Information current as of March 2020
1. PROPOSED TRANSACTION STRUCTURE
The Aircraft will be purchased by the Owner and leased on an operating lease basis to the Airline pursuant to a lease.
1.1 Is this is the usual structure for transactions of this nature in the Relevant Jurisdiction?
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. Searches regarding bankruptcy, commencement of liquidation or rehabilitation proceedings which have been already registered with the relevant court, can be performed in the National Court Register (information on details disclosed in the National Court Register is also available 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.
No fees apply for online searches. Costs of obtaining the extract from the National Court Register are minor.
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 should be recognised?
In general, other than written form for the transfer agreement there is no specific form of the transfer required. Usually, Polish Civil Aviation Authorities accept the bill of sale as evidence that the transfer took place.
3.1.2 Must any particular conditions be satisfied for the transfer to be recognised?
Assuming that the sale agreement is governed by the laws other than Polish, no particular conditions are required to be satisfied for the transfer to be recognised.
If the sale agreement is governed by Polish law, then under Polish law, the price must be paid and the physical possession of the aircraft must be transferred from the seller to the buyer. In the consequence of sale, certain other formalities may apply, depending on the circumstances (each specific case requires a separate in-depth analysis).
If the aircraft is registered with the Polish Register of Civil aircraft, the bill of sale, (together with any other document providing for any changes to the registration of aircraft), needs to be filed with the Civil Aviation Authority within 14 days from its execution.
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. Assuming that such transfer would be valid and binding under the law governing the transfer which has been elected by the parties (e.g. English law), the courts of Poland should recognise such transfer even if the aircraft is located in another jurisdiction at the time of the transfer.
3.1.4 Are any duties, taxes or fees levied on such transfer of ownership?
Polish Civil Aviation Authority apart from other, minor fees e.g. associated with filing the PoA or the lease agreement would not charge any fee for registering the transfer of ownership of the aircraft.
As a rule, purchase of an aircraft is subject to VAT in Poland. However, in the case when the purchaser is an entity engaged mainly in the international transport, purchase may benefit from 0% VAT tax rate.
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?
An airport operator has a right to retain an aircraft to secure payment of the landing fees and reimbursement of any damage caused by the Aircraft/Aircraft operator to the airport.
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?
The 1948 Geneva Convention on the International Recognition of Rights in Aircraft?
The 1933 Convention for the Unification of Certain Rules Relating to the Precautionary Arrest of Aircraft?
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, but please note however that the Poland is bound by the laws of the European Union, which has ratified the Cape Town Convention.
4.2 If the Relevant Jurisdiction has ratified the Cape Town, see the Cape Town Convention Annex.
4.3 If the Relevant Jurisdiction has not ratified the Cape Town Convention, has the Relevant Jurisdiction started official proceedings or given any other official indication that it will accede to or ratify the Cape Town Convention in the near future?
4.4 Is there an Aircraft Register in the Relevant Jurisdiction and if so, what is it called and who operates it?
Register of Civil Aircraft in Poland is maintained by the President of the Polish Civil Aviation Authority.
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?
Register of Civil Aircraft is an Owner type of the registry and any registration, de-registration or amendments to the registration can be performed by the Owner, the User of the aircraft authorised by the Owner or on the basis of the general rules attorney-in-fact appointed by the owner.
Please note however that notification of the amendments to the information disclosed in the register should be entered in the register within 14 days of its occurrence.
If the Owner or authorised User has not filed the notification referred to above, the President of the Polish Civil Aviation Authority may, after a single unsuccessful call, make an entry to that effect ex officio, indicating that fact in the register.
4.5.2 What details would normally be recorded on the Aircraft Register upon registration of an aircraft in the Relevant Jurisdiction? If not normally recorded, is it possible to record the Lease and/or an Aircraft Mortgage on the Aircraft Register?
The following details are recorded in the Aircraft Register and are reflected in the Certificate of Registration:
- Date of production and entry into the register
- Registration number
- Aircraft manufacturer
- Serial number
- Name of the Owner and its details
- Polish registration mark
- Type of aircraft, class of the aircraft and manufacturer’s designation;
- encumbrances established over an aircraft (usually pledges)
- operator/lessee /user of the aircraft and its details
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?
In general, the Aircraft register is an Owner type of register, therefore it is compulsory to disclose the owner’s details. Encumbrances in the form of Polish security interests (usually pledges- civil and/or registered) and an entity in a favour of which they are established, are disclosed in the Polish Register of Civil Aircraft and are reflected in the Certificate of Registration.
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, details disclosed in the register are valid against third parties.
4.5.5 Are any distinctions made between aircraft employed on international routes and those used purely for domestic flights?
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)?
Registration of the aircraft should be performed by the Owner or person authorised by the Owner – on its behalf. Polish registration marks should be reserved at the Polish Civil Aircraft Register and following documents (in originals or copies certified by the notary public or public authority) are required to register the Aircraft in the Polish Register on Civil Aircraft:
- application addressed to the President of the Civil Aviation Authority including the details of the Owner and the details of the lessee , details of the aircraft (MSN, technical details in order to determine the type of the aircraft), photographs of the aircraft)
- a statement that the aircraft is not registered in another country’s register;
- documents confirming the existence of the ownership title to the aircraft and any security interest in rem;
- noise certificate (however, we have received information from the Civil Aviation Authority that this certificate is not required at the stage of initial application);
- a radio licence to use an on-board air radio station (issued by the Polish Office for Electronic Communication); and
- SAD customs clearance document (for aircraft imported from outside the European Union).
- Agreement described in Article 41 sec. 1 of the Aviation Law.
Please note that although a valid airworthiness certificate is not required for entry into the register (and to issue a CoR), it is required for the actual operation of the aircraft.
4.7 Are there any restrictions on the legal status and/or nationality/domicile of parties seeking to register an aircraft on the Aircraft Register?
In general, an aircraft can be registered in the Polish Register of Civil Aircraft, if the Owner of the lessee /operator is a Polish entity or foreign person that is domiciled in Poland. In certain circumstances President of the Polish Civil Aviation Authority by the way a decision can register an aircraft in the Polish Aircraft Register if the conditions for registration (owner/lessee /operator being a Polish company/person or foreign person domiciled in Poland) are not met.
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. We have not come across such practice.
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?
Each time that: (i) there are any changes to the owner/user or, lessee of an aircraft, they need to be reflected in the Certificate of Registration carried on board of the aircraft (ii) the Polish law governed pledges over an aircraft or airframe and engines are established, establishment of such pledges should be disclosed in the Certificate of Registration carried on board of the aircraft.
5.1 Will the Relevant Jurisdiction recognise the concept of a lease over an aircraft?
Yes. Polish law recognises the concept of lease over an aircraft.
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?
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)?
A lease agreement under Polish law must be executed in written form, otherwise it is null and void. A Polish sworn translation should be provided to the Polish Civil Aviation Authority. Due to the size of these agreements, the Polish Civil Aviation Authority accepts the translation of the extract containing essentialia negotii of such agreement (i.e. parties, clause under which the leasing is made, event of default, termination).
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?
Yes, there are no restrictions as to which language version should prevail.
5.5 Are there any special terms that the Lease must contain or that it is advisable for the Lease to contain?
Under Polish law, the agreement on leasing is regulated under provisions of the Civil Code, tax law and accounting regulations. Among others, the following conditions need to be fulfilled in order for the lease agreement to be considered as such (in addition to the conditions referred to in 5.6.3 and 5.6.4 below): it needs to be in a written form, physical possession of the aircraft needs to be transferred form the lessor to the lessee and the lessee needs to pay the lease rent in instalments. Certain other provisions (described, among others, below) apply depending on whether the lease is an operating or finance lease.
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?
5.6.2 a finance (or capital) lease?
No (please refer to 5.6.3 and 5.6.4)
If so, please advise:
5.6.3 in what circumstances will such re-characterisation arise?
Polish tax law distinguishes the operating lease and the finance lease. At this point, it should be underlined as a potential field where the re-characterisation may occur, if certain provisions (described below) of the lease agreements will apply in case of operating/finance lease.
Under Polish law, operating lease is characterised as such when (among others) the following criteria are met: (i) the sum of the lessee instalments under the lease agreement less the VAT corresponds at least to the initial value of the leased fixed asset; (ii) the lessee makes no depreciation write-offs (the finance lessor takes the depreciation write offs); (iii) the term of the lease is at least 40% of the statutory depreciation life of the asset under polish tax law. Under the operating lease the lease instalments constitute tax deductible costs, in full.
The finance lease distinguishes from the operating lease mainly by two factors: (i) the lessee makes the depreciation write-offs; and (ii) the lease instalment is divided in two parts: principal and interest and only interest constitutes tax deductible costs.
On the basis of Polish VAT regulations, in principle, the finance lease is treated as a supply of goods, whereas operating lease is treated rather as provision of services.
5.6.4 will such re-characterisation result in additional registration requirements (e.g., to register security)?
Please note that this will only occur if re-characterisation from operating lease into finance lease occurs. If ownership is transferred to the lessee at end of the term of the finance lease, additional obligations would be imposed to register changes in the ownership of the aircraft in the Polish Register of Civil Aircraft.
5.6.5 what will be the effect of such re-characterisation on the rights of the Owner in an insolvency of the Airline?
5.6.6 what other consequences may arise (please include any consequences in relation to repossession rights and also to the recovery of ‘termination sums’ due under the Lease (in contrast to damages only))?
6. LEASE REGISTRATION
6.1 Is there a separate register for aircraft leases in the Relevant Jurisdiction?
No. There is no separate register for registration of aircraft leases except for the Polish Register of Civil Aircraft. Each time, lease agreement, needs to be filed with the Polish Register of Civil Aircraft.
If the lease agreement is in English, a sworn translation is required for the purposes of filing the lease agreement with the Polish Register of Civil Aircraft.
6.2 If yes, then:
6.2.1 What documentation and/or consents are required for the registration of the Lease?
6.2.2 What registration fees are payable (if any)?
6.2.3 What information is recorded on the register? How is the eventual discharge of the Lease recorded?
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?
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?
On the occurrence of an event of default, the Owner may terminate the Lease, effective immediately (unless the Lease provides for a termination period).
Events of default entitling the Owner to terminate the Lease are listed in the Polish Civil Code and include: 1) lack of proper conservation of the Aircraft, 2) use of the Aircraft in contravention to the Lease, 3) default in lease payments and 4) allowing for the Aircraft to be used by a third party. Other events of default entitling the Owner to termination may also be defined in the Lease – these should be explicitly described, so as to leave no room for doubt whether an event of default has occurred. As a general rule, prior to termination, the Owner will need to provide the Lessee with a notice to cure. There are, however, some doubts in the legal doctrine and court precedents whether events of default other than described in points 1) – 4) above (i.e. envisaged directly by the Polish Civil Code) can be enforceable grounds for termination.
Once the Lease is terminated, if the Lessee refuses to voluntarily return the Aircraft, the Owner may not enforce physical possession of the Aircraft of his own accord. Such “self-help” is prohibited under Polish law and the Lessee’s possession will warrant legal protection, regardless of whether he is acting in good faith.
7.2 If so, can the Owner take physical possession of the Aircraft without the need for judicial proceedings in the Relevant Jurisdiction?
As a rule, involuntary, physical repossession of the Aircraft will need to be preceded by judicial proceedings commenced by the owner.
7.3 Where judicial proceedings in the Relevant Jurisdiction are necessary, please provide details of the proceedings, in particular:
The type of judicial proceedings in a given case will depend on whether security was provided by the lessee on the Lease. In practice, security would typically take the form of the Lessee ‘s voluntary submission to enforcement, executed under a notarial deed. The submission to enforcement is not a security in a strict sense (although it is frequently called as such) but rather a tool to expedite the enforcement proceedings. The notarial deed comprises the lessee ‘s representation that he submits himself to enforcement through involuntary repossession of the Aircraft in enforcement proceedings. In such a case, judicial proceedings only require obtaining an enforcement clause on the notarial deed and commencing enforcement proceedings.
If the abovementioned security has not been established, the Owner will need to file a recovery claim against the Lessee in standard judicial proceedings.
In the answers to the questions below we take into account two scenarios:
- the Lessee has executed a voluntary submission to enforcement in the form of a notarial deed; and
- the Lessee has not established such security and the Owner files a recovery claim.
7.4 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?
- In order to obtain an enforcement clause, the Owner must submit the original notarial deed comprising the submission to enforcement and documents proving that the conditions triggering the submission have occurred, e.g. the notice to cure (if applicable) and notice of termination of the Lease. These documents must be executed as either a public document (e.g. a notarial deed) or a private document with officially authenticated signatures (e.g. by a notary public). The Owner should also submit proof of receipt of the notices by the Lessee and proof of payment of the court fee. The notarial deed will be returned to the Owner together with an enforcement clause stamped on the deed, which the Owner may then submit to the court bailiff of his choosing in order to commence enforcement proceedings.
- In judicial proceedings, the Owner may prove the existence of its claim for repossession with all allowable evidentiary measures, including documents, witnesses and expert witnesses. As a rule, the documents may be submitted as copies, but should be authenticated by an advocate or legal advisor if the Owner has professional representation. The court may obligate the Owner to present originals of the documents.
Subsequent to judgment, the Owner may obtain an enforcement clause on the judgment (which will be granted once the judgment is final and non-appealable) and apply to a court bailiff to commence enforcement proceedings.
7.5 What is the approximate cost of issuing proceedings?
- There is no cost for an application for an enforcement clause issued for the court judgement. The cost of an application for an enforcement clause issued for the voluntary submission to enforcement (which is a frequently used security) is PLN 50 (approx. EUR 12).
- The court costs in judicial is varying depending on the value of the subject of the dispute or the value of the subject of the appeal and amounting to:
- up to PLN 500 - PLN 30 (approx. EUR 7);
- over PLN 500 up to PLN 1,500 - PLN 100 (approx. EUR 23);
- over PLN 1,500 up to PLN 4,000 - PLN 200 (approx. EUR 46);
- over PLN 4,000 up to PLN 7,500 - PLN 400 (approx. EUR 92);
- over PLN 7,500 up to PLN 10,000 - PLN 500 (approx. EUR 116);
- over PLN 10,000 up to PLN 15,000 - PLN 750 (approx. EUR 174);
- over PLN 15,000 up to PLN 20,000 - PLN 1,000 (approx. EUR 230).
If the abovementioned value exceeds PLN 20,000, a proportionate fee equal to 5% of that value shall be charged but up to no more than PLN 200,000 (approx. EUR 46,512).
Please note that all conversions from PLN to EUR were made at the exchange rate as of 3 March 2020..
The above costs only comprise the court costs of first instance proceedings. In particular, they do not include the costs of legal representation, which vary on a case-by-case basis.
7.6 Would the Owner be required to provide a bond, guarantee or other security in order to issue proceedings?
- No. The Owner is only required to pay the court fee described in point 7.5 subpoint 2 above.
- As a rule, no. However, if the Owner is domiciled outside of Poland or an EU state, on the opposing party’s application, the court may obligate him to pay a deposit as security against future court costs. This obligation may be avoided if the Owner proves, for instance, that he has sufficient funds in Poland to pay potential court costs or that the parties agreed on Polish jurisdiction of the dispute.
7.7 What is an estimate of the normal duration of possession proceedings from time at which all required documentation is made available – if uncontested?
- Depending on the court to which the application is made, as a rule, the proceedings could take from one week up to one month.
- According to statistics published by the Polish Ministry of Justice for the year 2018, the average duration of civil proceedings in Poland was 4.1 months.
7.8 What is an estimate of the normal duration of possession proceedings from time at which all required documentation is made available – if contested?
- If the enforcement clause is contested (i.e. the Lessee files an objection), the proceedings could last up to six months.
- The duration of judicial proceedings in two instances is very difficult to ascertain, as this depends on a variety of circumstances, including the number of hearings and witnesses, as well as the time it takes for the files to be transmitted between the court of the first instance and the court of appeal. As a rule, judicial proceedings before the in two instances may last a total of 1.5 to 2.5 years.
7.9.1 Is there a waiting period before action may be taken?
7.9.2 Is there a long stop date by which action must be taken?
7.9.3 Is a Public Auction of the aircraft required?
7.10 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?
Subject to public law regulations, under private law no other permission is required to take possession of the Aircraft. However, pursuant to Polish aviation law, the administrator of an airport may hold the Aircraft in temporary custody, as security for outstanding claims for airport fees and damage caused to the airport by the operator of the Aircraft. Such custody expires if the Owner submits adequate security. In certain circumstances the Aircraft may also be seized under the Rome Convention of 1933, to which Poland is a party.
7.11 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.
Aircraft Leases are an expanding market in Poland, particularly due to the ever-growing number of airline operators. However, no significant cases of actual repossession have yet been reported.
7.12 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?
Assuming that the Lease is subject to Polish law and the case is decided by a Polish court, as a rule there would be no such circumstances in which sums express payable under the Lease or obligations assumed by the Airline would be unrecoverable or unenforceable. However, there are at least two significant exceptions to this rule: 1) if the court establishes that certain provisions of the Lease expressing obligations of the Airline are null and void, or 2) if the Lease sets out exorbitantly high contractual penalties for instances of non-performance of the non-pecuniary obligations under the Lease (e.g. for not returning the Aircraft in accordance with the Lease). In the first case, the court will refuse to enforce a provision which it finds to be contrary to the law (e.g. if the Airline assumes an obligation which is in contravention to the nature of the Lease). In the second case, on the Lessee ‘s application the court may decide that the contractual penalties are exorbitantly high and lower their amount in its judgment.
If the Lease is subject to foreign law and the case is adjudicated in a foreign jurisdiction, this may entail a variety of payments or obligations which would not be enforceable in Poland. For example, if a foreign court awarded the Owner punitive damages, such a judgment would be refused enforcement by a Polish court, as Polish law does not recognise the concept of punitive damages.
7.13 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?
As a rule, there are no such restrictions. If the Owner sells the Aircraft during the term of the Lease, the buyer enters into the contract in the place of the Owner. The Owner is obliged to inform the Lessee of the sale. If the Owner sells the Aircraft during pending judicial proceedings, this will not affect the proceedings (subject to the condition that the Owner was not encumbered with an interim order prohibiting him from selling the Aircraft). In such a case, the buyer will be able to join the proceedings in the place of the Owner, but only with the Lessee‘s consent. If the Lessee does not consent, the subsequent judgment will describe the Owner, and not the buyer, as plaintiff. However, the buyer may then be granted an enforcement clause in his favour, if the transfer of ownership is documented with a public document or a private document with officially authenticated signatures.
7.14 Are there any export restrictions on export of a repossessed aircraft?
As a matter of private law, assuming that the repossession was carried out in enforcement proceedings on the basis of a final and non-appealable judgment (enforcement title) and no interim order was placed on the aircraft, there would be no restrictions on the export of an Aircraft. Subject to the statutory requirements for exporting the aircraft, there are no restrictions under Polish aviation law on export of a repossessed aircraft.
8. DEREGISTRATION POWER OF ATTORNEY/EXPORTATION
8.1 Can the Owner apply for deregistration of the Aircraft either at the end of the lease term or following successful repossession (with or without judicial proceedings) and is there any time period within which such application should be made?
The Owner can apply for deregistration of the Aircraft. There is no time limit.
8.2 Is the consent of the Airline required to deregister the Aircraft either by law or as a matter of custom or practice?
Under Polish law there is no requirement for the lessee ’s consent in order for the Owner to de-register the aircraft. If such provisions are implemented contractually, this would be considered as customary practice rather than a statutory requirement.
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?
Upon filing all documents (some of them, such as the Certificate of Registration, are carried on board the aircraft), with the Civil Aviation Authority, it is possible to receive the deregistration decision even on the same day. If there is no cooperation form the Airline (e.g. they operate the aircraft and they cannot deliver the Certificate of Registration) and the lease agreement has expired, it gives grounds for the Owner to de-register the aircraft from the Polish Register of Civil Aircraft.
8.4 Is it possible to obtain an export licence or export permit in advance?
8.5 Approximately how long does it take to obtain an export licence or export permit? What are the costs involved?
The export certificate of airworthiness is usually issued on the same day as the decision on de-registration of the aircraft from the Polish Register on Civil Aircraft. Fees for issuing the export certificate of airworthiness depend on the weight of the aircraft and are in the following amounts:
- for aircraft of up to 2,730 kg – PLN 113 (approx. EUR 26)
- for aircraft from 2,730 kg to 5,700 kg – PLN 336 (approx. EUR 78)
- for aircraft from 5,700 kg to 20,000 kg – PLN 544 (approx. EUR 127)
- for aircraft above 20,000 kg – PLN 1667 (approx. EUR 388)
Please note that all conversions from PLN to EUR were made at the exchange rate as of 3 March 2020.
8.6 Is it possible to obtain a certificate of deregistration in advance?
If the aircraft is operating then the de-registration decision cannot be issued in advance. In certain cases, if there are no grounds for keeping the aircraft registered with the Polish Register, President of Civil Aviation Authority may decide to retain the aircraft registered with the Polish Register of Civil Aircraft.
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?
Bearing in mind that the Polish Aircraft Register is an Owner type of register, the Owner does not need a power of attorney to deregister and export the aircraft. In consequence, no Power of Attorney is needed. IDERA power of attorney is granted by the lessee in favour of the Owner. Under Polish law, the Owner does not need empowerment to make any changes in the Aircraft Register, de-registration of the Aircraft from the Aircraft Register or the export of the Aircraft upon the de-registration.
It can be done the other way around – the Owner can grant a power of attorney in favour of the lessee or the lender (particular persons acting on their behalf) to de-register the aircraft from the Polish register. The Owner can also appoint a lawyer to conduct the proceedings on de-registration and export of the aircraft.
8.8 If the power of attorney was stated to be irrevocable would this be enforceable against the Airline or can the Airline revoke such power of attorney?
In general, a power of attorney may be designated as irrevocable if it is justified by the nature of a legal relationship which the power of attorney is based on. However, in certain circumstances (e.g. due to the underlying legal relationship which justifies the irrevocability of power of attorney becoming null and void or due to other “important reasons”), a grantor may revoke the power of attorney regardless of the fact that it was designated as irrevocable.
8.9 Upon the occurrence of a bankruptcy or insolvency of the Airline is the power of attorney still effective?
No in case of declaration of bankruptcy.
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?
Yes, under the Polish Bankruptcy Law, an application to declare a company bankrupt should be filed with the competent court within 30 days from satisfying either of the bankruptcy tests.
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/no If no, what other form is possible?
Yes, an insolvency officer should be appointed (receiver, court supervisor or administrator, as the case may be). The scope of the Insolvency Official’s control over the bankruptcy estate depends mainly on the type of the bankruptcy procedures.
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?
9.1.4 Does the commencement of insolvency protection involving the appointment of an Insolvency Official in the Relevant Jurisdiction have the effect of prohibiting the Owner from taking the following actions to enforce the lease after commencement of such protection:
- applying any security deposit held by the Owner against any unpaid amounts due under the Lease? No
- accepting payment of rent or other lease payments from:
- (i.) the Airline? Yes (for the period preceding declaration of bankruptcy. No, if after such declaration the official receiver decides to continue the leasing
- (ii.) a guarantor? No
- (iii.) a shareholder? No
- giving notice of default under the lease? Yes
- obtaining a judgment or arbitral award for unpaid lease payments? No
- giving notice to terminate the leasing of the Aircraft? Yes, if after such declaration the official receiver decides to continue the leasing and the official receiver breaches it.
- exercising rights to repossess the Aircraft? Yes, if the official receiver terminates the lease under the relevant provision of the Polish Bankruptcy Law
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, in respect of payments by the Airline (if on no arm’s length terms) within 12 months preceding filing the bankruptcy petition.
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?
Yes, it can be done within 3 months of the declaration of bankruptcy.
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, those amounts will be paid within the bankruptcy proceedings and divided among all creditors.
9.1.8 If not or if the lease is “rejected”, would the Owner’s claim for any outstanding sums rank equally with other ordinary unsecured creditors of the Airline?
9.1.9 Are there certain types of preferred creditors whose claims will rank above claims of the Owner?
Yes, ordinary unsecured creditor’s claims rank second (principal) or third (interest) behind costs of receivables under employment relationships and certain farmers’ receivables for a period of three years prior to the declaration of bankruptcy, certain receivables that arose in debt restructuring proceedings if bankruptcy was declared upon the consideration of a simplified petition for bankruptcy, and receivables arose under financing provided for under an arrangement adopted in debt restructuring proceedings and granted in relation to the performance of such an arrangement, if bankruptcy was declared upon the consideration of a petition for bankruptcy filed not later than three months after the said arrangement has been finally set aside.
Claims secured by mortgage, pledge, financial pledge, registered pledge, treasury pledge, or a security assignment or a security transfer are subject to satisfaction from the proceeds of the sale of the unencumbered assets, decreased by costs associated with sale. These secured claims are satisfied in their order of precedence while any unsatisfied portion after realisation of security falls into second (principal) or third (interest) category.
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?
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.
10.1 The decision to lease to an airline in the Relevant Jurisdiction assumes that the Owner will not be taxed on receipt of rentals or other payments (including maintenance reserves) under the Lease except by way of tax on its general income, profits or gains payable by the Owner in its place of incorporation or place of main business (if different). Will there be a requirement for the Owner to pay tax in the Relevant Jurisdiction on lease payments on basis that either the Owner is subject to taxation in the Relevant Jurisdiction by reason only of the leasing of the Aircraft under the Lease and is required to make payment itself; or payment of such tax is by way of the airline being required to withhold and account for tax from lease payments, where:
10.1.1 the Owner is incorporated and is tax resident in Ireland?
DTT – yes: withholding tax– no. According to the DTT between Poland and Ireland, lease payments as a rule are treated as business profits and are not taxable in Poland.
10.1.2 the Owner is incorporated and is tax resident in the United Kingdom?
DTT – yes, withholding tax – two possibilities, depending on the main area of activity of the Owner and significance of lease agreements in its business portfolio:
- When aircraft leasing is incidental to the main area of activity of the Owner that mainly operates aircraft in international traffic – leasing revenues are, as a rule, not taxable in Poland;
- Otherwise: withholding tax: yes; rate: 5% – under certain circumstances, that consider, for example, providing an original copy of the tax residence certificate of the Owner or lessor.
10.1.3 the Owner is incorporated and is tax resident in Hong Kong?
DTT – no; withholding tax: yes; rate: 20% under certain conditions.
10.1.4 the Owner is incorporated and is tax resident in Singapore?
DTT – yes, withholding tax – two possibilities, depending on the main area of activity of the Owner and significance of lease agreements in its business portfolio:
- When aircraft leasing is incidental to the main area of activity of the Owner that mainly operates aircraft in international traffic – leasing revenues are, as a rule, not taxable in Poland;
- Otherwise: withholding tax: yes; rate: 2% under certain conditions.
10.1.5 the Owner is incorporated and is tax resident in Malta?
DTT – yes; withholding tax: yes; rate: 10% under certain conditions.
10.1.6 the Owner is incorporated and is tax resident in the Channel Islands?
DTT – no; withholding tax: yes; rate: in general – 20%.
10.1.7 the Owner is incorporated and is tax resident in the Isle of Man?
DTT – no; withholding tax: yes; rate: in general – 20%.
10.1.8 the Owner is incorporated and is tax resident in Mauritius?
DTT – no; withholding tax: yes; rate: in general – 20%.
10.1.9 the Owner is incorporated and is tax resident in Bermuda?
DTT – no; withholding tax: yes; rate: in general – 20%.
10.1.10 the Owner is incorporated and is tax resident in the Cayman Islands?
DTT – no; withholding tax: yes; rate: in general – 20%.
Generally, in Polish tax jurisdiction an Airline which is a lessee is required to withhold and account for tax from lease payments in case if the Owner does not have its registered office or management in the territory of the Republic of Poland. In principle, the lease of an aircraft is deemed by Polish tax authorities as a use of an industrial or transport device and the revenues from such are subjected to withholding tax in the rate of 20%.
Those provisions may, however, be altered by the double taxation agreements to which the Republic of Poland is a party. The lack of such results in the necessity of application of the abovementioned general provisions. Note: each particular case should be considered separately, because tax obligation in the considered scope may differ according to main area of activity of the parties of an agreement, shareholder relation between the parties, etc.
Please note, that since 2019 r. additional conditions regarding withholding tax were introduced to the Polish law. In the case when Polish company makes payments, which according to Polish law are subject to withholding tax, and applies an exemption or reduced withholding tax rate or does not collect tax, it should exercise an appropriate level of due diligence in checking whether the recipient is able to benefit from DTT.
In cases when the paying company is applying an exemption or reduced withholding tax rate under a DTT this obligation includes determining if the recipient is the beneficial owner of the payment.
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.
“Gross up” clause is recognised and its enforcement is permitted by courts and tax authorities in Poland.
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:
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:
No, lease Will be subject to zero VAT rate
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:
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:
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?
Depends on country of origin.
In general, there would be no additional notarial fee or equivalent payable. The need to pay stamp duty may arise for the power of attorney in the case of taking actions in front of Polish administrative authorities (17 PLN per attorney mentioned in the power of attorney). In the case of using a notarial power of attorney or other official documents in front of Polish authorities it is necessary to legalise them or obtain apostille.
Note: each particular case should be considered separately.
10.5 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?
The sole possibility of tax exemption considers withholding tax, but it requires satisfying jointly three conditions, namely:
- The particular shareholder relation between the lessee and the Owner (which must be established in EU/EEA) – (direct holding of no less 25% of shares in the equity);
- The minimal duration of such links – uninterrupted period of two years;
- The proper documenting of the entitlement for exemption that must be filed with tax authority.
10.6 Ignoring any taxation consequence already mentioned and any potential taxation issues if the Owner has any other connection to the Relevant Jurisdiction, is there any other Relevant Jurisdiction taxation consequence of the Owner:
10.6.1 being owner and lessor of an aircraft registered in the Relevant Jurisdiction and operated/leased by a company incorporated or registered in the Relevant Jurisdiction?
The fact that the aircraft is registered in Poland does not have any tax effects and does not affect the above-outlined tax situation of the Owner.
10.6.2 making available a lease facility to a company incorporated or regulated in the Relevant Jurisdiction?
In principle, no additional requirements.
10.6.3 receiving rent and other lease payments under the Lease from the lessee incorporated or registered in the Relevant Jurisdiction?
In principle, there is none.
10.6.4 repossessing the aircraft and exporting the aircraft from the Relevant Jurisdiction?
In principle, there is none.
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?
In principle, there is none.
Note: each case should be considered separately, especially depending on the type of leasing agreement (operational or financial) and especially in terms of VAT.
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?
Except for certain sanctions imposed by EU and decisions of other international bodies binding in Poland and subject to certain provisions of the Polish Act implementing the European anti-money laundering directive, there are no restrictions or limits on payments/capital flows to foreign owners within the EU, OECD and EEA member states.
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?
Please refer to our answer on question 11.1 above.
12.1 Is it a legal requirement to insure the Aircraft within the Relevant Jurisdiction?
There is no requirement to effect primary insurance partly or wholly in the Polish insurance market or through Polish entities.
12.2 If so, is there any restriction on reinsurance of the primary insurance outside the Relevant Jurisdiction?
In accordance with Polish law there are some restrictions in this area. A foreign reinsurance company that has its registered office in a non-member state of the European Union may take up and conduct reinsurance activity in the territory of the Republic of Poland only:
- via the main branch (the taking-up of reinsurance activity by the main branch shall be subject to an authorisation of the supervision authority),
- directly from the territory of the state of its registered office if the solvency system of this country, in accordance with Article 172 of Directive 2009/138/EC, has been deemed as equivalent or temporarily equivalent to the solvency system established within the European Union, or .
- directly from the territory of the state of its registered office if the contract referred to in Article 175 of Directive 2009/138/EC has been entered into with this country.
There are no such restrictions on insurance companies that have their registered office in a member state of the European Union.
12.3 Is there a minimum percentage of cover which a local insurer is obliged to retain, and if so, what is it?
12.4 Is it possible for local insurers to assign contracts of reinsurance? If not, is a cut-through clause enforceable?
Yes. The assignment of reinsurance contracts is possible under Polish law. The Insurance Activity Act provides directly that the conclusion of reinsurance contracts is an insurance operation (art. 3 sec. 3 point 1a).
Enforceability of a cut-through clause may be questioned under Polish law. The doctrine of law claims that a reinsurance contract does not create any legal relationship between a policyholder and a reinsurance company. In particular a policyholder is not empowered to submit a claim directly against a reinsurance company. Furthermore the Insurance and Reinsurance Activity Act does not allow the reinsurance companies to make direct payments under insurance agreements.
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?
As a matter of Polish law, the Owner should not generally be liable for any action or inaction of a lessee in respect of the operation of the Aircraft. This is based on the assumption that the Owner is not involved in the actual operation of the Aircraft.
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?
An airport operator is entitled to retain an aircraft in order to secure due and payable landing fees and reimbursement of any damage caused to the airport by the aircraft or the aircraft operator.
Under Polish law and only in certain limited circumstances (listed below), it is possible to detain a foreign owned aircraft in Poland to prevent its use. Such detention requires an administrative decision to be issued by the President of the Civil Aviation Authority.
Circumstances that allow for such decision being issued are as follows:
- the aircraft is in an inappropriate technical condition, is being used by unauthorised persons or, if it has been established that the rules of the safe operation of aircraft have been violated;
- the aircraft is in danger of an act of unlawful interference in civil aviation;
- a document confirming the conclusion of the compulsory civil liability insurance agreement or confirming payment of the insurance premium has not been presented – if the obligation to execute the compulsory civil liability insurance results from the provisions on the insurance for air carriers and aircraft operators;
- if it has been established that international agreements or provisions have been violated by aircraft operators or members of their crews, to the extent that this directly threatens the security of the flight.
Furthermore, an Aircraft could be forfeited under Polish criminal law, subject to a court’s decision, if it was used for criminal activities.
14.2 If so, can the Aircraft be forfeited and sold without the Owner being made aware?
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?
Under Polish law, airlines, inclusive of State-owned (wholly or partially) companies, are not entitled to any form of immunity against suit. Thus, there are no particular restrictions concerning the possibility to bring an action against such companies – they are not privileged in this respect.
15.2 Can such immunity be validly waived in advance by contract?
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?
There are no provisions of Polish law that would expressly prohibit such a submission to jurisdiction. Such prohibitions are also not expressly included in Regulation No. 1215/2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (as amended by the Regulation (EU) No. 542/2014 of the European Parliament and of the Council).
However, in light of certain Polish and European case law it cannot be excluded that a Polish court would not recognise such a submission to jurisdiction under Polish law and assume that it lacks jurisdiction.
16.2 If the Lease is governed by English Law and a judgment is obtained by the Owner in the English courts, can that judgment be automatically enforced in the Relevant Jurisdiction or will the case have to be re-examined on its merits? If so what procedures must be complied with to enforce such a judgment?
In the interim period of Brexit (until 31 December 2020) the provisions of Regulation No. 1215/2012 (as amended by the Regulation (EU) No 542/2014 of the European Parliament and of the Council) will still apply. This regulation applies to the recognition and enforcement of an English court judgment in Poland. Consequently, such a judgment shall be recognised and enforced in Poland without any special procedure being required. A Polish court may refuse recognition or enforcement upon the application of a party against whom proceedings have been commenced. The Regulation contains an exhaustive list of circumstances under which recognition and enforcement may be refused. These include: 1) if recognition/enforcement is manifestly contrary to public policy, 2) if the defendant was not served with the document which instituted the proceedings or with an equivalent document in sufficient time and in such a way as to enable him to arrange for his defence, 3) if the judgment is irreconcilable with a judgment given between the same parties in Poland or with an earlier judgment given in another Member State or in a third State involving the same cause of action and between the same parties, provided that the earlier judgment fulfils the conditions necessary for its recognition/enforcement in Poland. According to the Regulation, an English judgment shall not be re-examined by a Polish court in its merits, under no circumstances.
After the expiry of the interim period, in the absence of a bilateral or multilateral convention in this respect, provisions of the Polish Civil Procedure Code will apply.
According to Polish Civil Procedure Code decisions of foreign state courts issued in civil matters are recognised by virtue of law unless there exist obstacles as specified in Article 1146 of the Civil Procedure Code. The Polish court will not re-examine the case on its merits.
For the decision to become enforceable:
- It has to be enforceable in the state of issuance,
- It has to be enforced by way of execution,
- There should be no obstacles described in Art. 1146 § 1 and 2 of the Civil Procedure Code, and
- The Polish court will have to issue an enforcement clause.
The enforcement clause is issued by a regional court for the place of the debtor's residence or registered office or, if there is no such court, the district court in whose area execution is to be conducted.
A person who claims recognition of a decision of a foreign state court is obliged to present:
- an official copy of the decision;
- a document certifying that the ruling is non-appealable unless it is evident from the content of the decision that it is non-appealable;
- certified translation into Polish of the documents referred to above.
If a decision was issued in proceedings in which the defendant did not defend on the merits of the case, a document must be presented to confirm that the initial pleading has been served on the defendant.
The issuance an enforcement clause for the court decision is free of charge.
Please note that the Poland is a party to Convention on Jurisdiction and the Recognition and Enforcement of Judgments in Civil and Commercial Matters (the Lugano 2 Convention). We note that despite that United Kingdom has not singed the Lugano Convention 2 it was incorporated into the English legal system through domestic act and it may be possible that the provisions of this convention will apply. However due to the fact that the Lugano 2 Convention was not signed by the United Kingdom application of its provisions is a matter of English law.
16.3 Is the Relevant Jurisdiction party to the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention) or the 1965 Convention on the Settlement of Investment Disputes Between States and Nationals of Other States (the Washington Convention)? Will the courts of the Relevant Jurisdiction recognise and enforce a decision of an arbitrator?
The Republic of Poland is party to the New York Convention, but not to the Washington Convention.
Polish courts will recognise and enforce an arbitral award (issued in a state which is party to the New York Convention) pursuant to the provisions of the New York Convention. The Convention provides very limited grounds for refusal of recognition and enforcement and is interpreted restrictively by Polish courts.
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?
Based on our experience, in supply contracts involving one party domiciled in Poland, arbitration is becoming an increasingly popular choice for dispute resolution.
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 significant changes in respect of leasing. In general, there are no restrictions on the separate lease arrangements in respect of aircraft engines. There is no separate register for engines.
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?
Polish law recognises the concept of the separate ownership of aircraft engines. Aircraft engines are not subject to registration in the Polish Register of Civil Aircraft.
Polish law protects the lessor and financier of aircraft engines by permitting the establishment of separate registered/civil law pledges regarding the aircraft engines. Furthermore a tool for enforcement – submission to enforcement by the lessee - is available in respect of aircraft engines. Depending on the structure of the transaction, submission to enforcement can be used by the creditor/lessor in case of lessee default.
17.3 Is there a register of Aircraft Engines and is the information given above in relation to registration of Aircraft and the ownership and leasing of Aircraft the same for registration of an Aircraft Engine and the ownership and leasing of such Aircraft Engine at the Aircraft Engine register?
There is no separate register of aircraft engines.
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?
In case a bank grants some 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. Such a pledge, if it is established in the form of a civil (ordinary) pledge requires the dispossession of the pledged assets to either the pledgee itself or a third party pledgeholder. Therefore, if a civil pledge is established, the borrower cannot be the operator of the Aircraft as it would imply a dispossession and the impossibility to operate it. The above requirement of dispossession is not applicable to registered pledges (i.e. the pledgor under a registered pledge may be allowed to keep the free disposal of the pledged assets, and to lease, transform or sell the assets that are pledged, under certain conditions). Both types of pledges are widely used in aviation finance (civil pledges are created when possible in order to serve as an interim security until the registration of registered pledges; registered pledges are only valid as of their registration which can take up to two months).
Given the current predominant market practice (where a borrower is also an owner of the Aircraft and a lessor and a separate entity is a lessee / an operator (an airline directly or through a dedicated SPV) the above issues are theoretical as there is actual change in possession from the borrower/owner/pledgor to the operator (a third party).
It is also worth mentioning that it is a good practice to create separate pledges over airframes and engines, due to the fact that airlines often switch engines between airframes of the same type in their fleet.