- Registration of the Aircraft
Aircraft that are not registered elsewhere and that are owned by German nationals or by companies that are owned and effectively controlled by German nationals can be registered in the German Aircraft Register (Luftfahrzeugrolle) with the German Aviation Authority (Luftfahrt-Bundesamt hereinafter LBA). The same applies to aircraft owned by citizens or companies of the other EU member states and other countries applying EU aviation law, provided the owner resides or is domiciled in Germany or has appointed a process agent in Germany. Aircraft owned by nationals or companies of foreign countries can also be registered in Germany if they are leased to a German air carrier for at least 6 months. The German Aircraft Register (Luftfahrzeugrolle) is an owner register; i.e. it names the legal owner as the registered owner. However, the name of the operator of the aircraft is also specified in the Register (Section 64 paragraph 4 No. 6 German Air Traffic Code (Luftverkehrsgesetz)).
- Deregistration of the Aircraft
The owner has to apply for de-registration with the LBA. The application has to be accompanied by the originals of (i) the certificate of registration, (ii) the certificate of airworthiness and (iii) the noise certificate. However, from our experience it is possible to agree with the LBA that the original of these documents will be submitted to the LBA immediately following the de-registration of the aircraft. If a German aircraft mortgage is registered, the LBA requires the consent of the mortgagee prior to deregistration of the aircraft. In practice it is usually sufficient for the owner to provide a consent to deletion (Löschungsbewilligung) with respect to the de-registration of the aircraft to the LBA along with the application for de-registration. It should be noted that the consent of the mortgagee to the de-registration of the aircraft is not required by German law but such approach has been established as common practice within the LBA in order to protect the mortgagee.
- Detention of aircraft
Under German law, there are no statutory workmen’s liens in relation to an aircraft registered in Germany (Section 9 of the German Law on Rights in Aircraft (Gesetz über Rechte an Luftfahrzeugen)). However, it is common practice among maintenance providers to provide for the creation of a contractual charge in their general terms and conditions. It is questionable whether this is in line with the provisions of the German Law on Rights in Aircraft (Gesetz über Rechte an Luftfahrzeugen) if and to the extent aircraft registered in Germany are affected. However, as maintenance is very often also being performed in other countries, the risk of workmen’s liens or similar charges can never be excluded.
The same applies to liens resulting from airport charges and air navigation charges. The operator (Halter) of the aircraft is generally the debtor in respect of airport charges, Eurocontrol charges, taxes and fines in connection with the aircraft. As a result, these amounts may only be enforced against the operator. If the operator is not the owner of the aircraft, an arrest or attachment of the aircraft in Germany (to enforce such amounts) is not permitted, as the owner is not liable for their payment. However, both airports and air navigation service providers can refuse to provide their services if airport or navigation charges have not been paid (for instance, they may refuse to grant clearance for engine start-up or taxiing. In practice this has proven to be an effective and efficient way to collect such unpaid charges.
- Law and jurisdiction
According to German law, the rights in or over an aircraft are governed by the laws of the jurisdiction of registration of the aircraft (Article 45 para. 1 no. 1 of the Introductory Act to the German Civil Code (EGBGB)). If the Aircraft is not registered in any jurisdiction at the time of the transfer of title or the granting of a mortgage, German law would look to the jurisdiction to which the aircraft has the closest connection. The same would apply if the aircraft had a substantially closer connection to another jurisdiction than the jurisdiction of the registration.
- Enforcement of judgments
The recognition of an English judgment by a German court is subject to the EU Regulation (Council Regulation 44/2001) on Jurisdiction and the Recognition and Enforcement of Judgments in Civil and Commercial Matters. Recognition is subject to the following requirements:
- the relevant court must have jurisdiction;
- recognition must not be contrary to public policy and public morals in Germany;
- if the judgment was given in default of appearance, the defendant must have been duly served with the document which instituted the proceedings or with an equivalent document in sufficient time to enable him to arrange for his defence;
- the judgment must not be irreconcilable (i) with a judgment given in a dispute in Germany or (ii) with a foreign judgment to be recognised in Germany or (iii) with a pending case in Germany in each case between the same parties.
An order for the enforcement of a judgment will be issued if these requirements are met and the interested party has filed for leave to enforce the judgment with the competent court in Germany. Any proceedings in front of German courts must be in the German language and any English language documents must be accompanied by a German translation.
- Security over Aircraft
If an aircraft is registered with the German Aircraft Register (Luftfahrzeugrolle), according to Section 9 para. 1 of the German Law on Rights in Aircraft (Gesetz über Rechte an Luftfahrzeugen), the only way to encumber an aircraft in Germany is by way of a German Aircraft Mortgage (Registerpfandrecht). German Aircraft Mortgages (Registerpfandrecht) need to be registered in the (separate) German aircraft mortgage register maintained by the local court (Amtsgericht) in Braunschweig (Pfandrechtsregister für Luftfahrzeuge). Only mortgages taken in respect of aircraft registered in the German Aircraft Register (Luftfahrzeugrolle) can be registered in the German aircraft mortgage register.
A registered aircraft mortgage takes priority over any subsequently registered mortgage. A buyer of the aircraft will obtain ownership subject to any prior registered mortgage and free of any mortgage that was not registered when the purchase became effective. The Cape Town Convention has not yet been ratified by Germany.
- Enforceability of German law mortgage
A German aircraft mortgage grants the mortgagee the right to apply for an enforcement of the mortgage in order to be paid the outstanding obligations of the mortgagor (or a third party) that have been defined as secured claims. The enforcement of the mortgage has to comply with the rules and regulations for formal enforcement procedures under German law.
According to the German Enforcement Act (Gesetz über die Zwangsversteigerung und Zwangsverwaltung -ZVG) an aircraft mortgage can be enforced by way of public auction only.
According to Section 49 of the Law on Rights in Aircraft (Gesetz über Rechte an Luftfahrzeugen), any other arrangements between the mortgagor and the mortgagee in respect of the enforcement of the mortgage before the secured claim became due and payable are invalid. As a result, it is not possible to require a transfer of title to the aircraft to the mortgagee or to agree to any other means of enforcement other than the formal rules set out in the German rules of procedure which in effect require a public sale of the aircraft.
- Accessory nature and abstract acknowledgement of debt
According to German law, an aircraft mortgage is a strictly accessory right. This means that;
- it exists only in the amount of the obligation it secures and extinguishes upon fulfillment or discharge of such obligation (inc. by way of novation); and
- it can only be transferred together with the secured obligation.
It is therefore market practice for the mortgagor to grant an abstract acknowledgement of debt (Abstraktes Schuldanerkenntnis) in an amount equivalent to the debt to be secured by the mortgage. By entering into an abstract acknowledgement of debt, a separate claim is created in favour of, for example, the security agent (who holds and administers the security in favour of a changing pod of lenders). The aircraft mortgage is then created to secure this abstract acknowledgement of debt (and not the underlying claims in the finance documents). The link between the secured obligations and the underlying claims under the finance documents is the security purpose agreement (Sicherheitenzweckerklärung) which determines for which purpose the abstract acknowledgement of debt has been granted. This is helpful in a syndication scenario where the actual debt obligation is transferred because the mortgage will not cease to exist so long as the abstract acknowledgement of debt does not cease to exist.
- Sovereign Immunity
The circumstances in which the German government could interfere with the aircraft are rare. Provision is made by statute the taking of possession of aircraft in the event of war or other national emergency. The aircraft would be subject to confiscation if used for criminal purposes. In addition certain forms of attachment used in scheduled service may be prevented by the Rome Convention of 1933 as implemented in Germany.
Self-help remedies are not allowed under German law. The lessor of an aircraft cannot enforce the right to repossess the aircraft following a termination of the lease agreement by taking physical possession of the aircraft without the cooperation of the lessee. Repossession can therefore only be effected by means of judicial proceedings. If necessary, the lessor can obtain an interim injunction (Arrest) against an un-cooperative lessee who is in possession of the aircraft.
An injunction (Arrest) is enforced by the bailiff taking the aircraft in custody (Verwahrung) and surveillance (Bewachung). However, since the costs of such court proceedings and the acts of a bailiff would have to be borne by the lessee, it is not very likely that a lessee would try to retain possession of the aircraft once the lease has been terminated.