On 25 November 2015, Spain’s instrument of accession to the Aircraft Protocol, supplementary to Spain’s prior accession to the Cape Town Convention, received royal assent. Although this is not the place to elaborate either on the complex Convention-Protocol relationship, or on the relationship each shall have with the Spanish law on security interests insofar as lex rei sitae of aircraft registered in Spain, below follows a low-down on a number of key aspects.
- As a result of a ‘reserve’ of ‘competence’ by the EU (Council Decision 2009/370/EC), Spain, like any other Member State, cannot make any declaration concerning the options and scope of the critical art. XI of the Protocol. This means that there are no special rules in the event of insolvency of an airline with its COMI in Spain and that any adjustment to the model of art. XIII must be undertaken directly by yet another direct amendment to the Spanish Insolvency Act.
- By means of a timely declaration concerning art. 54(2) of the Convention, Spain declared that any remedy available to the creditor under the Convention may be exercised only with leave of a court. Basically, the self-help remedies provided in the Convention for enforcement of a security interest are not feasible in Spain. However, in this instrument of accession to the Protocol, Spain declares that “it will apply Article XIII of the Protocol, and in this case the provision contained in the Spanish declaration under Article 54(2) of the Convention will not apply”. Therefore, “[w]here the debtor has issued an irrevocable de-registration and export request authorisation substantially in the form annexed to this Protocol and has submitted such authorisation for recordation to the registry authority, that authorisation shall be so recorded. […] The person in whose favour the authorisation has been issued [creditor] shall be the sole person entitled to exercise the remedies specified in Article IX(1) […] Such authorisation may not be revoked”.
The “remedies specified in Article IX” of the Protocol are to procure the deregistration of the aircraft and procure the export and physical transfer of the aircraft object from the territory in which it is situated. What then remains as residual content for art. 54(2) of the Convention, that is, for what creditor activity will prior judicial action be required? To sell the object, to lease it, to receive income or benefits arising from the management of the aircraft, to take possession of the leased aircraft, as per arts. 8 and 10 of the Convention? But can the remedies of arts. IX and XIII of the Protocol be applied cumulatively together with the rest of the remedies in arts. 8 and 10 of the Convention subject to the court leave reserve? Or should preference be given to the interpretation that all “enforcement” remedies in art. 8/10 of the Convention, plus the specific remedies in IX/XIII of the Protocol (i.e., any and all enforcement remedies when the charged object is aircraft equipment), are absorbed by the declaration relating to the Protocol, so that the declaration relating to art. 54(2) of the Conventi on is indeed superseded for security interests (aircraft equipment) covered by the Protocol?
- Spain has designated the Chattel Registry as the “point of entry allowing transmission to the International Registry (Dublin) of the information required for registration therewith in respect of airframes and helicopters registered in Spain” pursuant to art. XIX of the Protocol. Although I will not delve here into the enormous problems of coordination and practicality that this decision will give rise to, it is important that you retain three facts:
- It is intended that the airframes and helicopters registered in Spain can only enter the International Registry via the Spanish Chattel Registry. As things stand, this means that the Chattel Mortgage Act shall apply (exception, it is my understanding, to the requirement of execution in notarial form, given art. 7 of the Convention).
- This intention, however, does not extend to aircraft engines, which can be charged with an “international interest” in any manner, anywhere, and with direct entry to the International Registry.
- As of yet there is no ban on the aircraft of companies with their COMI in Spain being registered outside Spain, which poses a suggestive choice of governing law.
- In the instrument of accession, Spain has declared that all non-contractual privileges and security interests which heretofore prevailed over the Spanish aircraft mortgage, and all those enjoying this priority in the future, shall also prevail over the international interest registered with the International Registry. This means that the “first ranking international interest” will seldom be, de facto, the first ranking interest and therefore (I presume) the privileged creditors ranking in priority can “prevent” the internationally secured creditor from relying on self-help remedies.
- As if all of the above were not enough, despite the bulk of pages of the Spanish In Re Jurisdiction Act 2015, there are still no special or default proceedings for a creditor to apply for “leave” of a Spanish court to proceed with enforcement.