Aviation finance in Spain: overview

A Q&A guide to aviation finance in Spain.

This Q&A provides a high level overview of key practical issues including financing options for purchasing aircraft; registration and deregistration requirements; transfer of title; security, including aircraft mortgages; transfer of security; enforcement of security and repossession; and application of the Cape Town Convention.

To compare answers across multiple jurisdictions, visit the Aviation Finance Country Q&A tool.

The Q&A is part of the global guide to aviation finance. For a full list of jurisdictional Q&As visit www.practicallaw.com/aviationfinance-guide.

Inmaculada Martinez Caballero, AEROIURIS ABOGADOS
Contents

Financing options

1. What are the main options available for financing the purchase of an aircraft? How are aircraft purchases typically financed?

The typical approach for financing the purchase of aircraft in Spain depends on the type of aircraft to be financed.

For airline companies with a long radius or scheduled transport, the financing of wide-bodied aircraft is based on a purchase agreement entered into with manufacturers either through:

  • Pre-delivery payments.

  • Long-term financing.

Long-term financing involves the assignment of the purchase of the aircraft and a sale and leaseback structure, implemented through a special purpose vehicle company established in a "soft tax" jurisdiction. This usually involves long-term leases (either finance leases or operating leases) providing that the aircraft must be returned to the lessor at the expiry of the lease. International, well-recognised financiers commonly use, and are open to participating in, these transactions.

In the Spanish aviation market, financing is arranged through finance leases from local Spanish banks, under which the Spanish bank acquires title and leases the aircraft back to the airline.

 
2. What are the issues arising in relation to the various financing options?

The main issue for a Spanish company to consider in relation to the financing of aircraft is whether a finance lease or operating lease is more appropriate. This will depend on the consequences and impact of each type of lease on the company's accounts. The current trend is to opt for operating leases rather than finance leases, as operating leases can be more advantageous when calculating costs to be offset.

 

Registration and deregistration requirements

Registration

3. What is the procedure for registration of an aircraft?

In Spain, aircraft are registered in the following two separate registries:

  • Spanish Aircraft Matriculation Registry (Registro de Matricula de Aeronaves). This is an administrative registry operated by the Spanish Air Safety Agency (Agencia Estatal de Seguridad Aerea) (AESA), which grants Spanish marks and Spanish nationality to any registered aircraft (www.seguridadaerea.gob.es/lang_castellano/home.aspx; www.seguridadaerea.gob.es/lang_en/home.aspx).

  • Spanish Movable Property Registry (Registro de Bienes Muebles). This is a property registry where ownership and security interests (liens, encumbrances, mortgages) over aircraft are generally recorded. It is also the Spanish point of entry into the International Registry under the Convention on International Interests in Mobile Equipment (Cape Town Convention).

Royal Decree 384/2015 on the Rule of Matriculation of Civil Aircraft, a new regulation governing these registries, came into force on 1 December 2015 and facilitates the co-ordination between the Spanish Aircraft Registry and the Spanish Movable Property Registry when evaluating and recording the legal titles submitted to register an aircraft.

There are two stages to register an aircraft in Spain: provisional and final registration. Under the new rules, to initiate the registration of an aircraft in Spain, it is mandatory to apply first to the Spanish Aircraft Matriculation Registry by submitting official and approved application forms, together with a copy of the legal title (for example, lease agreement, bill of sale, and so on). Depending on whether the aircraft is new or used, it may also be necessary to submit a certificate of non-inscription from the state of the manufacturer's registration or a deregistration certificate issued by the previous aircraft registry, where applicable. A certificate of insurance must also be submitted, in accordance with Regulation (EC) 785/2004 on insurance requirements for air carriers and aircraft operators.

Once the Spanish Aircraft Matriculation Registry has granted a Spanish provisional mark, the applicant must file the original legal title with the Spanish Movable Property Registry. The legal title (of either ownership or possession) to be registered must be original, legalised and apostilled (if required). Additionally, the capacity of the signatories must be recognised by a notary, either in the same document or by attaching an original legalised and apostilled power of attorney granted by a notary of the signatory's jurisdiction.

Unless otherwise expressly stated, all documents to be submitted to the Spanish Movable Property Registry must be original, legalised and apostilled. Any documents in a language other than Spanish must be accompanied by a sworn translation.

On registration of the legal title by the Spanish Movable Property Registry, the applicant must return it to the Spanish Aircraft Matriculation Registry. The applicant must also include the:

  • Import document (DUA de Importación), if the aircraft came from a non-EU country.

  • Form regarding the Spanish tax on certain transport vehicles (Impuesto sobre determinados medios de transporte), duly stamped as paid according to the appropriate use of the aircraft (that is, commercial or private).

The final mark must be granted within three months of submission of the title to the Spanish Movable Property Registry, subject to an extension of 45 days if required by the Movable Property Registry, or due to any other extraordinary circumstances.

 
4. What is the procedure for registration of aircraft mortgages?

A Spanish aircraft mortgage must be in the form of a public deed. Stamp duty is payable to the Spanish tax authorities for registration purposes. The rate of stamp duty applied to the amount guaranteed by the mortgage can vary depending on the location of relevant tax office.

To have legal effect, aircraft mortgages must be registered in the Aircraft Section of the Spanish Movable Property Registry, which is the central registry covering all of Spain. The Spanish marks and ownership title over the aircraft must have been recorded before registration of the aircraft mortgage (see Question 3).

To register an aircraft mortgage in the Aircraft Section of the Spanish Movable Property Registry, the public deed must provide the following information:

  • A description of the mortgagor and mortgagee.

  • A confirmation that the mortgagor owns the mortgaged asset.

  • A description of the mortgaged asset.

  • The amount (in euros) of the principal secured.

  • The term of the mortgage and repayment conditions.

  • The interest rate.

  • An amount for enforcement costs and expenses.

  • The value of the mortgaged asset for the purposes of any sale through public auction.

  • An address for sending notices and summons to the mortgagor.

  • The notary's details.

In addition to the general requirements for a public deed, a Spanish law aircraft mortgage must contain the following information (Article 40, Spanish Movable Mortgage Law dated 16 December 1954 (Ley sobre hipoteca mobiliaria y prenda sin desplazamiento de posesión)):

  • Number/mark of the aircraft granted by the Aircraft Matriculation Registry.

  • Stage of manufacture of the aircraft, where appropriate.

  • Manufacturer's serial number, nationality and other identifying characteristics.

  • Permanent base of the aircraft.

  • Specification of any agreed insurance, in particular mandatory insurance.

Aircraft mortgages can only be registered in the Spanish Movable Property Registry.

 
5. Can aircraft leases be registered? If so what is the procedure for registration of aircraft leases?

Aircraft leases are usually registered in the Spanish Aircraft Matriculation Registry.

Under new regulations that recently came into force (see Question 3), aircraft lease agreements can be entered into the Spanish Movable Property Registry and be registered without first having to register the title of ownership.

The procedure for registration of aircraft leases is the same as for aircraft registration (see Question 3).

 
6. What is the effect of registration of:
  • An aircraft?

  • An aircraft mortgage?

  • An aircraft lease?

Aircraft

Registration of an aircraft in Spain confers Spanish nationality to the aircraft, with legal effect under civil and commercial law.

Registration of ownership in the Spanish Movable Property Registry effects publicity and notifies third parties of the ownership interest in the aircraft.

Aircraft mortgage

Registration of a Spanish mortgage in Spain gives legal effect to the mortgage, making it fully effective in relation to the preference and priority rights of the mortgagee as a creditor over liens registered subsequently.

A Spanish aircraft mortgage must be registered in the Spanish Movable Property Registry to have legal effect.

Other preferential creditors in relation to an aircraft duly owned by a mortgagor include (Article 133, Law 48/60 on Air Navigation (Ley de Navegación Aérea), as amended by Law 22/2003, Law 38/2011 and Law 9/2015 referring to Insolvencies (Ley Concursal)):

  • Tax and levies due to the tax and administrative authorities for the last and present year.

  • Salaries and wages due to the aircraft's crew for the last month.

  • Insurance premiums due to the insurance company for the last two years.

  • Indemnification under the laws of Spain for damages caused by operation of the aircraft, either personal or material, and expenses of assistance or rescue of the aircraft.

  • Costs associated with saving the aircraft, in the case of an accident or if the aircraft was put at risk.

Aircraft lease

An aircraft lease can be registered to obtain a Spanish mark for the aircraft. If ownership title to the aircraft is registered, the aircraft lease must be registered according to the new rules governing aircraft registration in Spain (see Question 3).

The registration of an aircraft lease confers on the lessee the right to be considered as legal possessor of the aircraft. This is very important for aircraft leased to and operated by air carriers, as it determines whether the aircraft can be included in the carrier's air operator certificate as commercial operator.

 
7. What is the procedure for obtaining a certificate of airworthiness?

To obtain a certificate of airworthiness, the aircraft must comply with the design of the approved model in its type-certification adopted by the European Aviation Safety Agency (EASA). There are two distinct procedures to obtain a certificate of airworthiness, depending on whether the aircraft falls within the scope of Regulation (CE) 216/2008 on common rules in the field of civil aviation (EASA aircraft):

  • EASA aircraft procedure. The procedure starts by submitting an application for an EASA certificate of airworthiness on form F-DC-21HI-10, together with all related documents.

  • Non-EASA aircraft procedure. The procedure starts by submitting an application for an EASA certificate of airworthiness on form F-DC-CANO-12, together with all related documents (see https://sede.seguridadaerea.gob.es/LISA/servlet/Ficheros?id=1031&origen=d/).

The application must be submitted to the corresponding Safety Flight Office (Oficina de Seguridad en Vuelo) operated by the Aircraft Safety Directorate of the Spanish Air Safety Agency.

After applying for an EASA airworthiness certificate, the interested party will be contacted and provided with a receipt containing the file number, and the name and contact details of the officer in charge of the procedure.

The competent body has three months to complete the process and issue a decision. If the competent authority does not issue a decision within this deadline, the application must be considered as denied.

Deregistration

8. What is the effect of deregistration of:
  • An aircraft?

  • An aircraft mortgage?

  • An aircraft lease?

In the various deregistration procedures outlined below, the relevant forms/documents and user fees must be submitted to the Spanish Aircraft Matriculation Registry. Information on the relevant forms approved by the Spanish Aircraft Matriculation Registry is available at: www.seguridadaerea.gob.es/lang_castellano/aeronaves/matric_clasif_regis/solicitudes/default.aspx.

Aircraft

Deregistration of an aircraft can be obtained in the following cases (Article 31, Royal Decree 384/2015):

  • Loss of the aircraft.

  • Out of use or scrapped aircraft.

  • Permanent assignment of the aircraft to the army.

  • Registration in a foreign country.

  • Valid conveyance in favour of person who is not a Spanish national or EU national with a permanent residence in Spain (when the aircraft is for private use).

To deregister an aircraft, the registered owner must provide the following documents:

The Spanish Aircraft Matriculation Registry will issue a certificate of deregistration and send it to the foreign registry where the aircraft is to be registered (if applicable). It can take between 15 days and one month to obtain a certificate of deregistration, depending on the documents that have been submitted.

Deregistration of an aircraft cancels the Spanish marks for that aircraft. The aircraft loses Spanish nationality and the Spanish authorities are no longer responsible for inspecting and evaluating the maintenance of the aircraft for air safety purposes. Additionally, permanent deregistration leads to cancellation of registration of the aircraft in the Spanish Movable Property Registry, as the first requirement for registration in this registry is to have a valid and current Spanish mark.

Aircraft mortgage

On deregistration, an aircraft mortgage is cancelled and the obligation ceases to be guaranteed in favour of the mortgagee.

An aircraft subject to a mortgage registered in Spain cannot be deregistered until either:

  • The mortgage is cancelled and cancellation is registered in the Spanish Movable Property Registry.

  • The mortgagee's consent, legalised and apostilled (if applicable), is submitted to the Spanish Aircraft Matriculation Registry.

Cancellation of an aircraft mortgage must be in the form of a notary public deed of mortgage cancellation, in which the mortgagor and mortgagee confirm that the mortgage is cancelled and that the guaranteed obligations have been fulfilled.

It is not possible to obtain a deregistration certificate, but a certificate of liens can be applied for once the mortgage is cancelled, as evidence that there is no mortgage over the aircraft.

Aircraft lease

Cancellation of an aircraft lease requires the submission to the Spanish Movable Property Registry and the Spanish Aircraft Registry (as applicable) of a bilateral agreement signed by the lessor and lessee, confirming the termination of the lease. If an agreement cannot be executed, a court resolution can order the cancellation of the aircraft lease.

 

Transfer of title

9. How is legal title to an aircraft transferred?

If the legal title is transferred between Spanish individuals or legal entities and the title was granted in Spain, the transfer must be executed before a notary public as a deed or notarial policy. In the case of a sale and purchase agreement, the authorising notary public will require that it is executed as a Spanish public deed according to the Spanish notarial rules.

If the legal title was granted outside of Spain, and one of the parties is not Spanish, a bill of sale specifying that the property has been transferred free of charge can be accepted.

Transfer of property is effected by delivery (traditio). Therefore, it is also advisable to draft an acceptance certificate proving the transfer of possession.

Airframe

When transferring title to an airframe, the parties must specify that only the hull is to be transferred. The main terms of a transfer agreement include the:

  • Description of the parties.

  • Condition of the airframe.

  • Terms under which the airframe is delivered and accepted.

  • Provision that delivery is made to the buyer or acquiring party.

The execution of transfer agreements can be private. However, an agreement executed as a public document (that is, a deed or notarial policy) constitutes evidence of the date of, and reasons for, the execution of the agreement, including against third parties (Article 1.218, Spanish Civil Code).

Engine

When transferring title to an engine, the parties must specific the identification, type, manufacturer and serial number of the engine. The main terms of the transfer agreement include the:

  • Description of the parties.

  • Condition of the engine.

  • Terms under which it is delivered and accepted.

  • Provision that delivery is made to the buyer or acquiring party.

The execution of transfer agreements can be private. However, an agreement executed as a public document (that is, a deed or notarial policy) constitutes evidence of the date of, and reasons for, the execution of the agreement, including against third parties (Article 1.218, Spanish Civil Code).

 

Security

Mortgages

10. What are the types of aircraft mortgages available? What are the validity requirements for aircraft mortgages?

Aircraft mortgages in Spain are administered as movable mortgages, as provided under the Spanish Movable Mortgage Law of 16 December 1954. A movable mortgage is a right over an asset that remains under the possession of its owner or legal possessor. A mortgage is established by a public deed or a document executed by an official stock broker or trader (Article 3, Spanish Movable Mortgage Law).

Aircraft mortgages can be granted over either an:

  • Operational aircraft.

  • Aircraft under construction, provided that at least one third of its construction budget has been spent.

A Spanish aircraft can be mortgaged if the aircraft has previously been registered with the Spanish Registry of Movable Property. To achieve registration, the interested party must register as a first inscription the:

  • Original document evidencing the property right (for example, a purchase agreement) properly notarised (and apostilled if necessary) or the original bill of sale.

  • Powers of attorney, if required.

  • Relevant tax liquidation document evidencing payment of tax.

To be considered, all original documents in foreign languages must also be translated into Spanish by a sworn translator.

Once the property has been registered at the Spanish Registry of Movable Property, the mortgage can be registered and become enforceable. To register the mortgage, an original copy must be provided, together with the relevant tax liquidation document. Stamp duty (Impuesto sobre Actos Jurídicos Documentados) must be paid at the appropriate tax rate, which can vary from 0.5% to 1.5% depending on the location of the tax office where the tax is paid.

 
11. Will a registered mortgage take priority over other mortgages and charges over the aircraft?

Registration of a mortgage or charge over an aircraft with the Spanish Movable Property Registry establishes a first priority, secured interest. Under Spanish law, a credit arising from a movable mortgage is a privileged preferential credit.

Only charges due to the rescue and necessary expenses for the maintenance of aircraft will take priority over a movable mortgage, provided that they were registered with the Spanish Movable Property Registry within three months after the rescue operation or repairs (Article 41, Spanish Movable Mortgage Law).

 
12. Can spare parts be subject to an aircraft mortgage? If not, are there any other forms of security that can be taken over spare parts?

Spare parts can be subject to an aircraft mortgage (Article 39, Spanish Movable Mortgage Law). Unless otherwise agreed, an aircraft mortgage includes the airframe, engine, propellers, radio and navigation devices, tools, accessories and furniture. Therefore, the parties to an aircraft mortgage can decide whether and which spare parts are subject to the mortgage.

As spare parts are movable assets that must be identified by a manufacturer serial number, they can be subject to a non-possessory pledge.

Leases

13. What forms of security can be granted over an aircraft lease?

Under Spanish law, the obligations of the lessee under an aircraft lease agreement can be guaranteed by means of a mortgage or non-possessory pledge over an asset of the debtor. This acts as a guarantee that the lessee will meet its obligations under the lease agreement (for example, for lease payments).

Another possible method is for a third party, accepted by the lessor, to guarantee the obligations of the lessee. In these cases, the guarantor is typically either:

  • The company that is financially the strongest in the group of companies to which the lessee belongs.

  • A third party which agrees to be a guarantor in accordance with a security agreement.

Other forms of security

14. What other forms of security can be taken over an aircraft?

Airframe

The form of security that can be taken over an airframe under Spanish law is an aircraft mortgage. There are no other recognised forms of security over an airframe.

Engine

A non-possessory pledge can be taken over an engine if the engine is not part of any aircraft and is placed in a facility. If the debtor fails to comply with its obligations under a non-possessory pledge, the creditor can request payment of the debt or the sale of the asset, in a similar way as for an aircraft mortgage (see Question 18).

 
15. What other forms of security over an aircraft can be registered?

Only aircraft mortgages can be registered in the Aircraft Section of the Spanish Movable Property Registry. However, pledges or liens covering spare parts and engines can be registered in a separate section of the Spanish Movable Property Registry.

A non-possessory pledge over an engine can be entered in the Charges and Encumbrances Section of the Registry, but not the legal title to the engine.

Aircraft foreign security interests cannot be registered in the Spanish Movable Property Registry in order to secure priority over other parties claiming an interest in the aircraft.

 

Transfer of security

16. Is it possible to transfer security interests over an aircraft? Are there specific issues of local law when transferring security interests?

Transfers of security interests over an aircraft are governed by the rules applicable to the assignment or transfer of contractual obligations. The formalities for transferring security interests will depend on the specific circumstances of the case.

 
17. Is a transfer of security subject to registration requirements?

A transfer of security must be registered in the Movable Property Registry. Any agreement or document that is submitted to the Movable Property Register must bear the signatures of the parties, authorised by a notary public. If the notary public is a foreigner, the document must be apostilled in accordance with the HCCH Convention Abolishing the Requirement of Legalisation for Foreign Public Documents 1961. Transfers of foreign security interest cannot be registered.

 

Enforcement of security and repossession

Mortgages

18. What are the circumstances in which a mortgagee can take possession of the aircraft and/or sell the aircraft? What requirements must the mortgagee comply with?

The mortgagee can take possession of the aircraft and/or sell the aircraft if the mortgagor does not fulfill its obligations under the mortgage. This right is referred to as the right of "executive action" (acción ejecutiva). To claim its right, the mortgagee must possess an enforceable title (título jurídico) sustaining its claim. The mortgagee can enforce its rights through either:

  • An authentic enforcement title, which is a properly constituted public document, prepared by a public officer and meeting all the applicable legal requirements.

  • A private enforcement title, which is a document that does not fulfill the applicable legal formalities to make it enforceable. To take effect as an enforcement title, this document must be recognised by the competent judicial authorities.

 
19. What is the procedure for repossession of the aircraft?

To take possession and/or sell the aircraft, the mortgagee can seek the execution of its enforcement title (see Question 18) through one of the following procedures:

  • Ordinary execution procedure.

  • Special execution procedure.

  • Extrajudicial sale.

Ordinary execution procedure

Under this procedure, the mortgagee can ask the competent court to effect the execution of an authentic enforcement title (see Question 18). The enforcement title must comply with Article 517 of the Code of Civil Procedure, which defines the various documents that give rise to a right of executive action.

Special execution procedure

The mortgagee can use the special execution procedure if its enforcement title includes the following information:

  • Evidence of the price of the aircraft.

  • A designated domicile for the purpose of receiving notices and summons.

  • The designation of a court to decide on any possible dispute.

  • The legal right of the mortgagee to proceed against the mortgagor in the case of breach of the conditions of the mortgage.

The special execution procedure involves the following steps (Code of Civil Procedure):

  • The mortgagee must file a lawsuit against the mortgagor.

  • The court requires the mortgagor to make the payment due and requests a property registry certificate for the mortgage.

  • The aircraft can be put up for auction if the mortgagor fails to make the payment due under the mortgage.

  • When the auction has taken place, the court pays the mortgagee the amount owed.

  • The court pays the remainder of the auction proceeds to the mortgagor, provided that there are no further debts outstanding.

Extrajudicial sale

In the case of default on the amount and/or interest due under the mortgage, the mortgagee can choose to proceed with the extrajudicial sale of the aircraft if the parties agree and the mortgage document includes the following information (Spanish Movable Mortgage Law):

  • A specific provision envisaging extrajudicial sale.

  • Designation of a representative of the mortgagor (which can be the mortgagor itself) to be present during the procedure.

  • The amount of the mortgage loan.

  • A domicile designated by the mortgagor for the purpose of receiving notices and summons.

The extrajudicial sale procedure must take place before a notary public, at the request of the mortgagee, and is executed by public auction.

The mortgagee must request the payment of the loan amount and interest owed by the mortgagor before arranging the public auction. The auction must be:

  • Announced in the Official State Gazette (Boletín Oficial del Estado) five days after the mortgagee's request.

  • Completed by electronic means within 20 days after the announcement.

The mortgagee can participate in the auction but cannot be the only participant. All participants must deposit 5% of the value of the loan as provided under the mortgage. Any remaining proceeds after satisfying the debt will be paid to the mortgagor, provided that there are no other outstanding debts to be settled.

 
20. Will local courts recognise a choice of foreign law in an aircraft mortgage? Are there any mandatory local rules that apply, despite a choice of foreign law?

Spanish courts will recognise a choice of foreign law in an aircraft mortgage in certain cases. A choice of foreign law will be valid for aircraft mortgages over aircraft registered outside of Spain. However, aircraft mortgages taken over aircraft registered in Spain must comply with the following laws:

  • Mortgage Law.

  • Code of Civil Procedure.

  • Civil Code.

  • Air Navigation Law.

The application of a foreign law by local courts is subject to the parties demonstrating the content and validity of the law (Article 12, Spanish Civil Code; Article 281.2, Spanish Code of Civil Procedure).

Spanish courts will uphold a choice of foreign law provided that (Article 12, Spanish Civil Code):

  • The foreign law is not contrary to Spanish public policy.

  • Submission to a foreign law was not made with the aim of avoiding imperative Spanish laws or legal requirements.

These are the only existing mandatory rules that can apply despite a choice of foreign law, although the courts can also apply:

  • Any international conventions with a non-EU country where the aircraft is duly registered.

  • The principle of reciprocity.

 
21. Will local courts recognise and enforce a foreign court judgment in favour of a mortgagee?

The procedure for the recognition and enforcement of foreign court judgments relating to an aircraft mortgage depends on whether the court is an EU or non-EU court.

EU court judgments

Any judgment issued by an EU court or tribunal in favour of a mortgagee can be enforced in Spain in accordance with the provisions of Regulation (EC) 1215/2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (Recast Brussels Regulation). The Recast Brussels Regulation provides that:

  • If the parties, regardless of their domicile, have agreed that a court or the courts of a member state will have jurisdiction to settle any disputes that have arisen or that may arise in connection with a particular legal relationship, the court or those courts must have jurisdiction, and this jurisdiction must be exclusive unless the parties have agreed otherwise.

  • A judgment issued in a member state must be recognised in the other member states without any special procedure being required.

Any judgment issued by an EU court must not be recognised in Spain in any of the following cases:

  • Recognition is manifestly contrary to Spanish public policy.

  • The judgment was issued in default of appearance.

  • The judgment is irreconcilable with a judgment given in a dispute between the same parties in Spain.

  • The judgment is irreconcilable 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 in Spain.

Therefore, the exequatur procedure no longer applies for the enforcement of judgments issued by EU courts or tribunals.

Non-EU court judgments

For non-EU court judgments, local courts will apply Law 29/2015, dated 30 July, on international judicial co-operation regarding civil and commercial matters. To recognise and/or enforce a non-EU court judgment/resolution in favour of a mortgagee, the mortgagee must bring exequatur proceedings.

Any judgment/resolution issued by a non-EU court must not be recognised in Spain in any of the following cases:

  • Recognition is manifestly contrary to Spanish public policy.

  • The judgment was issued in default of appearance.

  • The judgment is irreconcilable with a judgment given in a dispute between the same parties in Spain.

  • The judgment is irreconcilable 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 in Spain.

  • There are proceedings pending in Spain between the same parties and with the same cause of action, which was initiated before the foreign proceedings.

The enforcement of non-EU court judgments is regulated by the Spanish Code of Civil Procedure, including with regards to the expiry date of the executive action.

Other forms of security

22. What is the applicable procedure for repossession of an aircraft under other forms of security interests?

There is no other applicable procedure of repossession of an aircraft under other forms of security interests.

Leases

23. In the event of a default event under an aircraft lease, can the lessor take possession of the aircraft without judicial intervention?

The only way a lessor can regain possession of the aircraft without judicial intervention is with the co-operation and consent of the lessee.

To repossess an aircraft in Spain in the absence of agreement between the parties, a final judgment must recognise and order the:

  • Termination of the lease.

  • Return of the aircraft to the lessor.

  • Deregistration of the aircraft in Spain (if necessary).

The final judgment must be notified to the Movable Property Register, to record the court's decision and the termination of the lease.

In any case, the lessor can request the judge to order precautionary measures, such as:

  • An interim possession order.

  • An order that the aircraft be kept in a specific place. In this case, the request must mention a maintenance centre where the aircraft can be kept in an airworthy condition.

The lessor can also request the Movable Property Registry to make a provisional filing of the action, which will be recorded as a marginal note informing third parties that this action exists.

It is difficult to estimate how long it can take to repossess an aircraft in cases of foreclosure, and this will depend on the circumstances of each case. There are many circumstances that can have a bearing on the time that may lapse before repossession takes place. Usually, it takes not less than six months to gain possession.

 
24. What is the procedure for taking possession of an aircraft before the expiration of a lease?

The parties must sign a lease termination agreement that authorises the lessor to appear as the legal holder of the aircraft before the Spanish Air Safety Agency and the Aircraft Matriculation Registry. This agreement must:

  • Bear the authorised signatures of the parties.

  • Be submitted to the Spanish Aircraft Matriculation Registry, if deregistration of the aircraft is required.

Repossession will take place at the airport and according to the terms agreed by the parties. The lessor should take into account any possible airport and EUROCONTROL charges which the lessee may not have paid (EUROCONTROL is the European Organisation for the Safety of Air Navigation). The lessee should authorise the lessor to take possession of the aircraft with respect to the airport authorities. If this is not possible, the lessor must demonstrate sufficient legal title to access and take possession of the aircraft

Once the early lease termination agreement has been executed, the return of the aircraft to the lessor under redelivery conditions agreed between the parties and the export procedures can be performed simultaneously. Repossession, deregistration and export can take about one to two months, and ferry flights can be arranged (if the aircraft is airworthy) provided that no further obstacles arise during these procedures.

 
25. If recovery of the aircraft is contested by the lessee and a court judgment is obtained in favour of the lessor, how long is it likely to take to gain possession of the aircraft?

The best scenario for repossession of an aircraft by a lessor in Spain is with the lessee's agreement and co-operation (see Question 24).

However, in practice, it is unusual to obtain the lessee's agreement. The lessor must therefore obtain a court order issued by the Spanish courts or a foreign court order recognised by the Spanish courts. This can take from six months to one year, depending on the court.

Once the court order or exequatur is obtained, and no further problems arise, the procedure to recover possession, deregister and export the aircraft, can be accomplished within two to three months. However, it is important to take into account the:

  • Condition of the aircraft and its airworthiness certification status.

  • Period required for necessary maintenance and certification of the aircraft.

 
26. Will local courts recognise a foreign court judgment in favour of a lessor?

The procedure for the recognition and enforcement of foreign court judgments relating to an aircraft lease depends on whether the court is an EU or non-EU court (see Question 21).

 

Cape Town Convention

27. Has your country signed and ratified the Convention on International Interests in Mobile Equipment (Cape Town Convention)?

Spain ratified the Cape Town Convention in 2012. Spain acceded to the Protocol to the Cape Town Convention on Matters Specific to Aircraft Equipment of 16 November 2001, by means of declarations made on 15 December 2015. The Cape Town Convention and its Protocol came into force on 1 March 2016, with the exception of Articles 39.1, 39.3, 40 and 53, which will come into force on 1 June 2016.

Pursuant to Article XIX of the Protocol, Spain designated the Spanish Movable Property Registry as the authorising entry point for registration of security interests over aircraft in the International Registry. The Spanish Movable Property Registry will provide the party seeking registration a unique authorisation code, which must be included in the information submitted to the International Registry to register an interest.

To obtain an authorisation code, once the mark certificate has been issued by the Spanish Aircraft Matriculation Registry, the interested party must submit the application code form (approved on 29 February 2016) to the Spanish Movable Property Registry. The Spanish Movable Property Registry can only request the applicant to provide the information required in the application code form. Once the application code is submitted, the Spanish Movable Property Registry will issue one authorisation code that will be required by the International Registry. The application code form is available at www.rmercantilmadrid.com/rmm/Impresos.aspx?Type=2&Cat=4.

 
28. Has ratification of the Cape Town Convention caused any conflicts or issues with local laws?

Ratification of the Cape Town Convention and Aircraft Protocol by Spain has led to some issues of compatibility with Spanish laws. New Spanish procedural rules are under preparation in relation to:

  • The authorisation code provided by the Spanish Movable Property Registry for registration of interests in the International Registry (see Question 27).

  • The enforcement of irrevocable deregistration and export request authorisation by the Spanish Aircraft Matriculation Registry (see Question 31).

 
29. What is the legal position regarding non-consensual rights and interests under Article 39 of the Cape Town Convention?

Spain has made a declaration under Article 39(1)(a) of the Cape Town Convention regarding the priority of Spanish rights and interests over other interests, including international interests.

Spanish law gives non-consensual interests and securities priority over registered rights provided by Articles 1921 et seq. of the Spanish Civil Code and Article 32 of the Spanish Workers' Statute (Estatuto de los Trabajadores) as amended by Law 11/1994 (rewritten and approved by RDL 1/1995), all of which have been amended by Law 22/2003 on Insolvency, as amended by Law 38/2011 and Law 9/2015.

 
30. Has your country adopted the remedies on insolvency provided under Article XI of the Protocol to the Cape Town Convention?

Spain has not adopted the remedies on insolvency provided under Article XI of the Protocol to the Cape Town Convention.

 
31. What is the procedure to file an irrevocable deregistration and export request authorisation (IDERA)?

The Spanish declaration of ratification of the Protocol to the Cape Town Convention provides that an IDERA is sufficient to repossess and deregister an aircraft in Spain. However, at the time of writing, the Spanish Aircraft Matriculation Registry has not yet adopted the regulations for implementing and enforcing IDERAs in Spain.

 

Reform

32. Are there any proposals for reform in the area of aviation finance?

The recent ratification of the Protocol to the Cape Town Convention has brought about the need to review the regulations and case law relating to aviation finance in Spain.

Regarding aircraft leases, the International Accounting Standards Board issued in January 2016 a new lease accounting standard, IFRS 16 Leases. IFRS 16 will be effective from 1 January 2019. IFRS 16 sets out the principles for the recognition, assessment, presentation and disclosure of leases for both the lessee and lessor, and eliminates the classification of leases as either operating leases or finance leases.

 

Online resources

Spanish Air Safety Agency (Agencia Estatal de Seguridad Aerea) (AESA)

W www.seguridadaerea.gob.es/lang_castellano/home.aspx

Description. This is the official website of the AESA. The AESA is a state agency ensuring that civil aviation standards are observed in all aeronautical activities in Spain.



Contributor profile

Inmaculada Martinez Caballero, Senior Partner

AEROIURIS ABOGADOS

T +34 91 319 66 65
F +34 91 319 99 99
W www.aeroiuris.com

Professional qualifications. Spain, Lawyer

Areas of practice. Aviation law.

Recent transactions

  • Negotiation of aircraft financing exceeding US$250 million for the acquisition of three Boeing 787 aircraft, including pre-delivery payments under a facility agreement and a sale and lease back.

  • Negotiation of aircraft financing worth more than US$70 million for the acquisition of one Boeing 737-800 aircraft, implementing an operating lease (sale and lease back) that included pre-delivery payments.

  • Negotiation of aircraft financing for five Boeing 787 aircraft, worth over US$500 million.

  • Negotiation of aircraft financing totaling more than US$200 million for two Boeing 737-800 aircraft, including pre-delivery payments.

  • Negotiation and sale of various aircraft corporate jets and helicopters for an amount exceeding US$50 million.


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