Aircraft finance and leasing in Belgium

  1.  Proposed transaction structure
    1. 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 Belgium?
  2. Searches
    1. Are there any public registers in Belgium 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 USD 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 Belgium:
    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 Belgium provide for any compensation in such circumstances?
  4. The Aircraft Register - nationality of Aircraft
    1. Has Belgium ratified any of:
    2. If Belgium has ratified the Cape Town, see the Cape Town Convention Annex.
    3. If Belgium has not ratified the Cape Town Convention, has Belgium 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 Belgium 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 Belgium generally, are there any foreign Aircraft Registers that are commonly used, or should be considered, as alternatives to or in addition to registration with Belgium’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 Belgium 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 Belgium recognize 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 Belgium?
    3. Must the Lease be in a particular form if it is to be valid and enforceable in Belgium (for example, must it be in Dutch, French or German or be notarised, legalised or have the apostille applied)?
    4. If the Lease must be in Dutch, French or German, 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 Belgium 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 Belgium as:
  6. Lease registration
    1. Is there a separate register for aircraft leases in the Belgium?
  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 Belgium?
    3. Where judicial proceedings in Belgium 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. 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 Belgium required to take possession of the Aircraft?
    6. Is there any history of actual repossession of aircraft by Owners in Belgium? If so, please provide details of any matters or issues of which an Owner should be aware.
    7. 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 Belgium?
    8. Are there any restrictions on the ability of the Owner to sell the Aircraft in Belgium during the term of the Lease or, following an event of default, on termination of the leasing or pending judicial enforcement of the Lease?
    9. 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 Belgium, either at the end of the lease term or following successful repossession (with or without judicial proceedings), be enforceable in Belgium?
    8. Will the courts recognise a power of attorney in the form of an IDERA and governed by English law?
    9.  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?
    10. 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 Belgium 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 Belgium on lease payments on basis that either the Owner is subject to taxation in Belgium 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 Belgium for the airline to withhold tax on lease payments, will the courts of Belgium 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. Therefore:
    4. 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 Belgium? If any such amount is payable how much is it approximately?
    5. 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?
    6. Ignoring any taxation consequence already mentioned and any potential taxation issues if the Owner has any other connection to Belgium, is there any other Belgium taxation consequence of the Owner:
  11. Exchange controls
    1. Are payments to foreign owners by companies incorporated or registered in Belgium 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 Belgium?
    2. If so, is there any restriction on reinsurance of the primary insurance outside Belgium?
    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
    1. 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?
  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 Belgium 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 Belgium laws 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 Belgium 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 Belgium 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 court of Belgium 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 Belgium?
  17. Aircraft engines
    1. If the equipment being leased to the Airline in Belgium 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 Belgium 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
    1. 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 Belgium or of which the Owner should be aware when contemplating leasing an aircraft to a company incorporated and operating in Belgium?
Information current as of February 2020

1. Proposed transaction structure

1.1 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 Belgium?

Yes. In Belgium, the structure generally used for the purchase of an Aircraft is as follows: the Aircraft is purchased by a special purpose vehicle company (with or without external financing) which will act as Owner of the Aircraft and will in turn lease the Aircraft to an Airline operating it. If the purchase of the Aircraft has been financed by an external financing, the Owner/Lessor will usually pledge the Aircraft as a security for the prompt repayment thereof and the Airline will act as the third-party pledgeholder for the Owner (pledgor) and the lender (pledgee).


2. Searches

2.1 Are there any public registers in Belgium 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, the Belgian legislator created in 2017 an online digital database for bankruptcy proceedings called the Central Solvency Register or RegSol in short (Centraal Register Solvabiliteit/Registre Central de la Solvabilité). This register only mentions the opening of an insolvency proceedings (and not the filing for bankruptcy/judicial reorganization).

The register does not deliver a so called non-bankruptcy certificate but such certificate may be requested at the clerk office of the relevant commercial court where the Airline has its registered office. Such document will show the bankruptcy or any insolvency proceedings opened against a company for the past five years.

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

The Central Solvency Register is available through www.regsol.be and is free of charge. Regarding the bankruptcy certificate, upon request of the relevant bankruptcy certificate, it will be delivered immediately upon payment of the clerk’s duties. If the request is done by emails/mail, the delivery of the certificate may take up to two weeks. The fees amount to EUR 30.00 (less than USD 100).


3. Rights and evidence of ownership

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

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

No specific formality is required for the transfer of title of ownership over an Aircraft.

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

Under Belgian law, the transfer will be valid between parties (in the event of a sale) as soon as there is an agreement among parties on the object of the sale and the price thereof. The sale and purchase agreement does not need to be notarized.

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

Yes.

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

No registration duties are due on the transfer of ownership of an Aircraft.

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 Belgium provide for any compensation in such circumstances?

Under Belgian law, public authorities are entitled to proceed to expropriation which results in the depravation of rights of ownership, but such expropriation can only occur for “common public interest” and following a very strict procedure. Owners of expropriated assets are entitled to fair compensation prior to the expropriation. In practice however, such expropriation procedures mainly (almost exclusively) concern real estate assets (e.g. for urban planning reasons, etc.).


4. The Aircraft Register - nationality of Aircraft

4.1 Has Belgium 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?

Yes.

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 Belgium has ratified the Cape Town, see the Cape Town Convention Annex.

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

There is no indication that Belgium intends to ratify the Cape Town Convention in a near future.

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

Yes there is an Aircraft Register in Belgium. It is called Registre matricule des aéronefs ou matricule aéronautique/Register voor inschrijving van de luchtvaartuigen, of luchtvaartregister.

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?

The request for registration may be filed with the Belgian Public Federal Service for Mobility and Transports by the owner, the bare owner or the Lessee (under an operating lease or a finance lease) of the Aircraft. It is an operator registry.

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

The following information/support documents will have to be provided while filing the application form with the Belgian Public Federal Service for Mobility and Transports:

  • description of the Aircraft (e.g. brand, year of manufacture, serial number);
  • description of whether the applicant is the Owner/bare owner/Lessee/financial Lessee;
  • description of the applicant (if the applicant is a company: details of the company must be provided);
  • bylaws (if the applicant is a company);
  • evidence of the title of the applicant on the Aircraft (e.g. invoice, leasing agreement etc.);
  • DL2 certificate showing the Aircraft has been validly imported (and all import duties paid);
  • evidence of deregistration from the foreign Aircraft registry if the Aircraft was previously registered in another jurisdiction;
  • evidence of payment of the administrative fee for registration (around EUR 120 for the certificate of registration)
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?

No.

The registration certificate only contains information as to the operator of the Aircraft and the Aircraft itself. It contains information as to the owner of the Aircraft only when the Owner operates the Aircraft, and as such, files the application for registration (see above). The registration certificate does not contain any information as to the existence of pledges/mortgage on the Aircraft since the Belgian Aircraft Register does not record rights/titles on the Aircraft.

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

N/A.

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)?

See above (answer to question 4.5.2). No formalities are required. The Aircraft Register will accept documents that are drafted in one of the official languages in Belgium (i.e. French, German or Dutch) or even in English. An unofficial translation is acceptable.

As a general principle, Article 3 of the Royal decree dated 15 March 1954 provides, as far as companies are concerned, that Aircraft that can be registered are those owned by Belgian companies whereof directors, managers, or proxies are EU citizens – or citizens of a member state of the European Economic Area (i.e. EEA).

However, as exceptions to the main rule mentioned above, the Belgian Public Federal Service for Mobility and Transports may authorize the registration of Aircraft that are either (i) owned by Belgian companies whereof the directors/managers/proxies do not comply with abovementioned criteria, or (ii) owned by EU/EEA companies with a place of business/office located in Belgium, or (iii) owned by non EU/EEA companies with a place of business/office located in Belgium since one year at least (without interruption), or (iv) operated under a finance lease by any of the abovementioned entities, or (iv) operated under a lease agreement for at least six months by any of the abovementioned entities/persons.

4.8 In respect of aircraft transactions connected with Belgium generally, are there any foreign Aircraft Registers that are commonly used, or should be considered, as alternatives to or in addition to registration with Belgium’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 Belgium 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?

There is no other registry in Belgium where title on an Aircraft may be recorded. Moreover, even though documents evidencing valid title on Aircraft are needed for registration purposes (see answer to question 4.5.2), such titles/rights are not registered as such in the Aircraft Registry.


5. Leases

5.1 Will Belgium recognize 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 Belgium?

Yes, to the extent that no provision of English law applicable to the Lease is manifestly incompatible with the Belgian international public policy. Note also that a Belgian court may give effect to mandatory rules of the laws of a jurisdiction other than Belgium with which the situation has a close connection, insofar as, under the laws of that other jurisdiction those rules must be applied, whatever the chosen law.

5.3 Must the Lease be in a particular form if it is to be valid and enforceable in Belgium (for example, must it be in Dutch, French or German or be notarised, legalised or have the apostille applied)?

No.

The lease agreement does not have to be in any particular form. Please note however that in the event of judicial proceeding, the court may request the agreement to be translated in the official language of the proceeding (i.e. Dutch, French or German, as the case may be).

5.4 If the Lease must be in Dutch, French or German, 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 Belgium language version?

Not applicable as English versions are admitted (see answer to question 4.6).

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

  • The lease of the Aircraft must be for a duration of at least six months in order to allow the operator to apply for registration thereof in the Aircraft Register (see answer to question 4.7).
  • In order to avoid the re-characterisation of a Lease as a finance lease (see below, question 5.6), express wording to that end may be inserted in the lease agreement.
  • In order to avoid the lease to be re-characterized as a finance lease, it should not contain any purchase option for the Lessee.

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

5.6.1 a secured loan?

Yes.

5.6.2 a finance (or capital) lease?

Yes.

In general, a lease agreement may always be re-characterised by a judge/bankruptcy trustee (in the event of a bankruptcy) if the latter considers that the agreement under its scrutiny has been mislabelled and actually corresponds to another type of legal relationship.


6. Lease registration

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

No.


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?

As a general rule, self-help remedies are not authorized under Belgian law. It means that if the Lessee does not give the Aircraft back to the Owner at its own initiative, the Owner will have to apply for a court-ordered repossession of the Aircraft against the Lessee. Even though self-help remedies are not allowed, practice shows that parties to a lease do nonetheless provide for clauses pursuant to which the Lessor/owner may physically re-take possession of the leased good in the event of a default by the Lessee. However, if the Lessee fails to comply with such provision, the Lessor will not be able to enforce that clause in particular but may still seek a court-ordered repossession of the leased good based on an event of default and subsequent termination of the lease agreement.

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

See above (answer to question 7.1)

7.3 Where judicial proceedings in Belgium 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?

The Owner would need to present (i) the lease agreement, (ii) evidence of non-payment of the lease (or evidence of any other event of default based on which the Owner seeks to terminate the lease and re-possess the leased good), and (iii) the articles of association of the Lessee. Copies are sufficient. The documents will have to be translated (under oath) in the official language of the proceeding (i.e. French, Dutch or German, as the case may be).

7.3.2 What is the approximate cost of issuing proceedings?

If the Owner uses the specific method provided for under Belgian law for filing a suit in the area of lease-related litigation, i.e. the so-called unilateral petition (requête unilatérale/eenzijdig verzoekschrift), the costs will be around EUR 50.00.

If the Owner uses the generic method for filing a suit in Belgium, i.e. the summons (citation/dagvaarding), the costs will be around EUR 300.00.

On top of these costs, a registration fee (droit de mise au role/rolrechten) is also due and vary from EUR 300 – EUR 800 depending on amount in issue.

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

No.

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?

From six to nine months.

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?

From six to nine months.

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

N/A.

7.5 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 Belgium required to take possession of the Aircraft?

No.

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

No.

7.7 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 Belgium?

As a general legal rule, if the Lessee claims it does not have the full use of the Aircraft, it may decide to cease any payment due under the Lease to the Owner. It is a legal defence which does not have to be specifically provided for in the Lease but should nevertheless be used in a reasonable – not abusive – way by the Lessee (i.e. if the Lessee decides to no longer pay the Lessor it should result from an impossibility to use the Aircraft and not from a small defect having no consequences on the operation of the Aircraft).

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

If the lease agreement does not provide anything to the contrary (which is usually the case), the Owner is free to sell the aircraft (subject to the lease) during the term of the Lease. In practice, the new Owner of the good will notify the Lessee of such transfer in order to receive the payments due under the Lease. The Owner may also sell the aircraft (subject to the lease) pending judicial enforcement of the Lease. In that latter scenario, such change of ownership will probably have procedural consequences (e.g. replacement of the parties to the lawsuit).

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

No.


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?

Only the persons allowed to register the Aircraft may apply for deregistration thereof. It means that the Owner (as long as it operates the Aircraft) and the Lessee (under a finance lease or an operating lease) may apply for deregistration. There is no time period within which the application for deregistration of the Aircraft should be made.

The consent of the Airline is required only if it operates 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?

There is no strict timeframe but it usually takes a few days (two to three days).

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

No.

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

It may vary from one situation to another and the size of the Aircraft but it usually takes from two to ten days.

8.5.1 What are the costs?

The costs are determined by a Royal Decree of 14 February 2001 and vary depending on the size/type of the Aircraft from EUR 250 to EUR 25,000.

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

No.

8.7 Will a power of attorney empowering the Owner to deregister and export the Aircraft from Belgium, either at the end of the lease term or following successful repossession (with or without judicial proceedings), be enforceable in Belgium?

Yes, subject to compliance with the relevant provisions of the law (see answer 4.7 above)

8.8 Will the courts recognise a power of attorney in the form of an IDERA and governed by English law?

Yes.

8.9 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 question is controversial under Belgian law, but it is generally admitted that a power of attorney under which the attorney has its own interests (other than a general power of attorney in the sole interest of the principal) can be irrevocable and such irrevocability would be enforceable vis-à-vis the Airline.

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

Upon the occurrence of a bankruptcy or insolvency of the Airline, the power of attorney is still effective. However, if the power of attorney was given during the suspect period or the moratorium, the latter will not be enforceable against the general body of creditors. In addition, if the power of attorney is not irrevocable there is a risk that the Insolvency Official prevents the use of this right during the bankruptcy or insolvency of the Airline.


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?

It depends on the insolvency proceedings. There are two different types of insolvency proceedings under Belgian law: 

  • The bankruptcy proceedings (faillite/faillissement) are governed by the Title VI of Book XX of the Belgian Code of Economic Law. If a company has ceased to make payments on a sustained basis and its creditworthiness is undermined, it will be deemed to be in a state of bankruptcy. Within one month after the cessation of payments (unless the company has filed for judicial reorganisation), the Airline must file for bankruptcy with the commercial court. Criminal sanctions are applicable for the directors if the company does not declare the bankruptcy within the prescribed timeframe.
  • The judicial reorganisation process (réorganisation judiciaire/gerechtelijke reorganisatie) is governed by Title VI of Book XX of the Belgian Code of Economic Law. The judicial reorganisation intends to promote the recovery of a business by granting its owner in temporary financial difficulties protection against its creditors through three different routes (i.e. amicable agreement (accord amiable/minnelijk akkoord), collective agreement (accord collectif/collectieve akkoord) and transfer under judicial supervision (transfert sous autorité de justice/overdracht onder gerechtelik gezag)).

If the continuity of the Airline is threatened (which is assumed when its net assets are less than half of the share capital), the Airline may apply, through its directors, to the competent commercial court for a judicial reorganisation. A judicial reorganisation is an option that can be triggered, but the directors of the concerned company do not have any obligation to do so.

9.1.2 Do the available forms of insolvency protection in Belgium 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?

No. 

Concerning the judicial reorganisation process, the insolvent Airline’s management remains in control but the Airline is protected against the rights of its creditors. In principle, the court does not appoint any Insolvency Official in such a case, but only a deputy judge to supervise the judicial reorganisation and to regularly report to the court. Only under certain specific circumstances, a judicial administrator (and not an Insolvency Official) can be appointed in order to manage the difficulties faced by the company

Yes. 

Concerning the bankruptcy process, from the date of the bankruptcy court decision, the powers of the Airline’s management are suspended and transferred to an Insolvency Official. The Insolvency Official has wide discretionary administrative, managing and representation powers including a power to sell the assets of the Airline and to distribute the proceeds to creditors

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?

The Insolvency Official can negotiate and reach agreement. However, some decisions (such as settlements, pursuing of the Airline business, etc.) require prior court approval.

9.1.4 Does the commencement of insolvency protection involving the appointment of an Insolvency Official in Belgium have the effect of prohibiting the Owner from taking the following actions to enforce the lease after commencement of such protection:

(a)    applying any security deposit held by the Owner against any unpaid amounts due under the Lease?

No.

The Owner is entitled to apply any security deposit.

(b)    accepting payment of rent or other lease payments from:

  1. the Airline? Yes.According to article XX. 110 of the Belgian Code of Economic Law, all payments, operations and transactions made by the bankrupt company, and all payments made to the bankrupt company as from the day of the bankruptcy order, shall be void and is not enforceable vis-à-vis the bankruptcy estate. 
  2. a guarantor?No (assuming the shareholder is not engaged in insolvency proceedings). Payments from a guarantor can be accepted.
  3. a shareholder?No (assuming the shareholder is not engaged in insolvency proceedings). Payments from a guarantor can be accepted.

(c)    giving notice of default under the lease?

No.

Notice of default may be given both in judicial reorganisation and bankruptcy proceedings.

(d)    obtaining a judgment or arbitral award for unpaid lease payments?

Yes.

Proceedings against the bankrupt company are suspended as from the bankruptcy judgment. Pursuant to article XX. 155 of the Belgian Code of Economic Law, in order to take part in the allocation or to exercise any preferential right in a personal capacity, creditors are required to register their claims, together with their titles, thru the website www.regsol.be, at the latest on the date indicated in the bankruptcy order. All the claims are then verified by the Insolvency Official in the presence of the bankrupt company. If the Insolvency Official accepts the claim, the dispute is ended. However, if the Insolvency Official contests a claim, he shall inform the creditor accordingly, adding that the latter will be summoned subsequently, by registered letter, to appear before the court to hear the decision thereon.

(e)    giving notice to terminate the leasing of the Aircraft? 

No. Usually, leases provide for an ipso jure termination clause in case of bankruptcy of the company. Such a clause will however have no valid effects in case of judicial reorganisation (see our answer to question 9.1.6).

(f)    exercising rights to repossess the Aircraft? 

No. 

In case of bankruptcy, subject to the below conditions, the Owner may exercise its right to recovery pursuant to article XX. 194 of the Belgian Code of Economic Law.

The Owner’s right to recovery needs to be exercised with the Insolvency Official, shortly after the day of the bankruptcy order by the Commercial Court. More specifically, subject to forfeiture, the action to recover property must be exercised prior to (the filing of the first verification report on) the claims, which will generally take place within the month of the declaration of the bankruptcy. 

If the custody or return of the claimed assets (such as an Aircraft) entailed costs at the expense of the bankruptcy estate, the Insolvency Official shall require that such costs be paid when these goods are delivered.  If the Owner refuses to pay these costs, the Insolvency Official shall be entitled to exercise a right of retention on the assets of the Owner. 
Such a right to recovery may not be exercised during the moratorium of the judicial reorganisation.

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?

Payments or other transactions (such as granting new security) made by a company during a certain period of time prior to the bankruptcy declaration – the hardening/ “suspect” period (période suspecte/verdachte periode) – can (and in certain instances must) be voided for the benefit of the creditors. The court will determine the date of commencement of this period which can be up to 6 months before the bankruptcy declaration

Whenever the bankrupt company enters into a transaction or makes a payment that proves fraudulent toward its creditors, such transaction or payment will be declared void for the bankrupt estate, even if the transaction or payment took place before the suspect period.

9.1.6 Is there, either under law or as a matter of practice in Belgium, 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 the case of a judicial reorganisation, contracts (such as lease agreements) remain in force and an early termination clause due to judicial reorganisation has no effect. However, the Owner may terminate the lease if the rent arrears are not paid by the debtor within 14 days of formal notice given by registered letter. Except for employment contracts, the debtor can decide, within 14 days as from the judgment, not to perform under certain contracts during the suspension period (if this is necessary for the reorganisation plan or the judicial transfer).

Yes, a specific time limit is provided for in article XX. 139 of the Belgian Code of Economic Law. According to this article, the Insolvency Official shall decide without delay whether to continue with the performance of contracts concluded prior to the bankruptcy order. The Bankruptcy Act further provides that the party that has contracted with the bankrupt company may serve notice to the Insolvency Official to take the said decision within 15 days.  If no extension of this period is agreed, or if the Insolvency Official does not take a decision, the contract shall be presumed to have been terminated by the Insolvency Official as of the expiry of said time limit. In conclusion, one of the first decisions the bankruptcy trustee needs to take, is to put an end to the lease and to return the property to the Owner.

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?

Yes. 

If the Insolvency Official decides to adopt the lease, all the unpaid lease payments due as at commencement of the insolvency protection are considered to be an expense of the administration and can be claimed as a debt incurred by the general body of creditors.

Pursuant article XX. 58 of the Belgian Code of Economic Law, when the claims are born during the judicial reorganisation process, they are considered as secured debts in a subsequent bankruptcy which occurred during the period of the judicial reorganisation..

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, all claims born prior to the bankruptcy will rank equally with other ordinary unsecured creditors of the Airline.

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

Based on the documentation provided by the creditors and documentation held by the Airline, the bankruptcy trustee establishes a list of creditors/claims and classifies them according to the categories established in Belgian law: 

  • Creditors benefiting from special privileges, in particular, where claims are secured by a specific asset or right (essentially, in rem security). These creditors are entitled to execute their privilege, subject to certain restrictions including the admission of their debt by the Court and a waiting period. The proceeds of the disposal of assets covered by a specific security do not form part of the bankruptcy estate. These creditors are paid directly through the proceeds of the disposal of such assets. If the proceeds prove to be insufficient, these creditors are admitted as unsecured creditors for the remaining amount.
  • Creditors benefiting from a general privilege, including, among others, specific labor claims up to a certain amount; claims relating to unpaid tax withholdings and social security contributions; claims for other amounts to be paid to the tax authorities and the social security authorities. During the liquidation process, claims benefiting from a general privilege are paid before ordinary claims, in accordance with the ranking established under the Belgian Mortgages Act. Assets subject to a special privilege may not be used to pay general privilege claims, unless there is an excess after the payment of the secured claim.
  • Ordinary creditors (non-subordinated and non-privileged claims) rank pari passu and will be paid pro rata.
  • Subordinated creditors to all ordinary creditors pursuant to an agreement or the law. Claims form creditors benefiting from a special or general privilege will rank above claims of the Owner.
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 Belgium laws, 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?

Yes, the right of retention may be exercised by a person other than the Owner 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. Nevertheless, the exercise of such a right can be considered, in certain circumstances, as an abuse of right.

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, such person could be entitled to exercise a right of retention.

This right of retention is even enforceable against the Owner if the person in possession of the Aircraft could legitimately believe that he was dealing with the effective Owner or at least with someone it could legitimately assume as authorized to act on behalf of the Owner.

9.1.11 Is a person other than the Airline, for example an airport authority, entitled under Belgium laws 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.

After the commencement of Insolvency Protection of the Airline, everyone is subject to the moratorium on enforcing rights once Insolvency has commenced. This is the case for both bankruptcy and judicial reorganisation. 


10. Taxation

10.1 The decision to lease to an airline in Belgium 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 Belgium on lease payments on basis that either the Owner is subject to taxation in Belgium 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?

A distinction has to be made between a wet lease of an Aircraft and the dry lease of an Aircraft.

If the Owner leases an Aircraft on a dry lease, there should be no taxation in Belgium on the lease payments unless the Owner carries on business through a permanent establishment in Belgium and the lease payments are attributable to that permanent establishment. In that case, the benefits will be taxed at a rate of 29,58% (25% as of financial year 2020) (article 7 of the double tax treaty). No Belgian WHT on the lease payments is due.

If the Owner wet leases an Aircraft to the Airline, the profits derived shall be taxable only in Ireland (article 8 of the double tax treaty). No WHT on the lease payments is due.

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

A distinction has to be made between a wet lease of an Aircraft and the dry lease of an Aircraft.

If the Owner leases an Aircraft on a dry lease, there should be no taxation in Belgium on the lease payments unless the Owner carries on business through a permanent establishment in Belgium and the lease payments are attributable to that permanent establishment. In that case, the benefits will be taxed at a rate of 29,58% (25% as of financial year 2020) (article 7 of the double tax treaty). No Belgian WHT on the lease payments is due.

If the Owner wet leases an Aircraft to the Airline, the profits derived shall be taxable only in the UK (article 8 of the double tax treaty). No WHT on the lease payments is due.

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

A distinction has to be made between a wet lease of an Aircraft and the dry lease of an Aircraft. 

If the Owner leases an Aircraft on a dry lease basis, there should be no taxation in Belgium on the lease payments unless the Owner carries on business through a permanent establishment in Belgium and the lease payments are attributable to that permanent establishment. In that case, the benefits will be taxed at a rate of 29,58% (25% as of financial year 2020) (article 7 of the double tax treaty). However when such lease is an occasional source of income for the Owner, the lease shall be taxable only in Hong Kong. No Belgian WHT on the lease payments is due.

If the Owner wet leases an Aircraft, the profits derived shall be taxable only in Hong Kong (article 8 of the double tax treaty). No Belgian WHT on the lease payments is due.

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

A distinction has to be made between a wet lease of an Aircraft and the dry lease of an Aircraft.

If the Owner leases an aircraft on a dry lease, there should be no taxation in Belgium on the lease payments unless the Owner carries on business through a permanent establishment in Belgium and the lease payments are attributable to that permanent establishment. In that case, the benefits will be taxed at a rate of 29,58% (25% as of financial year 2020) (article 7 of the double tax treaty). No Belgian WHT on the lease payments is due.

If the Owner wet leases an Aircraft to the Airline, the profits derived shall be taxable only in Singapore (article 8 of the double tax treaty). No WHT on the lease payments is due.

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

A distinction has to be made between a wet lease of an Aircraft and the dry lease of an Aircraft.

If the Owner leases an aircraft on a dry lease, there should be no taxation in Belgium on the lease payments unless the Owner carries on business through a permanent establishment in Belgium and the lease payments are attributable to that permanent establishment. In that case, the benefits will be taxed at a rate of 29,58% (25% as of financial year 2020) (article 7 of the double tax treaty). No Belgian WHT on the lease payments is due.

If the Owner wet leases an Aircraft to the Airline, the profits derived shall be taxable only in Malta (article 8 of the double tax treaty). No WHT on the lease payments is due.

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

There is no double tax treaty available between Belgium and the Channel Islands. Therefore, the income will be taxable in Belgium at the rate of 29,58% (25% as of financial year 2020), and may also be taxable in the Channel Islands. 

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

There is no double tax treaty available between Belgium and the Isle of Man. Therefore, the income will be taxable in Belgium at the rate of 29,58% (25% as of financial year 2020), and may also be taxable in the Isle of Man. 

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

A distinction has to be made between a wet lease of an Aircraft and the dry lease of an Aircraft. 

If the Owner leases an Aircraft on a dry lease, there should be no taxation in Belgium on the lease payments unless the Owner carries on business through a permanent establishment in Belgium and the lease payments are attributable to that permanent establishment. In that case, the benefits will be taxed at a rate of 29,58% (25% as of financial year 2020) (article 7 of the double tax treaty). However when such lease is an occasional source of income for the Owner, the lease shall be taxable only in Mauritius. No Belgian WHT on the lease payments is due.

If the Owner wet leases an Aircraft, the profits derived shall be taxable only in Mauritius (article 8 of the double tax treaty). No Belgian WHT on the lease payments is due.

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

There is no double tax treaty available between Belgium and Bermuda. Therefore, the income will be taxable in Belgium at the rate of 29,58% (25% as of financial year 2020), and may also be taxable in the Bermuda. 

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

There is no double tax treaty available between Belgium and the Cayman Islands. Therefore, the income will be taxable in Belgium at the rate of 33.99%, and may also be taxable in the Cayman Islands. 

10.2 If there is a requirement in Belgium for the airline to withhold tax on lease payments, will the courts of Belgium 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.

Gross up clauses agreed upon between the parties are generally accepted in Belgium.

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:

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

21%

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, VAT will not be applied to lease rentals from an airline operating for reward chiefly on international routes by reason of application of exemption.

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:

21%

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

10.3.4.1 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

10.3.4.2 If yes, is this because Belgium does not apply the decision in ECJ Case C-33/2011?

N/A

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%

No it is not possible to register a lease interest in Belgium. A copy of the lease agreement will usually be provided to the Belgian Civil Aviation Authority in order to proceed with registration, but the filing of the lease with the Aviation Authority cannot be considered as a registration as such.

No

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

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

No.

10.6.2 making available a lease facility to a company incorporated or regulated in Belgium?

No.

10.6.3 receiving rent and other lease payments under the Lease from the lessee incorporated or registered in Belgium?

No other than mentioned above

10.6.4 repossessing the aircraft and exporting the aircraft from Belgium? 

No other than mentioned above

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?

The capital gain resulting from the sale will be taxed as a business profit at the general corporate income tax rate of 29,58% (25% as of financial year 2020). Note however that most double tax treaties entered into in Belgium provide that capital gains realised on aircraft by their foreign owners with a Permanent Establishment in Belgium are not subject to tax in Belgium.


11. Exchange controls

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

No.

Payments from Belgium to foreign countries are not subject to prior authorisations. Belgium applies EU law with respect to the free movement of capital.

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?

N/A.


12. Insurance

There is no legal requirement to insure the Aircraft under Belgian law and no requirement that  primary cover be placed with a Belgian insurer. Generally, Belgian air carriers/Aircraft operators are required under the EU Regulation 785/2004 to insure damages caused by them to passengers, cargo and/or third parties but again there is no restriction on where the insurances are placed.

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

There is no restriction on reinsurance of the primary insurance outside Belgium. However, in order for non-EEA reinsurance companies to offer such services in Belgium, they must (i) have notified the Belgian Financial Services and Market Authorities (i.e. FSMA) thereof and (ii) be properly registered for such purpose with the FSMA.

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

There is no obligation to retain a percentage for the local insurer.

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

In principle, cut through clauses are not used in Europe (and Belgium).


13. Liability for damage

13.1 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?

Under Belgian law, the general principle is that any liability implies a fault, a damage and a causal link between the fault and the damage. There are however exceptions to such principles such as liabilities incurred for third parties or strict liability (liability without fault or negligence). An example of strict liability is the product liability covered by the law of 25 February 1991 (as amended). Indeed, under the Belgian legislation, the manufacturer of products is liable for damages caused by defective products even if there is no fault as such. In case the manufacturer is based outside the EU, any importer will also be liable on the basis of such legislation in the same way as the manufacturer. Therefore, in case of defect products causing damages and provided that the manufacturer is based outside EU, an Owner – as importer – could be liable (even without fault).

The parties to a lease may provide, contractually, how such risks are allocated between them and typically the risk is passed to the lessee.


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?

No specific rule law applies in this respect.

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

N/A.


15. Sovereign immunity

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

No.

The concept of sovereign immunity for state-owned companies does not exist under Belgian law.

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

16. Dispute resolution and reciprocal enforcement

16.1 Do Belgium laws 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?

Generally, Belgian courts will recognise and give effect to the choice of a foreign forum subject to the requirements of 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) if such foreign place of jurisdiction is located within the EU, the leasing agreement does not concern immoveable 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. 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. To our knowledge, there is no Belgian case-law on that specific issue, i.e. the abusive nature (or not) of an ‘asymmetric’ jurisdiction clause in case of lease on Aircraft.

In our point of view however, such a clause should be valid provided that no abuse of right may be found (the competent jurisdictions must have some links with the case under their scrutiny).

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 Belgium 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?

The case will not be re-examined on the merits but an exequatur procedure has to be followed. During such exequatur procedure, the Tribunal of First Instance will examine several elements listed below. The “exequatur” will indeed not be granted if:

  • the decision is incompatible with public order; or
  • the right of defence was infringed; or
  • the parties could not dispose of their rights; or
  • the decision is incompatible with a Belgian decision previously rendered; or
  • the claim was introduced before the English Courts after the introduction of the same claim involving the same parties that is still pending before Belgian jurisdictions; or
  • the Belgian jurisdictions were the sole competent jurisdictions; or
  • the jurisdiction of the English Courts was based only on the (random) presence of the defendant (in the exequatur procedure) or goods in England, without any direct relation with the dispute; or
  • the dispute concerns specific areas of law (adoption, modification of name, etc.).

16.3 Is Belgium 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 court of Belgium recognise and enforce a decision of an arbitrator?

Belgium is a party to the New York Convention of 1958. Belgium has made the reciprocity reservation (article I (3) of the Convention), and therefore Belgian courts will apply the New York Convention only to awards made in the territory of another contracting state.

Belgium also signed the ICSID Convention.

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 Belgium?

Except in supply contract which are regulated by mandatory rules, the usual choice is the one of the stronger party.


17. Aircraft engines

17.1 If the equipment being leased to the Airline in Belgium 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?

No.

17.2 In particular, does Belgium 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?

Although Belgian law recognizes the theory of annexation of fixtures, it is merely applied to real estate cases. If this theory is however applied to Aircraft, then the mere fact that the engine is affixed to an Aircraft owned by a different person does not give a right of ownership on such engine to that person. The engine may however be considered as part of the assets of the owner of the Aircraft by a creditor thereof if the latter shows evidence of “ostensible ownership” of the engine by the owner of the Aircraft/airframe. In practice, if the owner of the engine and the owner of the Aircraft are not the same person, they will try to avoid “ostensible ownership” by affixing plate on the engine (showing the identity of the real owner of the engine). As a consequence, if the Owner of the Aircraft engine is able to prove its title to such engine (by agreement with the Aircraft Owner, by plates, etc.), it will be able to recover such engine even if it is attached to an airframe belonging to another person. 

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 register of Aircraft Engines in Belgium. The only existing register is the abovementioned Aircraft Register (matricule aéronautique/luchtvaartregister).


18. Additional information

In case a bank grants facilities with a view to financing the sale of an Aircraft, it will usually require a pledge over the underlying Aircraft to cover any default under the Finance Documents. Since 1 January 2018, such pledge can be registered into an electronic national pledge registry (“Registre National du Gage”/”Nationaal Pandregister”). The validity and enforceability of a pledge over an Aircraft (as well as over any kind of moveable asset) does not require any dispossession of the pledged assets in the hands of a third party pledgeholder anymore. Therefore, the borrower (pledgor) can be the operator of the Aircraft (which was not permitted when a dispossession was legally required).

Picture of Arnaud Van Oekel
Arnaud Van Oekel
Partner
Brussels
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David Prync
Senior Associate
Brussels