Enforcement measures

Repossession following lease termination

Outline the basic repossession procedures following lease termination. How may the lessee lawfully impede the owner’s rights to exercise default remedies?

There are no self-help remedies available in Italy for the owner or lessor to repossess an aircraft following a lease termination, at least to the extent that such remedies would entitle the enforcing party to take measures without a court-supervised procedure. Indeed, under the Italian laws a judicial order of the competent court is necessary to take possession of the aircraft in case of non-cooperation by the relevant lessee. Therefore, the owner or lessor may either enforce a foreign judgment in Italy (as long as such judgment is recognised by the Italian system) or act before the Italian competent court claiming:

  • an injunction of return of the aircraft pursuant to article 633 of the Italian Civil Procedure Code, which can be granted without notice to the lessee and either immediately enforceable or subject to a waiting period of 40 days for possible objection by the lessee; or
  • precautionary measures (including seizure or attachment of the aircraft).

The lessee may oppose the issuance of the said measures by counter-arguing and providing evidence that the owner or lessor is not entitled to claim the aircraft repossession (for instance, because the lease would not be terminated or no event default would exist). As a general principle, the insolvency of the lessee and the absence of disputes about the lessee’s default or the like would expedite the repossession process, while - on the contrary - disputes about sums to be paid, or the claimant’s right to repossess or the existence of any default under the lease, would slow the process.

The above measures - if and when granted or recognised by the Italian competent court - are materially enforced on Italian territory by taking physical repossession of the aircraft through the assistance of the competent court bailiff.

Enforcement of security

Outline the basic measures to enforce a security interest. How may the owner lawfully impede the mortgagee’s right to enforce?

Self-help remedies are not permitted to enforce a security interest, likewise in the event of a lease termination. Therefore, any action carried out by the secured parties against the aircraft (or against its owner) must be taken by way of the judicial system. In particular, a mortgagee could start an enforcement action pursuant to the rules set out by the Italian Civil Procedure Code, asking the competent court to order the sale of the aircraft by public auction and then satisfy the mortgagee’s credit through the assignment of the relevant sale proceeds (or a quota thereof).

It must also be noted that in no circumstances can the parties agree on the transfer of title of the encumbered aircraft to the mortgagee in the event the mortgagor is in default of its obligations under the relevant agreement (eg, loan, credit facility). Any similar arrangement between the mortgagor and the mortgage is null and void pursuant to article 2744 of the Italian Civil Code.

Regarding the effect of an insolvency upon a creditor’s enforcement right, consider that, pursuant to article 168 of the Italian Bankruptcy Law (Royal Decree No. 267 dated 16 March 1942, as subsequently amended and supplemented from time to time), no enforcement and precautionary measures can be commenced or continued by any creditor against the assets of the insolvent company after the relevant insolvency procedure has started (‘stay of proceeding’ rule).

The aircraft owner may lawfully impede the mortgagee’s enforcement by challenging such remedy before the competent court and providing proper evidence that the secured party has not got the right to proceed (eg, because no default has occurred under the financing or the relevant credit or interest have been fully repaid).

Priority liens and rights

Which liens and rights will have priority over aircraft ownership or an aircraft security interest? If an aircraft can be taken, seized or detained, is any form of compensation available to an owner or mortgagee?

Specific liens and rights have priority over both aircraft ownership and aircraft mortgage interest pursuant to article 1023 of the Italian Navigation Code and include, among others, the following:

  • judicial costs due to the state;
  • expenses incurred in the common interest of the creditors for enforcement measures against the aircraft (including enforcement procedures (ie, the judicial procedure for the sale of the aircraft by public auction before the court));
  • wages of the captain and the crew;
  • airport duties and similar charges and taxes;
  • indemnities and rewards for giving assistance to, and the rescue of, the aircraft; and
  • compensations for death or bodily injury of passengers or for loss of the cargo or the baggage.

In addition, pursuant to Law No. 324 dated 5 May 1976, the aircraft owner is jointly liable with the operator for any unpaid duties, charges, taxes and interest due for flight operations to and from the Italian airports.

Pursuant to article 802 of the Italian Navigation Code, ENAC can prevent the aircraft from taking off, by warning the airport manager or ENAV (ie, the Italian Air Traffic Control Authority), in the event of any default in the payment of taxes, duties or fees, including charges for landing, take-off and parking of aircraft; taxes for cargo loading and unloading; fees for the supply of handling services; and fees pertaining to ENAV (such as overflight or terminal charges).

The Italian government and other public authorities may confiscate or requisition an aircraft if such measure is because of a matter of serious public interest or for military needs. In these circumstances the aircraft owner is fairly compensated.

Enforcement of foreign judgments and arbitral awards

How are judgments of foreign courts enforced? Is your jurisdiction party to the 1958 New York Convention?

Judgments rendered by extra-EU courts (including New York courts) are recognised and enforced by the Italian courts if the following requirements provided by article 64 of Law No. 218/1995 are met: (i) the foreign judgment is given by a foreign judge who was competent to settle the dispute (according to the Italian rules on competence); (ii) the defendant was duly summoned in the proceeding and given the opportunity to dispute the claim (according to the laws of the place where the proceedings is held); (iii) both the claimant and the defendant filed their respective defence with the foreign court, or the default of one of the parties (whether claimant or defendant) was declared according to the law of the place where the proceeding is held; (iv) the foreign judgment is final and conclusive according to the laws of the place where the proceedings is held; (v) the foreign judgment is not contrary to any other Italian judgment issued in relation to the same subject matter and that became final and conclusive according to the Italian laws; (vi) no other proceedings have been previously filed, and are pending, before the Italian courts between the same parties and having the same subject matter; and (vii) the foreign judgment is not contrary to the Italian public order rules.

Judgements rendered by EU courts (including English courts) are recognised and enforced by the Italian courts in accordance with the provisions of the Regulation (EU) No. 1215/2012 of the European Parliament and of the Council of 12 December 2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters, as subsequently amended and supplemented.

Italy is also a party to the New York Convention of 1958 on the recognition and enforcement of foreign arbitral awards.