Spain

  1. PROPOSED TRANSACTION STRUCTURE
  2. SEARCHES
    1. Are there any public registers in the Relevant Jurisdiction where a search can be carried out to determine whether an order or resolution for any bankruptcy, bankruptcy protection or similar insolvency proceedings has been registered in relation to the Airline?
    2. If so, specify which public registers, how long such searches typically take and if the fees are more than 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:
  4. THE AIRCRAFT REGISTER - NATIONALITY OF AIRCRAFT
    1. Has the Relevant Jurisdiction ratified any of:
    2. If the Relevant Jurisdiction has ratified the Cape Town, see the Cape Town Convention Annex.
    3. If the Relevant Jurisdiction has not ratified the Cape Town Convention, has the Relevant Jurisdiction started official proceedings or given any other official indication that it will accede to or ratify the Cape Town Convention in the near future?
    4. Is there an Aircraft Register in the Relevant Jurisdiction and if so, what is it called and who operates it?
    5. If so, in relation to registration:
    6. What documents and/or consents are required to obtain registration on the Aircraft Register and will these require any formalities (for example, notarisation, legalisation or application of apostille)?
    7.     Are there any restrictions on the legal status and/or nationality/domicile of parties seeking to register an aircraft on the Aircraft Register?
    8. In respect of aircraft transactions connected with the Relevant Jurisdiction generally, are there any foreign Aircraft Registers that are commonly used, or should be considered, as alternatives to or in addition to registration with the Relevant Jurisdiction’s Aircraft Register? If so, what is benefit of such registration?
    9. Are there any other filings or registrations necessary or desirable (other than the registrations already mentioned and Lease Registration - see section 6) in the Relevant Jurisdiction in order to ensure the validity, priority or enforceability of the transaction documents, or to perfect the interests of the Owner in the Aircraft or the transaction documents?
  5. LEASES
    1. Will the Relevant Jurisdiction recognise the concept of a lease over an aircraft?
    2. Would the choice of English law to govern the Lease be upheld as a valid choice of law in any action in the Relevant Jurisdiction?
    3. Must the Lease be in a particular form if it is to be valid and enforceable in the Relevant Jurisdiction (for example, must it be in the language of the Relevant Jurisdiction or be notarised, legalised or have the apostille applied)?
    4. If the Lease must be in the language of the Relevant Jurisdiction, is it possible under the Relevant Law also to have an English version, and to provide that the English version should prevail in case of conflict with the Relevant Jurisdiction language version?
    5. Are there any special terms that the Lease must contain or that it is advisable for the Lease to contain?
    6. Are there any circumstances under which the Lease might be re-characterised under the laws of the Relevant Jurisdiction as:
  6. LEASE REGISTRATION
    1. Is there a separate register for aircraft leases in the Relevant Jurisdiction?
    2. If yes, then:
  7. ENFORCEMENT OF LEASES (ASSUMING AIRLINE IS NOT IN A FORM OF INSOLVENCY PROTECTION)
    1. On the occurrence of an event of default under the Lease, assuming that the Owner is permitted to do so under the terms of the Lease, can the Owner terminate the Leasing of the Aircraft under the Lease and enforce the Lease by taking physical possession of the Aircraft?
    2. If so, can the Owner take physical possession of the Aircraft without the need for judicial proceedings in the Relevant Jurisdiction?
    3. Where judicial proceedings in the Relevant Jurisdiction are necessary, please provide details of the proceedings, in particular:
    4. Where judicial proceedings are not necessary, please comment on the time limits relevant to taking possession of the Aircraft, in particular: Not applicable.
    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?
    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. 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?
    5. 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? If not, is a cut-through clause enforceable?
  13. LIABILITY FOR DAMAGE
  14. DETENTION/CONFISCATION
    1. Are there any rights to detain or sell the Aircraft pursuant to drug trafficking, tax or other laws or pursuant to rights of airport or air navigation authorities if the Airline fails to pay when due?
    2. If so, can the Aircraft be forfeited and sold without the Owner being made aware?
  15. SOVEREIGN IMMUNITY
    1. Is any Airline based in the Relevant Jurisdiction entitled to any form of sovereign or other immunity from suit which might restrict the Owner’s rights under the Lease?
    2. Can such immunity be validly waived in advance by contract?
  16. DISPUTE RESOLUTION AND RECIPROCAL ENFORCEMENT
    1. Do the laws of the Relevant Jurisdiction permit and recognise an “asymmetric” submission to jurisdiction clause under which the lessee submits to the exclusive jurisdiction of the Courts of England but the Owner has discretion to choose a jurisdiction other than the Courts of England?
    2. If the Lease is governed by English Law and a judgment is obtained by the Owner in the English courts, can that judgment be automatically enforced in the Relevant Jurisdiction or will the case have to be re-examined on its merits? If so what procedures must be complied with to enforce such a judgment?
    3. Is the Relevant Jurisdiction party to the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention) or the 1965 Convention on the Settlement of Investment Disputes Between States and Nationals of Other States (the Washington Convention)? Will the courts of the Relevant Jurisdiction recognise and enforce a decision of an arbitrator?
    4. What is the usual choice of dispute resolution in international supply contracts involving a lessor or buyer incorporated in or with its main place of business in the Relevant Jurisdiction?
  17. AIRCRAFT ENGINES
    1. If the equipment being leased to the Airline in the Relevant Jurisdiction was an Aircraft Engine either unattached to an airframe or attached to an airframe belonging to a party other than the Aircraft Engine Owner and being leased to the Airline under a separate engine lease agreement, would there be any significant changes to the responses set out above?
    2. In particular, does the Relevant Jurisdiction recognise the separate ownership of the Aircraft Engine by the Aircraft Engine Owner when the Aircraft Engine is attached to an airframe belonging to a person other than the Aircraft Engine Owner?
    3. Is there a register of Aircraft Engines and is the information given above in relation to registration of Aircraft and the ownership and leasing of Aircraft the same for registration of an Aircraft Engine and the ownership and leasing of such Aircraft Engine at the Aircraft Engine register?
  18. ADDITIONAL INFORMATION – IS THERE ANYTHING ELSE WE SHOULD HAVE ASKED?
Information current as of February 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 the Lease.

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


2. SEARCHES

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

Yes

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

The Insolvency Public Registry would be the relevant registry to run such search. It provides information regarding all Spanish companies, including Airlines, being subject to insolvency proceedings. According to the article 3 of the Royal Decree 892/2013, of 15 November, regulating the Insolvency Public Registry, the access to this Registry is public, permanent and costless. In addition, anyone is entitled to access the Registry, without needing to justify or manifest any legitimate interest.


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?

In order to have legal effect, the agreement by which the ownership to an aircraft is transferred has to be executed as a public deed which must be recorded in the Spanish Movable Property Registry.

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

In accordance with the article 182 of Decree of 14 December 1956, approving the Commercial Registry Regulations, the registration of the transfer of title to an aircraft in the Spanish Movable Property Registry requires public deed or formally authenticated document.

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, if the country where the relevant aircraft is located recognises the form of transfer proposed for the transaction under Spanish law as a valid method of transfer under its domestic law. Otherwise, local law advice should be taken.

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

When an aircraft is supplied, repaired, transformed, full chartered or leased in Spain, despite there being no import or export of such aircraft, it is nevertheless treated as an exportation. Therefore, the transfer would be exempted from VAT. However, there are some requirements to be met regarding the nature of the acquirer:

  1. (i.) The purchaser needs to be a company dedicated essentially to the international air navigation as a commercial transporter of goods and /or passengers.
  2. (ii.) The purchaser has to use the aircraft in its commercial activity.

When the mentioned requirements are not fulfilled, the general VAT tax rate (21%) would be applicable. See 10.3 below for more detail.

Aircraft parts and equipment (including aircraft engines) supplied, repaired, transformed or leased in Spain will be exempted of VAT when used in aircraft exempted of VAT.

If the aircraft is to be registered in Spain, the Special Tax on certain means of transport, which is applied to the registration of aircraft, shall be paid.

An aircraft lessor carrying on the trade of leasing in Spain may be liable to Spanish Corporate Tax on its profits or gains. Specific advice is recommended if this is likely to be the case.

If the transaction is made through a public document, a tax over that document will have to be paid by the purchaser of the good. The tax rates applicable will range depending on the lengthof the document, from 0.30 cents per sealed document or 0.15 per folio.

Additionally, autonomic tax rates are also applicable (this tax can range between a 0.5%-1.5% of the value of the asset). In the case where the Autonomic Community has not approved its own tax rates, which is not probable, a 0.5% ofthe value of the aircraft will be applicable.

3.1.5    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?

According to Act 48/1960, of 21 July, on Aerial Navigation, the Government, by agreement of Council of Ministers, may order the requisition or confiscation of aircraft located in national territory, provided that serious circumstances of public interest are met, and requisition compensation shall be paid. 


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?

No

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

Yes

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

Yes

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?

Not applicable.

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

Yes, there is. In the Spanish Jurisdiction, aircrafts are registered in two different registries: (i) the Aircraft Matriculation Registry, an administrative registry that confers Spanish nationality to aircrafts; (ii) and the Spanish Movable Property Registry, which is a property registry. Ownership and in rem agreements must be registered in both registries. 

While the Spanish Movable Property Registry is operated by the Association of Land and Mercantile Registrars of Spain which is part of the Ministry of Justice, the Aircraft Matriculation Registry is run by the personal of the Juridical- Air Force Corps, part of on the Ministry of Development.

4.5 If so, in relation to registration:

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

The Aircraft Matriculation Registry is an operator registry; therefore, the person responsible for registering the aircraft is the operator of the aircraft.

Regarding the aircraft registration on the Movable Property Registry, it shall be carried out by its owner.

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 first inscription of an aircraft, according to article 181 of the Decree of 14 December 1956, approving the Commercial Registry Regulations, shall contain the following details: (i) aircraft number in the matriculation Registry; (ii) manufacture phase; (iii) trademark, name (if any), distinguishing marks, number and power of the engines, fuselage, load and passengers capacity, any other features for a better identification, as well as; (iv) its value; (v) usual aircraft parking; (vi) insurance contracts entered into, especially those which are compulsory, including the information related to the insurance entity, type and amount of the insurance, and policy number.  

Additionally, Aircraft Mortgage and Lease shall be registered in both Aircraft Matriculation Registry and Spanish Movable Property Registry in order to be fully valid under Spanish Law and recognized in those countries as part of the Aircraft Protocol, together with the Cape Town Convention.

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?

Yes, the details of the aircraft owner/lessor and financier shall be registered in the Aircraft Matriculation Registry (operator registry).

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, the registration with the Spanish Movable Property Registry (owner registry) determines the ownership of the Aircraft.

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

No, there are not.

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)?

The documents required to obtain the registration on the Aircraft Matriculation Registry are:

  • Photocopy of previous authorization of aircraft registration. 
  • Application of aircraft registration (Mod-2).
  • If the applicant is an individual of the European Economic Space, it shall attach photocopy of the NIF, or corresponding identity document; if the applicant is a legal entity, photocopy of the CIF or similar document is required.
  • Payment of the respective taxes and fees. 
  • Title deed which verifies the ownership of the aircraft. 
  • Unique Administrative Document which shall accredit import from the last country (non EEA-member). It must identify the aircraft and engines. 
  • Declaration of special taxes, over certain means of transport. 
  • Certificate of the insuring company. 
  • Original certificate, issued by the Aircraft Register, from the country of last registration, containing detail of cancellation entries.

On the other hand, in order to obtain the registration of an aircraft in the Spanish Movable Property Registry the acquisition agreement has to be granted as a public deed or a formally authenticated document.

Yes, there are. According to article 11 of the Decree 384/2015, of 22 May, on Aircraft Matriculation Registry Regulations, an aircraft can be registered by: (i) a natural person, national of any Member State, providing that she/he has its domicile in Spain; (ii) a legal person of any Member State and (iii) applicants of other states if their residence or permanent establishment is located in Spain and destine the aircraft for private purposes.

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?

According to the Decree 384/2015, of 22 May, on Aircraft Matriculation Registry Regulations, mortgages and in rem agreements must be also registered.


5. LEASES

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

Yes. Under the Decree 384/2015, of 22 May, on Aircraft Matriculation Registry Regulations, the concept of lease over an aircraft is recognised, since it states that aircrafts may be object of lease or any other form of possession authorized by law.

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?

In the absence of Spanish rules governing this sort of contracts, the applicable regulation is the Regulation (EC) No 593/2008 of the European Parliament and of the Council, of 17 June 2008, on the law applicable to contractual obligations (Rome I). The article 3 sets forth freedom of choice, which means that the parties to a contract are to choose the governing law. Therefore, English law would be a valid choice providing that the parties have chosen it.

However, if the law chosen is that of a country other than that relating most closely to the contract, the provisions of the latter law need to be respected. In addition, should the contract relate to one or more Member States, the applicable law chosen, other than that of a Member State, must not contradict the provisions of EU law.

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)?

In order to be recordable in both registries, the Lease must be notarised and, in case of a foreign document, it must be also apostilled.

In addition, Spanish Registrars and/or Spanish Courts may require the Lease and all relevant supporting documents to be sworn, translated into Spanish language by an official translator (traductor jurado) and appostilled in accordance with The Hague Convention, as the case may be, as a condition precedent to its recording with the relevant registry and/or admissibility as evidence or proof and/or before deeming them to be in proper form for enforcement.

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, it would be possible. In this regard, please note that for submission to court that the Lease needs to be sworn translated into Spanish language by an official translator (traductor jurado) and appostilled in accordance with the Hague Convention, as the case may be, in case English language prevails.

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

Since Spanish law doesn’t regulate lease agreements, they will be subject to the principle of contractual freedom. Nevertheless, it is recommended that the lease agreement includes all the aircraft features for a good identification, as well as the typical provisions for these kind of agreements.

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

5.6.1 a secured loan?

No.

5.6.2 a finance (or capital) lease?

Yes, in case the purpose of the lease is to finance its acquisition it can be re-characterised as a so called “leasing agreement” which is not defined as a different type of lease by Spanish law but it is recognized as a different type of agreement by the Spanish case law.


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?

Not applicable.

6.2.2 What registration fees are payable (if any)?

Not applicable.

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

Not applicable.

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

Not applicable.


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

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

The Owner can unilaterally declare the termination of the leasing agreement. The lessee can then accept the termination (irrespective of the debt accrued, that shall be paid in any case unless agreed otherwise) or reject it. In this last case, the Owner would be obliged to initiate an ordinary declarative proceeding to obtain a judicial declaration of termination of the leasing agreement and an order of repossession on the Aircraft. Otherwise, the Owner cannot take physical possession of the Aircraft unless the lessee accepts the termination and agrees to voluntarily give back the Aircraft to the Owner.

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

The Owner cannot, in any case, take physical possession of the Aircraft without the need for judicial proceedings (unless a voluntary termination agreement is reached between the parties, as explained in point 7.1 above).

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?

The main documents to the presented by the Owner would be the certificates from the relevant registers proving its ownership, the leasing agreement and the documents evidencing the breach of the contractual obligations by the lessee that would entail the necessary termination of the leasing agreement and the subsequent obligation of the lessee of delivering the Aircraft back to the Owner. The documents to be provided should be originals, whenever possible.

7.3.2 What is the approximate cost of issuing proceedings?

It is not possible to provide an approximate cost, since it would depend on the amount of the claim, which, in its turn, must be fixed as an amount equal to the lease rent of a whole year.

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?

The duration of an ordinary procedure may substantially vary from court to court, depending on the load of work of the relevant court before which the proceedings are being held. A rough estimation would be of between eight months to one year for the first instance, and around one year for the appeal on a second instance before the corresponding Provincial Court. The duration of the subsequent enforcement proceedings, in case the lessee does not voluntarily comply with the terms of the judgment, is almost unpredictable.

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?

Same answer as point 7.3.4.

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

7.4.1 Is there a waiting period before action may be taken?
7.4.2 Is there a long stop date by which action must be taken?
7.4.3 Is a Public Auction of the aircraft required?

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, no special permission shall be required once a final judgment is obtained, apart from the compliance with any formal issues determined by the circumstances under which the repossession would take place.

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.
Yes, cases of repossession of aircraft by the lessors can be found in Spanish Case Law.

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, there are not, apart from the cases in which the insolvency of the Airline is declared by the relevant court.

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?

There are no restrictions and the Owner can sell at any time, unless it is contractually agreed otherwise.

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

For the purposes of Regulation (EC) No. 428/2009 establishing a Community regime for the control of exports of dual use goods (for example, aircraft), repossession is a form of export and, therefore, an export licence is required where the destiny of the aircraft is a non-member 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?

The Civil Aircraft Register may, ex officio or at the request of a party, proceed to the cancellation of the registration of the aircraft.

In order to cancel the registration of an aircraft leased at the request of its registered owner, the owner shall provide, among others, original and photocopy of the resolution document of the lease or document showing the agreement of both parties to cancel the registration and a certificate of the Movable Property Registry stating that the aircraft was inscribed in favor of the applicant and is free of any charges and liens.

There is no time requirement for submission of this application. 

Additionally, in those cases where the registered holder is the holder of the aircraft by virtue of an annotated legal title, whose validity has expired, the Movable Property Registry may proceed ex officio to cancel the registration of the aircraft.

No. The consent of the Airline is only required if it is the Aircraft’s owner.

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

Co-operation of the Airline is only required if the Airline is the Owner. Deregistration is usually completed within three weeks.

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

In accordance with Regulation (EC) No. 428/2009 establishing a Community regime for the control of exports of dual use goods (for example, aircraft), an export licence is required where the destiny is a non-member country.

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

If an export licence is required, it takes approximately one month to obtain it and there are no administrative costs involved.

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

No.

8.7 Will a power of attorney empowering the Owner to deregister and export the Aircraft from 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?

Insofar as the Owner is the only person entitled to deregister the Aircraft, a power of attorney would not be required for such purposes.

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?

Not applicable.

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

Not applicable.


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?

Yes. The Spanish Insolvency Act (Law 22/2003, of July 9th) sets forth the legal obligation for companies in a situation of insolvency, as defined in the Act (i.e. inability to comply with its ordinary course obligations) to file for insolvency proceedings within the two months following the moment at which the company becomes insolvent or becomes aware of such insolvency. Failure to comply with such obligation may give rise to liability on the part of the insolvent company’s directors.

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

Yes. An “Insolvency Administration” is appointed by the competent Court and depending on the circumstances of the insolvency (mainly, whether the proceedings filed by the insolvent company itself, within the legally established deadline, or they were started by a creditor) the Airline’s directors would maintain their managing powers or these would be transferred wholly to the aforementioned Insolvency Administration.

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? 

No.

Payment of unpaid rent (accrued before the declaration of the insolvency of the airline), cannot be negotiated by the Insolvency Administration, in accordance with the principle of “par condicio creditorum” and will be subject to the order of priority for payment within the insolvency proceedings. As regards the rents accrued as from the declaration of insolvency, they would be considered as “créditos contra la masa” (“credits against the estate”) and should be paid with preference over debts of the debtor which are subject to the insolvency proceedings.

From the declaration of insolvency, the termination of the Lease (if it is considered beneficial for the insolvent party) would be subject to an agreement in which the Insolvency Administration must intervene and that should be authorized by the Court before which the insolvency proceedings are being held. The Owner can also give notice of the termination of the Lease due to the breach of the contractual obligations by the lessee, and the issue should be decided by means of a judgment entered within an incidental procedure before the Court in which the insolvency proceedings are being held.

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? Yes
  • Accepting payment of rent or other lease payments from:
    1. (i.) the Airline? The payment of rents/debts accrued prior to the declaration of insolvency can only take place within the insolvency proceedings. Rents or debts accrued after the declaration of insolvency may be paid directly by the insolvent Airline (debtor) or the Insolvency Administration, in case the debtor has been deprived of its managerial powers.
    2. (ii.) a guarantor? No. A guarantor could make payments of unpaid rents or other lease payments as long as any guarantee conditions are met. The guarantor would then become creditor of the debtor and may file its claim within the insolvency proceedings in order to have its subrogation claim credit recognized.
    3. (iii.) a shareholder? No.
  • giving notice of default under the lease? Yes. The owner can only terminate the lease agreement by filing an incidental claim in which it requests that termination, on the grounds of a breach of the payment obligations, irrespective of whether that breach is prior or subsequent to the declaration of insolvency, and apply for the repossession of the Aircraft. It must be noted that the Commercial Judge may dismiss the claim for termination even if the breach actually existed, and maintain the agreement in place, ordering the payment of all pending amounts against the estate, provided that the Judge considers that the relevant agreement is beneficial to the debtor and all the creditors.
  • obtaining a judgment or arbitral award for unpaid lease payments? Yes. As regards the lease payments accrued prior to the declaration of insolvency, the creditor cannot file declarative proceedings against the debtor after that declaration. If the procedure was filed before the declaration of insolvency, it will be followed until a final and definitive judgment is rendered and its result will be reflected in the insolvency proceedings. If the creditor wishes to terminate the lease agreement on the grounds of lack of payment of amounts accrued before or after the declaration of insolvency, and also obtain payment of those amounts, please see (c) above.
  • giving notice to terminate the leasing of the Aircraft? Please see (c) above.
  • exercising rights to repossess the Aircraft? Please see (c) above.
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?

No. The commencement of Insolvency Proceedings in itself does not affect any of the aforementioned actions, given that they had already been taken or started. The ordinary declarative proceedings started before the declaration of insolvency may continue until a final judgment is entered by the corresponding court. As regards the enforcement proceedings started before the declaration of insolvency, they would be suspended as from the date of such declaration of insolvency, until the termination of the insolvency proceedings.

Nevertheless, under Spanish Insolvency law, the Insolvency Administration could exercise what is known as a “claw-back action”, by which it can request for the rescission of contracts, agreements and operations in general entered into the Airline and a third party two years before its declaration of insolvency, where that operation is deemed to be detrimental to the assets of the Airline.

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?

The lease would remain in full force after commencement of insolvency proceedings, i.e., the declaration of insolvency does not affect the effectiveness of the lease agreement. In accordance with the answers already provided above, the Insolvency Administration can only intervene in order to propose or support an agreement for the termination of the lease (in case it is favourable to the insolvency proceedings), and the execution of such agreement would be subject to the authorization of the Court. For the event that the Insolvency Administration or the Airline fails to pay the rents/amounts accrued, please see 9.1.4. c).

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

Yes, the debtor or the Insolvency Administration should pay all outstanding amounts against the estate.

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?

In case the lease agreement is terminated within the corresponding incidental procedure, outstanding debts accrued before the declaration of insolvency would rank as “ordinary credits” (junior to “privileged credits” and senior to “subordinate credits”), which can be fairly described as ordinary unsecured claims; the outstanding debts accrued from the start of the insolvency proceedings should be paid against the estate.

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

Yes. Any creditors with in rem security (mortgages, pledges, etc.) are referred to as special privileged creditors and have preference to collect payment over the collateral; and others such as tax authorities, workers, etc., which are considered general privileged creditors, who have preference over ordinary creditors over the assets of the debtor which have not been given as collateral.

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?

No. Retention rights such as possessory liens cease their effect when insolvency proceedings are commenced. The Spanish Insolvency Act only recognises as an exception in cases in which the retention is declared in accordance with administrative, tax, labour or social security rules.

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. The Aircraft being property of the Owner, not the Airline, no third party is entitled to neither seize it nor assert any lien on it based on debts by the Airline, with the only exception being where the retention is declared in accordance with administrative, tax, labour or social security rules.


10. TAXATION

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

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

The income obtained by the Owner for the lease of bareboat aircrafts could be qualified as business profits for Spanish Non-Resident Income Tax purposes (“NRIT”) according to the pronouncement issued by the National High Court on 26 June 2017. Under this scenario, income obtained by the Owner would not be subject to taxation in Spain according to the Double Tax Treaty signed between Spain and Ireland.

On the other hand, if said income is qualified as a royalty (which is the criterion followed by the Spanish General Directorate of Taxes and the Spanish Administrative-Economic Court), said income would be subject to withholding tax at the 4% tax rate established by the NRIT Law 1 Please note that the article 14.1.m) establishes an exemption for royalties paid to a company located in other EU member state when both companies are associated (i.e. being participated in at least 25% for the same company, or, having one of them at least 25% of the stake of the other company). .

On this basis, the Owner will be taxed by NRIT at a 4% tax rate (the amounts withheld by the lessee could be deducted and, if this were the case, reimbursed).

Notwithstanding the above there is a tax exemption in article 14.1.g) of the NRIT Law for the lease of aircrafts, on a bareboat basis, by foreign entities which may not be deemed to have a permanent establishment (“PE”) in Spain, when used for international flights 2 Please note that said exemption will also apply when the grade of use in international flights represents more than 50% of the total distance flighted by all the aircrafts leased by the lessee.

In the case of lease of an aircraft not in a bareboat charter, income received by the Owner would not be subject to taxation in Spain according to the applicable Double Tax Treaty for being considered as business profits.

In case of the Owner acting through a PE in Spain, income obtained would be subject to NRIT being applicable a 25% tax rate (again any withholding made by the lessee could be deducted). Additional tax rate (19%) would arise over the income retrieved by the parent company.

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

Same comments as in section 10.1.1. (please note that we did not take into account the effects of a hard Brexit scenario).

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

Same comments as in section 10.1.1.

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

Same comments as in section 10.1.1.

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

Same comments as in section 10.1.1.

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

The Channel Islands are considered a tax haven by Spanish law, therefore, there is not double tax treaty signed by Spain with said territory.

Due to the above, the lease of an aircraft on a bareboat charter basis, without a permanent establishment, would be subject to taxation in Spain. Said income would be taxed by NRIT at the 4% tax rate

However, the NRIT exemption established in article 14.1.g) could be applicable if the requirements mentioned in section 10.1.1. above are met.

On the other hand, if the lease is not carried out on a bareboat charter basis, said income would be taxed by NRIT (at the 4% tax rate) and the above exemption would not be applicable, in any case.
In case of the Owner acting through a PE in Spain, income obtained would be subject to NRIT being applicable a 25% tax rate. Additional tax rate (19%) would arise over the income retrieved by the parent company.

Where a tax rate is applicable in accordance with the mentioned legislation, the tax amount shall be withheld by the lessee over the amount paid to the lessor. Said amount would be deductible for the lessor.

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

Same comments as in section 10.1.6.

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

Same comments as in section 10.1.6.

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

Same comments as in section 10.1.6.

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

Same comments as in section 10.1.6.

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.

Yes.

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

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

21%

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

Yes, provided that the recipient of said service would be the company engaged in the international air navigation using the aircraft for this purpose and that its activity is the remunerated transportation of persons or goods.

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 provides with its EU VAT Number to the seller, then the VAT charge will be a reverse charge given that the aircraft is made available to the acquirer in the country in which it is established. Otherwise VAT will be applied to purchase price at current rate: 21%

10.3.4  Sale of aircraft by an aircraft lessor to another aircraft lessor of an aircraft subject to a lease to an airline operating for reward chiefly on international routes:

VAT will be applied to purchase price:  yes, at 21%, provided that the purchaser of said service is not itself a company engaged in international air navigation using the aircraft for this purpose. In this sense, please see our comments above regarding the reverse charge mechanism.

10.3.5 If yes, is this because of the exemption under Article 148(f) is applied to the airline disregarding the decision in ECJ Case C-33/2011?

No, it is because the application of article 22.Four of Spanish VAT legislation, which transposes article 148 of the Directive stating that for the application of the exemption the recipient of said service should be the company engaged in the international air navigation using the aircraft for this purpose.

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

0%

10.4 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?

If any phase of the transaction is made through a “public document”, a tax on that document will have to be paid by the acquirer of the good. The tax rates applicable will range depending on the extension of the document, from 0.30 cents per sealed document or 0.15 per folio. 

A public document would be required for the granting of the power of attorney and the Lease, provided that it is going to be registered. Mortgages have also to be notarised, as explained.

Moreover, local regional tax rates are also applicable (this tax can range between a 0.5%-1.5% on the value of the asset) in the event of certain public documents registrable in a public registry (Leases and mortgages). This tax will be also applicable if the registrable document is signed outside Spain. The following are applicable rates up to date are:

Autonomous Region

Percentage

Andalucía

1,50%

Aragón

1,50%

Asturias

1,20%

Islas Baleares

1,20%

Islas Canarias

0,75%/1,00%

Cantabria

1,50%

Castilla La-Mancha

1,50%

Castilla y León

1,50%

Cataluña

1,50%

Extremadura

1,50%

Galicia

1,50%

Madrid

0,75%

Murcia

1,50%

Navarra

0,50%

País Vasco

0,50%

La Rioja

1,00%

Valencia

1,50%

If an exemption is applicable, the lessee should file a “negative” tax return communicating to the Spanish Tax Authority that the income received is exempt from NRIT and, additionally, an annual summary.

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?

No.

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

Interests obtained by the Owner would be taxed by Spanish NRIT if the lender is not an EU entity.

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

No.

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

No.

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

No.


11. EXCHANGE CONTROLS

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

No, there is no applicable exchange control in Spain.

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

Not applicable.


12. INSURANCE

It is a legal requirement that adequate insurance will be maintained but there is no requirement that the risk is placed with insurers or underwriters in the Relevant Jurisdiction.

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

Not applicable.

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

Not applicable

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

As stated in the 12.1 above, it is not necessary to use reinsurance.

Cut-through clauses are not valid under Spanish legislation, insofar as article 78 of the Act on Insurance Contract prohibits direct claim by the insured against the reinsurer.


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. In accordance with the Aerial Navigation Act as well as the Montreal Convention, of May 28, 1999, ratified by Spain, the carrier is liable for the damages caused during a flight.


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?

Article 16 of the Convention on International Civil Aviation provides the appropriate authorities with the possibility of searching an aircraft of the other contracting States, in order to inspect the certificates and other documents related to the aircraft.

On the one hand, Aerial Security Act 21/2003, of 7 July states that in the event that any kind of breach of safety regulations is found, after a search of an aircraft, the Director-General for Civil Aviation shall take appropriate measures such as detaining the aircraft, provided that the irregularities committed are serious.

On the other hand, the Directive 2004/36/EC sets forth a procedure for ramp inspections of third-country aircraft landing at airports located in the Member States in order to verify if those meet the international security regulations. The Directive provides the possibility of detaining the aircraft if it poses a risk to aerial security and safety.

In addition, under the Spanish Criminal Code, an Aircraft used as an instrument to commit a crime (e.g. drug trafficking), may be confiscated by a Court during the time of the investigation.

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. Every airline licensed to operate in Spain is a regular commercial company, regardless of its ownership, and does not enjoy sovereign immunity or any other kind of immunity that may prevent the Owner from bringing to Court (or to any other contractually agreed dispute resolution mechanism) any legal action arising out of the Lease.

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

Not applicable.


16. DISPUTE RESOLUTION AND RECIPROCAL ENFORCEMENT

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

The validity of such a clause has always been widely discussed in Spain. However, a recent order of the Madrid Regional Court of 18 October 2013 has admitted the validity of an asymmetric submission to jurisdiction clause. This order states that the principle of contractual freedom should prevail on choosing the applicable forum. Basing on Article 25.1 of the Council Regulation (EC) No 44/2001 of 22 December 2000 (Brussels I), its admissibility is clear. Moreover, in accordance with the Spanish Organic Law on Judicial Power the parties are not required to submit only to Spanish Courts. Finally, the Spanish Civil Procedure Act states that “Explicit submission shall be understood as that agreed upon by the parties involved with specification of the judicial district to whose courts they submit themselves”. Specifying a jurisdiction, does not contradict the idea that the parties submit to more than one jurisdiction.

Therefore, although the validity of this sort of clauses hasn’t been generally admitted in Spain, it seems that, according to the recent case law and basing on the applicable legislation, Spain must recognise 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?

In accordance with Brussels I, that judgment will be recognised in Spain without any special procedure being required, unless being subject to the exceptions provided by the Regulation, which are as follows:

  • such recognition is manifestly contrary to public policy in the EU country in which recognition is sought;
  • the defendant was not served with the document that instituted the proceedings in sufficient time and in such a way as to enable the defendant to arrange for his/her defence;
  • it is irreconcilable with a judgment given in a dispute between the same parties in the EU country in which recognition is sought;
  • it is irreconcilable with an earlier judgment given in another EU or non-EU country involving the same cause of action and the same parties.

The English judgment cannot be re-examined on its merits.

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

Yes, Spain is party to the New York Convention and the Washington Convention.

Spanish Courts allow the enforcement and recognition of arbitrator decisions, according to 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?

Spanish legislation provides different alternative disputes resolutions, such as arbitration or mediation proceedings, which are out-of-court solutions. Spanish legislation encourages the use of these alternative measures promoting access to them prior to access to courts. Nevertheless, the usual choice of dispute resolution is court procedure.


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?

Please see 17.2 and 17.3 below. Subject to 17.2 and 17.3 generally, no significant changes are required in relation to Aircraft 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?

Yes, if explicitly agreed by parties, since the ownership is governed by the laws of contract and will follow the parties’ intentions. If documentation and maintenance of Aircraft Engine records are correctly drafted, the ownership of an Aircraft Engine could be preserved separately from the rest of the Aircraft.

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 not any register of Aircraft Engines in Spain. However, even though it is not usual, engines may be subject to separate security interests which must be recorded with the Movable Property Registry.


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?