Aircraft finance and leasing in Slovenia

  1.  PROPOSED TRANSACTION STRUCTURE
  2.   SEARCHES
    1. Are there any public registers in the Relevant Jurisdiction where a search can be carried out to determine whether an order or resolution for any bankruptcy, bankruptcy protection or similar insolvency proceedings has been registered in relation to the Airline? 
    2. If so, specify which public registers, how long such searches typically take and if the fees are more than US$100, approximately what fees apply.
  3. RIGHTS AND EVIDENCE OF OWNERSHIP
    1.  In the case of the transfer of title to an aircraft registered in the Relevant Jurisdiction:
    2.  Other than Insolvency laws (see section 9) are there any laws which may have the effect of defeating the Owner’s right in the aircraft – for example, Government  requisition?  Do the laws of the Relevant Jurisdiction provide for any compensation in such circumstances?
  4.  THE AIRCRAFT REGISTER - NATIONALITY OF AIRCRAFT
    1.  Has the Relevant Jurisdiction ratified any of:
    2. If the Relevant Jurisdiction has ratified the Cape Town, see the Cape Town Convention Annex.
    3.  If the Relevant Jurisdiction has not ratified the Cape Town Convention, has the Relevant Jurisdiction started official proceedings or given any other official indication that it will accede to or ratify the Cape Town Convention in the near future?
    4. Is there an Aircraft Register in the Relevant Jurisdiction and if so, what is it called and who operates it?
    5. If so, in relation to registration:
    6. What documents and/or consents are required to obtain registration on the Aircraft Register and will these require any formalities (for example, notarisation, legalisation or application of apostille)? 
    7. Are there any restrictions on the legal status and/or nationality/domicile of parties seeking to register an aircraft on the Aircraft Register? 
    8. In respect of aircraft transactions connected with the Relevant Jurisdiction generally, are there any foreign Aircraft Registers that are commonly used, or should be considered, as alternatives to or in addition to registration with the Relevant Jurisdiction’s Aircraft Register? If so, what is benefit of such registration?
    9. Are there any other filings or registrations necessary or desirable (other than the registrations already mentioned and Lease Registration - see section 6) in the Relevant Jurisdiction in order to ensure the validity, priority or enforceability of the transaction documents, or to perfect the interests of the Owner in the Aircraft or the transaction documents? 
  5.  LEASES
    1. Will the Relevant Jurisdiction recognise the concept of a lease over an aircraft? 
    2. Would the choice of English law to govern the Lease be upheld as a valid choice of law in any action in the Relevant Jurisdiction?
    3. Must the Lease be in a particular form if it is to be valid and enforceable in the Relevant Jurisdiction (for example, must it be in the language of the Relevant Jurisdiction or be notarised, legalised or have the apostille applied)?
    4. If the Lease must be in the language of the Relevant Jurisdiction, is it possible under the Relevant Law also to have an English version, and to provide that the English version should prevail in case of conflict with the Relevant Jurisdiction language version?
    5. Are there any special terms that the Lease must contain or that it is advisable for the Lease to contain?
    6. Are there any circumstances under which the Lease might be re-characterised under the laws of the Relevant Jurisdiction as:
  6. LEASE REGISTRATION
    1. Is there a separate register for aircraft leases in the Relevant Jurisdiction?     
    2. If yes, then:
  7.   ENFORCEMENT OF LEASES (ASSUMING AIRLINE IS NOT IN A FORM OF INSOLVENCY PROTECTION)
    1. On the occurrence of an event of default under the Lease, assuming that the Owner is permitted to do so under the terms of the Lease, can the Owner terminate the Leasing of the Aircraft under the Lease and enforce the Lease by taking physical possession of the Aircraft? 
    2.   If so, can the Owner take physical possession of the Aircraft without the need for judicial proceedings in the Relevant Jurisdiction?
    3. Where judicial proceedings in the Relevant Jurisdiction are necessary, please provide details of the proceedings, in particular:
    4. Where judicial proceedings are not necessary, please comment on the time limits relevant to taking possession of the Aircraft, in particular:
    5. Is there any history of actual repossession of aircraft by Owners in the Relevant Jurisdiction? If so, please provide details of any matters or issues of which an Owner should be aware. 
    6. Are there any circumstances in which the sums expressed to be payable under the Lease or obligations expressed to be assumed by the Airline in the Lease are or will be unrecoverable or unenforceable in the Relevant Jurisdiction?
    7. Are there any restrictions on the ability of the Owner to sell the Aircraft in the Relevant Jurisdiction during the term of the Lease or, following an event of default, on termination of the leasing or pending judicial enforcement of the Lease? 
    8. Are there any export restrictions on export of a repossessed aircraft?
  8. DEREGISTRATION POWER OF ATTORNEY/EXPORTATION
    1. Can the Owner apply for deregistration of the Aircraft either at the end of the lease term or following successful repossession (with or without judicial proceedings) and is there any time period within which such application should be made? 
    2.  Is the consent of the Airline required to deregister the Aircraft either by law or as a matter of custom or practice? 
    3.  How long does deregistration take, both where there is co-operation from the Airline and where this is no co-operation from the Airline? 
    4. Is it possible to obtain an export licence or export permit in advance? 
    5.   Approximately how long does it take to obtain an export licence or export permit?  What are the costs involved? 
    6. Is it possible to obtain a certificate of deregistration in advance? 
    7. Will a power of attorney empowering the Owner to deregister and export the Aircraft from the Relevant Jurisdiction, either at the end of the lease term or following successful repossession (with or without judicial proceedings), be enforceable in the Relevant Jurisdiction?  Will the courts recognise a power of attorney in the form of an IDERA and governed by English law? 
    8. If the power of attorney was stated to be irrevocable would this be enforceable against the Airline or can the Airline revoke such power of attorney? 
    9. Upon the occurrence of a bankruptcy or insolvency of the Airline is the power of attorney still effective?
  9. INSOLVENCY
    1. In the event that the Airline were to become insolvent either on a balance sheet basis (assets less than liabilities) or unable to pay debts as fall due:
  10.  TAXATION
    1. The decision to lease to an airline in the Relevant Jurisdiction assumes that the Owner will not be taxed on receipt of rentals or other payments (including maintenance reserves) under the Lease except by way of tax on its general income, profits or gains payable by the Owner in its place of incorporation or place of main business (if different). Will there be a requirement for the Owner to pay tax in the Relevant Jurisdiction on lease payments on basis that either the Owner is subject to taxation in the Relevant Jurisdiction by reason only of the leasing of the Aircraft under the Lease and is required to make payment itself; or payment of such tax is by way of the airline being required to withhold and account for tax from lease payments, where:
    2. If there is a requirement in the Relevant Jurisdiction for the airline to withhold tax on lease payments, will the courts of the Relevant Jurisdiction recognise and permit enforcement of a “gross up” clause in the Lease requiring the payment by the Airline of an additional sum to ensure the Owner receives and is entitled to retain the same net amount as would have been received in the absence of the withholding, taking account of any further withholding on account of tax  required in relation to such additional sum.  
    3.  VAT: European Union country: under Article 148(f) of the VAT Directive, an exemption from VAT is applied to “supplies” consisting of chartering or hiring of aircraft which are used by airlines operating for reward chiefly on international routes. 
    4. .4 Sale of aircraft by an aircraft lessor to another aircraft lessor of an aircraft subject to a lease to an airline operating for reward chiefly on international routes: VAT will be applied to purchase price:  No, the VAT exemption will apply (please refer to point 10.3 above).If no, is this because of application of the exemption under Article 148(f) to the airline following the decision in ECJ Case C-33/2011? 
    5. .5 If the transaction involves the first importation of the aircraft into the EU (and assuming the aircraft is intended for use as a civil and not military aircraft) what rate of Customs Duty will apply? 
    6.   Is any stamp duty, notarial or other fee or equivalent payable in respect of the execution of the Lease, a de-registration power of attorney or any other lease related document concerning the aircraft? Will such stamp duty or fee still be payable if the relevant documents are executed and held outside the Relevant Jurisdiction? If any such amount is payable how much is it approximately?
    7. Can any form of consent, authorisation or licence be obtained exempting the payments referred to in this Section from such tax or duty? If so, how would it be obtained?
    8. Ignoring any taxation consequence already mentioned and any potential taxation issues if the Owner has any other connection to the Relevant Jurisdiction, is there any other Relevant Jurisdiction taxation consequence of the Owner:
  11. EXCHANGE CONTROLS
    1. Are payments to foreign owners by companies incorporated or registered in the Relevant Jurisdiction subject to any form of exchange or similar control? 
    2. If yes, can any consents, authorisations or licences be obtained to exempt payments from any such control? How would these be obtained? Are such consents, authorisations or licences transferable? 
  12. INSURANCE
    1. Is it a legal requirement to insure the Aircraft within the Relevant Jurisdiction? 
    2. If so, is there any restriction on reinsurance of the primary insurance outside the Relevant Jurisdiction?
    3. Is there a minimum percentage of cover which a local insurer is obliged to retain, and if so, what is it? 
    4. Is it possible for local insurers to assign contracts of reinsurance?  If not, is a cut-through clause enforceable? 
  13. LIABILITY FOR DAMAGE
  14. DETENTION/CONFISCATION
    1.  Are there any rights to detain or sell the Aircraft pursuant to drug trafficking, tax or other laws or pursuant to rights of airport or air navigation authorities if the Airline fails to pay when due? 
    2. If so, can the Aircraft be forfeited and sold without the Owner being made aware?
  15. SOVEREIGN IMMUNITY
    1. Is any Airline based in the Relevant Jurisdiction entitled to any form of sovereign or other immunity from suit which might restrict the Owner’s rights under the Lease?
    2. Can such immunity be validly waived in advance by contract?
  16. DISPUTE RESOLUTION AND RECIPROCAL ENFORCEMENT
    1.   Do the laws of the Relevant Jurisdiction permit and recognise an “asymmetric” submission to jurisdiction clause under which the lessee submits to the exclusive jurisdiction of the Courts of England but the Owner has discretion to choose a jurisdiction other than the Courts of England?
    2. If the Lease is governed by English Law and a judgment is obtained by the Owner in the English courts, can that judgment be automatically enforced in the Relevant Jurisdiction or will the case have to be re-examined on its merits? If so, what procedures must be complied with to enforce such a judgment?
    3. Is the Relevant Jurisdiction party to the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention) or the 1965 Convention on the Settlement of Investment Disputes Between States and Nationals of Other States (the Washington Convention)? Will the courts of the Relevant Jurisdiction recognise and enforce a decision of an arbitrator?
    4. What is the usual choice of dispute resolution in international supply contracts involving a lessor or buyer incorporated in or with its main place of business in the Relevant Jurisdiction? 
  17. AIRCRAFT ENGINES
    1. If the equipment being leased to the Airline in the Relevant Jurisdiction was an Aircraft Engine either unattached to an airframe or attached to an airframe belonging to a party other than the Aircraft Engine Owner and being leased to the Airline under a separate engine lease agreement, would there be any significant changes to the responses set out above?
    2. In particular, does the Relevant Jurisdiction recognise the separate ownership of the Aircraft Engine by the Aircraft Engine Owner when the Aircraft Engine is attached to an airframe belonging to a person other than the Aircraft Engine Owner?
    3. Is there a register of Aircraft Engines and is the information given above in relation to registration of Aircraft and the ownership and leasing of Aircraft the same for registration of an Aircraft Engine and the ownership and leasing of such Aircraft Engine at the Aircraft Engine register? 
  18. ADDITIONAL INFORMATION – IS THERE ANYTHING ELSE WE SHOULD HAVE ASKED?
Information current as of March 2020

1. PROPOSED TRANSACTION STRUCTURE

Relevant Jurisdiction: Slovenia

The Aircraft will be purchased by the Owner and leased on an operating lease basis to the Airline pursuant to the Lease. 

Is this is the usual structure for transactions of this nature in the Relevant Jurisdiction? 

Yes.             


2.  SEARCHES

2.1 Are there any public registers in the Relevant Jurisdiction where a search can be carried out to determine whether an order or resolution for any bankruptcy, bankruptcy protection or similar insolvency proceedings has been registered in relation to the Airline? 

Yes, a search can be made at the Agency of the Republic of Slovenia for Public Legal Records and Related Services (“AJPES”), which provides access to official public information on business entities in Slovenia. Pursuant to the Financial Operations, Insolvency Proceedings and Compulsory Dissolution Act (“ZFPPIPP”), AJPES provides data and other information about insolvency proceedings (bankruptcy, compulsory settlement, liquidation) of natural persons and legal entities taking place before bankruptcy courts.  While AJPES provides information on all Slovenian business entities being subject to insolvency proceedings, Airlines are no exception to this rule. However, the ZFPPIPP provides for certain information which is not published – e.g., published information in the preventive restructuring proceeding is considerably more limited compared to bankruptcy or compulsory settlement proceeding.

2.2 If so, specify which public registers, how long such searches typically take and if the fees are more than US$100, approximately what fees apply.

AJPES provides direct online access to official public information. The website is available non-stop. No fees for searches with regard to insolvency proceedings information apply.             


3. RIGHTS AND EVIDENCE OF OWNERSHIP

3.1 In the case of the transfer of title to an aircraft registered in the Relevant Jurisdiction:

3.1.1 Is any particular form of transfer required for the transfer to be legally recognised?

The agreement by which the title on an aircraft is transferred shall be in written form, otherwise it has no legal effect. 

The above stated does not apply in case of: (i) the title on an aircraft is acquired by inheritance or by public auction; (ii) transfer of the title to the insurance company under the provisions of insurance law. 
In accordance with the decision of the Supreme Court of the Republic of Slovenia, a contract on transfer of the property right on the aircraft shall be valid even if not concluded in written form if the contracting parties fully or partly perform the obligations arising therefrom, unless it clearly follows otherwise from the purpose for which the form was prescribed. 

3.1.2 Must any particular conditions be satisfied for the transfer to be recognised?

Title on the aircraft is transferred with the entry in the aircraft register of the Civil Aviation Agency of the Republic of Slovenia on the basis of a legal transaction. 

3.1.3. Will such a transfer still be recognised by the courts of the Relevant Jurisdiction as legally valid where the relevant aircraft is located in another jurisdiction at the time of the transfer?

If the country where the relevant aircraft is located will recognize a transfer of title in the form proposed for the transaction under Slovenian law as a valid method of title transfer under its domestic law, yes; if not, then no and local law advice should be taken. 

3.1.4 Are any duties, taxes or fees levied on such transfer of ownership?

Supply of aircrafts in Slovenia is normally subject to taxation with VAT. The current general VAT rate in Slovenia is 22% and the current reduced VAT rate is 9,5%.

However, an exemption from VAT is available where the aircraft will be used “for operating for reward chiefly on international routes”. The Slovenian VAT Act has no further guidance as to whether this means that the company has to use the aircraft for international flights only or whether a combined use (domestic and international) is allowed. If combined use should arise, it is possible to address this issue with the Tax Authority and ask for a ruling.

The same VAT regime is also applicable to:

  • the supply of goods for fuelling and provisioning of an aircraft;
  • the supply, modification, repair, maintenance, chartering and hiring of an aircraft;
  • the supply, hiring, repair and maintenance of equipment incorporated or used therein;
  • the supply of services for the direct needs of an aircraft or of their cargoes.

If the supplier of an aircraft is either established in Slovenia or has a permanent establishment in Slovenia, the corporate income tax consequences may also arise (e.g. taxation of capital gain upon the sale of airplane, taxation of income generated with lease). The current corporate income tax rate in Slovenia is 19%.

3.2 Other than Insolvency laws (see section 9) are there any laws which may have the effect of defeating the Owner’s right in the aircraft – for example, Government  requisition?  Do the laws of the Relevant Jurisdiction provide for any compensation in such circumstances?

In accordance with the Obligations and Real Rights in Air Navigation Act and Maritime Code, under the enforcement procedure an attachment / seizure of an aircraft can be performed. The following cannot be subject to the enforcement procedure: (i) military and other state aircrafts and aircrafts for medical and humanitarian purposes; (ii) foreign aircraft flying in accordance with applicable regulations over the territory of the Republic of Slovenia or land at an airport in the territory of the Republic of Slovenia due to force majeure or for reasons of safety in aviation (aircraft emergency), as long as the force majeure or reasons for safety in aviation lasts, as well as if an aircraft lands at the request of the competent authority; (iii) an aircraft owned by a debtor engaged in an economic activity if it is strictly necessary for the debtor to carry on his business. 

An aircraft referred to under point (ii) above may be subject to the enforcement procedure and securing of a claim in case of enforcement or securing of a claim arising during its flight through the territory of the Republic of Slovenia or while the aircraft was in that territory.

An aircraft referred to under point (iii) above shall not be exempted from an enforcement if the enforcement is conducted to repay the claim from the loan with which the aircraft was purchased or the claim is secured by a lien on that aircraft. Further, there is no exemption from the enforcement when enforcement is conducted to repay the following claims:

  • the damage caused by the aircraft in the flight or on the ground as a result of death, health detriment or other injury to persons or suffered by the aircraft persons as a result of its exploitation;
  • for search and rescue, to assist or to guard the aircraft;
  • from a contract of transport or other contract for the exploitation of the aircraft subject to enforcement;
  • from the provision, repair and equipping of the aircraft subject to enforcement.

4. THE AIRCRAFT REGISTER - NATIONALITY OF AIRCRAFT

4.1 Has the Relevant Jurisdiction ratified any of:

The Chicago Convention of 1944 on International Civil Aviation?    

Yes

The 1948 Geneva Convention on the International Recognition of Rights in Aircraft?    

Yes

The 1933 Convention for the Unification of Certain Rules Relating to the Precautionary Arrest of Aircraft?    

No

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

No

4.2 If the Relevant Jurisdiction has ratified the Cape Town, see the Cape Town Convention Annex.

4.3 If the Relevant Jurisdiction has not ratified the Cape Town Convention, has the Relevant Jurisdiction started official proceedings or given any other official indication that it will accede to or ratify the Cape Town Convention in the near future?

Currently there are no official proceedings or any other official indication that the Republic of Slovenia will ratify the Cape Town Convention in the near future.

4.4 Is there an Aircraft Register in the Relevant Jurisdiction and if so, what is it called and who operates it?

Yes, there is; it is called Aircraft Register of the Republic of Slovenia. It is operated by Civil Aviation Agency of the Republic of Slovenia. 

4.5 If so, in relation to registration:

4.5.1 Who is responsible for registering the Aircraft - is it an owner registry or an operator registry? 

It is an owner registry. The Aircraft is entered in the registry upon the application of the owner / owners (if more than one). The relevant documentation from which the owner demonstrates its ownership has to be enclosed to the application. The foreign Aircraft may be registered upon the application of the operator if certain requirements are fulfilled and the applicant submits the Charter-Party Agreement for the duration of min. six months and permission of the owner for registering the Aircraft in the Register. 

4.5.2 What details would normally be recorded on the Aircraft Register upon registration of an aircraft in the Relevant Jurisdiction? If not normally recorded, is it possible to record the Lease and/or an Aircraft Mortgage on the Aircraft Register? 

The main details registered are the identity of Registered Owner (who may be the owner or charterer), mortgages as well as other rights on the Aircraft, method of acquisition and the details of the Aircraft. The owner or charterer are obliged to notify the CAA of any changes regarding the details recorded in the Aircraft Register.

4.5.3 If the Aircraft Register is an operator register, is it possible to record the details of the aircraft owner/lessor and any financier with an Aircraft Mortgage? 

As noted above, the Aircraft Register in Slovenia is an owner register. 

4.5.4 If the Aircraft Register is an owner register, is registration on the Aircraft Register definitive to determine ownership of the Aircraft? 

Yes, ownership is acquired with the entry into the register. Please note that Owner and Operator are registered. However, an Aircraft cannot be registered in the Republic of Slovenia if it is already registered outside the Republic of Slovenia.

4.5.5 Are any distinctions made between aircraft employed on international routes and those used purely for domestic flights? 

No. 

4.6 What documents and/or consents are required to obtain registration on the Aircraft Register and will these require any formalities (for example, notarisation, legalisation or application of apostille)? 

An application form must be completed and signed, a fee paid and evidence supplied:

  • evidence regarding the purchase of an Aircraft (e.g. invoice, sale and purchase agreement);
  • customs declaration;
  • export certificate of airworthiness if the aircraft has been imported;
  • certificate of citizenship for the owner or the operator;
  • certificate on deletion from the relevant registry of a foreign state if the Aircraft is imported from a non-EU state;
  • declaratory decision of the court regarding the ownership or the change in ownership and some other documents.

If the registration proceeding is conducted by a third person on behalf of another company or any other natural person, authorization of the Power of attorney by a notary public is required.

The applicant has to be national of the Republic of Slovenia. Companies majority-owned by Slovenians or under de facto control of Slovenians, associations, flight schools, local community of the Republic of Slovenia, the Republic of Slovenia itself and citizens as well as legal persons of the EU and EEA are equated with the Slovenian nationals. 

4.8 In respect of aircraft transactions connected with the Relevant Jurisdiction generally, are there any foreign Aircraft Registers that are commonly used, or should be considered, as alternatives to or in addition to registration with the Relevant Jurisdiction’s Aircraft Register? If so, what is benefit of such registration?

No.

4.9 Are there any other filings or registrations necessary or desirable (other than the registrations already mentioned and Lease Registration - see section 6) in the Relevant Jurisdiction in order to ensure the validity, priority or enforceability of the transaction documents, or to perfect the interests of the Owner in the Aircraft or the transaction documents? 

Aircraft Mortgages require registration with the Aircraft Register of the Republic of Slovenia. The mortgage agreement must be in writing.              


5. LEASES

5.1 Will the Relevant Jurisdiction recognise the concept of a lease over an aircraft? 

Yes.

5.2 Would the choice of English law to govern the Lease be upheld as a valid choice of law in any action in the Relevant Jurisdiction?

The parties are free to choose the law governing the contract, therefore English law might be upheld as a valid choice of law. However, if all elements relevant to the situation at the time of the choice of governing law are located in a country other than the country the law of which has been chosen, the choice of the parties shall not prejudice the application of provisions of the law of that other country which cannot be derogated from by agreement.

5.3 Must the Lease be in a particular form if it is to be valid and enforceable in the Relevant Jurisdiction (for example, must it be in the language of the Relevant Jurisdiction or be notarised, legalised or have the apostille applied)?

The Lease must be in writing, otherwise the Lease is null and void. No other requirements as to language, notarisation, etc., apply 1 According to the provisions of Obligations and Real Rights in Air Navigation Act on regular lease, which are applicable to operating lease by analogy. .  

5.4 If the Lease must be in the language of the Relevant Jurisdiction, is it possible under the Relevant Law also to have an English version, and to provide that the English version should prevail in case of conflict with the Relevant Jurisdiction language version?

The Lease must be in Slovenian language only if presented to the court (for instance, in case of a dispute). In such case, the Lease has to be translated in Slovenian language by a sworn translator. Otherwise, the Lease may be in English language, which may be the prevailing version as well. 

5.5 Are there any special terms that the Lease must contain or that it is advisable for the Lease to contain?

Operating Lease is not specifically regulated by Slovenian law, nonetheless such lease is common in business practice. Therefore, parties to the Lease are free to contractually determine the subject matter of the Lease, which will be respected by the courts as far as the parties remain in line with mandatory provisions of Slovenian law. In business practice it is common for the lease to be determined in detail in the lease agreements and general conditions to such agreements. 

5.6 Are there any circumstances under which the Lease might be re-characterised under the laws of the Relevant Jurisdiction as:

5.6.1 a secured loan? 

No, provided the lessor (or its successor as lessor) retains ownership of the leased property, then the lease should not be re-characterised as a secured loan.

5.6.2 a finance (or capital) lease?     

No, since the Owner is and remains the titleholder in case of operating lease. To the contrary, in case of finance lease it is more common that the Owner remains the title holder only until the Lessee fulfils all his/her obligations.


6. LEASE REGISTRATION

6.1 Is there a separate register for aircraft leases in the Relevant Jurisdiction?     

No. The Operator (Lessee) of an Aircraft (if not the Owner) is registered separately as an Operator of a particular Aircraft within the Register of Aircrafts.

6.2 If yes, then:

6.2.1 What documentation and/or consents are required for the registration of the Lease? 

Not applicable. 

6.2.2 What registration fees are payable (if any)? 

Not applicable. 

6.2.3 What information is recorded on the register? How is the eventual discharge of the Lease recorded? 

Not applicable. 

6.2.4 Does any registration in respect of the Lease remain valid throughout the tenure of the Lease or does such a registration require periodic renewal? If renewal is required when must this be done and what is the approximate cost of renewal? 

Not applicable. 


7.  ENFORCEMENT OF LEASES (ASSUMING AIRLINE IS NOT IN A FORM OF INSOLVENCY PROTECTION)

7.1 On the occurrence of an event of default under the Lease, assuming that the Owner is permitted to do so under the terms of the Lease, can the Owner terminate the Leasing of the Aircraft under the Lease and enforce the Lease by taking physical possession of the Aircraft? 

Yes, it is common that the lessor terminates the Lease if the Lessee fails to fulfil his/her obligations. According to the Obligations and Real Rights in Air Navigation Act, the Owner may terminate the Lease if the Lessee fails to fulfil his/her obligations within 15 days after maturity of these obligations and is at the same time entitled to reimbursement of costs. However, if the Lessee fulfils all obligations after the time limit of 15 days but prior to Owner’s statement on termination of the Agreement, the Lease Agreement is not terminated. The law does not prohibit taking physical possession of the Aircraft.

7.2  If so, can the Owner take physical possession of the Aircraft without the need for judicial proceedings in the Relevant Jurisdiction?

Yes, though detailed advice should be obtained on contract wording regarding retaking physical possession. The only limitation provided for by the law is determined by the Consumer Protection Act, which stipulates that if the Lessee is a consumer, the Owner cannot take physical possession of the leased property and demand from the Lessee to fulfil all his/her obligations at the same time. If the Lessee is not a consumer, the parties to the Lease are free to determine the consequences of the termination of the Lease.

7.3 Where judicial proceedings in the Relevant Jurisdiction are necessary, please provide details of the proceedings, in particular:

7.3.1 What documents would the Owner as lessor need to present in order to obtain possession of the Aircraft, both before and subsequent to judgment? Can documents be copies? 

Not applicable.

7.3.2 What is the approximate cost of issuing proceedings? 

Not applicable.

7.3.3 Would the Owner be required to provide a bond, guarantee or other security in order to issue proceedings? 

Not applicable.

7.3.4 What is an estimate of the normal duration of possession proceedings from time at which all required documentation is made available – if uncontested? 

Not applicable.

7.3.5 What is an estimate of the normal duration of possession proceedings from time at which all required documentation is made available – if contested? 

Not applicable.

7.4 Where judicial proceedings are not necessary, please comment on the time limits relevant to taking possession of the Aircraft, in particular:

7.4.1 Is there a waiting period before action may be taken? 

Apart from the general time limit for payment of the Lessee’s obligations, i.e. within 15 days from the date of maturity of his/her obligations prior to which the Owner cannot terminate the Lease, there is no waiting period for taking possession of the Aircraft.

7.4.2 Is there a long stop date by which action must be taken? 

All claims from commercial contracts (i.e. contracts concluded by and between commercial entities) become statute-barred after three years.

7.4.3 Is a Public Auction of the aircraft required?

No. 

Apart from the judicial proceedings described above and ignoring deregistration (see section 8), is the permission of any other party (including any official body) in the Relevant Jurisdiction required to take possession of the Aircraft?

No.

7.5 Is there any history of actual repossession of aircraft by Owners in the Relevant Jurisdiction? If so, please provide details of any matters or issues of which an Owner should be aware. 

We are not aware of such cases.  

7.6 Are there any circumstances in which the sums expressed to be payable under the Lease or obligations expressed to be assumed by the Airline in the Lease are or will be unrecoverable or unenforceable in the Relevant Jurisdiction?

After the insolvency occurs the debtor shall not make commitments and payments other than those needed for the regular business operations. After the commencement of the compulsory settlement proceeding, the debtor may conduct only regular business operations and settle business liabilities arising out of such business operations. In addition, debtor’s payment orders may be executed only subject to prior approval of the administrator. In bankruptcy proceeding, the debtor also has the right to cancel rental and lease contracts concluded prior to the initiation of bankruptcy proceedings. 

7.7 Are there any restrictions on the ability of the Owner to sell the Aircraft in the Relevant Jurisdiction during the term of the Lease or, following an event of default, on termination of the leasing or pending judicial enforcement of the Lease? 

Provided the Lessee is not in insolvency procedure, the law does not prohibit the Owner to sell the Aircraft at any time. Nevertheless, the parties may contractually agree on certain limitations thereof. If, however, the Lessee is in bankruptcy procedure, the bankruptcy administrator has a right to terminate the Lease agreement; please see below under 9.1.3. Generally, bankruptcy administrators decide to terminate the lease agreements and return the leased property. Please note that this only applies in cases where the Lessee is in bankruptcy procedure and not in other insolvency proceedings. .

7.8 Are there any export restrictions on export of a repossessed aircraft?

Deregistration is required before the Aircraft may be exported and registered abroad. For this purpose, the original registration document has to be returned to the CAA, a valid Certificate of Airworthiness is required as well as the deletion of all entered third party rights on the Aircraft. 


8. DEREGISTRATION POWER OF ATTORNEY/EXPORTATION

8.1 Can the Owner apply for deregistration of the Aircraft either at the end of the lease term or following successful repossession (with or without judicial proceedings) and is there any time period within which such application should be made? 

The Owner of the Aircraft entered into the Aircraft Register is entitled to apply for deregistration. A Certificate of Airworthiness has to be enclosed to such an application and all third party rights on the Aircraft (for example mortgages) have to be deleted from the register prior to deregistration. Finally, the original certificate of registration has to be returned to the CAA for deregistration. 

A lease is a contractual obligation and does not affect the deregistration procedure. However, the Owner’s rights may be restricted with the contractual provisions, meaning that the Owner will bear the consequences under the law of the obligations when conducting an action contrary to the agreement.

No, the Airline’s participation is only required if the Airline is the Owner of the Aircraft.

8.3 How long does deregistration take, both where there is co-operation from the Airline and where this is no co-operation from the Airline? 

Co-operation of the Airline is only required if the Airline is the Owner. Deregistration is usually completed within a week in a simple case (i.e. no third party right in rem rights etc.) 

8.4 Is it possible to obtain an export licence or export permit in advance? 

No, export permit is required, merely a confirmation of deregistration and the payment of an administrative fee of approximately EUR 100.00. 

8.5  Approximately how long does it take to obtain an export licence or export permit?  What are the costs involved? 

See above. 

8.6 Is it possible to obtain a certificate of deregistration in advance? 

No, contacts with the Slovenian Aviation Agency in advance may nevertheless speed up the deregistration process. 

8.7 Will a power of attorney empowering the Owner to deregister and export the Aircraft from the Relevant Jurisdiction, either at the end of the lease term or following successful repossession (with or without judicial proceedings), be enforceable in the Relevant Jurisdiction?  Will the courts recognise a power of attorney in the form of an IDERA and governed by English law? 

Please note that Slovenia did not sign the Cape Town Convention on International Interests in Mobile Equipment and the Aircraft Protocol. Hence, the enforceability of a IDERA Power of Attorney is subject to the general legal framework. The Slovenian CAA explained that in principle IDERA Power of Attorney would suffice for deregistration and export of an Aircraft. 

8.8 If the power of attorney was stated to be irrevocable would this be enforceable against the Airline or can the Airline revoke such power of attorney? 

The Airline may revoke such power of attorney.

8.9 Upon the occurrence of a bankruptcy or insolvency of the Airline is the power of attorney still effective?

The power of attorney remains valid until revoked. However, a proxy shall only be allowed to conduct those legal transactions for which the power of attorney was given or, in case of a general power of attorney, a proxy is allowed to conduct legal transactions appertaining to ordinary business. No power of attorney is required for representing a client as creditor in the insolvency proceeding.


9. INSOLVENCY

9.1 In the event that the Airline were to become insolvent either on a balance sheet basis (assets less than liabilities) or unable to pay debts as fall due:

9.1.1 Would the airline be required to file for insolvency protection?

When a company becomes insolvent, the management shall, within one month following the occurrence of insolvency, present to the supervisory board a report on financial restructuring measures. The management has to give its opinion as to whether there is the probability of a minimum of 50 per cent for the successful execution of financial restructuring, the result of which would be regained liquidity and solvency of the company. If the management is of opinion there is not at least 50 per cent possibility, it shall file a petition for commencement of a bankruptcy proceeding. If the management estimates that insolvency may not be wholly eliminated with adoption of financial restructuring measures and it is of opinion there is a probability of a minimum of 50 per cent for the successful execution of compulsory settlement, the management shall file a petition for commencement of the compulsory settlement proceeding. 

9.1.2 Do the available forms of insolvency protection in the Relevant Jurisdiction involve the appointment of either an officer of the court or a specifically court appointed official to take control of the Airline (an Insolvency Official) while in insolvency protection? 

Yes. An administrator is appointed by the court when the decision on commencement of the bankruptcy/compulsory settlement proceeding is adopted. The exception here are the compulsory settlement proceedings over certain companies where the court appoints the administrator the following day after the institution of such proceeding. In the bankruptcy proceeding, with appointment of the administrator the powers of the debtor’s representatives, holders of procuration and other persons authorised to represent the debtor, as well as the powers of the management of the debtor to conduct its operations, expire. In the compulsory settlement proceeding, an administrator is obliged to supervise and examine the debtor’s business and the fulfilment of its obligations. 

9.1.3 Does the Insolvency Official have authority to negotiate and reach agreement with the Owner in relation to matters such as the payment of unpaid rent, continuation or termination of the Lease and repossession of the Aircraft without the need for court approval?

In the compulsory settlement proceeding, the debtor’s operations shall be limited only to the performance of regular operations associated with the performance of its business activity, which is supervised by the administrator. The administrator is empowered to file a proposition to the court to prohibit certain operations and acts, which are not in line with the above-mentioned limitation. In the bankruptcy proceeding, the administrator conducts the operations of the debtor and represents it, inter alia, in legal transactions which the insolvent debtor may carry out pursuant to the Insolvency Act. In addition, rules on mutually unfulfilled bilateral contract could apply. In such case, the insolvent debtor has the right to either withdraw from such a contract or to honour the contract. If the debtor withdraws from the contract (for which the consent of the court is required), the Owner shall have an exclusion right, meaning that it can request from the insolvent debtor to deliver the Aircraft in its possession. If the debtor decides to honour the contract, the Owner is not required to register his/her claims in the insolvency proceeding, but is rather paid according to the Lease agreement and based on the rules concerning the payment of the costs of bankruptcy proceedings. 

9.1.4 Does the commencement of insolvency protection involving the appointment of an Insolvency Official in the Relevant Jurisdiction have the effect of prohibiting the Owner from taking the following actions to enforce the lease after commencement of such protection:
  • Applying any security deposit held by the Owner against any unpaid amounts due under the Lease? No. 
  • Accepting payment of rent or other lease payments from:
    • (i)  the Airline? After commencement of the bankruptcy proceeding, the administrator with consent of the court decides which transactions may be carried out with regard to admissible operations of the insolvent debtor, e.g. continuation of operation by the Airline. In the compulsory settlement proceeding, since payments of rent or other lease payments for aircraft would be considered liabilities arising from the performance of regular business activity of the Airline, the Airline would be permitted to continue to make such payments. In both, bankruptcy and compulsory settlement proceeding, the administrator/debtor has the right to withdraw from the mutually unfulfilled bilateral contract; please see above under 9.1.3.
    • (ii) a guarantor? The Owner may accept payments from the guarantor if he/she is not subject to the insolvency proceeding.
    • (iii) a shareholder? Assuming a personally liable shareholder is not himself in insolvency proceedings then there is no limitation on accepting payments from such shareholder.
  • giving notice of default under the lease? The Owner is not prohibited from giving such notice, however the legal consequences of the initiation of bankruptcy proceedings have effect only for creditors’ claims which incurred before the initiation of bankruptcy proceedings. 
  • obtaining a judgment or arbitral award for unpaid lease payments? After insolvency proceedings have been initiated, issuing an order on execution or securing against the insolvent debtor is not permitted. All proceedings are generally suspended when an insolvency proceeding is initiated.
  • giving notice to terminate the leasing of the Aircraft? The Owner may still give notice to terminate the lease. 
  • exercising rights to repossess the Aircraft? Since the Owner owns the Aircraft, he has an exclusion right, which grants him the possibility to request from the insolvent debtor to deliver him/her the Aircraft. 
9.1.5 Can the commencement of Insolvency Proceedings have retrospective effect in relation to any such actions taken before commencement? If so, for what period can there be a look back?

Generally, the legal consequences of commencement of bankruptcy proceedings come into effect as of the beginning of the day of publication of the notice of the commencement of bankruptcy proceedings. However, all legal transactions and other legal actions which the debtor in bankruptcy has concluded or carried out in the period as of the beginning of the 12 months prior to the introduction of bankruptcy proceedings up to the initiation of bankruptcy proceedings may be challenged within six months after the commencement of the bankruptcy proceeding. In certain cases, even legal transactions carried out by the debtor in the period as of the beginning of the 36 months prior to the introduction of bankruptcy proceedings up to the initiation of bankruptcy proceedings may be challenged. 

9.1.6 Is there, either under law or as a matter of practice in the Relevant Jurisdiction, a period of time within which the Insolvency Official will either “adopt” the lease and pay rent and other lease payments as an expense of the insolvency or “reject” the lease and permit the Owner to enforce such rights as it may have under the lease?

In line with one of the core principles of insolvency proceedings under Slovenian law, i.e. the principle of conducting insolvency proceedings in such a manner as to strive for the optimum conditions for payment of creditors, the administrator may, within one month of the initiation of the bankruptcy proceeding, ask the court for the approval of completion or continuation of debtor’s operations:

  •  Completion of debtor’s operations that were started prior to initiation of bankruptcy proceeding: such completion is permitted if it is necessary to prevent a reduction of the bankruptcy estate and if such completion does not cause a delay in selling of the bankruptcy estate and provided the risks are limited; 
  • Continuation of debtor’s operations: continuation is permitted if more favourable conditions are reached for the sale of assets of the debtor which are used in such operations, as a business whole, than in case of completion of operation and provided the risks are limited. 

In both bases, the court makes a decision also based on the opinion of the creditors' committee.  
As already stated under question 9.1.3 above, the administrator has also the right either to withdraw from mutually unfulfilled bilateral contract or to honour such contract. In the bankruptcy proceeding, the administrator may exercise the right to withdrawal within three months after the initiation of bankruptcy proceedings or within three months of being notified of existence of such contract, whichever is later, while in the compulsory settlement proceeding, the administrator may exercise such right one month after the initiation of the proceeding at latest. Court's approval for withdrawal is required. 

9.1.7 If the lease is “adopted” will the Insolvency Official also pay any unpaid lease payments due as at commencement of the insolvency protection?

No legal consequences of the initiation of bankruptcy proceeding apply for the mutually unfulfilled bilateral contracts. Consequently, if the debtor does not withdraw from such a contract, it has to pay the obligations arising out of the mutually unfulfilled bilateral contracts towards the creditor in line with such contract and such payments will be, simply put, considered as costs of bankruptcy proceedings, meaning they will be paid before any claims by other creditors. 

9.1.8 If not or if the lease is “rejected”, would the Owner’s claim for any outstanding sums rank equally with other ordinary unsecured creditors of the Airline?

Yes.

9.1.9 Are there certain types of preferred creditors whose claims will rank above claims of the Owner?

Yes, there are creditors with the right to separate settlement. Creditors with the right to separate settlement are creditors who are enforcing their claims, which are secured with a right to separate settlement in the insolvency proceeding. The right to separate settlement is a right that ensures that creditor's claims are paid from certain assets of the insolvent debtor before the claims of other creditors of such debtor are paid from such assets. This is a statutory definition. In practice, these provisions refer to creditors that have secured their claims with pledges of certain assets of the insolvent debtor and therefore have the right to repay their (secured) claims from the pledged assets before other (unsecured) claims. Moreover, of all unsecured claims, priority claims are paid from the common distribution estate with first priority order. 

9.1.10 If the Aircraft is in the possession of a person other than the Airline at the commencement of Insolvency Protection of the Airline, for example an independent maintenance facility, will such person be entitled, under the laws of the Relevant Jurisdiction, to assert a lien arising under law or contract over the Aircraft in respect of amounts then due and unpaid to such person by the Airline?

When certain kinds of contracts, e.g. contract for work, contract of mandate, commission agency contract etc. are entered into, a contractual party who is obliged to perform specific transactions, acts, or deeds, in return for payment could claim to have a lawful lien on the Aircraft in its possession in order to secure payment for work performed and costs. In the event a debtor becomes insolvent, such creditor is entitled to a retention right even though his claim is not yet due.

9.1.11 Is a person other than the Airline, for example an airport authority, entitled under the laws of the Relevant Jurisdiction to seize possession of the Aircraft after commencement of Insolvency Protection and assert a lien arising under law or contract over the Aircraft in respect of amounts then due and unpaid to such person by the Airline.

No. If security was not established prior to commencement of the insolvency proceeding, no person is entitled to assert a lien after the commencement of insolvency proceeding.


10. TAXATION

10.1 The decision to lease to an airline in the Relevant Jurisdiction assumes that the Owner will not be taxed on receipt of rentals or other payments (including maintenance reserves) under the Lease except by way of tax on its general income, profits or gains payable by the Owner in its place of incorporation or place of main business (if different). Will there be a requirement for the Owner to pay tax in the Relevant Jurisdiction on lease payments on basis that either the Owner is subject to taxation in the Relevant Jurisdiction by reason only of the leasing of the Aircraft under the Lease and is required to make payment itself; or payment of such tax is by way of the airline being required to withhold and account for tax from lease payments, where:

10.1.1 the Owner is incorporated and is tax resident in Ireland?

Payments of lease amounts (rental fees) from Slovenia to Ireland are not subject to Withholding Tax according to Slovene domestic tax legislation. Consequently, DTT relief should not be required, even though a DTT with Ireland is in place.

10.1.2 the Owner is incorporated and is tax resident in the United Kingdom? 

Payments of lease amounts (rental fees) from Slovenia to United Kingdom are not subject to Withholding Tax according to Slovene domestic tax legislation. Consequently, DTT relief should not be required, even though a DTT with United Kingdom is in place.

10.1.3 the Owner is incorporated and is tax resident in Hong Kong? 

Payments of lease amounts (rental fees) from Slovenia to Hong Kong are not subject to Withholding Tax according to Slovene domestic tax legislation. No DTT with Hong Kong is in place.

10.1.4 the Owner is incorporated and is tax resident in Singapore? 

Payments of lease amounts (rental fees) from Slovenia to Singapore are not subject to Withholding Tax according to Slovene domestic tax legislation. Consequently, DTT relief should not be required, even though a DTT with Singapore is in place.

10.1.5 the Owner is incorporated and is tax resident in Malta? 

Payments of lease amounts (rental fees) from Slovenia to Malta are not subject to Withholding Tax according to Slovene domestic tax legislation. Consequently, DTT relief should not be required, even though a DTT with Malta is in place.

10.1.6 the Owner is incorporated and is tax resident in the Channel Islands? 

Payments of lease amounts (rental fees) from Slovenia to Channel Islands are not subject to Withholding Tax according to Slovene domestic tax legislation. No DTT with Channel Islands is in place.

10.1.7 the Owner is incorporated and is tax resident in the Isle of Man?

Payments of lease amounts (rental fees) from Slovenia to Isle of Man are not subject to Withholding Tax according to Slovene domestic tax legislation. Consequently, DTT relief should not be required, even though a DTT with Isle of Man is in place.

10.1.8 the Owner is incorporated and is tax resident in Mauritius? 

Payments of lease amounts (rental fees) from Slovenia to Mauritius are not subject to Withholding Tax according to Slovene domestic tax legislation. No DTT with Mauritius is in place.

10.1.9 the Owner is incorporated and is tax resident in Bermuda? 

Payments of lease amounts (rental fees) from Slovenia to Bermuda are not subject to Withholding Tax according to Slovene domestic tax legislation. No DTT with Bermuda is in place.

10.1.10 the Owner is incorporated and is tax resident in the Cayman Islands? 

Payments of lease amounts (rental fees) from Slovenia to Cayman Islands are not subject to Withholding Tax according to Slovene domestic tax legislation. No DTT with Cayman Islands is in place.

10.2 If there is a requirement in the Relevant Jurisdiction for the airline to withhold tax on lease payments, will the courts of the Relevant Jurisdiction recognise and permit enforcement of a “gross up” clause in the Lease requiring the payment by the Airline of an additional sum to ensure the Owner receives and is entitled to retain the same net amount as would have been received in the absence of the withholding, taking account of any further withholding on account of tax  required in relation to such additional sum.  

Not applicable, as the payments of lease amounts (rental fees) from Slovenia are not subject to Withholding Tax as per Slovenian national tax legislation.

10.3 VAT: European Union country: under Article 148(f) of the VAT Directive, an exemption from VAT is applied to “supplies” consisting of chartering or hiring of aircraft which are used by airlines operating for reward chiefly on international routes. 

Therefore, as the operating lease of an aircraft is treated as a supply of services, it may also benefit from VAT exemption, if the aircraft will be used “for operating for reward chiefly on international routes”. Unfortunately, within the Slovene VAT Act there is no further guidance as to whether this means that the company has to use the aircraft for international flights only, or whether a combined use (domestic and international) is allowed. If combined use should arise, it is possible to address this issue with the Tax Authority and ask for a ruling.

10.3.1 New lease to airline operating for reward chiefly in domestic routes: VAT will be applied to lease rentals at current rate:

22%

10.3.2 New Lease to airline operating for reward chiefly on international routes: VAT will not be applied to lease rentals by reason of application of exemption:  

Yes (please refer to point 10.3 above).

10.3.3 Sale of aircraft by an aircraft lessor to another aircraft lessor of an aircraft subject to a lease to an airline operating for reward chiefly in domestic routes: VAT will be applied to the purchase price. If the seller and the purchaser are both EU entities and the purchaser supplies its EU VAT Number to the seller then the VAT charge will be a reverse charge. Otherwise VAT will be applied to purchase price at current rate:

22%

10.3.4 Sale of aircraft by an aircraft lessor to another aircraft lessor of an aircraft subject to a lease to an airline operating for reward chiefly on international routes: VAT will be applied to purchase price:  No, the VAT exemption will apply (please refer to point 10.3 above).If no, is this because of application of the exemption under Article 148(f) to the airline following the decision in ECJ Case C-33/2011? 

Yes, the ECJ ruling confirms our understanding of Article 148(f) of the VAT Directive.

10.3.5 If the transaction involves the first importation of the aircraft into the EU (and assuming the aircraft is intended for use as a civil and not military aircraft) what rate of Customs Duty will apply? 

0% customs apply to civil aircraft, falling under codes 8802 20 00 10, 8802 30 0010 or 8802 40 00 10 of EU Customs Tariff (TARIC).

No stamp duties are foreseen in respect of the execution of the Lease.

If there is an option for any tax or duty exemption, usually the competent authority publishes the forms required to obtain such relief.

10.6 Ignoring any taxation consequence already mentioned and any potential taxation issues if the Owner has any other connection to the Relevant Jurisdiction, is there any other Relevant Jurisdiction taxation consequence of the Owner:

10.6.1 being owner and lessor of an aircraft registered in the Relevant Jurisdiction and operated/leased by a company incorporated or registered in the Relevant Jurisdiction?

No specific tax consequences in Slovenia.

10.6.2 making available a lease facility to a company incorporated or regulated in the Relevant Jurisdiction? 

No specific tax consequences, except if a lease facility is an immovable property (real estate) located in Slovenia.

In the latter case, VAT registration in Slovenia would be obligatory, as the place of supply of services related to immovable property located in Slovenia (including granting of rights to use immovable property), is deemed to be in Slovenia. In addition to that, the payments for the lease of immovable property, located in Slovenia, are subject to 15% Withholding Tax in Slovenia (the rate cannot be further diminished with applicable DTTs).

10.6.3 Receiving rent and other lease payments under the Lease from the lessee incorporated or registered in the Relevant Jurisdiction?

No specific tax consequences in Slovenia.

10.6.4 Repossessing the aircraft and exporting the aircraft from the Relevant Jurisdiction?

No specific tax consequences in Slovenia.

10.6.5 Selling the aircraft at a profit, whether such sale is after repossession or is subject to the Lease and the lessee’s rights?

No specific tax consequences in Slovenia, except if the owner of the aircraft is either established in Slovenia or has a permanent establishment in Slovenia. In such case, the corporate income tax consequences may arise (i.e. taxation of capital gain upon the sale of an airplane). The current corporate income tax rate in Slovenia is 19%.


11. EXCHANGE CONTROLS

11.1 Are payments to foreign owners by companies incorporated or registered in the Relevant Jurisdiction subject to any form of exchange or similar control? 

No, there is no exchange control regime applicable in Slovenia.

11.2 If yes, can any consents, authorisations or licences be obtained to exempt payments from any such control? How would these be obtained? Are such consents, authorisations or licences transferable? 

Not applicable.


12. INSURANCE

If the Aircraft is registered in the Republic of Slovenia, it shall be insured within the Slovenia in accordance with the Compulsory Motor Third-Party Liability Insurance Act and relevant EU legislation, whereas also insurers from the EU Member States and from the third countries are entitled to carry out insurance operations related thereto, either through a branch office or directly, provided that they meet the conditions prescribed by the Insurance Act.

12.2 If so, is there any restriction on reinsurance of the primary insurance outside the Relevant Jurisdiction?

No.

12.3 Is there a minimum percentage of cover which a local insurer is obliged to retain, and if so, what is it? 

Not applicable. 

12.4 Is it possible for local insurers to assign contracts of reinsurance?  If not, is a cut-through clause enforceable? 

Yes. Cut-through clause represents ius quaesitium tertio. Under the Slovenian legislation, if a contract establishes a right in favour of a third person, the third person acquires the right directly against the debtor, unless agreed otherwise or unless it follows otherwise from the circumstances of the transaction. The debtor may exercise all objections against the third person that the former holds against the contracting party from the contract in favour of the third person.

Also, the contracting party has the right to request from the other contracting party to perform the contractual obligation towards the third person. A contracting party that is entitled to request that the fellow contracting party perform an obligation to a third person may revoke or amend the right established in favour of the third person at any time until the third person declares that the right is accepted.

If the third person refuses the right established in his/her favour or if the contracting party revokes it, the right shall pertain to the contracting party, unless agreed otherwise or unless it follows otherwise from the nature of the transaction.


13. LIABILITY FOR DAMAGE

Can the Owner be strictly liable - liable without a requirement to prove fault or negligence - for any damage or loss caused by the Aircraft assuming Owner is an innocent owner with no operational control of the Aircraft? 

Yes. Under the Obligations and Real Rights in Air Navigation Act the owner of the aircraft can be held liable for the damages, which result on the ground for case of death, health detriment or other injuries of people as well as for the damage on objects, caused directly by the plane in flight or people or cargo or other items that have either fallen or have been thrown from such a plane.  This includes the damage that has arisen due solely to the flight through the airspace, if the damage had arisen as a consequence of actions against the regulations on safety in aviation. 

When an Aircraft is subject to lease, a Lessee is liable for the above-mentioned damages.
Furthermore, the owner of the aircraft is deemed liable for damages, which arise due to fault that has made the aircraft unusable, has diminished its use from agreed or normal use in case the fault had already been present when the aircraft was given to lessee.

The person responsible for above-stated damages shall not be liable if he proves: i) that the damage was caused by the act of the injured party or the accomplishment of the injured party's assistant; ii) that the aircraft causing the damage was illegally exploited by someone else, and the responsible person took all necessary steps to prevent it.


14. DETENTION/CONFISCATION

14.1 Are there any rights to detain or sell the Aircraft pursuant to drug trafficking, tax or other laws or pursuant to rights of airport or air navigation authorities if the Airline fails to pay when due? 

The state prosecution authorities may invoke the right to detain an object which has been used as an instrument to perform a criminal activity or even a minor offence. Such “instrument of crime” may even be destroyed in the following procedure. 

Further, the tax authority may file a motion for interim measure in a tax procedure, if the rightful holder of an airplane has failed to pay its due tax obligations, requesting that an airplane is to be confiscated and eventually sold in the following execution procedure.
An answer regarding the eventual particular airport/air navigation authorities would require an in-depth analysis of the various legal fields and would exceed the scope of this survey.

14.2 If so, can the Aircraft be forfeited and sold without the Owner being made aware?

In an eventual execution procedure, in the course of which an aircraft was confiscated, the Owner would be made aware of an eventual forfeit and sale.


15. SOVEREIGN IMMUNITY

15.1 Is any Airline based in the Relevant Jurisdiction entitled to any form of sovereign or other immunity from suit which might restrict the Owner’s rights under the Lease?

No, Adria Airways does not enjoy sovereign immunity. An answer exceeding the question of sovereign immunity is outside of the scope of this survey. 

15.2 Can such immunity be validly waived in advance by contract?

See above.


16. DISPUTE RESOLUTION AND RECIPROCAL ENFORCEMENT

16.1  Do the laws of the Relevant Jurisdiction permit and recognise an “asymmetric” submission to jurisdiction clause under which the lessee submits to the exclusive jurisdiction of the Courts of England but the Owner has discretion to choose a jurisdiction other than the Courts of England?

The laws of Slovenia do not provide a possibility of an “asymmetric” submission to a jurisdiction clause as described, but also not exclude such submission. If the aircraft is registered in Slovenia, an exclusive jurisdiction of Slovenian courts is applicable with respect to leases and right in rem rights as well as possession of the aircraft. If the aircraft would be submitted to other registry outside Slovenia the determination of the jurisdiction may potentially be in disposition of the parties. 

16.2 If the Lease is governed by English Law and a judgment is obtained by the Owner in the English courts, can that judgment be automatically enforced in the Relevant Jurisdiction or will the case have to be re-examined on its merits? If so, what procedures must be complied with to enforce such a judgment?

In general such judgement could be automatically enforced in Slovenia if it is recognised by the Slovenian courts, without additional re-examination on the merits. The judgement can only be recognised in case of reciprocity between the jurisdictions and in case the decision has already been declared as final. Slovenian legislation provides the possibility to enforce the following decisions: court decision, court settlement and a decision of other bodies, which are deemed as equal to a court decision or court settlement (i.e. arbitral awards). 

The proceeding for the recognition is commenced upon a motion. For the recognition of such a decision the applicant must provide the foreign court decision or its certified copy and provide a certificate of decision being final by the foreign court or other entity, which has published the decision. Further a confirmation of enforceability in the country of execution is required. Providing that the decision is not in the formal language of the court, this decision must be translated by a certified translator. On the first instance the sole judge of the district court decides whether all conditions for the recognition are fulfilled and issues a decision on the recognition. 

The decision cannot be automatically enforced if the matter is already pending before the Slovenian courts or in case another foreign decision had already been recognised on the same matter. Further, hindrance for recognition of a foreign decision is conflict with the ordre public. 

The EU Regulation No. 1215/2012 dated 12 December 2012 on Jurisdiction and the Recognition and Enforcement of Judgments in Civil and Commercial Matters ("EU No. 1215/2012") provides that a judgment given in a Member State shall be recognised in the other Member States without any special procedure being required.

In accordance with the above written, Slovenian courts will recognize and give effect to the choice of a foreign forum subject to the requirements of EU No. 1215/2012 if such foreign place of jurisdiction is located within the EU, the leasing agreement does not concern immovable property and provided that the agreement of the parties to the lease to submit to the jurisdiction of an EU court is valid under the law applicable to the lease agreement. The EU No. 1215/2012 provides for two forms, namely, the certificate concerning a judgment and the certificate concerning an authentic instrument/court settlement.

Note that certain formal requirements apply in respect of a valid choice of jurisdiction in accordance with EU No. 1215/2012, for example, the place of jurisdiction must normally be agreed in a (written) document executed by all parties.

16.3 Is the Relevant Jurisdiction party to the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention) or the 1965 Convention on the Settlement of Investment Disputes Between States and Nationals of Other States (the Washington Convention)? Will the courts of the Relevant Jurisdiction recognise and enforce a decision of an arbitrator?

Yes. The Relevant Jurisdiction is a party to the New York Convention as well as the Washington Convention. 

The courts of the Relevant Jurisdiction provide for a possibility of a recognition and enforceability of a foreign arbitral award upon the recognition of the District Court of Ljubljana. The recognition and enforcement are decided upon under the rules of the NYC Convention. For the recognition an original or a certified copy of the foreign arbitral award shall be provided. The arbitral agreement must be concluded as provided under the provisions of Arbitration Act. 

16.4 What is the usual choice of dispute resolution in international supply contracts involving a lessor or buyer incorporated in or with its main place of business in the Relevant Jurisdiction? 

The legislation in the Relevant Jurisdiction provides for various dispute resolution techniques, whereas in our experience litigation before the Slovenian courts still prevails. In each dispute brought in front of a judge there is a possibility for the parties to opt for a mediation proceeding or to settle their dispute. 


17. AIRCRAFT ENGINES

17.1 If the equipment being leased to the Airline in the Relevant Jurisdiction was an Aircraft Engine either unattached to an airframe or attached to an airframe belonging to a party other than the Aircraft Engine Owner and being leased to the Airline under a separate engine lease agreement, would there be any significant changes to the responses set out above?

If the Aircraft Engine is unattached to an airframe or if the dispute does not concern the validity of the register entry in the event of separate ownership (see below) the exclusive jurisdiction of Slovenian courts is not applicable.

The above written applies to attached Aircraft Engines in the event of separate ownership as well.

17.2 In particular, does the Relevant Jurisdiction recognise the separate ownership of the Aircraft Engine by the Aircraft Engine Owner when the Aircraft Engine is attached to an airframe belonging to a person other than the Aircraft Engine Owner?

Yes, the Aircraft Engine may be in separate ownership if explicitly so agreed and entered in the Register of Aircrafts by the Owner.

17.3 Is there a register of Aircraft Engines and is the information given above in relation to registration of Aircraft and the ownership and leasing of Aircraft the same for registration of an Aircraft Engine and the ownership and leasing of such Aircraft Engine at the Aircraft Engine register? 

There is no separate register for Aircraft Engines; separate ownership for Aircraft engine is entered at a particular Aircraft entry if applicable.


18. ADDITIONAL INFORMATION – IS THERE ANYTHING ELSE WE SHOULD HAVE ASKED?

Are there any other matters, issues, recommended courses of action or steps which can be taken to protect and/or perfect the Owner's interests, as owner and lessor of the Aircraft in the Relevant Jurisdiction or of which the Owner should be aware when contemplating leasing an aircraft to a company incorporated and operating in the Relevant Jurisdiction?

Not applicable.