This short Q&A references 20 key points to think about on aviation deals in France describing practical things aircraft lessors and financiers need to be aware of in relation to their operations in France and/or with French lessors.
FRENCH AVIATION AUTHORITY:
1. Which government authority has primary responsibility for the regulation of aviation and the registration of aircraft in France?
The registre français d’immatriculation des aéronefs maintained by the French Direction Générale de l’Aviation Civile (the “DGAC”) in Paris Orly records title in relation to French registered aircraft, as well as aircraft mortgages and lease agreements.
2. What are the fees for registering an aircraft in France?
Fees are nominal. There is a DGAC registration fee of €91 to be paid for the first registration of an aircraft in France (i.e. for a new aircraft or an aircraft previously registered abroad). There is no registration fee to be paid for the filing of a lease agreement or a mortgage with the DGAC.
A fee of €6 is payable in order to obtain a registry extract.
3. Are there any restrictions on the legal status and/or nationality of parties seeking to register an aircraft in France?
Aircraft can be registered in France with the DGAC either if they are (i) owned by EU or EEA citizens or legal entities or (ii) operated by an airline whose operating license (licence d’exploitation) and air transport certificate (certificat de transport aérien) have been granted by the French (not another European) authorities (the list of which, as of 2021, is set out ).
As required by Regulation (EC) No 1008/2008, any French (or EU) airline must be majority owned and effectively controlled by EU member states and/or nationals of member states at all times.
4. Who is responsible for registering an aircraft in France?
The DGAC is an owner (or “title”) registry, and the owner is responsible for registering the aircraft. In practice, WFW Paris can arrange the relevant filings (registration of aircraft, lease and/or sublease / mortgage) with the DGAC on behalf of the owner and/or the mortgagee, as relevant, under a power of attorney. Although a “F-W” registration mark (used by, for example, manufacturers) is often thought to be a “temporary” registration mark, there is no such thing as a “temporary” registration of an aircraft in France and the registration is permanent (although the aircraft can at any time be de-registered at the owner’s request).
5. How is deregistration effected in France?
Just as registration of an aircraft in France can only be made by (or on behalf of) the owner, deregistration of an aircraft from the DGAC can only be completed by (or on behalf of) the registered owner (with, in practice, the consent of any registered mortgagee to release its registered mortgage). Deregistration cannot be blocked by the lessee and no power of attorney is required from the lessee. However, cooperation from the lessee is, to a certain extent, required, as the original certificate of registration (certificat d’immatriculation) of the aircraft (which is carried onboard the aircraft) shall have to be provided to the DGAC. Of course, if the deregistration is in the context of a repossession of an aircraft by the lessor, the latter will presumably be in a position to recover the original certificate of registration.
It will not be possible to file any Deregistration Power of Attorney (or IDERA, see below) with the DGAC (and in any event the DGAC would require a fresh set of powers of attorney at the time of deregistration).
6. Has France ratified and brought into force any of the following aviation related conventions: 1944 Chicago Convention, 1948 Geneva Convention and 2001 Cape Town Convention?
France is a party to and has ratified the 1944 Chicago Convention and the 1948 Geneva Convention on the International Recognition of Rights in Aircraft. However, regarding the 2001 Cape Town Convention, whilst the EU has ratified the Convention, France has signed the Convention and the Aircraft Equipment Protocol but has not ratified either of them (and has not expressed an intention to do so).
MORTGAGE REGISTRATION AND ENFORCEMENT:
7. Would a mortgage governed by a foreign law over aircraft and/or engines be recognised in France?
No. Only French law aircraft mortgages (hypothèques aériennes) in French language can be registered with the DGAC. The registration of the mortgage with the DGAC is made at the mortgagee’s request and will ensure its enforceability against third parties for a duration of 10 years (subject to renewal prior to this deadline). See below re priority liens.
8. Does a registered mortgage extend to engines and other removable equipment attached to the aircraft?
Yes. The mortgage registration extends to the aircraft as a whole, including (if owned by the owner) the engines and parts. In case of total loss of the aircraft, the mortgagee is by operation of law subrogated in the rights to the insurance proceeds.
French law would not treat an engine owned by a third party as being subject to the same ownership as the aircraft itself. It is however generally recommended to affix a nameplate on such engine in order to give notice to third parties (in particular in the context of seizure of the aircraft). Where such engine is subject to a separate lease to a French lessee, it would also be prudent to record the lease with the Greffe of the commercial court of the jurisdiction of the lessee.
9. Do certain rights have priority over those of the mortgagee?
Yes. Certain liens (privileges) arise by operation of law and enable the arrest of the aircraft. Such liens (relating to court costs incurred in respect of the sale of the aircraft and the distribution of the sale price, remuneration due for the salvage of the aircraft and indispensable costs incurred for the preservation of the aircraft) take priority over a registered mortgage.
10. What is the procedure for a lender (as mortgagee) to enforce a mortgage over the aircraft in France? Can the lender enforce the mortgage by taking physical possession of the aircraft?
It is important to note that French law, like many civil law jurisdictions, does not recognise “self-help” remedies over aircraft, and enforcement of a mortgage in France can only take place via a judicial sale of the aircraft. The enforcement of a mortgage over an aircraft starts with the arrest of the aircraft (by way of attachment order (saisie conservatoire) or enforcement order (saisie execution), leading up to the sale of the aircraft through a court-supervised process.
LEASE REGISTRATION AND ENFORCEMENT:
11. Is registration of lease agreements with the DGAC mandatory under French law?
No, it is not strictly mandatory. However, it is highly recommended to register leases with the DGAC, otherwise the owner and the lessee/operator of the aircraft will be deemed jointly and severally liable for damage caused by the aircraft. Where a lease is so registered, the owner will only liable if the third party to whom the damage is caused can prove actual fault on the part of the owner. Such registration will be valid for the (initial) duration of the lease. Sub-leases shall also be registered with the DGAC although they will not expressly appear on the registry extract (only the head lessor (as owner) and the operator (as sublessee) will be mentioned). The DGAC will however require a summary of lease agreements for such purposes.
12. How can lessors further strengthen their rights in respect of a lease agreement toward third parties?
Operating lessors can (and finance lessors must) also publish leases involving French lessees with the Greffe of the commercial court where the lessee has its registered office. It will give them the right (other than in an insolvency situation) to apply for the aircraft subject to the published lease, to be returned to it by a relatively simple action en restitution before the French courts. The registration of the lease with the Greffe has to be renewed every five years.
13. On the occurrence of an event of default under the lease or any termination of the leasing of the aircraft under the lease, assuming that the owner is permitted to do so under the terms of the lease, can the owner enforce the lease by taking physical possession of the aircraft?
No. Generally speaking, the French courts are very adverse to “self-help” repossession of assets (i.e. repossession by taking physical possession upon the occurrence of an event of default under a lease of the asset). In a repossession scenario (and subject to the rights of lien holders), the lessor shall apply for the aircraft to be returned by following certain proceedings before the French courts (action en restitution or action en revendication).
OTHER KEYS POINTS FOR LESSORS AND FINANCIERS
14. Is it necessary for the lessor or the mortgagee to have a place of business, or be domiciled, in France in order to enforce any provisions of the lease or mortgage in France?
There is no specific domiciliation requirement to enforce provisions of a lease agreement. However, aircraft mortgages shall contain an élection de domicile clause whereby the mortgagee appoints, for the sole purpose of registration of the mortgage, a territorially competent huissier (bailiff) who will be the primary point of contact with the DGAC and the French courts in the event of enforcement of the mortgage. WFW Paris can arrange the relevant appointment.
15. In the event that the French lessee become insolvent, what would be the lessor’s rights?
The lease is an on-going contract (contrat en cours) and can therefore either be continued or terminated by the judicial administrator appointed by the court. In a nutshell, if the judicial administrator decides to continue the terms of the lease, payment of rentals due prior to the opening of the insolvency proceedings will be suspended, rentals due and payable following the opening of the insolvency proceedings must be paid as they fall due and the lessee will be able to use the aircraft until the lease termination date.
Of course, in the event of non-payment of any post-insolvency rental, the lessor will be entitled to terminate the lease immediately and repossess the aircraft. Any sum due pursuant to the termination of an on-going contract during insolvency proceedings shall be filed as a claim as part of the insolvency proceedings of the debtor during the month following the termination of the on-going contract.
16. Are there any circumstances in which a French court can sell, transfer or otherwise dispose of the aircraft without the consent and authorisation of the owner or the mortgagee?
No. There are no circumstances under which, in the context of insolvency proceedings against a French lessee, French courts could order the sale of an aircraft owned by a third party (i.e. the lessor/financier). The release of any mortgage will require the mortgagee’s consent.
17. Are there any banking rules restrictions regarding finance lease transactions?
Yes. Under French law, finance lease transactions (i.e. a lease with a purchase option) are considered credit operations. Such operations should be treated with great caution as they may potentially (but not necessarily) fall within the scope of the banking monopoly rules of the French monetary and financial code which prohibits the “habitual” exercise of “banking transactions” by any person other than authorised credit institutions. Both criminal and civil sanctions may apply.
18. Is it a legal requirement to insure the aircraft domestically in France?
No, it is not. However, insurance (wherever placed) must meet the requirements set forth by European Regulation (EC) No 785/2004 of 21 April 2004, as amended by European Regulation (EC) No 285/2010 of 6 April 2010.
GREEN INITIATIVES IN FRANCE: ARE THERE ANY CHANGES CONTEMPLATED UNDER FRENCH LAW WHICH MIGHT IMPACT THE AVIATION SECTOR IN FRANCE?
19. Ban on short-haul internal flights?
France might move to ban short-haul internal flights where train alternatives exist, in a bid to reduce carbon emissions, pursuant to the projet de loi climat. The French National Assembly recently voted in favour of a bill to end routes where the same journey could be made by train in under two-and-a-half hours. The measure, which has already sparked some heated debate, does not yet have force of law. It now has to pass through the French Senate, then return to the lower house for a final vote before becoming law.
20. Sustainable aviation fuels: next steps?
The French government and the Spanish government have signed the “Declaration of Intent on Cooperation and Promotion of Sustainable Aviation Fuels”. Within its framework, both countries have committed to seeking clean fuels for aviation. The ultimate objective is to facilitate the promotion of industrial initiatives and consortia for the joint supply of sustainable aviation fuels in both countries and in other markets of the EU. Partnerships with the private sector, academic research entities and the promotion of coordination initiatives will be strengthened.