Enter to open, tab to navigate, enter to select
Aviation Finance in Singapore: Overview
Practical Law Country Q&A 3-630-4292 (Approx. 17 pages)
Aviation Finance in Singapore: Overview
by Shaun Lee, Niel Liebenberg and Leo Fattorini, Bird & Bird ATMD
| Law stated as at 01 Apr 2023 • Singapore |
A Q&A guide to aviation finance in Singapore.
This Q&A provides a high-level overview of key practical issues including applicable international conventions and domestic legislation; financing options for purchasing aircraft; transfer of title; security, including aircraft mortgages; transfer of security; enforcement of security and repossession; deregistration and discharge; application of the Cape Town Convention; liability for the operations of the aircraft and actions of the operator; and reform and recent developments..
Conventions and Legislation
Singapore is a party to the:
- 1944 Convention on International Civil Aviation (Chicago Convention).
- 1929 Convention for the Unification of Certain Rules Relating to International Carriage by Air (Warsaw Convention) as amended by the Hague Protocol of 1955 and as further amended by Montreal Protocol No.4 of 1975.
- 1999 Convention for the Unification of Certain Rules for International Carriage by Air (Montreal Convention).
- 1963 Convention on Offences and Certain Other Acts Committed on Board Aircraft (Tokyo Convention).
- 2001 Convention on International Interests in Mobile Equipment (Cape Town Convention) and the associated Protocol on Matters Specific to Aircraft Equipment (Protocol). (See also Question 38 in relation to the Cape Town Convention and Protocol).
- 2010 Convention on the Suppression of Unlawful Acts Relating to International Civil Aviation (Beijing Convention).
- 1971 Convention for the Suppression of Unlawful Acts of Violence at Airports Serving International Civil Aviation, Supplementary to the Convention for the Suppression of Unlawful Seizure of Aircraft as supplemented by the Montreal Protocol of 1988.
Singapore is not a party to the:
- 1948 Convention on the International Recognition of Rights in Aircraft (Geneva Convention).
- 1933 Convention for the Unification of Certain Rules Relating to the Precautionary Arrest of Aircraft.
- 1933 Convention for the Unification of Certain Rules Relating to Damage Caused by Foreign Aircraft to Third Parties on the Surface.
- 1952 Convention on Damage Caused by Foreign Aircraft to Third Parties on the Surface (Rome Convention).
There is no specific legislation governing aviation finance in Singapore. Legislation more generally applicable to civil aviation in Singapore includes the:
- Air Navigation Act 1966.
- Air Navigation Order 1990.
- Civil Aviation Authority of Singapore Act 2009.
- International Interests in Aircraft Equipment Act 2009, which implements the Cape Town Convention (see Question 1).
Financing Options
3. What are the main options available for financing the purchase of an aircraft? How are aircraft purchases typically financed?
Given the international nature of aircraft finance, lenders and lessors to airlines based in Singapore, and lenders to lessors based in Singapore, are often based outside Singapore. Although some domestic financing exists (in which case, Singapore law governs the key transaction documentation), it is more common for there to be an international element and for English law to apply.
The concept of agency is recognised in Singapore, and an institution can therefore act as facility agent for a group of lenders. Singapore law also recognises security trusts, where security is granted to a security trustee who holds the security on behalf of a group of lenders.
Singapore does not impose any stamp duty on documents relating to title transfer or financing and leasing of aircraft, including bills of sale and mortgages over aircraft.
Transfer of Title
Airframe
In transactions involving the sale and purchase of aircraft, title is typically transferred by way of a bill of sale.
There is no requirement for bills of sale related to aircraft or aircraft sale and purchase agreements to be stamped, notarised, legalised or registered in Singapore to be effective. If the bill of sale is executed as a deed, its execution should be in accordance with the execution requirements for deeds.
The purchaser may be able to register the sale as a prospective international interest with the International Registry of Mobile Assets in the Republic of Ireland (International Registry). This is subject to the sale and purchase agreement being concluded when either the:
- Seller is situated in a contracting state (as defined in the Cape Town Convention); Singapore is a contracting state.
- Aircraft is registered in a contracting state.
Engine
The same principles apply with respect to aircraft engines as with aircraft airframes (see above, Airframe). However, aircraft engines cannot be registered in their own right in Singapore, and therefore the sale agreement relating to an aircraft engine cannot be registered in the International Registry as a prospective international interest unless the seller is located in a contracting state (see above, Airframe).
Security
6. What are the types of aircraft mortgages available? What requirements must be met to ensure an aircraft mortgage is valid?
Singapore law recognises mortgages over moveable assets (chattels) such as aircraft. They are the most common form of security taken.
Mortgages can be created by individuals (or unincorporated entities) or by incorporated companies.
Mortgages created by individuals (or unincorporated entities) are usually considered bills of sale and if so are governed by the Bills of Sale Act 1886. However, under the Bills of Sale Act, where the mortgage is capable of being registered in the International Registry under the Cape Town Convention (see Question 5), the mortgage is not considered a bill of sale, and the requirements of the Bills of Sale Act do not therefore apply.
There is no register of aircraft mortgages in Singapore, and the Civil Aviation Authority of Singapore (CAAS) does not maintain a register of charges over aircraft.
It is possible to register the international interest created by a mortgage over an aircraft in the International Registry under the Cape Town Convention (see Question 5) if either the:
- Mortgagor is located in a contracting state (which includes Singapore).
- Aircraft is registered in a contracting state.
As a mortgage is a contract, the rules relating to the formation of a contract apply in any consideration of the validity of a mortgage. Mortgages are typically executed as deeds.
Singapore does not maintain a register of aircraft mortgages or charges over aircraft (see Question 6).
Written chattel mortgages created by incorporated companies are subject to the provisions of the Companies Act 1967. A Singaporean or a foreign company registered under the Companies Act that grants a mortgage must (unless that mortgage is registerable as an international interest in the International Registry (see Question 5)), lodge the particulars of the mortgage with the Accounting and Corporate Regulatory Authority (ACRA) within 30 days of the creation of the mortgage (section 131, Companies Act).
Failure to register a mortgage with ACRA renders the security interest void against the liquidator on insolvency of the mortgagor.
Registration under the Companies Act also amounts to notice to the public of the existence of the security interest over the aircraft, and has an impact on priority between competing security interests in the same aircraft. Common law priority rules apply to two or more mortgages created over the same aircraft. A mortgage registered with ACRA has priority over mortgages registered subsequently.
Under the Cape Town Convention, registered international interests (including an international interest created by a mortgage) have priority over any other subsequently registered interest and any unregistered interest.
8. 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?
A chattel mortgage can be granted over spare engines and other parts.
If a spare engine or spare part is installed on an aircraft, title to the engine or part does not pass to the owner of the airframe unless the owner of the engine or part intends for title to pass. However, title can pass to the owner of the airframe under the principles of the law of accession if it is shown that as a matter of practicability the engine or part:
- Can no longer be identified.
If identifiable, has been incorporated to such an extent that it cannot be detached from the aircraft.
The lessor under an aircraft lease (the assignor) can assign its rights under the aircraft lease agreement, by way of security, to its creditor (the assignee). To create a legal assignment, the assignee and assignor must notify the lessee of the assignment. It is typical for this notice to include an acknowledgement of the assignment, for the lessee to return. Failure to notify the lessee can cause the assignee to lose priority to other competing assignees who gave notice first.
Airframe
Other than mortgages, forms of security under Singapore law that can theoretically be taken over an aircraft are:
- Fixed and floating charges. A fixed charge is a security interest that attaches itself to a particular charged asset without transferring either title or possession to the creditor. If the debtor defaults, the creditor can sell the asset and assert a claim over the proceeds of sale in priority to other creditors without security over that asset. However, because the charge does not transfer the title or possession to the creditor, it gives the creditor fewer rights than a mortgage or a pledge and is therefore not typically used as security over an aircraft. However, fixed and floating charges are, used when taking security over other elements in an aircraft financing transaction, such as shares or bank accounts.
- Pledges. An aircraft can also be pledged to a creditor. However, since pledging the aircraft involves transferring possession of (but not title to) the aircraft to the creditor, a pledge has little practical value as a form of security over aircraft in Singapore.
- Common law liens. A common law lien can be created over an aircraft when possession of the aircraft is given to an entity performing work or maintenance on the aircraft. While the fee for the work is outstanding and while the worker entity is in possession of the aircraft, that entity (the lienee) obtains, by operation of the law, a lien over the aircraft. Under common law, the right of the lienee is merely to retain possession of the aircraft until full payment is made. Unless the lienee and the counterparty contractually agree further rights, no other remedy (such as a power of sale) is available. The lien is extinguished if the lienee relinquishes possession of the aircraft.
- Statutory liens. A lien can also be imposed by statute. Section 89 of the Civil Aviation Authority of Singapore Act creates a statutory lien giving the CAAS the right to detain an aircraft for unpaid levies, service charges, penalties or any further amounts outstanding in respect of the aircraft. The statutory lien on the aircraft vests in the CAAS when an employee authorised by the CAAS makes an entry in the Register of Statutory Liens in the prescribed manner. The statutory lien includes a right for CAAS to sell or dispose of the aircraft if the amounts due are still outstanding after nine months. In terms of priority among creditors and for the purposes of distributing the proceeds from a sale by CAAS, the lien has the same effect as a security interest over the aircraft, and ranks after any security interest (other than a floating charge) in respect of the aircraft created before the time of registration of the statutory lien. The statutory lien continues to apply even if the CAAS loses possession of the aircraft and despite any sale or disposition of the aircraft (other than a sale or disposition under the Civil Aviation Authority of Singapore Act).
Engine
See above Airframe. However, the statutory lien under the Civil Aviation Authority of Singapore Act does not apply to standalone aircraft engines.
Transaction security typically provided in secured aircraft financing transactions can include:
- Security assignments with respect to the proceeds of insurance and reinsurance.
- Pledges of or charges over the shares of the lessor or aircraft owner entities.
- Charges over the bank accounts of the debtor, lessor and/or owner of the aircraft.
- Forms of quasi-security which may also be provided include:
- Guarantees.
- Airframe and engine warranty agreements (giving the creditor or lessor rights to the manufacturer's warranties following a default by the borrower/lessee).
- An irrevocable deregistration and export request authorisation (IDERA) and deregistration powers of attorney.
Registration Requirements
The CAAS is the body responsible for administering the registration of an aircraft in Singapore. The CAAS also maintains the aircraft register for all civilian aircraft registered in Singapore.
The only persons qualified to be the owner of a legal or beneficial interest in an aircraft registered in Singapore are:
- The Singaporean Government.
- Citizens of Singapore.
- Citizens of any Commonwealth country.
- Bodies incorporated in Singapore or in some part of the Commonwealth and having their principal place of business in some part of the Commonwealth.
(Section 4(3), Air Navigation Order.)
However, if an aircraft is leased to an airline (as operator) which is a qualified person as set out above, the Chief Executive of the CAAS can register the aircraft in Singapore in the name of the operator if satisfied that the aircraft can otherwise be properly registered.
Assuming the aircraft is to be registered in the name of the operator, the following documents must be provided order to register the aircraft:
- A completed Form CAAS (AW) 39.
- A letter from the owner authorising the operator's representatives to register the aircraft.
- The bill of sale (usually a copy) and any other relevant documents evidencing the ownership of the aircraft.
- The relevant lease or other documents evidencing the leasing of the aircraft to the operator.
- Proof of cancellation of any foreign registration (or, if the aircraft has never been registered, proof from the country of its manufacture that the aircraft is not registered in that country).
- A copy of the certificate of insurance for the aircraft.
- A copy of the import permit for the aircraft issued by Singapore customs.
In addition, the applicant must separately apply to the:
- CAAS, for a noise certificate, using Form CAAS (AW) 143.
- Singapore Info-Communications Media Authority, for a radio station licence to operate radio equipment on board the aircraft.
See Question 6.
See Question 6.
There are no other forms of security over an aircraft that can be registered (see Question 10 for the forms of security that can be taken over an aircraft).
19. Can aircraft leases be registered? If so, what is the procedure for registration of aircraft leases?
There is no register of aircraft leases in Singapore.
Interests created by leases can be registered in the International Registry under the Cape Town Convention if the lessee is located in a contracting state or if the aircraft is registered in a contracting state (Singapore is a contracting state).
See Question 7 for the effect of registering international interests in the International Registry.
The registration of any security interests over aircraft cannot be certified in Singapore. It is possible to search for charges created by Singapore or foreign companies registered under the Companies Act with the ACRA. However, these results are not certified.
Priority search certificates issued by the International Registry can confirm whether any international interests are registered in the International Registry against a particular aircraft or aircraft engine.
An applicant seeking a certificate of airworthiness must apply to the CAAS using Form CAAS (AW) 29 and pay the application fee. Appendix 1 to Chapter 2.2 of the Singapore Airworthiness Requirements sets out the documents which must be provided alongside the application.
The CAAS is entitled to conduct an inspection of the aircraft and aircraft technical records before granting a certificate of airworthiness.
Transfer of Security
23. Is it possible to transfer security interests over an aircraft? Are there specific issues of local law when transferring security interests?
Enforcement of Security and Repossession
25. In what circumstances can a mortgagee take possession of the aircraft and sell the aircraft? What requirements must the mortgagee comply with?
There are no statutory requirements under Singapore law imposing terms in mortgages over aircraft.
The rights of a mortgagee to take possession of an aircraft and sell it are usually set out in the mortgage itself. Typically, a mortgagee is entitled to exercise those rights following an event of default by the borrower under the financing documents.
Subject to any moratoriums on enforcement that may apply in the case of ongoing insolvency proceedings, Singapore law recognises a lender's right in financing contracts to demand repayment of the loan before the stated date of maturity by giving notice to the borrower on the occurrence of any event of default set out in the finance documents. Events of default typically include non-payment or breach of obligations.
The mortgage typically provides that the mortgagee's power of sale becomes enforceable on the occurrence of an event of default by the borrower under the finance documents.
Subject to the terms of the mortgage, a lender can generally enforce its security without court involvement. A legal mortgage also confers on the mortgagee an unqualified right to possession of the mortgaged property, and the mortgagee can therefore repossess the aircraft without seeking court intervention.
Regarding registered international interests, Singapore has declared (under Article 54(2) of the Cape Town Convention) that all remedies available to the creditor under the Cape Town Convention which are not specified in the Convention as requiring an application to the court, can be exercised without court action and without leave of the court. As a result, if the mortgagor has consented in the mortgage document to self-help remedies on the part of the creditor, repossession of the aircraft can be carried out without the need for judicial proceedings.
Even if self-help remedies are available, it is still prudent for a mortgagee to obtain a court order before repossessing an aircraft. By repossessing without a court order, the mortgagee risks a civil claim against it for wrongful repossession or trespass. A court order also facilitates access to the aircraft at an airport. In addition, this route enables the mortgagee to seek any additional relief it requires from the court at the same time as seeking an order for repossession.
Under Order 52 of the Rules of Court 2021 (ROC), a mortgagee can commence a mortgage action against the mortgagor either by way of an originating claim (formerly a writ) or originating application (formerly an originating summons), to claim any one of the following reliefs:
- Payment of moneys secured by the mortgage.
- Sale of the mortgaged aircraft.
- Foreclosure. The effect of foreclosure is that is extinguishes the mortgagor's equity of redemption and the mortgagee therefore becomes the absolute and beneficial owner of the aircraft. Consequently, the mortgagee is therefore entitled to all the sale proceeds, including any surplus above the outstanding debt. By contrast, in the case of a sale of the aircraft under a power of sale contained in the mortgage, the mortgagee would only be entitled to retain the proceeds up to the amount of the outstanding debt.
- Delivery of possession (before or after foreclosure, or without foreclosure) to the mortgagee by any person alleged to be in possession of the aircraft.
- Reconveyance of the aircraft, or its release from the security.
Mortgagees typically commence these actions by way of an originating application supported by an affidavit.
An originating application is typically heard and resolved within three to seven months from when the application is filed and served on the defendant mortgagor.
Generally, an originating application process is appropriate where there is unlikely to be any substantial dispute of fact. While the originating application process is generally faster, the court can, at any stage of the proceedings, order that pleadings be delivered and that the proceedings continue as if the matter was begun by originating claim (Order 15 Rule 7(6), ROC).
Pending the final determination of the originating application, the mortgagee can also apply for an interim injunction ordering the detention, custody or preservation of the mortgaged aircraft. The court has the power to grant such an injunction if it to do so appears just or convenient. The interim injunction can be applied for on a with notice or without notice basis (in urgent cases). However, this is only appropriate where the delay occasioned by notifying the defendant may cause the claimant irreparable damage, or where secrecy is essential.
27. 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?
The Singapore courts generally recognise an express choice of law made by parties in a contract, provided that the choice:
- Was made in good faith.
- Is not illegal.
- Would not result in an application of the law that is inconsistent with public policy.
However, the express choice of law does not prevent a Singapore court from applying Singapore laws and rules to determine whether parties have in fact made such an express choice.
The same rules apply as for foreign court judgments in favour of lessees (see Question 33).
29. What is the procedure for taking possession of an aircraft if a security interest other than a mortgage is held over that aircraft?
As well as a legal mortgage, a pledge or lien also give the security holder a right to possession.
Other forms of security such as fixed charges do not give the security holder a right to possession without a court order (unless the security document expressly provides for such a right).
In Singapore, self-help remedies are available to creditors who have registered international interests in the International Registry under the Cape Town Convention (see Question 26).
In addition to this, a creditor can seek one or more of the following orders from the court pending determination of its claim:
- Preservation of the aircraft and its value.
- Possession, control or custody of the aircraft.
- Immobilisation of the aircraft.
- Lease or management of the aircraft and the income deriving from those activities.
- Sale of the aircraft, and application of proceeds arising from this.
See Question 26 for the procedure for commencing actions to obtain possession of an aircraft, and for the procedures for obtaining an injunction.
In addition, the creditor can, in the circumstances specified in Chapter III of the Cape Town Convention, procure the deregistration of the aircraft and the export and physical transfer of the aircraft object from Singapore, exercisable by an authorised party under an IDERA lodged with the CAAS.
30. In the event of a default event under an aircraft lease, can the lessor take possession of the aircraft without judicial intervention?
The lessor can physically repossess the aircraft without judicial intervention if rights to possess and to enter the lessee's premises are provided for in the lease agreement.
Even if self-help remedies are available, it is prudent for a mortgagee to obtain a court order before repossessing an aircraft (see Question 26).
See Question 26.
32. 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?
See Question 26.
It is difficult to provide any time estimate for the proceedings, since much in a contested recovery claim would depend on litigation exigencies. Assuming the originating claim or originating application action is not contested it is likely to take a minimum period of three months for the court action (excluding the enforcement and any subsequent sale process).
Foreign judgments can be enforced under (as applicable) the:
- Reciprocal Enforcement of Commonwealth Judgments Act 1921 (RECJA).
- Reciprocal Enforcements of Foreign Judgments Act 1959 (REFJA).
- Choice of Court Agreements Act 2016 (CCCA).
- Common law.
RECJA. A foreign judgment for payment of money obtained against a debtor in a superior court of the UK or certain other prescribed Commonwealth countries (including Australia, New Zealand and Malaysia) (each an originating court) can be registered under RECJA and enforced by the courts in Singapore without re-hearing, provided that the:
Originating court had jurisdiction (this would be the case if the debtor expressly agreed in the financing or lease documents to submit to the originating court).
Foreign judgment is final and not subject to appeal.
Foreign judgment was not obtained by fraud.
Enforcement of the foreign judgment would not be contrary to the public policy of Singapore.
REFJA. Non-monetary foreign judgments (such as specific performance or injunctions) obtained from an originating court against a debtor can also be enforced under REFJA if the Singapore court is satisfied, having regard to the circumstances of the case and the nature of the relief contained in the judgment, that enforcement of the non-monetary judgment would be just and convenient. If it appears to the court that a monetary judgment awarded damages (including exemplary or punitive damages) in excess of compensation for the actual loss or harm suffered by the party awarded the damages, the court can only register the amount of the actual compensation. Only Hong Kong judgments are currently enforceable through REFJA.
CCCA. Foreign judgments from courts in countries which are not subject to RECJA or REFJA can still be recognised and enforced in Singapore under the CCCA, which implements the Hague Convention on Choice of Court Agreements 2005 (Hague Convention). The CCCA applies where both the:
- Claimant and the defendant entered into an exclusive choice of court agreement designating, for the purpose of deciding any dispute in connection with the financing or leasing transaction, the originating court.
- Originating court is a court of a state which is a signatory to the Hague Convention. Presently, the only states to have ratified the Hague Convention are the EU (including Denmark which acceded to the Convention separately), Montenegro, Singapore and the UK.
If these criteria are fulfilled, the party enforcing the judgment can apply to the General Division of the High Court of Singapore for the foreign judgment to be recognised. The foreign judgment is then recognised without a review on the merits or the facts, provided that the High Court is satisfied of all the following:
- The judgment was not given in default, unless the defendant was notified of the proceedings and given sufficient time to defend the proceedings.
- The enforcement of the foreign judgment would not be manifestly incompatible with the public policy of Singapore.
- The foreign judgment was not obtained by procedural fraud.
Common law. If the financing or lease agreement does not contain an exclusive choice of court agreement, the CCCA does not apply. However, the aggrieved party can bring a fresh action against the defendant in Singapore for recovery of the judgment debt under a foreign judgment, and apply for summary judgment on the basis that there is no defence to the claim. Generally, foreign judgments giving rights against identifiable persons can be enforced by a claim in proceedings in Singapore if both the:
- Foreign judgment is a money judgment from a court of competent jurisdiction.
- Judgment pronounced by the foreign court is final and conclusive as between the parties.
The Singapore court does not ordinarily reopen the merits of the claim on which the foreign judgment is based, or the factual findings made by a foreign court, unless there is evidence that the:
- Foreign judgment was procured by fraud.
- Enforcement of the foreign judgment would be contrary to public policy.
- Proceedings in which the foreign judgment was obtained were contrary to natural justice.
Deregistration and Discharge
34. What is the procedure for and effect of deregistration of an aircraft from the aircraft register?
The following can apply for deregistration of an aircraft:
- A party holding a valid certificate of registration.
- A party authorised under an IDERA.
- A certified designee under a certified designee confirmation letter (CDCL).
An application to the CAAS can be made on the CAAS' Enterprise Safety Oversight Management System (eSOMS). If eSOMS is not available, the applicant should apply to the CAAS on Form CAAS (AW) 137 along with the following:
- A letter of authorisation from the owner of the aircraft.
- An original copy of the certificate of registration.
- An original copy of the certificate of airworthiness.
- An original copy of the flight manual approval letter.
- An original copy of the maintenance schedule approval letter (if applicable).
- A photocopy of the export permit issued by the Controller/Registrar of Import and Export.
- The IDERA (if applicable).
- The CDCL (if applicable).
Before the aircraft is deregistered, the CAAS usually notifies the owner of the aircraft. However, the owner's consent is not required if the application to deregister the aircraft is made by a creditor under an IDERA.
There is no register of aircraft mortgages in Singapore.
If a mortgage or any other security agreement, is registered as an international interest in the International Registry under the Cape Town Convention, that registration can only be discharged with the consent of the party in whose favour it was made (for a security agreement or a lease agreement, that consent must be given by the mortgagee/chargee or lessor). A party in whose favour a registration was made can transfer the right to consent to discharge that registration to another entity, in which case the transferee has the sole right to consent to the discharge (section 5.8.2, Cape Town Act).
If the party in whose favour the interest was made refuses to discharge the security, or where that party no longer exists, an order from the court with jurisdiction under the Cape Town Convention should be obtained; if that order is not complied with, the court of the place in which the Registrar (as defined in the Cape Town Convention) has its centre of administration can direct the Registrar to take steps to give effect to that order (Article 44(3), Cape Town Convention).
The discharge of international interests filed with the International Registry can be done instantaneously by the holder of the right to discharge the relevant interests.
There is no register for aircraft leases in Singapore. See Question 35 for the procedure for discharges where an aircraft lease is registered as an international interest in the International Registry.
Cape Town Convention
38. Has your country signed and ratified the Convention on International Interests in Mobile Equipment 2001 and its Protocol on Matters Specific to Aircraft Equipment (Cape Town Convention)?
No cases of conflict between the Cape Town Convention and Singapore law have been reported. Section 3(2) of the Cape Town Act provides that where there is inconsistency between a provision of the Cape Town Act and any other law of Singapore, the provision of the Cape Town Act prevails over that other law to the extent of the inconsistency.
40. What is the legal position regarding non-consensual rights and interests under Article 39 of the Convention?
Singapore has made the following declarations under Article 39(1) of the Cape Town Convention:
- All categories of non-consensual rights or interests which, under Singapore law, have (and will have) priority over an interest in an aircraft object (airframe, aircraft engine or helicopter) equivalent to that of the holder of a registered international interest, to that extent have priority over a registered international interest, in and outside insolvency proceedings.
- Nothing in the Cape Town Convention affects the right of Singapore or of any Singaporean state entity, any intergovernmental organisation, or any other private provider of public services in Singapore, to arrest or detain an aircraft object under Singapore law for payment of amounts owed to them directly relating to those services in respect of that aircraft object or another aircraft object.
- All categories of non-consensual rights or interests covered by the declaration prevail over an international interest registered before the date of the deposit of the declaration.
No rights or interests, except for non-consensual rights or interests of a category covered by a declaration under Article 39(1) of the Cape Town Convention, have priority in insolvency proceedings over registered interests (section 4(15), Cape Town Act).
Singapore has selected Alternative A in its declaration under Article XXX(3) in respect of Article XI of the Protocol.
Section 4 of the Cape Town Act gives effect to election in Article XI of the Protocol by prescribing certain remedies that are available in the event of an insolvency. These remedies apply where the:
- Debtor of the agreement is a body corporate incorporated in Singapore, or a natural person domiciled in Singapore.
- International interest of the agreement has been registered.
- Debtor and creditor have not excluded the application of section 4 of the Cape Town Act by mutual agreement.
Where insolvency proceedings have commenced against the debtor under a financing or lease of an aircraft, the debtor or the debtor's insolvency administrator (if the insolvency administrator has custody of the aircraft) must, no later than 30 days after the start of insolvency proceedings, give the creditor an opportunity to take possession of the aircraft.
The insolvency administrator or the debtor (as the case may be) can retain possession of the aircraft where, within the 30-day period, it has agreed to perform all future obligations of the debtor under the finance or lease agreement and all defaults under that agreement (other than a default constituted by the commencement of the insolvency proceedings) have been cured. Where the insolvency administrator or debtor fails to perform all future obligations of the debtor as agreed, the creditor can immediately take possession of the aircraft.
42. What is the procedure to file an irrevocable deregistration and export request authorisation (IDERA)?
An IDERA must be filed with the CAAS.
The IDERA submitted must be in the form prescribed by the CAAS (Form CAAS (AW) 135).
If the party submitting the IDERA is a company, the IDERA must be accompanied by a letter of authorisation or power of attorney. The CAAS acknowledges its acceptance of the IDERA, typically within seven working days of the submission.
Liability
43. Can an owner, lessor or financier be liable for the operation of the aircraft or the activities of the operator?
Singapore is not party to the Rome Convention (see Question 1), and so owners of Singapore-registered aircraft are not strictly liable for injury, death or damage caused by those aircraft to people and property on the ground.
Where an aircraft is flown in such a manner as to be the cause of unnecessary danger to any person or property on land or water, the pilot, any person who hired or leased the aircraft, and also the owner of the aircraft could be guilty of an offence (section 44, Air Navigation Act).
Outside the statutory regime, a claimant can bring a common law action in contract and/or in tort against a lessor or owner of an aircraft on lease to an airline. The success of the claim would largely depend on the facts of the case.
Reform and Recent Developments
45. What are the key developments (key cases, judgments and legislation) of the past year relevant to aviation finance?
The recent decision in Singapore Airlines Ltd v CSDS Aircraft Sales & Leasing Inc ([2021] SGHC(I)3, Singapore International Commercial Court Suit No 4 of 2019) raised the question of whether an aircraft purchase agreement had been rightfully terminated by the claimant and, if not, whether the defendant could terminate the agreement for repudiation by the claimant.
While the judgment revolved mainly around the specific facts of the case, the court examined the defendant's argument that the claimant, in bringing and serving proceedings claiming specific performance, had unequivocally elected to affirm the purchase agreement, with the result that the alleged prior breaches of contract by the defendant (in failing to pay the purchase price) were waived or spent, and consequently the claimant was not entitled to terminate the agreement for repudiation. The defendant relied heavily on the English Court of Appeal decision in The Public Trustee v Pearlberg ([1940] 2 KB 1).
However, the court found that Pearlberg made it clear that it is open to a party to discontinue its claim for specific performance and pursue a claim for termination and damages if the breach persists. Pearlberg also made it clear that the effect of bringing and serving a claim for specific performance is only to suspend the right to terminate the contract.
The case also illustrates the importance of including a time is of the essence clause where a specific date or time is required to close a transaction or make payments. In this case, a notice was served on the defendant making time of the essence and requiring completion of the purchase within 14 days, failing which the contract would be rescinded and the deposit forfeited. The inclusion of that clause in the notice allowed the court to find that the defendant had repudiated the purchase agreement.
Contributor Profiles
Shaun Lee, Partner
Bird & Bird ATMD
T +65 6534 5266
E [email protected]
W www.twobirds.com
Professional qualifications. Advocate & Solicitor (Singapore); Solicitor, England and Wales
Areas of practice. Dispute resolution.
Niel Liebenberg, Partner
Bird & Bird ATMD
T +65 6534 5266
E [email protected]
W www.twobirds.com
Professional qualifications. Solicitor, England and Wales; Singapore Registered Foreign Lawyer
Areas of practice. Aviation and aerospace.
Leo Fattorini, Partner
Bird & Bird ATMD
T +65 6534 5266
E [email protected]
W www.twobirds.com
Professional qualifications. Solicitor, England and Wales; Singapore Registered Foreign Lawyer
Areas of practice. Aviation and aerospace.