Aviation finance in Hong Kong: overview

A Q&A guide to aviation finance in Hong Kong.

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 typical options for financing the purchase of an aircraft include the following:

  • Finance lease.

  • Operating lease.

  • Sale and leaseback.

  • Bank loans.

  • Cash purchase.

Larger transactions may involve a combination of the structures above.

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

The Hong Kong Special Administrative Region of the People's Republic of China has no special system for the mortgage of aircraft and is not a party to the Convention on International Interests in Mobile Equipment 2001 or the Protocol on Matters Specific to Aircraft Equipment 2001. Therefore, the issues arising are the same as for Hong Kong financing schemes generally.

 

Registration and deregistration requirements

Registration

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

Articles 129 and 130 of the Basic Law of the Hong Kong Special Administrative Region (SAR) have maintained Hong Kong's:

  • Specific system of civil aviation management and aircraft registration.

  • Responsibility for routine civil aviation business and technical management.

The Chief Executive of the Hong Kong SAR is the authority broadly responsible for civil aviation regulatory matters (Article 98(1), Air Navigation (Hong Kong) Order 1995 (Cap. 448C) (Air Navigation Order); section 2A, Civil Aviation Ordinance (Cap. 448)). In practice, this authority is delegated to the Director-General of Civil Aviation, who is the head of the Government's Civil Aviation Department (CAD) (Article 98(1), Air Navigation Order; sections 43 and 63, Interpretation and General Clauses Ordinance (Cap. 1)).

Applications for aircraft registration in Hong Kong must be made on Form DCA 99 (which can be downloaded from the CAD's website: www.cad.gov.hk/application/DCA%2099.pdf) and submitted to the CAD's Airworthiness Office. The form must be accompanied by various supporting documents and the prescribed fee, which is currently HK$660 (Article 4(6), Air Navigation Order; regulations 3 and 4, Schedule paragraph 1, Hong Kong Air Navigation (Fees) Regulations (Cap. 448D)).

Applicants should consult the following notes to Form DCA 99 for the supporting documents required in their particular case:

  • Note 6 (for non-charterer natural qualified persons).

  • Note 7 (for non-charterer body corporate qualified persons).

  • Note 8 (for charterers).

Persons qualified to hold a legal or beneficial interest by way of ownership of a Hong Kong registered aircraft, or a share in such an interest, are defined in Article 4(3) of the Air Navigation Order. Article 4(5) provides an exception to this general rule for charterers.

The CAD issues a certificate of registration to any successful applicant (except for certain Hong Kong aircraft dealer's certificate holders), in whose name the aircraft is registered. A certificate of registration indicates the date of issue and contains the following particulars, which the CAD's Airworthiness Office also enters into its Aircraft Registration Records (ARR):

  • Certificate number.

  • Nationality mark of the aircraft.

  • Hong Kong registration mark assigned to the aircraft.

  • Name of the constructor of the aircraft and its designation.

  • Serial number of the aircraft.

  • Name(s) and address(es) of every qualified person holding a legal/beneficial ownership interest, or a share in such an interest (if the aircraft is not subject to a lease).

  • Name and address of the charterer and, where the charterer exception is relied on, an indication to that effect (if the aircraft is subject to a lease) (Article 4(7)-(9), Air Navigation Order).

Members of the public can apply to the CAD's Access to Information Officer for access to the ARR in accordance with the terms of the Hong Kong Government's Code of Access to Information (available at: www.access.gov.hk). The relevant application form can also be downloaded from the CAD's website (www.cad.gov.hk/english/pdf/Access_to_Information_Form.pdf).

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

Security over an aircraft can be taken by way of a mortgage (which effects transfer of the legal title to the lender) or a charge. These cannot be registered on the Aircraft Registration Records (ARR) of the Civil Aviation Department (CAD). A secured lender may, however, wish to notify the CAD of its aircraft security interest.

A mortgage over an aircraft, or any share in an aircraft is registrable with the Hong Kong Companies Registry (CR) (Part 8, Companies Ordinance (Cap. 622) (CO)) where the mortgagor is either:

  • A company incorporated in Hong Kong.

  • A company registered under Part 16 of the CO as a non-Hong Kong company, and the aircraft is registered in Hong Kong.

The conditions for registering a mortgage with the CR (as a charge) are set out in Part 8 of the CO. A mortgage must be registered within one month after the date of its creation. Any charge documents delivered after this time will not be accepted, unless the court grants an order extending the deadline for registration. Once the mortgage is registered, the CR issues a certificate of registration of charge as conclusive evidence that the requirements of the CO have been satisfied.

Aircraft mortgages are further categorised as "specified charges" (section 334(1)(h), Division 2, Part 8, CO). Failing to register them with the CR has the following consequences:

  • Mortgagors and their "responsible persons" will incur criminal liability (section 337(1)-(3), CO).

  • Any security interest will be void as against any liquidators or other creditors (section 337(4), CO).

  • Mortgagees can require immediate repayment of any monies advanced, subject to the express terms of the mortgage (section 337(6), CO).

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

There are no statutory provisions for the registration of aircraft leases in Hong Kong. Therefore, there are no specific legal requirements for such leases to be registered.

However, an aircraft lease that creates a mortgage or charge is registrable with the Hong Kong Companies Registry where the mortgagor or chargor is a company incorporated in Hong Kong or a registered non-Hong Kong company under Part 16 of the Companies Ordinance (Cap. 622) (see Question 4).

In practice, the Civil Aviation Department does not generally allow the registration of aircraft leases in the Hong Kong Nationality Register.

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

  • An aircraft mortgage?

  • An aircraft lease?

Aircraft

An aircraft cannot fly in or over Hong Kong without first being registered here, subject to some narrow exceptions set out in the Air Navigation (Hong Kong) Order 1995 (Cap. 448C) (Air Navigation Order).

Additionally, registered aircraft generally cannot fly without a valid certificate of airworthiness (see Question 7).

On registration in Hong Kong, an aircraft generally becomes subject to the Civil Aviation Ordinance (Cap. 448) and its subsidiary legislation, including the Air Navigation Order, regardless of its actual location (section 11, Civil Aviation Ordinance; Articles 92 and 98(1), Air Navigation Order).

Title to an aircraft is not determined merely by Hong Kong registration. The registered particulars of the aircraft depend (except for aircraft subject to a lease) on the Civil Aviation Department (CAD) recognising qualified persons' pre-existing ownership interests (see Question 3).

The CAD can (Articles 4(13), (16), 62(1)-(2) and 98(11), Air Navigation Order):

  • Suspend, vary or revoke a certificate of registration on due inquiry.

  • Require a certificate of registration to be surrendered within a reasonable time.

  • Amend the Aircraft Registration Records.

  • Cancel the registration of an aircraft.

Aircraft mortgage

See Question 4.

Aircraft lease

See Question 5.

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

Once an aircraft is duly registered, an application for a certificate of airworthiness for a Hong Kong registered aircraft can be made on Form DCA 46D to the Civil Aviation Department's (CAD's) Airworthiness Office. This form can be downloaded from the CAD's website (www.cad.gov.hk/application/DCA%2046D.pdf).

Applicants should consult the Notes to the Form and the HKAR-1 Airworthiness Procedures (HKAR-1), which are also available for download from the CAD's website (www.cad.gov.hk/reports/HKAR-1/HKAR-1.pdf) and set out the technical matters to be considered and more detailed information about the particulars and supporting documents to be submitted.

Broadly, applicants must persuade the CAD that the aircraft is fit to fly with regard to (Article 8(1), Air Navigation (Hong Kong) Order 1995 (Cap. 448C) (Air Navigation Order)):

  • Its design, construction, workmanship and materials (especially any engines fitted).

  • Any equipment carried in the aircraft which the CAD considers necessary for airworthiness.

  • The results of any tests that the CAD may require, including flying trials (for certain variant or prototype aircraft).

The timeline for processing applications is as follows (except for certain special categories of certificate applications) (sub-section 1.3-2, HKAR-1):

  • Three months for new series aircraft.

  • Six months for new variant aircraft.

  • 12 months for new aircraft prototypes.

Used aircraft applications take an extra three months of processing.

Applicants must ensure that they pay the various fees prescribed in their specific case at the time they submit their Form DCA 46D. Applicants are also liable for any costs necessarily incurred by the CAD for travelling outside Hong Kong (sub-section 1.3-2, paragraph 2.3-4, HKAR-1).

All relevant supporting documents must be submitted to the CAD at least ten working days before the intended date of the certificate of airworthiness (sub-section 1.3-2, paragraph 2.2, HKAR-1).

Certificates are normally issued for a 12-month validity period (sub-section 1.3-2, paragraph 11, HKAR-1). Applications for renewal must be made on Form DCA 46C, which is also available for download from the CAD's website (www.cad.gov.hk/application/DCA%2046C.pdf). Applicants for renewal should also consult HKAR-1 for relevant considerations and information.

The CAD can suspend/vary or revoke/cancel/terminate a certificate of airworthiness on due inquiry (except for documents incorporated by reference, which can be varied without due inquiry) and can require a certificate to be surrendered within a reasonable time (Articles 8(6), 62(1)-(2), 62(4) and 98(11), Air Navigation Order).

The Air Navigation Order prescribes other circumstances in which certificates of airworthiness can become invalid.

Operators and commanders of non-exempt Hong Kong registered aircraft must comply with strict insurance obligations under the Civil Aviation (Insurance) Order (Cap 448F) in order to land in, or take off from, Hong Kong. The CAD and its authorised persons have various enforcement powers in this regard.

Deregistration

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

  • An aircraft mortgage?

  • An aircraft lease?

Aircraft

A Hong Kong registered aircraft may be bought by an overseas purchaser with the intent to register it elsewhere. In this case, the registered person must apply to the Civil Aviation Department (CAD) for a statement of conformity for export (SOC Export) and cover the costs necessarily incurred by the CAD in travelling outside Hong Kong (sub-section 1.3-6, paragraphs 2.1-2, Hong Kong Aviation Requirements Airworthiness Procedures (CAD 554) (HKAR-1)).

The CAD will investigate compliance with any additional requirements or special conditions prescribed by the airworthiness authority in the target registration jurisdiction (destination authority), which have been notified to the CAD in writing (sub-section 1.3-6, paragraphs 3.1-2, HKAR-1). Where the aircraft is used and has previously been certificated as airworthy in Hong Kong, the CAD will also assess compliance with the requirements for renewing a Hong Kong certificate of airworthiness.

Once the CAD, and in certain respects the destination authority, are satisfied that the level of compliance is acceptable, the CAD will issue a SOC Export and deregister the aircraft from the Aircraft Registration Records (ARR). For a used aircraft previously certificated in Hong Kong, the SOC Export signifies that (subject to any listed derogations) a Hong Kong certificate of airworthiness could presently be issued or renewed (sub-section 1.3-6, paragraphs 1.2 and 4.1, HKAR-1).

The SOC Export does not in itself give the right to fly an aircraft. Either the CAD or the destination authority can issue a certificate of airworthiness that is sufficient to cover the delivery of the aircraft to its intended destination (sub-section 1.3-6, paragraph 1.3, HKAR-1).

Although the CAD does not issue deregistration certificates, the CAD will usually:

  • Notify the destination authority in writing that the aircraft has been deregistered from the ARR.

  • Provide the applicant with a copy of this notification.

See Question 6, Aircraft regarding the CAD's general powers of deregistration and registered persons' obligations in this regard.

For an aircraft deregistered due to its withdrawal from service, the registered person must also pay a fee (calculated as one twelfth of the fee to renew a Hong Kong airworthiness certificate per month of service since the most recent certificate issue/renewal date) or part of the fee (regulation 6, Schedule paragraph 6, Hong Kong Air Navigation (Fees) Regulations (Cap. 448D)).

Aircraft mortgage

There is no register of aircraft mortgages in Hong Kong. However, the usual practice is to notify the CAD of any changes to a mortgage created over Hong Kong registered aircraft.

The registration of a charge with the Companies Registry (CR) cannot be cancelled. The mortgagor company, the mortgagee or the person entitled to the charge can notify the CR of the payment, satisfaction, release or cessation of the underlying debt if the (Companies Ordinance (Cap. 622)):

  • Underlying secured debt has been repaid or satisfied in whole or in part.

  • Whole or any part of the property or undertaking subject to the registered charge has been released from the charge, or has ceased to form part of the company's property.

To notify the CR, the relevant person must submit all of the following:

  • Statutory form (Form NM2).

  • Certified true copy of the instrument creating or evidencing the payment, satisfaction, release or cessation of the debt.

  • Fee, currently of HK$190.

Aircraft lease

There is no register of aircraft leases in Hong Kong. See above, Aircraft mortgage with respect to charges created under an aircraft lease registered with the CR.

 

Transfer of title

9. How is legal title to an aircraft transferred?

Airframe

The sale of an aircraft and/or its constituent equipment or parts is governed by the general laws relating to the sale of goods. For example, the extent to which the contract can exclude or limit the warranties implied by the Sale of Goods Ordinance (Cap. 26) is subject to the general statutory regime (including the Control of Exemption Clauses Ordinance (Cap. 71)) and to the ordinary principles of legal interpretation. The ordinary rules relating to any liability for tax or stamping, import or other duties also apply to aircraft conveyancing.

Legal title to a Hong Kong registered aircraft is typically transferred under a sale and purchase agreement, which identifies the aircraft and its particulars as listed in its certificate of registration and entered into the Aircraft Registration Records. When conducting due diligence on the seller's title, buyers should at least require sellers to cure any registration defects as a condition precedent to the execution of the agreement.

A prudent buyer will usually also require warranties or indemnities from the seller that, within its power or control and to the best of its knowledge, nothing has been done or omitted by the aircraft's registered person that may reasonably cause the Civil Aviation Department to exercise any of its general powers of deregistration (see Question 8). The seller will usually be the registered person, unless the aircraft is under lease.

Due diligence in relation to the aircraft's Hong Kong certificate of airworthiness is also recommended.

Engine

See above, Airframe.

 

Security

Mortgages

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

Apart from registration obligations (see Question 4), there are no statutory provisions specifically applicable to mortgages over aircraft registered in Hong Kong.

Types of aircraft mortgages

Aircraft mortgages can be legal or equitable.

Legal mortgages transfer the legal title to the mortgagee, with an undertaking by the mortgagee to return title to the mortgagor when the debt is fully settled.

An equitable mortgage arises when either:

  • An agreement was made with the intention to create a legal mortgage, but the parties failed to execute some document or to comply with some formality required to create a legal mortgage.

  • The mortgagor's interest in the aircraft is equitable (for example, any mortgage of a beneficial interest under a trust).

The priority of legal and equitable mortgages is discussed in Question 11.

Validity requirements

In principle, the validity of an aircraft mortgage is determined by both the:

  • Proper law that governs the contractual aspects of the mortgage, as expressly agreed by the parties or implied by law, which is normally the governing law of the mortgage documents.

  • Law of the jurisdiction where the aircraft is located at the time the aircraft mortgage is entered into (lex situs), which has an effect on the validity of a transfer of title under the mortgage.

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

An aircraft mortgage must be registered with the Hong Kong Companies Registry (CR) if the mortgagor is either a (sections 333(2) and 334(1)(h), Companies Ordinance (Cap. 622) (CO)):

  • Company incorporated in Hong Kong.

  • Company registered in Hong Kong as a non-Hong Kong company under Part 16 of the CO.

Generally, the priority of aircraft mortgages is determined in accordance with the common law rules governing the priority of charges, and will depend on the type of mortgage (that is, legal or equitable mortgage).

A subsequent mortgagee acquiring a bona fide security interest for value under a legal mortgage will take priority over any prior equitable mortgage of which they have no actual/constructive notice. To give constructive notice (that is, to keep priority), a prior equitable mortgagee must ensure that its mortgage is duly and promptly registered with the CR (see, for example, Wilson v Kelland [1910] 2 Ch 306) (see Question 4).

Otherwise, priority rules are as follows:

  • A duly registered legal mortgage will take priority over subsequently created (that is, executed) legal mortgages.

  • A duly registered equitable mortgage will take priority over subsequently created (that is, executed) equitable mortgages.

  • A mortgage of either type pending registration, regardless of its earlier creation (that is, execution), will cede its priority to any mortgage of the same type registered earlier, regardless of that later mortgagee’s knowledge (see, for example, Re Monolithic Building Co, Tacon v Monolithic Building Co [1915] 1 Ch 643).

A floating charge taken over the chargor's whole undertaking, or over any other group/class of assets in the hands of the chargor from time to time, usually ranks behind any fixed charge (such as a mortgage) taken over any asset in particular (such as an aircraft). However, specific advice is required to determine whether the usual order of priority may have been displaced in any given circumstances.

 
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?

Under Hong Kong law, engines and other spare parts, including parts that may become attached to the aircraft, can form part of the subject matter of an aircraft mortgage.

Leases

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

A Hong Kong company that owns an aircraft may assign the benefit of a lease agreement over the aircraft. Security over an aircraft lease is typically taken by way of a security assignment, which usually requires both a:

  • Written notice to the lessee.

  • Written acknowledgement from the lessee.

Other forms of security

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

Airframe

Under Hong Kong law a mortgage is the most typical and widely recognised form of security granted over an aircraft, but other forms of security interests are possible, including pledges, liens and equitable charges.

Pledges. A pledge is created when goods are delivered to the lender as security for a loan. The pledgee can sell the pledged goods when the pledgor fails to repay the loan. However, the pledgee cannot acquire the goods by foreclosure (Carter v Wade (1877) 4 Ch D 605). Like any other chattel, an aircraft can be pledged by delivery of possession to a pledgee.

Liens. Under a contractual lien, the lienee can retain possession of the lienor's assets as security for loan repayment, but the lienee cannot sell those assets when there is a default. Without a statutory or contractual power of sale, the lienee must apply to the court if it wishes to sell the goods in satisfaction of the debt.

Equitable charges. An equitable charge is an arrangement for the chargor to appropriate certain property as security for the discharge of a loan, or of other obligations under the loan. While the ownership of equitably charged property does not necessarily vest in the creditor chargee, the chargee can recover the loan by making use of the judicial process in the case of non-payment.

A charge is a floating charge if the following conditions are met (Re Yorkshire Woolcombers' Association Ltd [1903] 2 Ch. 284):

  • It is a charge on a class of present and future assets of a company.

  • In the ordinary course of business of the company, that class of assets is changing from time to time

  • The charge contemplates that, until some future step is taken by or on behalf of the chargee the company can carry on its business in the ordinary way with regards to the particular class of assets charged.

See Question 4 regarding registration obligations under Part 8 of the Companies Ordinance (Cap. 622) and the consequences for failure to comply with these obligations.

Engine

See above, Airframe.

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

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?

Under Hong Kong law, security interests (such as mortgages, charges, pledges, liens and assignments) can be transferred or assigned to another person. If a security interest is created by a written agreement, this will usually contain express provisions that further govern the transfer of the interest.

If the holder of a security interest is or is likely to become insolvent or bankrupt, any transfer of the interest can be rendered void if either:

  • It is transferred at an undervalue.

  • It unfairly prefers a creditor.

The usual practice is to notify the Civil Aviation Department of any changes to a mortgage created over a Hong Kong registered aircraft. Registered persons have an obligation in this regard where the mortgage (typically, a legal mortgage) gives an ownership interest in the aircraft (see Questions 3 and 10).

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

For an aircraft mortgage registered as a charge with the Hong Kong Companies Registry (CR), any change of mortgagee or any other changes to the particulars of the charge must be notified to the CR by filing the relevant statutory form, together with any documents evidencing these changes.

See Question 3 regarding the obligations of registered persons with respect to any change to any ownership interest in Hong Kong registered aircraft.

 

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 an event of default, the mortgagee can take possession of the aircraft and subsequently effect a private sale of the aircraft without court intervention, provided that this is stipulated in the mortgage documents. Usually, the requirements or procedures that the mortgagee must comply with to implement these remedies are set out in the mortgage documents. Mortgage documents typically grant the mortgagee the right to seize or otherwise take possession of the aircraft on the occurrence of an event of default. Common examples of events of default include the:

  • Mortgagor's failure to satisfy amounts due under the mortgage.

  • Cancellation of any of the licences, permits or approvals material to the mortgagor's business.

  • Insolvency of the mortgagor or any material adverse changes.

The mortgagee can take possession of the aircraft under a court order if either:

  • The mortgagor opposes the mortgagee's action to take possession of the aircraft.

  • There is uncertainty as to whether an event of default occurred.

For example, the mortgagor can challenge the sale of the aircraft by the mortgagee on the following grounds:

  • Lack of authority or right to sell.

  • Failure to sell at a proper price.

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

The mortgagee can take possession of an aircraft without judicial intervention under the express terms of the aircraft mortgage, or if the mortgagor otherwise agreed to it. The terms of the aircraft mortgage often set out the specific procedures applicable to the repossession of the aircraft.

However, the mortgagee will normally commence proceedings in the Hong Kong courts to seek payment of the mortgage debt and repossession of the aircraft if either:

  • The repossession of an aircraft subject to the Hong Kong jurisdiction is contested by the aircraft mortgagor.

  • There is uncertainty as to whether an event of default occurred under the aircraft mortgage.

Pending judgment from the Hong Kong court, the mortgagee can seek interim relief by way of an injunction prohibiting the mortgagor from removing the aircraft from Hong Kong, or from otherwise disposing of or dealing with it.

If the Hong Kong court considers that the mortgagee can repossess the aircraft, the mortgagee can request the court bailiff's assistance by completing a praecipe and issuing a writ of execution. In this case, the mortgagee must:

  • Pay a deposit for the court bailiff's costs and expenses.

  • Provide detailed instructions on how repossession of the aircraft should be carried out.

The court bailiff will repossess the aircraft and transfer possession to the mortgagee provided that there are no claims that take priority over the mortgagee (see Question 11).

 
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?

A Hong Kong court will generally recognise a choice of foreign law in an aircraft mortgage that was adopted by mutual agreement of the parties unless this is deemed contrary to Hong Kong public policy or a mandatory rule of law.

However, the choice may not have legal effect if it is not expressed in clear and unambiguous terms. In this case, the Hong Kong court will apply conflict of laws principles to determine the law applicable to the aircraft mortgage.

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

In Hong Kong, a foreign judgment can be recognised and enforced either under the statutory regime or the common law regime.

The Foreign Judgments (Reciprocal Enforcement) Ordinance (FJRE Ordinance) provides the legal framework for the registration and consequent enforcement in Hong Kong of judgments from the superior courts of the foreign jurisdictions listed in the Foreign Judgments (Reciprocal Enforcement) Order (Cap. 319A) (FJRE Order). To qualify for registration, a judgment must be:

  • Given after the coming into force of the FJRE Order.

  • Issued by the superior courts of the foreign jurisdictions listed in the FJRE Order.

  • Registered in Hong Kong within six years after the date of the judgment, or, if there were appeal proceedings, the date of the last judgment given in these proceedings.

  • Not included in the list of excluded in personam proceedings under section 2(2) of the FJRE Ordinance.

  • Final and conclusive between the parties.

  • For a sum of money, not being a sum payable in respect of taxes or other charges of a similar nature, or in respect of a fine or other penalty.

The Foreign Judgments (Restriction on Recognition and Enforcement) Ordinance (Cap. 46) also sets out various circumstances that affect the recognition or enforcement in Hong Kong of judgments covered by the FJRE Ordinance.

The Mainland Judgments (Reciprocal Enforcement) Ordinance (Cap. 597) (MJRE Ordinance) governs the registration of judgments from specified courts of Mainland China for enforcement in Hong Kong.

The common law regime is only potentially available for foreign judgments that are not covered by the FJRE Ordinance and the MJRE Ordinance. A foreign judgment can be recognised and enforced under the common law if it is both:

  • Final and conclusive between parties.

  • For a sum of money, not being a sum payable in respect of taxes or other charges of a similar nature, or in respect of a fine or other penalty.

However, a foreign judgment cannot be enforced in any of the following cases (Orders 71 and 71A, Rules of the High Court (Cap. 4A)):

  • It was obtained by fraud.

  • Enforcement would be contrary to public policy.

  • The foreign proceedings did not comply with the rules of natural justice.

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 is governed by the terms of the relevant security agreement and the applicable governing law. The procedure is similar to that for the repossession of chattels.

Leases

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

In the event of default by the lessee under an aircraft lease, the lessor will normally take possession of the aircraft without judicial intervention under the express terms of the lease. Accordingly, an aircraft lease is normally drafted to ensure that various breaches of its terms are treated as events of default.

However, the lessee can seek an injunction to restrain the lessor's recovery of the aircraft if it considers that the lessor's repossession of the aircraft is not justified. The lessee can also seek damages from the lessor if the repossession is unreasonable. The steps taken by the lessee in this regard will require judicial intervention.

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

The terms of an aircraft lease generally set out the specific procedures applicable to repossession of the aircraft without judicial intervention.

However, if repossession of an aircraft subject to the Hong Kong jurisdiction is contested by the lessee, the lessor will commence proceedings in the Hong Kong courts to seek repossession of the aircraft. The lessor will specify that the lessee is not entitled to retain the aircraft by paying of a sum of money to the lessee. If this is not specified, the lessee will have the option of either:

  • Returning the aircraft to the lessor.

  • Retaining the aircraft by paying the assessed value.

Otherwise, the procedure is the same as set out in Question 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?

The timing of repossession of an aircraft depends on a number of legal and practical factors, such as the:

  • Date on which the sealed court order is delivered following the hearing of the contested application.

  • Availability of the court bailiff to assist with repossession of the aircraft.

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

Cape Town Convention

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

Although China signed and ratified the Cape Town Convention on 3 February 2009, its application has not been extended to Hong Kong.

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

Hong Kong has not signed the Cape Town Convention.

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

Not applicable. Hong Kong has not signed the Cape Town Convention.

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

Not applicable. Hong Kong has not signed the Cape Town Convention.

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

Not applicable. Hong Kong has not signed the Cape Town Convention.

 

Reform

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

In his 2016 Policy Address, the Chief Executive of the Hong Kong Special Administrative Region (SAR) stated that the Hong Kong Government would formulate measures to develop Hong Kong into a centre for aviation financing.

The Hong Kong SAR Financial Secretary further indicated in the 2016/17 budget that the Government would examine the use of tax concessions to boost the aircraft leasing business and would explore business opportunities in aerospace financing. It is therefore anticipated that the Hong Kong Government will eventually introduce such tax concessions and introduce other changes to Hong Kong's taxation regime in order to:

  • Boost the aviation finance industry.

  • Establish Hong Kong as one of the world's leading aviation finance centres.

 

Online resources

Bilingual Laws Information System

W www.legislation.gov.hk/blis/eng/index.html

Description. This official government website provides access to Hong Kong legislation.

Judiciary

W www.judiciary.gov.hk/en/index/index.htm

Description. This is the official website of Hong Kong's Judiciary.

Civil Aviation Department

W www.cad.gov.hk/english/home.html

Description. This is the official website of the Hong Kong Government's Civil Aviation Department.



Contributor profiles

Richard Bates, Partner

Kennedys

T +852 2848 6308
F +852 2848 6333
E richard.bates@kennedyslaw.com
W www.kennedyslaw.com

Professional qualifications. England and Wales, Solicitor, 1989; Hong Kong, Solicitor, 1994

Areas of practice. Insurance (general and life); corporate and commercial; employment and information technology.

Languages. English

Professional associations/memberships

  • Hong Kong Insurers Club.

  • British Chamber of Commerce in Hong Kong.

  • Associate External Academic Advisor for Post Graduate Certificate in Laws (PCLL) for City University of Hong Kong and Chinese University of Hong Kong.

  • Law Society of Hong Kong.

Sarah Catchpole, Head of Aviation Hong Kong

Kennedys

T +852 2848 6369
F +852 2848 6333
E sarah.catchpole@kennedyslaw.com
W www.kennedyslaw.com

Professional qualifications. Australian Capital Territory, Solicitor/Barrister, 1995; England and Wales, Solicitor, 1999; London, Certificates of Insurance and Insurance Law issued by Lloyds and The Chartered Insurance Institute, 1997-2007; New South Wales, Solicitor/Barrister, 2013, Hong Kong, Registered Foreign Lawyer, 2014; Hong Kong, Passed the Overseas Qualified Lawyers’ Examination, 2016

Areas of practice. Aviation & aerospace and insurance & reinsurance.

Languages. English (native), Portuguese (fluent), Spanish (proficient), Mandarin (beginner)

Professional associations/memberships. Law Society of Hong Kong.

Peter Cashin, Partner

Kennedys

T +852 2848 6306
F +852 2848 6333
E peter.cashin@kennedyslaw.com
W www.kennedyslaw.com

Professional qualifications. Australia, Solicitor, 1990

Areas of practice. Insurance & reinsurance; corporate & commercial.

Languages. English

Professional associations/memberships. Law Society of Hong Kong; The Australian Chamber of Commerce.

Publications

  • General Editor of the Investor's Handbook for Hong Kong, Pearson Professional (1996).

  • Articles in a number of Insurance Industry Journal, various dates.

  • Multi-Jurisdictional Guide 2013/14, Insurance and Reinsurance, PLC - Hong Kong Chapter.

  • Multi-Jurisdictional Guide 2014/15, Insurance and Reinsurance, PLC - Hong Kong Chapter.

  • Hong Kong's intermediaries face tough new rules, Insurance Day, 26 April 2016.


{ "siteName" : "PLC", "objType" : "PLC_Doc_C", "objID" : "1248395361213", "objName" : "Aviation finance in Hong Kong", "userID" : "2", "objUrl" : "http://us.practicallaw.com/cs/Satellite/us/resource/7-631-1323?null", "pageType" : "Resource", "academicUserID" : "", "contentAccessed" : "true", "analyticsPermCookie" : "2-40e00097:15b19122c8f:2105", "analyticsSessionCookie" : "2-40e00097:15b19122c8f:2106", "statisticSensorPath" : "http://analytics.practicallaw.com/sensor/statistic" }