transfer will be completed by registration of the new owner's details in accordance with the process set out in Question 3.

Notarisation of the bill of sale is not required to effect transfer of aircraft title under English law.

Engine

The engines are considered an integral part of the aircraft and will usually be sold together with the airframe. The sale and purchase agreement should specify the details of the parts (including any spare engines to be transferred) that are intended to be sold with the airframe. Title to the engines will transfer in the same way as title to an airframe (see above, Airframe).

Title to an engine is not registrable in the UK, but is registrable with the International Registry (see Questions 27 to 31).

 

Security

Mortgages

10. What are the types of aircraft mortgages available? What are the validity requirements for aircraft mortgages?

The types of aircraft mortgages available under English law are legal and equitable mortgages. The required formalities for aircraft mortgages are outlined below.

Legal mortgage

Under a legal mortgage, a mortgagor conditionally transfers its ownership of the aircraft to the mortgagee as a security for a debt. The mortgagor retains possession of the aircraft and a right to recover title to the aircraft free of encumbrance when the mortgage is discharged. In general, legal mortgages are created either by oral agreement or in writing. However, in order to satisfy the requirements for registration, legal mortgages over aircraft are commonly created in writing.

Equitable mortgage

An equitable mortgage arises where there is a specifically enforceable agreement to create a legal mortgage. The equitable mortgage creates a charge over the aircraft but does not convey any legal interest to the mortgagee. There is no actual transfer of ownership. The transfer of the equitable title to the aircraft to the mortgagee is subject to the mortgagor's equity of redemption, as in the case of legal mortgages. An equitable mortgage can be created by any of the following:

  • A mortgage of an equitable interest.

  • An agreement to create a legal mortgage.

  • A mortgage that fails to comply with the formalities for a legal mortgage.

An equitable mortgage must be created in writing and is registrable on the CAA Aircraft Mortgage Register.

Where the mortgagor is a company registered in England, with a registered branch or place of business in England, the mortgage (whether over the aircraft or spare parts) must be registered at Companies House by filling in Form MR01 to register the particulars of a charge (whether or not the aircraft is registered in the UK). Otherwise, the mortgage will be void against any creditor of the company.

 
11. Will a registered mortgage take priority over other mortgages and charges over the aircraft?

A registered mortgage will take priority over all other mortgages and charges over the aircraft, except for mortgages registered before that mortgage or unregistered mortgages created before October 1972. However, a registered aircraft mortgage will not take priority over:

  • A possessory lien in respect of work done on the aircraft, whether before or after the creation or registration of the mortgage.

  • Any rights of detention arising under any Act of Parliament (such as detention rights arising from unpaid airport charges, air traffic control charges and Eurocontrol charges).

A "priority notice" of intention to register an aircraft mortgage can be registered on the CAA Aircraft Mortgage Register. The aircraft mortgage will be deemed to have priority from the date of registration of the priority notice, provided that the mortgage is registered within 14 working days of the day of registration of the notice.

 
12. Can spare parts be subject to an aircraft mortgage? If not, are there any other forms of security that can be taken over spare parts?

Spare parts (including engines and future parts) can be made subject to an aircraft mortgage and can be registered as part of an aircraft. However, a mortgage over spare parts cannot be registered separately on the CAA Aircraft Mortgage Register (see Question 4) unless the mortgagor is an individual, in which case the mortgage can be registered with the High Court.

A company incorporated in England and Wales can enter into a document called a debenture, which is a broad ranging security document creating any of the following:

  • Fixed charges over the company's assets (which would include spare parts, engines and other equipment).

  • Assignments by way of security over the benefit of contracts and insurance policies.

  • A floating charge over assets not otherwise mortgaged, charged or assigned.

Mortgages and fixed charges (not floating charges) are registrable against the company at Companies House.

 

Leases

13. What forms of security can be granted over an aircraft lease?

Security over a lease is usually taken by way of a security assignment from the lessor, with written notice to the lessee (to comply with section 136 of the Law of Property Act 1925). In practice, it is preferable to also obtain a written acknowledgement to the assignment from the lessee.

In a finance lease structure, a financier may require a special purpose vehicle (SPV) aircraft owner to assign to the financier all of the owner's rights, remedies, title, benefits and interests in connection with the lease agreement (including the right to compel performance by the lessee of the lessee's obligations under the lease agreement). The effect of this is to allow the financier to step in and enforce rights directly against the aircraft operator in the event of a default under the finance lease. The SPV will also usually be required to assign to the financier all of its rights and interest in, and benefits of, the insurance proceeds from all policies and contracts of insurance and reinsurance maintained in respect of the aircraft in accordance with the lease agreement. This entitles financiers to receive insurance proceeds under an operator's insurance policy.

 

Other forms of security

14. What other forms of security can be taken over an aircraft?

Airframe

The main security agreement over an aircraft will usually take the form of a legal mortgage (see Question 10). However other forms of security are also available, such as charges. Charges have similar characteristics to an equitable mortgage, as the creditor obtains equitable proprietary interests in the aircraft, but does not obtain either legal or beneficial title to it. Because a charge does not transfer ownership, it does not give the chargee the right to enforce its security interest without a court order. Therefore, legal mortgages are more commonly used.

A security assignment transfers the aircraft title by way of security. The assignor can have the asset reassigned to it on discharge of its indebtedness. A security assignment can either be:

  • An equitable security assignment, if it does not comply with the requirements of section 136 of the Law of Property Act 1925 (LPA 1925) (under which the assignment must be absolute, in writing, signed by the assignor and a notice must be given to the security provider). In an equitable security assignment, the beneficial title is transferred. The assignee, as a general rule, cannot bring an action in its own name against the relevant third party, but is normally required to join the assignor as a party in any action it brings against the relevant third party. However, in practice, the court has the discretion to allow the assignee not to join an assignor to the proceedings if it is satisfied that there is no prospect of a further claim by the assignor.

  • A legal security assignment, if it complies with the requirements of section 136 of the LPA 1925 (see above). In a legal security assignment, the legal title is transferred and the assignee can sue the third party against whom the assignor has rights in its own name.

A lien entitles a party to hold on to the aircraft in its possession pending payment of a debt owed. It can be created by any of the following:

  • Equity.

  • Operation of law (legal or common law lien).

  • Contract (contractual lien).

  • Statute (statutory lien).

A lien does not confer on the lien holder an automatic right to sell the assets, unless the right to sell is granted under a contract. In exceptional cases, a lien holder can obtain a court order for sale of the aircraft.

The Torts (Interference with Goods) Act 1977 (1977 Act) provides a mechanism under which a lien holder can obtain legal power to sell the aircraft with good title and keep the proceeds of sale to pay for outstanding fees. The lien holder will be liable to account to the owner of the aircraft for any proceeds left after the payment of the outstanding fees and any reasonable cost of sale. A lien holder has a statutory power of sale if the owner of the aircraft fails to take delivery of the aircraft after the lien holder has provided the aircraft owner with a notice to collect the aircraft by a certain date (1977 Act). This notice must also:

  • Inform the owner of the aircraft that the aircraft will be sold if it is not collected.

  • Provide details about the aircraft, its location, where it should be collected, the amount of fees outstanding at the date of the notice and the date after which the lien holder intends to sell it.

However, where there is a dispute regarding the payment of the outstanding fees, the lien holder must apply to the High Court for authorisation to sell the aircraft (1977 Act).

Engine

All the types of securities that can be taken over an airframe can also be created over engines (see above, Airframe).

 
15. What other forms of security over an aircraft can be registered?

Any interests in airframes, engines and helicopters created under a security agreement under the Cape Town Convention can be registered with the International Registry.

All charges created by a UK company must be registered at Companies House (see Question 10).

 

Transfer of security

16. Is it possible to transfer security interests over an aircraft? Are there specific issues of local law when transferring security interests?

It is possible to transfer security interests over an aircraft. This is done by way of assignment of contractual rights or novation.

Generally, the following issues of English law should be considered:

  • Whether consent to the transfer from the security provider is required.

  • A bank owes a common law duty of confidentiality to its customer not to disclose commercially sensitive information. Transferring a bank's rights to another party may have an impact on the bank's duty of confidentiality, and it would be appropriate to seek the consent of the security provider in these cases.

  • To be effective, the security must contain a covenant to pay the relevant debt in favour of the transferor. Otherwise, the transferee will not be able to acquire the right to be repaid the relevant debt by the security provider.

  • Where security is cross-collateralised, it may be difficult to transfer that security to another creditor if not all debt obligations can be transferred.

  • Future rights are not assignable at common law, as the security interest must exist at the time of the transfer. However, in equity, an assignment of future right takes effect as a specifically enforceable contract to assign, and therefore requires a valuable consideration. Future rights can also be novated.

  • It is not possible to effect a legal assignment of part of a debt (section 136, Law of Property Act 1925).

 
17. Is a transfer of security subject to registration requirements?

An assignment of security transfers existing rights and does not create a new security interest. Therefore, there is no requirement to register the new security holder.

However, when a security interest is novated, it is deemed to create a new security interest, as the assignor is in fact released from its rights and obligations and a new contract is created between the assignee and the security provider. Novation may require registration depending on the type of interest.

A transfer of security interest can be registered with the International Registry under the Cape Town Convention.

 

Enforcement of security and repossession

Mortgages

18. What are the circumstances in which a mortgagee can take possession of the aircraft and/or sell the aircraft? What requirements must the mortgagee comply with?

On the occurrence of an event of default under a mortgage, the mortgagee can take possession of the aircraft without judicial intervention and subsequently sell the aircraft, provided that this has been specified in the mortgage document or otherwise agreed in writing. This is known as "self-help". Once there has been an event of default, the mortgagee will notify the mortgagor (in accordance with the terms of the mortgage) that there has been an event of default under the loan and that it intends to enforce its security.

A mortgagee can apply to the court for an order of delivery up and possession of the aircraft if either:

  • The mortgagor opposes repossession.

  • There is uncertainty about whether there has been an event of default under the mortgage.

In practice, a court order will be sought by the mortgagee for the purposes of certainty of title on the resale of the aircraft.

In addition to the English law self-help remedy, the following remedies are available to a mortgagee without judicial intervention under the Convention on International Interests in Mobile Equipment (Cape Town Convention). These remedies include:

  • Taking possession of an aircraft without obtaining a court order.

  • Deregistering and exporting the aircraft by exercising its rights under an irrevocable deregistration and export request authorisation (see Question 31).

  • Selling or granting a lease of an aircraft object.

  • Collecting or receiving any income or profits in connection with the management or use of that aircraft object.

  • Obtaining interim relief pending final determination of any claim.

The Cape Town Convention also allows a mortgagee, in an insolvency scenario, to take possession of the aircraft if the mortgagor defaults and fails to perform its obligations under the mortgage for more than 60 days.

 
19. What is the procedure for repossession of the aircraft?

Court proceedings for repossession of an aircraft will commence with the issuance of a claim form. The court will consider the mortgage terms and give full effect to the ordinary meaning of its provisions, including the ability to take possession of the aircraft.

The mortgagee can apply for interim relief if there is a real risk that either:

  • The aircraft will be taken out of the UK.

  • The mortgagor will deal with the aircraft in a way that would prejudice the mortgagee's position.

Interim relief can be applied for and granted at any stage of the claim, including before proceedings have commenced. If a pre-action injunction is granted, the mortgagee must issue proceedings as soon as possible. Interim relief can include:

  • An injunction relating to the aircraft.

  • An order for detention of the aircraft, preventing it from leaving the jurisdiction.

  • A freezing injunction restraining the mortgagor from disposing of the aircraft.

The mortgagee is usually required to provide an undertaking and/or security for damages to the court against a wrongful claim.

Where a court judgment has been obtained, a mortgagee can issue a claim for enforcement of the judgment if the money owed is still outstanding. This is done automatically by issuing a writ or warrant of control without the case being re-examined on its merits. A writ or warrant of control can often be issued administratively by the court office, following production of documents and payment of a fee. This enables an officer of the court to seize and sell the aircraft.

Remedies under the Cape Town Convention are also available to a mortgagee. These remedies include:

  • Taking possession of an aircraft without obtaining a court order.

  • Deregistering and exporting the aircraft.

  • Selling or granting a lease of an aircraft object.

  • Collecting or receiving any income or profits in connection with the management or use of that aircraft object.

  • Obtaining interim relief pending final determination of any claim.

 
20. Will local courts recognise a choice of foreign law in an aircraft mortgage? Are there any mandatory local rules that apply, despite a choice of foreign law?

Generally, English courts will uphold an express choice of law as a valid choice. English courts are experienced in applying foreign laws to determine disputes brought before them. However, foreign law must be pleaded and proved as a fact, usually by witness evidence from a qualified lawyer in the relevant jurisdiction. English courts can refuse to apply a foreign law in any of the following cases:

  • Its provisions are contrary to English mandatory rules (such as public policy).

  • Its provisions are contrary to the mandatory rules of the country with which all other elements of the contract are connected.

  • All elements of the contract are located in one or more EU member states and the choice of law is of a non-EU member state.

English courts can also apply overriding mandatory provisions of the law of the place of performance of the contract, to the extent that these provisions render performance unlawful.

 
21. Will local courts recognise and enforce a foreign court judgment in favour of a mortgagee?

Methods of enforcing a foreign court judgment depend mainly on both the:

  • Country or state of its origin.

  • Nature of the judgment or order.

The process of recognising and enforcing judgments of EU member states is generally quick and simple and is governed by one of the following:

  • Regulation (EC) 805/2004 creating a European Enforcement Order for uncontested claims.

  • Regulation (EC) 44/2001 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters.

  • Lugano Convention on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters 2007.

Depending on the applicable rules, an application must be made to either the originating court or to the relevant court in England and Wales. Once the foreign judgment is recognised, this judgment is considered by the English court as if it had been delivered by a court in England and Wales, and the usual methods of enforcement can be used by the mortgagee.

Judgments of current or former Commonwealth countries are governed by the:

  • Administration of Justice Act 1920.

  • Foreign Judgments (Reciprocal Enforcement) Act 1933.

Under these acts, foreign judgments that satisfy specific requirements can be registered in the English High Court. On registration, a judgment will be treated as if it had been delivered by the English High Court.

For foreign judgments that fall outside the above rules, a mortgagee must issue fresh proceedings in England and Wales to enforce the judgment.

However, an English court can refuse to recognise a foreign judgment in favour of a mortgagee if the mortgage is not valid and effective according to the law of the country where the aircraft was situated at the time the mortgage was created. See Question 2, Enforceability of aircraft mortgages regarding the application of the lex situs rule.

 

Other forms of security

22. What is the applicable procedure for repossession of an aircraft under other forms of security interests?

The procedure for repossession of an aircraft under other forms of security can either take place:

  • Without the court's intervention, by using the remedies provided under the Cape Town Convention (see Question 18).

  • Through court proceedings (see Question 19).

 

Leases

23. In the event of a default event under an aircraft lease, can the lessor take possession of the aircraft without judicial intervention?

Similar to the self-help remedy available to a mortgagee (see Question 18), a lease will typically provide the lessor with the right to take possession of the aircraft without a court order following demand being made under the lease agreement. However, self-help repossession rarely works as either:

  • Lessees are often unwilling to co-operate.

  • There may be uncertainty about whether an event of default has occurred under the lease.

In practice, a court order is required in order to provide certainty to the mortgagee on the resale of the aircraft.

 
24. What is the procedure for taking possession of an aircraft before the expiration of a lease?

The procedure for taking possession of an aircraft before the expiration of a lease is the same as when an event of default occurs under an aircraft mortgage (see Questions 18 and 19).

 
25. If recovery of the aircraft is contested by the lessee and a court judgment is obtained in favour of the lessor, how long is it likely to take to gain possession of the aircraft?

Possession can be obtained within a few days from the issuance of a warrant of control by the court office in favour of the lessor, depending on where the aircraft is located and/or when the aircraft is due to arrive to the UK.

 
26. Will local courts recognise a foreign court judgment in favour of a lessor?

The methods of enforcing a foreign court judgment in favour of a lessor are the same as the methods described in Question 21.

 

Cape Town Convention

27. Has your country signed and ratified the Convention on International Interests in Mobile Equipment (Cape Town Convention)?

The Cape Town Convention was ratified in the UK on 27 July 2015. The International Interests in Aircraft Equipment (Cape Town Convention) Regulations 2015 implementing the Cape Town Convention entered into force on 1 November 2015.

 
28. Has ratification of the Cape Town Convention caused any conflicts or issues with local laws?

The lex situs rule under English law (see Question 2, Enforceability of aircraft mortgages) contrasted with the goal of the Cape Town Convention to exclude the application of conflict of laws when creating interests over aircraft.

Under the English lex situs rule, the validity of an aircraft security interest would only be effective if that interest was validly created under the laws of the jurisdiction of the location of the aircraft at the time of creation. By contrast, under the Cape Town Convention, an international interest over an aircraft is constituted once the Cape Town Conventions' validity conditions are satisfied, regardless of any national laws.

However, the International Interests in Aircraft Equipment (Cape Town Convention) Regulations 2015 confirm that international interests are recognised as a matter of English law and have effect when the conditions of the Cape Town Convention are met, with no further requirements to determine whether the lex situs rule has been satisfied.

 
29. What is the legal position regarding non-consensual rights and interests under Article 39 of the Cape Town Convention?

Non-consensual rights that currently have priority over a mortgage-type interest under English law will continue to have priority over registered international interests under the Cape Town Convention following ratification, without any requirement for registration with the International Registry. These non-consensual rights include those arising from:

  • Unpaid airport charges.

  • Unpaid air navigation charges.

  • Unpaid amounts relating to the EU Emissions Trading Scheme.

 
30. Has your country adopted the remedies on insolvency provided under Article XI of the Protocol to the Cape Town Convention?

The Alternative A insolvency regime applies in the UK, which essentially permits creditors to exercise self-help remedies (International Interests in Aircraft Equipment (Cape Town Convention) Regulations 2015). Under the Alternative A insolvency regime, in an insolvency scenario, the insolvency administrator or the debtor must either:

  • Return the aircraft (or aircraft object, as defined in the Cape Town Convention) to the creditor by the end of a waiting period.

  • Cure all defaults and agree to perform any relevant obligations.

The waiting period adopted by the UK is 60 days. To obtain possession at the end of the waiting period, a creditor does not need the court's permission. Once possession has been obtained, the creditor can deregister and export the aircraft.

 
31. What is the procedure to file an irrevocable deregistration and export request authorisation (IDERA)?

To request an IDERA over an eligible aircraft, the registered owner of the aircraft must complete the form "CA50 IDERA REQUEST". Once completed, the form must be scanned and e-mailed to the Civil Aviation Authority.

The following issues must be noted:

  • The filing fee is GB£100.

  • The form must be completed by the current registered owner of the aircraft. If the aircraft is not yet registered, or a change of registered ownership is pending, an IDERA request can be made by the prospective registered owner provided that this person already made an application to register the aircraft.

  • The form must be signed by an authorised signatory of the registered owner, usually at director or company secretary level, or under a power of attorney that explicitly empowers the signatory to execute the IDERA on behalf of the registered owner.

  • A request to issue an IDERA must not be made in connection with a pre-existing right or interest. The International Interests in Aircraft Equipment (Cape Town Convention) Regulations 2015 do not apply to pre-existing rights or interests, which retain the priority they enjoyed under English law before the 2015 Regulations came into force.

  • Once the IDERA is recorded, a confirmatory e-mail/letter will be sent to the registered owner and entity or person in favour of whom an IDERA has been issued.

 

Reform

32. Are there any proposals for reform in the area of aviation finance?

There are currently no material proposals for reform in the area of aviation finance.

 

Online resources

UK Civil Aviation Authority

W www.caa.co.uk

Description. Official website of the UK aviation regulator.

The National Archives on behalf of HM Government

W www.legislation.gov.uk

Description. Publication of all UK legislation from 1988 to the present day.



Contributor profiles

Owen Costine, Solicitor

Kennedys

T +44 20 7667 9451
F +44 20 7667 9777
E owen.costine@kennedyslaw.com
W www.kennedyslaw.com

Professional qualifications. Solicitor, Law Society of Ireland, 2010

Areas of practice. Aviation law; banking and finance.

Non-professional qualifications. Bachelor of Civil Law, University College Cork, 2004; LLM, University College Cork, 2005

Professional associations/memberships. Law Society of England and Wales; Law Society of Ireland.

Tanya Dolan, Senior Associate

Kennedys

T +44 20 7667 9451
F +44 20 7667 9777
E tanya.dolan@kennedyslaw.com
W www.kennedyslaw.com

Professional qualifications. Solicitor, England and Wales, 2003

Areas of practice. Aviation law; banking and finance.

Non-professional qualifications. LLB (Bachelor of Laws), London School of Economics and Political Science, 2000; Postgraduate Diploma in Legal Practice, College of Law, 2001

Professional associations/memberships. Law Society of England and Wales; International Aviation Womens Association.

Maya Gabay, Solicitor

Kennedys

T +44 20 7667 9738
F +44 20 7667 9777
E maya.gabay@kennedyslaw.com
W www.kennedyslaw.com

Professional qualifications. Solicitor, Law Society of England and Wales, 2012

Areas of practice. Aviation law; finance and liability.

Non-professional qualifications. LLB (hons) Law, The University of Law, 2010; BA, Political science and International relations, The Open University of Israel

Professional associations/memberships. Law Society of England and Wales.


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