Analysis GA&P | May 2016 1 I. This paper does not discuss the requirements and procedure for registration with the International Registry of Mobile Assets (hereinafter the “International Registry”) and should be read in conjunction with the document series produced by the International Civil Aviation Organization, the Regulations for the International Registry (see Article XVIII of the Aircraft Protocol) and the Official Commentary on the Cape Town Convention and Aircraft Protocol published by UNIDROIT (Third Edition , 2013) . In Spain , for domestic registration rules one should refer to the Decision of the Directorate-General for Registries and Notaries, of 29 February 2016, approving the methods of entry to the International Registry through the designated entry points provided for by art. XIX of the Aircraft Protocol. The Cape Town Convention on International Interests in Mobile Equipment (CTC) and the Protocol [thereto] on Matters Specific to Aircraft Equipment (AP), both enforceable in Spain under the instruments of accession to the same, shall be jointly analysed. For the purposes that follow, we will assume that in a given case Spain is the relevant jurisdiction inasmuch as the State where the debtor is situated, the “State of registry” of the aircraft or the forum whose jurisdiction is chosen by an interested party. We will also presuppose that the reader has a basic understanding of CTC/AP rules. II. It is well known that Spain has made several declarations. In conformity with art. 54(2) CTC, Spain shall require leave of a court for the creditor to exercise self-help remedies1, but shall not require leave of a court for an authorised party to unilaterally procure de-registration of an aircraft under art. XIII AP. Spain has designated an entry point for international registration of security interests and rights in respect of airframes and helicopters registered in Spain. All privileges over aircraft that rank or will rank in priority - including the privilege owing to the cost of the services under art. 39(1)(b) CTC - to an aircraft mortgage, will have the same priority over a registered international interest, whether registered before or after Spain’s accession, and this priority will apply inside and outside insolvency proceedings2. “National” caveats concerning judicial or administrative seizures (in the latter case, only for tax debts) may be entered as if they were international security interests. III. Scope The CTC and AP apply: (i) When the “debtor” is situated in a Contracting State at the time of concluding the agreement creating or providing for the international security interest [it does not suffice to be so after the conclusion of Guide to Spanish substantive law on the treatment of security interests in aircraft equipment following Spain’s accession to the Cape Town Convention and the Aircraft Protocol Ángel Carrasco Perera Professor of Civil Law, Universidad de Castilla-La Mancha Academic Counsel, Gómez- Acebo & Pombo 1 The fact that Spain has made the relevant declaration in the instrument of accession to the CTC, but not in that to the AP as prescribed by art. 54(2) CTC, might have some importance. 2 The latter is stated in art. 39(1)(a) CTC. But in fact this is not so in Spain, where privileges that are not security are not recognised priority within insolvency proceedings. Analysis GA&P | May 2016 2 the agreement], with the term “situated” having the meaning given in art. 4 CTC. Provided the aforementioned requirement is met, it does not matter where the creditor is “situated”, it is of no import that the law of the State where the debtor is situated refers as governing law to a non-contracting State, it matters not where the aircraft is registered, it is of no matter whether the jurisdiction hearing the conflict a quo is that of that (Contracting) State where the debtor is situated or that of another Contracting State. (ii) “Debtor” is the debtor grantor of a security interest, the buyer under retention of ownership, the lessee of the aircraft or the simple buyer who registers (in accordance with arts. III and XIV AP). (iii) A non-contracting State, whose jurisdiction is the jurisdiction a quo where a dispute is determined, is not bound by the CTC/AP, even if its private international law rules determine as governing law that of a Contracting State where the debtor is situated at the time of the agreement3. (iv) Even if the debtor is not situated in a Contracting State at the time of concluding the agreement, the CTC/AP will apply where the subject matter (‘object’) of the international security interest/right is an airframe or helicopter registered with the Aircraft Register of a Contracting State (art. IV/XXI AP). This rule does not apply to engines, which do not have a Register. Consequently, a security interest in an airframe registered in a Contracting State, even if it contains a clause extending the same to the engine, does not render the se cu ri ty in te re s t in the engine an international security interest, unless the State of registry is also the State where the debtor is situated. (v) For any purpose where the lex rei sitae is relevant, an airframe is located in the State of registry of the aircraft of which it is a part; a helicopter in its State of registry; an aircraft engine in the State of registry of the aircraft whereon it is installed, or, if not installed on an aircraft, where it is physically located. (vi) When Spain is the forum where the dispute is determined, the “applicable law” pursuant to the CTC is that determined by Spanish private international law (Spain has not opted for the application of art. VIII AP). IV. International or national security interests. There are no “international security interests” in aircraft equipment “other than” the national security interests that may eventually be granted as a chattel mortgage or, where applicable, non-possessory pledge. This has important consequences. (i) If a national security interest registerable with the Chattels Registry (Registro de Bienes Muebles or RBM) could be granted and, hypothetically, this interest had not been granted as an “international” interest under the CTC, such interest would have no relevance or enforceability as it would not rank in priority to any security interest (or similar right) under the CTC system. Therefore, in principle, granting chattel mortgages over aircraft makes no sense. (ii) The CTC “international” security interest (implicitly hereinafter, or similar right) does not really have any trait or condition that reveals or requires an element of internationality. It suffices that the “security” has been granted in compliance with the requirements of art. 2(2) (essentially, granted by whoever has powers of disposal) over assets covered by art. 2(3)(a), that the grantor debtor or obligor of the similar right is “situated” in a Contracting State, in the broad sense of the term as defined in art. 4 CTC, or that the right is granted in the place of registration in the case of art. IV AP and in the (very simple) form of art. 7 CTC. (iii) If the charged debtor or obligor are “situated” in a Contracting State (which may not be Spain), it is immaterial whether the lex rei sitae of the jurisdiction where the property is located, or of the jurisdiction of aircraft registration, or of the jurisdiction of the State where the debtor is “situated”, refers as applicable law to that of a Contracting State. (iv) It is not even specific to the international security interest to be registered with 3 The Official Commentary states the opposite (no. 230). Analysis GA&P | May 2016 3 the CTC Register, except for the effects of insolvency (art. 30(1) CTC: unless Spain confers, as lex fori, enforceability under insolvency to a registrable unregistered security interest, which seems excluded by art. 90(2) of the Insolvency Act [abbrev. LCON]). An international security interest is “concluded” and “enforceable” irrespective of registration (art. 7 CTC), without prejudice to the priority of international security interests being then largely determined by the registration of the security interest (art . 29 CTC). (v) The rules on international security interests apply (in respect of Spain) to all “internal” transactions, even if the same have no connective internationality (art. 50 CTC). Consequently, for internal transactions regarding aircraft and other objects of the CTC, the Chattel Mortgage Act (abbrev. LHMPSD) need not apply, nor would such application be of any use. (vi) A chattel mortgage over aircraft or helicopters (including their engines as an integral part thereof ), granted in accordance with the LHMPSD and registered with the CTC Register, is a written document that suffices to contain an “international interest” within the meaning of art. 7 CTC. But granting a chattel mortgage to achieve the status of international interest makes, prima facie, no economic sense; in fact, neither would granting the security interest as a mortgage under the LHMPSD confer the priority of international interest. (vii) However, the specific or “additional” granting of a “Spanish” security interest makes sense when intending to extend the security interest to goods, products or components that are not included in the CTC interests, or to ‘extract’ this limited interest from the international interest regime, of which examples are provided below. V. Non-security interest agreements. It is particularly striking, and has indubitable practical consequences, that the CTC/AP apply to pure leasing agreements and simple sale and purchase agreements, which are not security interests: (i) Simple aircraft equipment sale and purchase agreements (no retention of ownership or condition precedent of payment) would not, prima facie, fall within the scope of CTC. But art. 29(3) generally refers to the “buyer of an object”, charged or not with retention of ownership, and precisely to lay down that unregistered interests will not be enforceable against such buyer regardless of his or her actual knowledge of such interests. Provided the simple buyer registers his or her right (art. XIV AP, which for aircraft equipment would repeal the rule of art. 29(3) CTC). This inclusion of simple sales and purchases is expressly provided for in arts. 41 CTC and III, V and XIV AP. They may be registered in accordance with arts. 16(1)(a) and 20(1) CTC and shall en joy the retroactivity provided for prospective interests in art. 19(4) CTC. (ii) But the “purchase” to which art. III AP refers is the one that has transferred the property. The sale and purchase agreement without immediate real effects may be a conditional sale (with retention of ownership) or a “prospective” sale. However, thanks to art. 19(4) CTC, this distinction will have no practical effect, at least within the scope of the CTC4. (iii) If the simple lease agreement is not registered, but the lessee subleases the aircraft to a third party, and this right is registered, the sub-lessee is entitled to quiet possession of the object, even if the main lease agreement is terminated, for any reason, before the end of the sublease [art. 29(4)(b) CTC, art. XVI(1) AP]. Furthermore, by virtue of art. 29(4) CTC, if the person who registers the sale and purchase of an asset, executed by the lessee of this object, having no power of disposal, and registers it, it will be free of the “interest” (right of the initial lessor) if such is not registered, even if the buyer had actual knowledge of it (!). (iv) The buyer subject to retention of ownership and the lessee may grant an international security interest in the rights they hold. And although the latter can never rely 4 However, for appropriate purposes, it is not presumed that the property has been transferred to the buyer just because a “sale” has been registered with the International Registry. Not even the registration acts as a symbolic transfer or transfer by equivalence. Analysis GA&P | May 2016 4 on registration to assert against their counterparts (seller, lessor) rights they do not have, they can give their creditors a preferential right if such creditors register their own security interest before others eventually granted by the conditional seller or the lessor in their own rights are registered. (v) The “simple” buyer who has registered his purchase is not only preferential to the creditor with a subsequent security interest, whether registered or not, but also to earlier unregistered CTC rights. (vi) By default, the CTC also regulates and makes subject to the regime of ordinary registration assignments of claims and interests [arts. 16(1), 32] and transfers of property for security purposes (arts. 31(5), 34, 35) VI. The object of the security interest (i) Neither under the LHPSD nor under the CTC can separate security interests be granted over aircraft components other than the engines. Outside the CTC, separate security interests may be granted in these other components as “goods” or “other identifiable property”, under art. 53 LHMPSD, or appurtenances of the aircraft. (ii) Aircraft engines may be charged in Spanish law separate from the aircraft as a non-possessory pledge under art. 53(1) LHMPSD. They may be charged together with the mortgage over the aircraft as integral parts of the same (art. 39 LHMPSD). Also under the CTC, separate security interests may be granted in the airframe and engines. Moreover, security interests must be granted separately in the airframe and engines and a joint interest in both is not possible. (iii) An international interest may be granted and registered in an aircraft engine that is already installed in an aircraft and is an integral part thereof. (iv) A security interest in an airframe does not automatically extend to the engine of the aircraft, unless granted under the LHMPSD. (v) Even in engines installed or to be installed on aircraft registered in Spain, or to be deregistered, an autonomous international interest distinct from that of the aircraft can be granted, without requiring access to the international registry through the Spanish designated point of entry (Chattels Registry), art. XIX(2) AP. (vi) The international security interest in an aircraft engine is not terminated even if later this engine forms part of an aircraft, in turn subject (or not) to an international interest (art. XIV(3) AP). (vii) If the “helicopter engine” is not installed the reon , i t should be t rea ted like other aircraft engines. Once installed, it becomes an integral part of the interest in the helicopter, although pre-existing rights created before the installation shall survive. In the installed engine a security interest distinct from the interest in the helicopter cannot be granted ex novo, but a “prospective interest” can be granted for when the engine is no longer installed on the helicopter. (viii) The (double) international interest in the aircraft and its engines enjoys priority over any subsequent international interest resting solely in those engines. (ix) “Stock spare parts” form an integral part of the Spanish mortgage over aircraft (art. 39 LHMPSD), but they are not part of the international interest, nor can they be the subject matter of independent international interest. (x) An international interest extends its priority to compensatory “proceeds” (art. 29(6) CTC). This statement must be read as having the same scope as art. 5 LHMPSD. Non-compensatory proceeds (freight, loans, etc.) cannot be charged with CTC security interests and, where appropriate, a nonpossessory pledge must be registered with the Spanish Registry. (xi) The “items” (sic) that cannot be the “object” of an international interest [i.e., not an airframe, aircraft engine or helicopter] can be charged outside the CTC [art. 29(7) CTC], and if this Analysis GA&P | May 2016 5 were the case before such “items” were to form part of a CTC interest in the aircraft or helicopter, those rights will continue subsisting with their own priority regardless of the subsequent installation on an object of international interest, provided that “under the applicable law those rights continue to exist after the installation” [art. 29(7)(a) CTC]. That is, if under the Spanish law (hypothetically) those separate rights have not been terminated by reason of the “items” becoming accessions to the aircraft. (xii) Although Spanish law enshrines, like many others, the principle of accession to personal property, there is no rule in the Civil Code (CC) preventing the voluntarily granting of separate security interests in “items” which form an integral part of another object. Because in Spain it does not suffice for accession that property becomes an integral part of another, but rather that the things come together “in such a manner that they become one” (art. 375 CC) and that such union “cannot be separated without loss” (art. 378 CC), which ordinarily will not occur with “items” installed on an aircraft. (xiii) The above issue has its importance even in the field of international security interests. As the Spanish “applicable law” does not contain a doctrine of accession such as the construct of art. 29(7) CTC, the “Spanish law of accession” would not, prima facie, allow an international interest in an airframe to extend to other “items” that are not a registrable “object”. However, art. I(2)(e) AP provides that, for the purposes of the Convention, “airframe” includes all installed, incorporated or attached accessories, parts and equipment, provided a separate right has not been granted before the installation in or after uninstalling from the aircraft, if tolerated by the applicable law. This is also the case if the independent interest in the item is granted after installation but before being uninstalled and before an international interest is granted in the airframe (or other object subject to the AP)5. As for aircraft engines, they never fall under the interest of the airframe, even if under (Spanish) applicable law they constitute a case of chattel accession. (xiv) If the aircraft had been purchased in Spain subject to a retention of ownership or a lease, before accession to the AP, the buyer and lessee may constitute a subsequent security interest in their right (when the Convention has not yet come into force). This security interest would already be granted as, and would be, an international interest. But the conditional seller or lessor would not be able to register their right; unless the contract is novated with effects of termination. VII. Written form and notice filing. (i) The “writing” recording the agreement granting the security interest (art. 7 CTC) does not require public form. It does not even require an attestation of signatures [although the registration application requires the applicant’s electronic signature]. Therefore, to a security interest thus granted the insolvency restriction in the form of art. 90(2) LCON would not apply. However, art. 517 of the Civil Procedure Act (abbrev. LEC) is applied and the “writing” can only serve as an enforceable judicial instrument if recorded in deed form. Even if what is intended (which is possible, art. 12 CTC) is the enforcement of the international interest through the general or special court enforcement procedure of the LEC, the enforcement instrument should be in the form of art. LEC 517 or the special form procedurally required in order to proceed in enforcement against the property especially attached to the instrument. (ii) The “agreement” granting the security interest, which must be in “writing” [art. 7(a) CTC] is not the “content” of the registration, which is only a summary registration and with spaces and priorities pre-established electronically, subject to merely formal examination control. The “consent” concluding the agreement is not consent to carry out or alter the registration [cf. arts. 16, 18(1)(a), 20(1) CTC]. 5 As opposed to this, the Official Commentary, which only seems to admit an interest in an item already installed if such item has in turn been uninstalled (no. 4197). Analysis GA&P | May 2016 6 (iii) The international interest can cover present debts and future advances and does not require the determination of maximum liability [art. 7(d) CTC]. But a security interest of this kind could not be enforced by way of the Spanish enforcement procedure, due to a lack of mechanisms to ensure debt liquidity. VIII. Fiduciary holders. The person who appears as holder of the security interest as “principal” or “fiduciary” is “authorised to enforce rights” under the CTC (art. VI AP). Consequently, the “security interest agent” is authorised to register in his name and to enforce in his name, without having to reveal the beneficial owner or owners and without the latter becoming or making a statement at any time as holders of the legal relationship, or of having to novate the title when there is a modification of the underlying holders. No “mandatory” requirement of the Spanish forum can dilute this rule. The rule against “trusts” can no longer form part of Spanish ‘public policy’. IX. Preferences. There are special characteristics worthy of consideration regarding priorities between competing rights. (i) As Spain has not made the relevant declaration (cf. art. 60 CTC), pre-existing national security interests (prior to accession to the AP) retain the validity and priority conferred by the LHMPSD or civil law. But note that the AP would come into force for present purposes when a CTC contract has been entered into with a debtor in a Contracting State, provided that the jurisdiction a quo (the jurisdiction determining the conflict) is that of a State which has also become a contracting party. But if - taking Spain as a reference - the debtor of a security interest in Spain before Spain’s accession to the AP, then leases the aircraft to another person that, as debtor, is situated in a Contracting State and the jurisdiction a quo is that of this State, and the lease is registered with the International Registry, subsequent national security interests granted in Spain in the same aircraft shall come later in priority to the international security, provided the conflict of priorities is resolved in this second State (already having acceded to the AP). (ii) Once Spain acceded to the AP, the novations that may affect the priority and the legitimate expectations of holders of subsequent rights must be re-granted as international interests. If Spain is the jurisdiction where the relevant conflict is resolved, art. 4 of Act 2/1994 (2007 version) can be analogically applied to determine the novations that affect the priority or not. (iii) Rights in an international interest can be acquired by subrogation (arts. 9(4) and 38 CTC). Although the subrogation may be subject to registration pursuant to art. 16(1)(c), the subrogated party acquires the right and priority held by the debtor for which the payment there has been subrogation. The same applies to assignments of claims and security interests [in the CTC an assignment is only possible where its subject matter is the claim (“associated rights”), which carries with it the assignment of the security interest, but there is no possibility of assignment independent of the security interest, art. 1(b) and (c) CTC]. The assignee acquires with the priority of the assignor (cf. art. 50(3) CTC), but if it does not register, it will succumb against another subsequent registered assignee. The assignee may register its right even if that of the assignor is not. (iv) “Non-consensual rights” (privileges) that take precedence over an international interest, not yet registered with the International Registry and the international interest being registered before the privilege came into existence or the CTC came into force in the country where such privilege is enforceable, as a result of the declaration of the relevant State (Spain has made this declaration) under the terms of art. 39 CTC, will only be recognised with said preference if the court a quo is a court of the jurisdiction of the State that made the declaration, unless the foreign court had to apply the Spanish law by virtue of its rules of private international law. It will not have to do this if the object is located in the situs of the forum court at the relevant time, even if the debtor is not “situated” in this situs or the aircraft or helicopter is not registered therein. Analysis GA&P | May 2016 7 (v) In fact, no other foreign competent court shall apply the CTC with reservations and declarations made by Spain, even if the debtor is situated in Spain or the aircraft is registered in Spain. (vi) Spain shall apply its rules of preference (basically, the priority given to privileges over the aircraft, in the terms of art. 39 CTC) if Spain becomes the forum that determines the dispute. It suffices that the property is located at that time in Spain and that the debtor is “situated” in a Contracting State or that the aircraft/ helicopter is registered in a Contracting State. (vii) If a privilege to which art. 39 CTC refers must have priority in respect of a registered international right or security, such priority should be enforced by thirdparty intervention in court enforcement proceedings only if the creditor holding the security is undertaking at that time a judicial enforcement. Otherwise, the privilege must be enforced by way of an independent declaration (with possible interim injunction). The privilege that is preferential against the interest does not lose this preference because of the fact that the holder of the interest has relied on the exercise of one of the enforcement remedies provided for in the CTC/AP or the applicable national law6. (viii) The above must be understood with the following limitation. Pursuant to art. IX(2) AP, a contrario, the creditor, security interest holder, could exercise the specific remedies of this provision (procure de-registration and procure exportation) without the consent of the holder of an unregistered privilege, even if such this privilege ranked in priority to the international interest. (ix) When the preference rules act in favour of a lessee [e.g., the lease is registered before a pre-existing security over the lessor’s right], such preference translates into the right to quiet possession for all the time specified in the lease. The same applies to a sublease (arts. 29(4) CTC and XVI AP). Please note that, although neither the conditional buyer nor lessee are “holders” of registered rights (the registered right is that of the seller or lessor), with the latter being registered, the lessee and the buyer will be protected as if it were their own right which has been registered. (x) According to the declaration made by Spain in respect of art. 40 CTC, aircraft seizure caveats will be registrable with the International Registry as if they were an international interest regulated in the CTC. But, curiously, in Spain, these atypical interests would not be endowed with a privileged insolvency status (cf. art. 90 LCON), which would not be the case if Spain had made a declaration concerning the application of art. XI AP. (xi) A prospective interest and a “notice” of interest produce earliness and advantage of the priority already from this moment, without prejudice to the prospective right becoming definitively consolidated [arts. 16(1)(a) and (d), 18(3), 19(4) CTC, V.3 AP]. A “prospective” interest might be granted - the matter is debatable - where future enforceability is subject to the production of a legally required condition. The International Registry does not provide information distinguishing between the registration of an interest (or similar right) and the registration of a prospective interest (or similar right), art. 22(3) CTC. (xii) An interest (or similar right) can be regi s tered in pro spe c tive air cra f t equipment if conditions already permit the identification of the object as an object of international interest (art. 18(3) CTC). But under the CTC an ‘after acquired property clause’ is not enforceable, just as it would not be in aircraft mortgages under the application of the LHMPSD. (xiii) The CTC does not contain any special super privilege. Thus, if A grants and registers a prospective interest in an aircraft engine, and then B, who produces and sells these engines, sells to the common Debtor and an international 6 Against the opinion contained in no. 2218 of the Official Commentary. Analysis GA&P | May 2016 8 interest in the engine is granted or not, A has priority, even if the value given in his agreement with the Debtor is not value directly provided by B to produce the object of the security interest. (xiv) Against the “assigned debtor”, the assignee of an interest “and associated rights” can claim performance without this assignment being registered (art. 33(1) CTC). (xv) In general, the registration of the interest or associated rights is not a condition of procedurability for any contractual remedies that may be established inter partes. (xvi) “Pre-existing rights and interests”, prior to the entry into force of the CTC/AP, retain the priority they enjoyed under the law previous to the CTC and cannot be the subject matter of registration as an international interest and, if registered, they do not have any legal effect under the CTC (art. 3(2) Regulations). Even if such rights were assigned after the CTC came into force, Spain could at any time avoid this outcome by way of a relevant declaration (art. 60(1) CTC). (xvii) The aforementioned rule (art. 3(2) Regulations) also applies when at the time of the agreement the debtor was not situated in a Contracting State (nor was there another alternative point of connection) and then goes on to be situated in a Contracting State: that right or interest may not be subsequently registered, and if registered, it will have no legal effect in accordance with the CTC. (xviii) Within the scope of the CTC, priority will never be obtained through possession. (xix) No registered right or interest shall acquire priority under the CTC against rights (for “privileges” art. 39(1)(a) governs) that are not rights registrable under the CTC/AP7 or that, though registrable in the abstract (lease), the debtor (lessee) is not situated in a Contracting State or there are no other factors of connection with the CTC. A purchase option may be registered, probably also a right of first refusal; but not a usufruct (yes, a lease!). The extension of the international interest to the “proceeds” in art. 29(6) does not grant priority over a pre-existing claim pledge over these proceeds. X. Remedies. Insolvency. When the interest has been granted in accordance with art. 8 or has been “reserved” pursuant to art. 10 CTC (reservation of title, lease), the remedies specified therein [or art. XI AP (procure the deregistration of the aircraft, procure the export and physical transfer of the object)], regardless of whether they are self-help remedies (take possession, sell, receive under antichresis cash flows, terminate the agreement) or by way of a court order [art. 8(2) and 10(b) CTC], and the debtor or grantor of the interest goes into insolvency, the resulting situation according to how Spain has acceded to the AP is as follows: (i) Spain has made no declaration concerning art. XI AP. There is, therefore, no special rule on insolvency, and Spanish ordinary insolvency rules related to security interests and similar rights apply to international interests granted in accordance with the CTC. (ii) Unlike what happens, for instance, with the “financial collateral” under Directive 47/2002, “ CTC international interests” do not enjoy a general safeguard rule in insolvency situations. Therefore, there is no special regime, and CTC interests cannot be enforced outside the insolvency proceedings in a manner different to other “national” security interests. (iii) Consequently, none of the mentioned specific remedies of international interests can in principle be enforced in a situation of insolvency of the debtor holding the charged property, or of the buyer debtor with retention of ownership or of the lessee of the aircraft. (iv) One could argue as to whether these specific CTC/AP remedies can be enforced, even as self-help remedies (if this is the case) within insolvency proceedings in the same way security interests in charged assets can be enforced within insolvency proceedings , according to arts . 56 7 The opposite seems to be held in no. 2157 of the Official Commentary. Analysis GA&P | May 2016 9 and 57 LCON. In other words, if when these interests can be enforced within Spanish insolvency proceedings, they could be enforced in accordance with the enforcement format laid down in arts. 8 and 10 CTC and IX AP, and not in the manner required by arts. 56 and 62 LCON or paras. 10 and 11 of art. 250(1) LEC. (v) The above question would be particularly relevant when the international interest is a simple lease (not even financial), mode of “interest” provided for in art. 2(2) (c) and 10 CTC. In Spanish insolvency proceedings, this atypical interest would then have to be enforced under the rules appropriate to security, not to bilateral contracts. Art. 62 LCON shall not apply, the insolvency practitioner may rely on, to whatever extent is feasible, art. 155 LCON, but not art. 62(3) LCON. If payment is not offered to the lessor (art. 155(2) LCON), he may terminate the lease, even out of court, although - given the Spanish declaration pursuant to art. 54(2) CTC, to which reference is later made - judicial authorization will be required to extract the charged property from the insolvent estate. (vi) The same can be said when the “secured” creditor is a seller with retention of owne r ship . He may te rmina te the agreement outside the ordinary regime of contractual terminations in art. 62 LCON. (vii) However, art. 30(3)(b) CTC would object to the possibilities set out in paragraphs (iv) to (vi) above. The CTC “does not affect the procedural rules concerning the exercise of rights in property that is subject to the insolvency practitioner’s control or supervision”. At least while there is the possibility of a specific insolvency regime as contained in art. XI, Alternative A AP. We believe this barrier to self-help remedies also applies to the specific remedies of art. IX AP (procure the deregistration, procure the export) when the debtor is subject to insolvency proceedings. (viii) All righ t s and bene fi t s tha t unde r Spanish insolvency law (or Spanish noninsolvency law applicable in the insolvency proceedings) are appropriate to an international interest shall apply in favour of the holder of this interest, even if not be mentioned in the CTC and AP (art. 30(2) CTC). However, no specifically national rule concerning security interests shall apply to a (simple) aircraft lease, because this lease right is not a security interest under (Spanish) applicable law and the same will happen with the simple sale and purchase art. III AP refers to, even though this provision refers to art. 30 CTC. (ix) Despite the declaration made by Spain in respect of art. 54(2) CTC, the specific remedies of art. VIII and XIII AP (procure the deregistration and procure the export) are not subject to prior court authorisation if the parties have followed the procedure of art. AP XIII (the “IDERA” (Irrevocable De-Registration and Export Request Authorisation) route in the language of the industry). Unless insolvency proceedings have been opened, in accordance with art. 30(3)(b) CTC. (x) Art. XIII(2) AP leads to a denial of an assignee’s (the creditor’s) entitlement to benefit from the authorisation to deregister. (xi) The existence of unregistered privileges that, pursuant to art. 39 CTC, must rank in priority to a registered interest does not prevent deregistration (art. IX(2) AP). But if before the international interest is registered a non-consensual right of art. 40 is registered [seizure caveat], the aircraft cannot be deregistered without the consent of the holder of this privilege [as where, in general, there is a previous holder of another interest, art. IX(2) AP]. With the exception of debtor insolvency proceedings: in this case, and unless the holder of the seizure caveat enjoys a separate enforcement right, the holder of the interest, duly authorised under the terms of art. XIII, can proceed with deregistration, provided he can “take control” of the aircraft pursuant to national insolvency law (again, referral of art. 30(3)(b) CTC). (xii) Pursuant to art. 11 CTC, the notion of “default” - that triggers the relevance of enforcement remedies - is not subject to a test of essentiality or substantiality, provided the parties have specified in the agreement which are the events of default. (xiii) The enforcement must be performed “in a commercially reasonable manner”. But the debtor can only defend himself by way of Analysis GA&P | May 2016 10 judicial defences that are reactive (interim injunctions to desist) or subsequent to the enforcement. The court competent to grant such relief shall be, equally, either the court chosen by the parties, or the court of the jurisdiction where the enforcement is being carried out insofar that the aircraft object is located there, or the court of the State of registration of the helicopter or airframe, or the court of the Contracting State in which the debtor is situated (arts. 42, 43 CTC, XXI AP). None of these can apply their own rules of national law in respect of unfair terms when clarifying what is meant by “manifestly unreasonable”. XI. The declaration of art. 54(2) CTC. As is known, Spain has made the declaration relevant to art. 54(2) CTC and by virtue of the same a judicial authorisation will be required for the exercise by the creditor of the remedies under the Convention and Protocol. (i) Although the parties have chosen a law other than Spanish law as applicable (art. VIII AP), the substantive law (here: the need for judicial authorisation) and the Spanish procedural law will apply provided Spain is the forum where these remedies are to be applied to the aircraft object (art. 14 CTC). (ii) Spain has not made pursuant to art. AP XXX(1) a declaration of application of art. VIII of the AP, so the parties cannot choose applicable law, at least to the extent that it affects the procedural law of the (Spanish) forum or rules that would apply under the lex rei sitae principle. (iii) Notwithstanding the provisions of arts. 42 and 43 CTC, in any case the Spanish jurisdiction shall be competent where enforcing remedies for default over aircraft objects in Spain. Even if the enforcement remedy is a “lease” [art. 8(1)(b) CTC] and notwithstanding that according to art. 43(2) (b) the competence to order an interim remedy of this type would lie with the court chosen by the parties or that appropriate to where the debtor is situated. (iv) The Spanish declaration on the need for judicial authorisation does not impose a legal procedure when the aircraft object upon which the remedies of arts. 8 and 10 CTC would apply is located in another jurisdiction, whether or not the jurisdiction of a Contracting State. It changes nothing that Spain has designated a national point of entry for aircraft and helicopters registered in Spain. Conversely, the effects of the Spanish declaration concerning art. 54(2) CTC come into play if the object is located in Spain at the date of enforcement, but they are not subject matter of Spanish registration nor is Spain the country in which the debtor was “situated” according to the criteria of art. 4 CTC. (v) The Spanish declaration concerning art. 54(2) CTC does not prevent the creditor from personally giving the notice to which art. 8(4) CTC / IX(4) and IX(6) AP refers or from making the distribution under art. 8(6) CTC. (vi) The “judicial authorisation” that Spain requires under art. 54(2) CTC may not in fact consist of enforcement proceedings. Strictly speaking we are not talking either of non-contentious (in re) proceedings, but we fail to see how else but under such proceedings this motion could be raised, with the notable condition that the debtor’s “objection” “will not render the dispute contentious” (art. 17(3) of A c t 15/2015) . The “au thori sa tion p r o c e e di n g s ” will n e v e r b e c om e contentious, other than by circumventing the spirit of the CTC. (vii) Agreed appropriation of property that has been assigned to the creditor as fiduciary security and has been agreed post-default does not require judicial approval, if all interested parties agree (pactum commissorium ex intervalo, art. 9(1) CTC). Otherwise it cannot be agreed in advance without involving a judicial decision, even if Spain had not (or withdraws) the declaration in respect of art. 54(2) (art. 9(2) CTC) (viii) Although understanding art. 15 CTC is not straight forward, it seems that the parties may agree on non- intervention by courts for the production of effects of interim or interlocutory relief under art. 13, with the exceptions listed there. Analysis GA&P | May 2016 11 8 Art. 24 CTC. 9 Art. 25 CTC brushes away the problem taking for granted that the registered holder will discharge without delay upon written request by the concerned party. The jurisdiction of Irish courts in the making of orders to discharge seems limited as per art. 44(2). Litigating both in Spain, resorting later to the procedure of international recognition , and in Ireland, seem terrible options for whoever has to obtain a judgment declaring the inexistence or termination of a registered right. 10 Official Commentary, no. 2143. For further information please visit our website at www.gomezacebo-pombo.com or send us an e-mail to: firstname.lastname@example.org. Barcelona | Bilbao | Madrid | Valencia | Vigo | Brussels | Lisbon | London | New York XII. System risks and limits. (i) There is no specific centralised jurisdiction or specific international courts for the implementation of the CTC/AP, nor those to which questions could be referred concerning the implementation o f these international instruments. There is no “international” appeal track. Each jurisdiction can support the interpretation of these instruments that best suits it, with the ultimate possibility of generalised disharmony in the implementation of the CTC. (ii) The Official Commentary to the CTC/AP is not an “authenticated” interpretation binding national courts. (iii) International registration is not a public instrument or an entry protected by law. There is no principle of accuracy in respect of that which has been registered or of existence of document of title as a consequence of registration. Anyone can judicially challenge the entry. No acquirer under the CTC system consolidates his acquisition a non domino in circumstances similar to those operating in art. 34 of the Mortgage Act (abbrev. LH) or art. 8 of the Companies Register’s Rules (abbrev. RRM). (iv) Unlike, for example, the provisions of art. 6 RRM, the international Registrar does not examine “under his responsibility” the legality of the extrinsic forms, the capacity and the actual entitlement of the grantors and the substantial validity of the content of the agreement. (v) Input errors are not neutralised by the Registry. Search errors could give rise to liability on the part of the Registrar, but cannot confer or consolidate inter partes rights. The Supervisory Authority has no jurisdiction to resolve legal appeals concerning the Registrar. Cf. arts. 17, 18(2), 20(4), 24, 25(4), 28 CTC. The CTC system provides no “protection for the party who relies on untrue registration”, nor does it cure any defect in the title, capacity, form, object or power of disposal; not even does it guarantee that the registered right is a right that can be registered according to the CTC/ AP, or whether in fact it is or not applying the CTC/AP. Because neither does the registration system expel prima facie that which could not be registered, provided that an aircraft object is involved with the conditions required in the AP and the Regulations of the Registry. The value of the registration certificates as prima facie evidence is quite limited8. (vi) The registered right may have already been terminated by contractual termination or can be so later, and the procedure to procure a “discharge” against the will of the person appearing as the holder is cumbersome and presumably protracted9. (vii) Disputes concerning the validity and enforceability of the registered right may not be settled before the international Registrar or the Supervisory Authority of the International Registry or before the (Dublin) Court of competent jurisdiction to make orders to the Authority or the Registrar, but before the court determined under the ordinary rules of jurisdiction, which, in turn, cannot (doubtful in the case of insolvency courts) give instructions or orders to the international Registrar, so that the judgments thus obtained will have to be sent to the Irish jurisdiction through the ordinary track of recognition and enforcement of foreign judgments10.