Home / All CMS Expert Guides / CMS Expert Guide to aircraft finance and leasing /
Croatia

Aircraft finance and leasing in Croatia

Table of contents
  1. PROPOSED TRANSACTION STRUCTURE
    1. Is this the usual structure for transactions of this nature in the Relevant Jurisdiction?
  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 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 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:The Chicago Convention of 1944 on International Civil Aviation?
    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. 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?
    6. 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.
    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 the Relevant Jurisdiction?
    8. 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?
    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 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. 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 the Relevant Jurisdiction? 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 the Relevant Jurisdiction, is there any other Relevant Jursidiction 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?
  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)?
    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?
Croatia

1. PROPOSED TRANSACTION STRUCTURE

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

Is this 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. The opening of the bankruptcy proceedings is published on e-bulletin board of the Croatian Ministry of Justice. The initiation of liquidation is recorded in the Company registry held with the respective Commercial courts. The Company registry can be viewed online. 

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.

Company registry and the e-bulletin board of the Croatian Ministry of Justice. All searches can be conducted online and are free of charge.


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 aircraft is acquired has to be in written form.

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

The transfer of ownership is done by registration of the new owner with the Croatian Civil Aircraft Registry. Legal effects of registration are constitutive, i.e. only by registration with the Croatian Aircraft Registry the new owner acquires its proprietary rights in relation to the aircraft. 

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?

Yes. However, law of the country where the aircraft is registered has to be observed.

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

VAT is not payable where the Aircraft will be used by an Airline operating commercial flights for reward mostly on international routes (see 10.3 below for more detail). Aircraft Parts and equipment (including Aircraft Engines) supplied in Croatia are also VAT exempt where they are of a kind ordinarily installed or incorporated in an Aircraft operated by an Airline operating commercial flights mostly on international routes. 

If the Aircraft is to be registered on the Croatian registry of civil aircraft then Special administration fee in the amount of HRK 170.00 (for aircraft whose maximum take-off mass is up to 2,000 kilos), HRK 490.00 (for aircraft whose maximum take-off mass is 2,000 – 5,700 kilos) or HRK 1,400.00 (for aircraft whose maximum take-off mass is over 5,700 kilos) will be paid.

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?

Croatian law provides the possibility of government requisition in the event of war or immediate threat of war. In such event the owner is entitled to compensation in the amount which will be subsequently prescribed by government decision. However, the only compensation which is certain and prescribed by law is the one paid in the event of damage done to the aircraft during its use by the government. The owner is in no circumstance entitled to compensation for loss of profits.

Aircraft inspectors have the power to limit the use or entirely forbid the use of a certain aircraft if it is determined in the course of inspection that it or its component does not fulfil the technical requirements for airworthiness. The limitation or prohibition lasts until the irregularities are remedied.


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.

N/A.

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?

No, as far as we’re aware of.

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

Yes. It is called Croatian Civil Aircraft Registry. It is operated by the Croatian Civil Aviation Agency.

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?

Owner. The owner can authorize the operator to register the aircraft based on a notarized Power of Attorney. Both owners and operators are registered in the Registry.

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?

Generally, Croatian Civil Aircraft registry includes information on the following: ownership, registration designation, manufacturer, aircraft manufacturer label, ICAO aircraft type, serial number, year of production, operator information, MTOM, former state of registry, former registration mark, date of removal from the former registry. Additionally, mortgage and lease can be recorded.

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?

It is not an operator registry. However, the Register of Civil Aircraft contains the details of the aircraft owner, lessor and operator.

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.

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

No, save for VAT (see point 3.1.4).

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)?

Request for aircraft entry to the register have to be accompanied with originals or certified copies of the following documents: 

  • Single customs declaration (if the aircraft has been bought in foreign country which is not an EU Member State), 
  • Application for the acquisition of the new aircraft if the buyer is subject to the value added tax (if the aircraft has been bought in the EU Member State),
  • Application for the acquisition of the new aircraft with proof of payment of the value added tax, if the buyer is not subject to value added tax (i.e. provided that the aircraft has been bought in EU Member State), 
  • Sale-purchase agreement or the bill of sale or other relevant proof of ownership,
  • Excerpt from the court registry which proves that legal person has the seat in the Republic of Croatia or in another ECAA contracting party,
  • Lease agreement (if the operator is different from the owner),
  •  If the applicant is operator, written verified consent of an owner given to the operator which entitles him to take all the actions regarding entering aircraft into the Registry and for the entering of operator into the Registry,
  • Certificate of De-registration issued by competent body entitled for maintenance of foreign registry or military registry, if the aircraft is being transferred from foreign registry to the Registry,
  • Certificate of Non-registration, if the new aircraft was bought in foreign country which has never been entered into registry or military registry,
  • Certificate of Airworthiness or Permit to Fly,
  • Export Certificate of Airworthiness, for aircraft entering from foreign country which is not EU Member State,
  • Personal identification card or other equivalent document which proves the nationality of Republic of Croatia or ECAA Contracting Party (copy of the document is acceptable),
  • OIB Certificate - OIB means Personal Identification Number issued by the Ministry of finance of the Republic of Croatia (copy of the document is acceptable),
  • For a newly produced aircraft which has not before been registered in any jurisdiction documents proving that it is a newly produced aircraft are required (e.g. builder’s certificate, contract with the builder or its representative transferring the title over the aircraft etc).    

Yes. An Aircraft can be registered in Croatian Civil Aircraft registry if it is not already registered in register of another country or in Croatian or some other’s country military register. An owner or an operator are required to be nationals of either Croatia or EU Member State or Member of ECAA Agreement or corporations incorporated in Croatia, EU Member State or Member state of ECAA Agreement. If an Aircraft is already registered in another register, an evidence of deletion from that register has to be submitted for the purpose of registration in Croatian Register of Civil Aircraft. An Aircraft has to comply with air traffic safety standards and other requirements prescribed by the by-laws rendered pursuant to Air Transport Act.

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?

Other than mortgages, lease, pre-emption right and repurchase right registered with Croatian Register of Civil Aircraft, no further filings or registrations are desirable.


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?

Yes, providing one of the parties to the Lease is a non-Croatian domicile.

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)?

Written form will suffice. If the Owner requests the notarisation of the Lease (although notarisation is not mandatory), then Lease must be also in Croatian language.

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 does not have to be in Croatian language. (Please also see 5.3). The parties are free to agree that in case of any discrepancies the English version shall prevail. However, as Croatian is the official language in the Relevant Jurisdiction, all communication before Croatian authorities (including courts and other regulatory authorities) must be in Croatian language. 

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

There are no special terms that the Lease must contain.

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?

It is not very likely that a lease would be re-characterised as a secured loan. However, if elements of sale and lease back are present, structure of the transaction may resemble to a financing, consequently triggering regulatory and tax requirements specific for sale and lease back. 

5.6.2 a finance (or capital) lease?

Finance lease is defined in Croatian Leasing Act as a transaction in which the lessee, during the period of the lease agreement, pays a fee to the lessor (i.e. leasing provider) as a compensation for using the leased object. In finance lease agreement, the entire value of the leased object has been calculated into leasing fee and the lessee undertakes to bear the cost of depreciation of the leased object. Finance lease contains also an option for lessee to acquire the leased object at a certain price (such price being less than the actual value of the leased object at the time such option is exercised). In financial lease agreement, most ownership related risks and awards are transferred to the lessee. Save for the characteristics of the finance lease above, it should be noted that there is no firmly set criteria determining the difference between general lease agreements and the leasing agreements. Hence, such issue should be addressed on a case to case basis.


6. LEASE REGISTRATION

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

No.

6.2 If yes, then:

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

N/A.

6.2.2 What registration fees are payable (if any)?

N/A.

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

N/A.

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?

N/A.


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, the Owner can terminate the Lease and ask for repossession of the Aircraft. In case of judicial proceedings, enforcement of the court decision is allowed if the aircraft is located on the territory of the Republic of Croatia or if the aircraft is registered with the Croatian Civil Aircraft Registry (in case the aircraft is not located on the Croatian territory).

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

Yes, if Lessee does not object and such undertaking is allowed pursuant to the lease agreement.

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?

If lessee objects to the owner's re-possession request, the Owner has to prove its title, i.e. it needs to present the originals of Sale and Purchase Agreement, or other document evidencing the title over the Aircraft as well as the lease agreement and the evidence of valid termination thereof. Documents can be presented in copies before the court, although opposite party may request for originals to be presented before the court. 

7.3.2 What is the approximate cost of issuing proceedings?

It is hard to predict.

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?

It is hard to predict.

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?

It is hard to predict.

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?

The Owner can terminate the Lease after expiration of 15 days after the Lessee is in payment default and then has a right to take action to repossess.

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

No.

7.4.3 Is a Public Auction of the aircraft required?

No.

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 the Relevant Jurisdiction required to take possession of the Aircraft?

No, except from the case of criminal activity (see 14.1)

7.6 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 any such history.

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 the Relevant Jurisdiction?

No, except in the case of bankruptcy proceedings over Lessee or in case of debt restructuring in pre-bankruptcy proceedings.

7.8 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?

Generally, the Owner can at any time sell the Aircraft. Following the sale, a buyer steps into the Lessor’s place and assumes all rights and obligations of the Lessor. If there is a mortgage registered on the Aircraft, sale shall be subject to mortgage. If, however, the sale is conducted after the Lease had already been terminated, the buyer shall not assume the Lessor’s position.

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

When exporting aircraft from the Republic of Croatia to non-EU member states, one has to inquire about the importing national requirements. On the basis of an airworthiness review certificate not older than 60 days and information on the national importing requirements, Croatian Civil Aviation Agency will issue upon the request of the Aircraft Owner an Export CoFa for exporting aircraft to a specific country.


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?

Yes and there is no time period for submission of application for deregistration (besides submitting a completed form which can be found on the Agency’s web page) the following documents are required: certificate of registration, if the applicant is operator – written verified consent of an owner given to the operator which entitles him to take all the actions regarding deregistration, if there is a burden entered in the burden sheet – written verified consent of the authorized person or a decision of the competent court must be submitted).

The consent of the Airline is not required. The Aircraft can be deregistered ex officio or by the request of the Owner or the Operator, authorised by the Owner. Croatian Civil Aviation Agency brings a resolution on deregistration of the Aircraft from Croatian registry.

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?

According to the law, deregistration takes up to 30 days. However, in practice, it takes up not more than few days.

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

Croatian Civil Aviation Agency issues an Export Certificate of Airworthiness only when all requirements prescribed by law are met and when the Aircraft is exported outside EU. Other potential export licence or export permit depend on import state.

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

It depends on import state in each particular case.

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

No, Croatian Civil Aviation Agency brings a resolution on deregistration of the Aircraft only when all requirements prescribed by law are met (ex officio or by the request of the Owner/authorised Operator).

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?

Power of attorney has to contain a verified signature, be drafted in Croatian language and not older then six months. There is a special Removal of Aircraft Application Form prescribed, that has to be filled and submitted (not IDERA form.)

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?

Pursuant to general law, the Airline can revoke power of attorney even if the power of attorney was stated to be irrevocable by the contract.

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

Generally yes, but by commencement of bankruptcy proceedings over the Airline, its power of attorney regarding its assets will terminate.


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?

The Airline (i.e. its directors) is obliged to file for opening of bankruptcy proceedings in case of illiquidity1, within 61 days from the day when illiquidity occurred, except when there is an obligation of pre-bankruptcy proceedings. The Airline (i.e. its directors) is also obliged to file for opening of bankruptcy proceedings in case of inability to pay debts2 or insolvency3, within 21 days from the day when inability to pay debts when due or insolvency occurred, except where there is an obligation of the Airline to initiate pre-bankruptcy proceedings. Bankruptcy proceedings over the Airline will commence in a case of its insolvency, except when it can be presumed (by e.g. available assets and security) that by continuing its business activity the Airline will keep fulfilling its liabilities properly when due.

The Airline (i.e. its directors), if still has assets and employees, is obliged to file for opening of pre-bankruptcy proceedings in case of illiquidity, within 60 days from the day when illiquidity occurred, if it cannot maintain liquidity with measures of financial restructuring. The Airline (i.e. its directors), if still has assets and employees, is also obliged to file for opening of pre-bankruptcy proceedings in case of inability to pay its debts or insolvency, within 21 days from the day when inability to pay the debts or insolvency occurred.

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.

Upon opening of bankruptcy procedure, a court will appoint an Insolvency Administrator, who will represent and take the business of the Airline.

Upon opening of pre-bankruptcy proceedings, the court may appoint a Pre-bankruptcy Commissioner, who will control the business of the Airline.

In a case of liquidation, a Liquidator appointed by shareholders of the Airline will represent and take the business of the Airline until the company is liquidated and deleted from a Court register.

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?

Insolvency Administrator holds the right continue performing all Airline's obligation arising from Lease during the bankruptcy proceedings. However, it also holds a right not to fulfil the Airline's obligation pursuant to the lease agreement in which case the owner is entitled to submit its claims arising therefrom as a bankruptcy creditor in the bankruptcy proceedings. Although, general supervision of Insolvency Administrator's work is prescribed by the Bankruptcy Act, Insolvency Administrator does not need the court's approval for such actions. 

After the commencement of pre-bankruptcy proceedings until the pre-bankruptcy settlement, the Airline can make payments necessary for continuing regular business activity, for example pay unpaid rent incurred after commencement of pre-bankruptcy or provide other actions, without preliminary approval of the Pre-bankruptcy Commissioner or the court. 

Liquidator is obliged 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 during the proceedings of liquidation.

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? After commencement of bankruptcy and pre-bankruptcy proceedings, applying security against unpaid lease payments is prohibited. There is no such prohibition in liquidation.
  • Accepting payment of rent or other lease payments from:
    • (i.) the Airline? Yes in bankruptcy and pre-bankruptcy proceedings provided that, in the bankruptcy proceedings, the Insolvency Administrator has decided not to terminate the Lease, no limitation during liquidation.
    • (ii.) a guarantor? Assuming the Guarantor is not itself in bankruptcy or pre-bankruptcy proceedings then there is no limitation on accepting payments under the guarantee from the Guarantor.
    •  (iii.) a shareholder? Assuming the shareholder is not itself in bankruptcy or pre-bankruptcy proceedings then there is no limitation on accepting payments from the shareholder.
  • Giving notice of default under the lease? No restrictions, notice of default can be given.
  • Obtaining a judgment or arbitral award for unpaid lease payments? After commencement of bankruptcy and pre-bankruptcy proceedings, commencing proceedings or an arbitration process to enforce unpaid lease payments is prohibited. Pending proceedings started before commencement of bankruptcy proceedings will terminate while pending proceedings started before commencement of pre-bankruptcy proceedings will terminate upon a request of the Airline. There is no such a prohibition in liquidation.
  • Giving notice to terminate the leasing of the Aircraft? After a motion for opening bankruptcy proceedings has been submitted, lessor may not terminate the lease agreement for the reason of payment default which has occurred prior to opening of the bankruptcy proceedings or due to decrease of value of debtor's assets
  • Exercising rights to repossess the Aircraft? No restrictions.
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?

Yes, legal actions representing preferential transfer to certain creditors prior to the opening of the bankruptcy proceedings are not allowed and such actions can be challenged by bankruptcy administrator or other bankruptcy creditors before the court. Clawback periods vary on various conditions (e.g. degree of creditor's awareness of debtor's insolvency or inability to pay) and may last up to 10 years for cases of wilful misconduct to the detriment of other creditors. 

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?

There is no legal requirement or particular practice pursuant to which Insolvency Administrator should terminate the Lease. It will decide in each particular case how to proceed like with any other commercial contract. However, lessor may request for Insolvency Administrator to inform it on Insolvency Administrator’s right of choice to either terminate or continue the agreement (please see 9.1.3. above). In that case, Insolvency Administrator is obliged immediately (or by the end of reporting bankruptcy hearing) to inform the creditor on its right of choice. If Insolvency Administrator decides to terminate the contract, the Owner may submit its due and payable claims arising from lease agreement as a bankruptcy creditor in the bankruptcy proceedings.

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, lease payments due before commencement of the bankruptcy or pre-bankruptcy proceedings are under regime of insolvency protection, i.e. the Owner can apply his claims as a bankruptcy creditor.

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?

Owner has a right of repossession of the Aircraft, prior to other creditors, but considering unpaid lease payments there are certain types of preferred creditors/receivables (such as those creditors who are also owners of certain asset in debtor’s possession or are secured creditors, i.e. creditors with a mortgage, lien, claims for expenses of bankruptcy proceedings, expenses of lawyers, receivables of employees occurred after commencement of the bankruptcy…).

In pre-bankruptcy proceedings the Owner has also a right of repossession of the Aircraft, prior to other creditors, but considering unpaid lease payments preferred creditors are also other owners of certain asset in debtor’s possession or those creditors who have a mortgage, secured creditors, creditors with a lien, workers whose receivables occurred before commencement of the pre-bankruptcy, creditors whose receivables matured after commencement of the bankruptcy proceedings.

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?

Yes.

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.


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:

Remark: Croatian DTT treaties generally comply with the OECD model, including the article 8 (1): Profits of an enterprise of a Contracting State from the operation of ships or aircraft in international traffic shall be taxable only in that State.

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

Yes/no DDT yes/no If yes, Rate:

DTT – yes; there is no withholding tax on lease payments.

Provided that the Owner is non-resident in Croatia, there is no requirement for the Owner to pay corporate profit tax in Croatia on the lease payments under the Lease.

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

Yes/no DDT yes/no If yes, Rate:

DTT – yes; there is no withholding tax on lease payments.

Provided that the Owner is non-resident in Croatia, there is no requirement for the Owner to pay corporate profit tax in Croatia on the lease payments under the Lease. 

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

Yes/no DDT yes/no If yes, Rate:

DTT – no; there is no withholding tax on lease payments.

Provided that the Owner is non-resident in Croatia, there is no requirement for the Owner to pay corporate profit tax in Croatia on the lease payments under the Lease.

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

Yes/no DDT yes/no If yes, Rate:

DTT – no; there is no withholding tax on lease payments.

Provided that the Owner is non-resident in Croatia, there is no requirement for the Owner to pay corporate profit tax in Croatia on the lease payments under the Lease. 

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

Yes/no DDT yes/no If yes, Rate:

DTT – yes; there is no withholding tax on lease payments.

Provided that the Owner is non-resident in Croatia, there is no requirement for the Owner to pay corporate profit tax in Croatia on the lease payments under the Lease.

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

Yes/no DDT yes/no If yes, Rate:

DTT – no; there is no withholding tax on lease payments.

Provided that the Owner is non-resident in Croatia, there is no requirement for the Owner to pay corporate profit tax in Croatia on the lease payments under the Lease.

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

Yes/no DDT yes/no If yes, Rate:

DTT – no; there is no withholding tax on lease payments.

Provided that the Owner is non-resident in Croatia, there is no requirement for the Owner to pay corporate profit tax in Croatia on the lease payments under the Lease.

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

Yes/no DDT yes/no If yes, rate:

DTT – yes; there is no withholding tax on lease payments.

Provided that the Owner is non-resident in Croatia, there is no requirement for the Owner to pay corporate profit tax in Croatia on the lease payments under the Lease.

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

Yes/no DDT yes/no If yes, Rate:

DTT – no; there is no withholding tax on lease payments.

Provided that the Owner is non-resident in Croatia, there is no requirement for the Owner to pay corporate profit tax in Croatia on the lease payments under the Lease.

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

Yes/no DDT yes/no If yes, Rate:

DTT – no; there is no withholding tax on lease payments.

Provided that the Owner is non-resident in Croatia, there is no requirement for the Owner to pay corporate profit tax in Croatia on the lease payments under the Lease.

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.

N/A. Lease payments are not subject to withholding tax in Croatia.

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:

25%. 

It is expected that as of 1/1/2020 the general VAT rate will be reduced to 24%.

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.

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:

Sale will be subject to VAT. 

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.

10.3.5 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, but following the exemption provided in the Croatian VAT Law (following Art 148(f) of the VAT Directive).

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

N/A.

10.3.7 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?

According to the Council Regulation (EEC) No 2658/87 on the tariff and statistical nomenclature and on the Common Customs Tariff,

  • 7.7% customs duty is applicable to Aeroplanes and other aircraft, of an unladen weight not exceeding 2.000 kg and 
  • 2.7% customs duty to Aeroplanes and other aircraft, of an unladen weight exceeding 2.000 kg.

Lease Contract have to be concluded in written form. If it is going to be concluded in Croatia, in a form of public notary’s act, notarial fee depends on value of the Lease (i.e. 1-year lease payments, save for the leases entered into for less than a 1-year term). When the case value exceeds approx. EUR 50,000, notarial fees would amount between approx. EUR 400 and approx. EUR 5,300. In a case of notarization of the Lease contract, composed by, for example, attorney instead of public notary, notarial fee would amount 50% of above-mentioned fees.

Other notarial or attorney’s fees in respect of the execution of the Lease are also possible and they are payable in Croatia if the relevant documents are executed in Croatia, by Croatian public notary and attorney.

No.

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 Jursidiction 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?

Under assumption that the Owner does not trigger PE in Croatia, no other taxation consequences should arise.

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

Under assumption that the Owner does not trigger PE in Croatia, no other taxation consequences should arise.

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

Under assumption that the Owner does not trigger PE in Croatia, no other taxation consequences should arise.

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

Under assumption that the Owner does not trigger PE in Croatia, no other taxation consequences should arise.

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?

Under assumption that the Owner does not trigger PE in Croatia, no other taxation consequences should arise.


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. With an exception to certain capital investments, payments to non-residents are free of exchange or similar control.

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

In order to operate in the Croatian airspace, every air carrier or aircraft operator is required to have liability insurance for damages caused to passengers, baggage, cargo and third parties, in accordance with the Regulation (EC) No 785/2004 of the European Parliament and of the Council of 21 April 2004 on insurance requirements for air carriers and aircraft operators, as amended by the Commission Regulation (EU) No 285/2010 of 6 April 2010.

Insurance certificate or any other evidence of insurance have to list all insured risks and demonstrate compliance with the Regulation (EC) No 785/2004 of the European Parliament and of the Council of 21 April 2004 on insurance requirements for air carriers and aircraft operators.

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?

The requirements regarding minimum insurance covers stated in Special Drawing Rights (SDRs) are as follows:

Insurance in respect of liability to third parties, per accident for aircraft with a maximum take-off mass (MTOM) off:

  • up to 500 kg: SDR 0.75m,
  • from 501 and up to 1000 kg: 1.5m SDR,
  • from 1.001 and up to 2.700 kg: 3m SDR,
  • from 2.701 and up to 6.000 kg: 7m SDR,
  • from 6.001 and up to12.000 kg: 18m SDR,
  • from 12.001 and up to 25.000 kg: 80m SDR,
  • from 25.001 and up to 50.000 kg: 150m SDR,
  • from 50.001 kg and up to 200.000 kg: 300m SDR,
  • from 200.001 kg and up to 500.000 kg: 500m SDR,
  • above 500.001 kg: 700m SDR.

For every individual passenger 250.000 SDR in commercial operations.

For baggage 1.131 SDR in commercial operations.

For cargo 19 SDR per kg in commercial operations.

In respect to non-commercial operations by an aircraft with MTOM of 2700 kg or less, the minimum insurance cover must be 100.000 SDR per passenger.

12.4 Is it possible for local insurers to assign contracts of reinsurance?

Yes.

If not, is a cut-through clause enforceable?

Yes, also.


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? 

No. Lessee is liable for damage caused on earth by the Aircraft in air, during the Lease. Lessee is also liable for misdemeanour caused by using the Aircraft while the Aircraft is in its possession. Furthermore, Croatia has ratified Montreal Convention from 1999 defining liability of the Airline for damage.


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?

Yes, there is such a possibility. For example, according to Croatian Criminal Act, if the Aircraft was used for a purpose of criminal act (e.g. drug trafficking), a Court may confiscate the Aircraft, but in certain cases the Owner has a right of exemption from the enforcement.

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

No.


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.

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

N/A.


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?

In Croatia, according to the rules of private international law the Regulation (EU) No 1215/2012 of the European Parliament and of the Council (Bruxelles I bis) is applicable to the jurisdiction, recognition and enforcement of judgements in civil and commercial matters. There is no explicit provision within Croatian Jurisdiction permitting such an “asymmetric” submission to jurisdiction clause.

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?

According to the Bruxelles I bis Regulation, such a judgment brought in England will be recognised in Croatia (with exceptions prescribed by the Regulation) without any special procedure being required. The judgment obtained in the English courts cannot be re-examined on its merits, save for an ordre public test (where applicable).

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)?

Yes, Croatia is party both the New York Convention and the Washington Convention.

Will the courts of the Relevant Jurisdiction recognise and enforce a decision of an arbitrator?

Generally yes, with some exceptions proscribed by the Croatian Arbitration Act and the New York 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 the Relevant Jurisdiction?

The usual choice of dispute resolution is arbitration or, in case foreign law is the governing law for the contract, disputes are often resolved before the courts of that country.


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?

No.

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?

Croatian law does not specifically recognise the separate ownership of the Aircraft Engine by the Aircraft Engine Owner through a system of registration where the Aircraft Engine is attached to an airframe owned by a person other than the Aircraft Engine Owner. However, since the Aircraft Engine can be physically detached from the airframe without demolishing the Aircraft, a separate property right over the Aircraft Engine can exist in favour of a person other than the airframe owner, subject to a contract between the Aircraft Engine Owner and the airframe owner (i.e. the Aircraft Owner) whereby, inter alia, the Aircraft Owner should acknowledge the engine title separation from the aircraft ownership and such rights should be recognised in courts. The Aircraft Engine Owner shall have a burden of proof that such property rights exist in its favour.

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 Aircraft Engine register. However, although it is not explicitly prescribed by Croatian Law regulating the aircraft registration, it is possible to file the notice with the Croatian Civil Aircraft Registry confirming that the title over the Aircraft Engine has remained with the Engine Owner in spite the fact that the Aircraft Engine has been physically attached to the particular aircraft. Filing “the notice” itself does not constitute title or any other property right over the Aircraft Engine in favour of the Engine Owner (such right is constituted by the contract between the Aircraft Owner and the Engine Owner), however the notice should serve as an evidence to any third party that the Aircraft Engine is owned by a person other than the Aircraft Owner, pursuant to terms of the Engine SPA


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?

N/A.