Overview

Conventions

To which major air law treaties is your state a party?

Qatar has ratified the following major air law treaties:

  • the Chicago Convention of 1944 on International Civil Aviation - on 5 September 1971, which came into effect on 5 October 1971;
  • the 1948 Geneva Convention on the International Recognition of Rights in Aircraft - on 20 April 2007, which came into effect on 19 July 2007; and
  • the Convention for the Unification of Certain Rules for International Carriage by Air - on 15 November 2004, which came into effect on 14 January 2005.

Qatar has not ratified the 1933 Convention for the Unification of Certain Rules Relating to the Precautionary Arrest of Aircraft (the Rome Convention) or the 2001 Cape Town Convention on International Interests in Mobile Equipment and the associated Protocol on Matters Specific to Aircraft Equipment (the Cape Town Convention).

Domestic legislation

What is the principal domestic legislation applicable to aviation finance and leasing?

The following legislation is relevant in relation to aircraft financing, leasing and registration of ownership:

  • Law No. 15 of 2002 on Civil Aviation, as amended (the CAA Law);
  • Regulation No. 1001/2006 laying down the implementation rules governing aircraft registration in Qatar, as amended (the CAA Regulations); and
  • Law No. 22 of 2004 on Civil Law (the Civil Code).
Governing law

Are there any restrictions on choice-of-law clauses in contracts to the transfer of interests in or creation of security over aircraft? If parties are not free to specify the applicable law, is the law of the place where the aircraft is located or where it is registered the relevant applicable law?

The laws of Qatar recognise the principle of freedom of contract, which theoretically also extends to choice of law provisions. There are no restrictions on the contracting parties in respect of the choice of governing law as long as the principles of public policy, morals or sharia are not contravened. However, in practice, the courts of Qatar are likely to disregard the choice of foreign law and apply Qatar law in certain circumstances.

Title transfer

Transfer of aircraft

How is title in an aircraft transferred?

Under Qatar law, transfer of title to a purchaser is effective from the time of the sale if the purchase price is paid, unless there is an agreement to the contrary.

In relation to aircraft, a copy of a bill of sale and certificate of acceptance is required to be submitted to the Qatar Civil Aviation Authority (QCAA), among other documents, to record the name of the owner of the aircraft in the aircraft register.

Transfer document requirements

What are the formalities for creating an enforceable transfer document for an aircraft?

There is no particular form of transfer prescribed by the QCAA. Normally, the transfer of an aircraft takes place following the sale of an aircraft through an aircraft sale agreement, a bill of sale, aircraft delivery certificate and aircraft certificate of acceptance. The QCAA would normally examine certified true copies of these documents before it will issue the certificate of registration in favour of the owner. However, the QCAA may request notarised and legalised versions in certain cases or may require translated documents if the documents are in any language other than English or Arabic.

Registration of aircraft ownership and lease interests

Aircraft registry

Identify and describe the aircraft registry.

The CAA Regulations require the application for registration of aircraft to be filed by the person seeking to register the aircraft in Qatar (ie, the owner of the aircraft). The QCAA will only register the aircraft in the legal name of its owner. The Certificate of Registration issued by the QCAA states the name of the owner as well as the name of the operator of the aircraft. All applications and documents must be submitted to the QCAA through the operator.

There is no specific engine register in Qatar.

Registrability of ownership of aircraft and lease interests

Can an ownership or lease interest in, or lease agreement over, aircraft be registered with the aircraft registry? Are there limitations on who can be recorded as owner? Can an ownership interest be registered with any other registry? Can owners’, operators’ and lessees’ interests in aircraft engines be registered?

The QCAA Regulations require a copy of the lease agreement of an aircraft to be filed with the QCAA. The QCAA will only register the aircraft in the name of the owner if it is satisfied that certain mandatory terms and conditions are provided in the lease agreement.

As mentioned in the previous question, the QCAA will only register the aircraft in the legal name of its owner.

Registration of ownership interests

Summarise the process to register an ownership interest.

The CAA Regulations sets out a list of documents to be submitted to the QCAA when registering an aircraft:

  • a copy of the passport of the owner or Qatar identification document if the owner is a Qatari national (additional identification and supporting documents may be required if the owner is a resident in Qatar but not a Qatari national);
  • constitutional documents of the owner if the owner is a body corporate, including a copy of the certificate of incorporation, including evidence of the authority of the authorised signatory (eg, power of attorney or board resolutions);
  • a cover letter on the owner’s letterhead affixed with the company stamp addressed to the QCAA requesting the registration of the aircraft;
  • a certified true copy of the aircraft bill of sale or sale and purchase agreement;
  • if applicable, a certified true copy of the following executed documents:
    • aircraft lease agreement;
    • mortgage agreement;
    • security assignment agreement;
    • aircraft delivery certificate; and
    • aircraft certificate of acceptance;
  • complete and sign the appropriate application form; and
  • information relating to the particulars of the aircraft, including a proper description of the aircraft, If the aircraft is imported from a foreign country then a copy of the foreign export certificate of airworthiness or equivalent document will also need to be submitted.

The constitutional documents (such as articles of association or memorandum of association, certificate of incorporation, etc), the corporate authorisations (such as power of attorney or board resolutions) and ID copies are normally required to be notarised and legalised up to the Qatari Embassy in the jurisdiction of issuance. However, we normally advise that such requirements be checked and confirmed with the operator or the QCAA before these documents are submitted.

As regards fees, for issuance of a certificate of registration, the fee may range from 40 Qatari riyals to 550 riyals, depending on the maximum take-off weight of the aircraft. The fee is payable to the QCAA by cheque or money order.

Title and third parties

What is the effect of registration of an ownership interest as to proof of title and third parties?

The CAA Regulations specifically state that the certificate of registration is not evidence of ownership of an aircraft in any proceeding in which the ownership of the aircraft by a specific person or entity is in issue. The QCAA does not issue any certificate of ownership or endorse the information with respect to the ownership on a certificate of registration. The QCAA issues the certificate of registration to a person or entity who appears to be the owner on the basis of the evidence of ownership submitted to it, which includes the bill of sale or sale and purchase agreement and other related transaction documents.

Registration of lease interests

Summarise the process to register a lease interest.

There is no separate register for aircraft lease interests. The entry is made in the Aircraft Register in Qatar.

The lease agreement is required to be submitted along with the documents to register ownership of the aircraft. Please refer to question 8.

There is no prescribed form for lease agreements or a form preferred by the QCAA. However, under the CAA Regulations, a copy of the lease agreement is required to be submitted to the QCAA and must contain the following points:

  • the continuing airworthiness requirements of the aircraft is ensured under the terms of the lease agreement;
  • the lessor and lessee are properly identified;
  • the aircraft is identified by the make, model and manufacturer serial number under the lease agreement;
  • effective dates of the lease are properly identified;
  • the person having operational control is the lessee;
  • the aircraft will be maintained and the responsibilities for the accomplishment of maintenance and for keeping the aircraft maintenance records are in accordance with Qatar’s implementation rules on continuing airworthiness; and
  • the maintenance or inspection programme that will be utilised is approved by the QCAA.

Apart from the above, the parties are free to agree contractually upon the lease terms to the extent that these are not against public policy or morals.

Certificate of registration

What is the regime for certification of registered aviation interests in your jurisdiction?

The QCAA will issue the certificate of registration upon being satisfied that the relevant requirements under the CAA Law and CAA Regulations have been complied with and the prescribed fee has been submitted at the QCAA. The following information will appear on the certificate of registration:

  • number of certificate issued;
  • nationality and registration mark of the aircraft;
  • name of manufacturer and manufacturer’s designation of aircraft;
  • aircraft serial number;
  • name and address of the owner of the aircraft; and
  • name and address of the lessee operator of the aircraft if the aircraft is the subject of a lease agreement acceptable to the QCAA.

Any security interest over the aircraft is not recorded on the certificate of registration. The QCAA issues a separate letter confirming its notice of any security interest over the aircraft.

A separate engine registration certificate is not issued by the QCAA.

Deregistration and export

Is an owner or mortgagee required to consent to any deregistration or export of the aircraft? Must the aviation authority give notice? Can the operator block any proposed deregistration or export by an owner or mortgagee?

The CAA Regulations require the owner to submit the following to the QCAA if the owner wishes to cancel the certificate of registration of the aircraft for the purposes of export:

  • a written request for cancellation of the certificate describing the aircraft by make, type, serial number, stating the Qatar registration mark and the country to which the aircraft will be exported; and
  • evidence satisfactory to the QCAA that each holder of a recorded right has been satisfied or has consented to the transfer.

The QCAA will notify the country to which the aircraft is to be exported of the cancellation of registration.

At the time of registration of the aircraft, the QCAA normally issues a letter confirming that it will act on the instructions of the owner, lessor or the security agent, as the case may be, in all matters relating to the deregistration, as such, unless there is a lien exercised over the aircraft by the operator. The operator may not object to the proposed deregistration.

Powers of attorney

What are the principal characteristics of deregistration and export powers of attorney?

Generally, a duly authenticated or legalised deregistration power of attorney in favour of the owner, lessor or security agent, as the case may be, would be enforceable in Qatar and may be relied upon to deregister and export the aircraft from Qatar, in the absence of any objection from the QCAA or the operator.

As a general principle under Qatar law, a power of attorney cannot be irrevocable in nature. The agency related provisions in the Civil Code relate to the issuance of a power of attorney. Article 735 of the Civil Code states that the principal may at any time terminate or limit the agency, even if there is an agreement to the contrary. However, if the agency is issued in favour or for the benefit of the agent or any third party, the principal may not terminate or limit such agency without the consent of such agent or third party, as applicable. The power of attorney will not lose its validity upon the bankruptcy of the principal if the agent or third party has any interest or benefit deriving from the power of attorney.

The deregistration power of attorney issued by the operator in favour of the owner, lessor or security trustee, as the case may be, is authenticated at the Ministry of Justice in Qatar. If the deregistration power of attorney is issued outside Qatar then it must be notarised and legalised up to the Qatari Embassy in the jurisdiction of execution and then attested at the Ministry of Foreign Affairs in Qatar.

Cape Town Convention and IDERA

If the Cape Town Convention is in effect in the jurisdiction, describe any notable features of the irrevocable deregistration and export request authorisation (IDERA) process.

Not applicable as Qatar is not a signatory to the Cape Town Convention.

Security

Security document (mortgage) form and content

What is the typical form of a security document over the aircraft and what must it contain?

There is no form of mortgage document prescribed by the QCAA. The QCAA accepts mortgage documents in English. Typically, the mortgage document would refer to the obligations that are being secured under the relevant transaction documents. As such, the amount secured and the economic terms of the deal are indirectly referred to in the mortgage document.

Security documentary requirements and costs

What are the documentary formalities for creation of an enforceable security over an aircraft? What are the documentary costs?

Typically, a mortgage document should either be executed at the Authentication Department, Ministry of Justice if being executed in Qatar or, if executed outside Qatar, notarised and legalised up to the Embassy of Qatar in the relevant foreign jurisdiction. However, in practice, the QCAA accepts a certified true copy of the mortgage document (along with other documents) for the purposes of recording the ownership of the aircraft and the issuance of the letter of understanding in respect of the security interest noted over the aircraft. We recommend that the filing requirements be confirmed with the operator (who is responsible for filing the documents at the QCAA) on a deal-by-deal basis.

Although the QCAA does not require submitted security documents to be either notarised and legalised or be translated into Arabic, it is advisable to have the security documents notarised and legalised up to the Qatari Embassy in the jurisdiction of execution and then attested at the Ministry of Foreign Affairs in Qatar to avoid any challenge in respect of the authenticity or validity of the documents before the Qatari courts. Also note that any document to be submitted before the courts in Qatar are required to be in Arabic. Arabic translations of the relevant documents may be prepared subsequently through official translation companies if required.

Except for the costs relating to the authentication or legalisation of the mortgage document, no other costs or fees are payable in Qatar for the time being.

Security registration requirements

Must the security document be filed with the aviation authority or any other registry as a condition to its effective creation or perfection against the debtor and third parties? Summarise the process to register a mortgagee interest.

Yes, a security document must be filed with the QCAA to obtain priority. There is no requirement to register the security interests in any other register in Qatar. Article 37 of the CAA Law states that all legal actions taken in respect of an aircraft must be registered and approved by the QCAA. This includes sale, transfer, lease and mortgage.

The process and the documentary requirements set out in question 8 will have to be followed to register the security interests over the aircraft.

Registration of security

How is registration of a security interest certified?

Mortgages or other security interests are not registered by the QCAA on the registration certificate. The QCAA issues a letter confirming that it has taken on record the mortgage or the security interests created under the documents submitted to the QCAA. However, the letter will not state the priority of the secured parties. Such a letter is normally issued fairly quickly, subject to the availability of the relevant officer at the QCAA. It may be possible for the deal parties to review a draft of such a certificate to record the transaction structure accurately.

Effect of registration of a security interest

What is the effect of registration as to third parties?

Registration of the security interest (including the mortgage) will confer priority over subsequent security interests recorded. Article 37 of the CAA Law states that all legal actions taken in respect of an aircraft must be registered and approved by the Civil Aviation Authority. This includes, sale, transfer, lease and mortgage. Security interests are not registered or recorded by the QCAA on the registration certificate. The QCAA issues a letter confirming that it has taken on record the security interest. It is also possible to make enquiries at the QCAA in respect of a particular aircraft. The QCAA would, by a return letter, confirm whether any security interests have been recorded by the QCAA in respect of that aircraft.

Security structure and alteration

How is security over aircraft and leases typically structured? What are the consequences of changes to the security or its beneficiaries?

Under Qatar laws, the concept of trust is not recognised and such arrangement would be viewed as an agency relationship. Financing in respect of, and security over, an aircraft typically involves a bilateral facility or syndicated structure. In a bilateral facility the lender would take security over the aircraft. In a syndicated structure, a security trustee or agent acting on behalf of the lenders would hold the security over the aircraft on behalf of lenders. The QCAA would accept security created in favour of the lender (in a bilateral structure) or the security trustee or agent (in a syndicated structure). The security would typically include security assignment (including lease rentals), assignment of insurances and reinsurances and mortgage over the aircraft.

If there is a change in the nature or terms of the security, then the security recorded with the QCAA may have to be updated. With regard to the change in beneficiaries (being lender(s) in the financing transaction) by replacement of a lender with a new lender, the Civil Code recognises the concept of novation. Novation is valid when the debtor agrees to the change. If the procedure for transfers under the relevant transaction documents is followed and the consent of the debtor is obtained for the transfer in accordance with the transfer procedures, then a novation would be effected from a Qatar law perspective. Further, the benefit of the security is transferred to the new lender if the contracting parties have so agreed. As such, if the relevant finance documents address the mechanism in which the security would be transferred to the new lenders or the relevant parties enter into a security confirmation agreement then the benefit of the security documents would transfer.

If there is a change in the lenders under the financing documents resulting in the change of beneficiaries under the security documents, but the security agent or security trustee continues to be the same entity and holds the security on behalf of the beneficiaries, then this may not trigger a requirement to update the records at the QCAA, on the assumption that the transfer of participation will not trigger any amendment or update to any of the relevant documents in respect of the aircraft. We would recommend that the operator is involved in this process on a deal-by-deal basis.

Security over spare engines

What form does security over spare engines typically take and how does it operate?

Security over spare engines may be created as a possessory pledge over movable asset. This type of pledge may be created over movable assets that are not registered with any government authority in Qatar. The possessory pledge would essentially be a tripartite pledge agreement between the pledgor, the pledgee and the bailee. In addition to the provisions relating to the creation of the pledge, provisions relating to the care and maintenance of the pledged assets, insurance over engines (if applicable) and the procedure for enforcement of the pledge will also be set out in the pledge agreement. The description of the pledged assets (such as engines) and the location of the pledged assets will be set out in a schedule to the pledge agreement.

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?

The owner or lessor will require a court order to terminate the lease (unless otherwise agreed) and take possession of the aircraft. The owner or lessor may seek to rely upon the deregistration power of attorney and provisions of the lease to take possession of the aircraft. However, if the lessee or QCAA object and require a court order to be provided confirming the actions of the owner or lessor, court proceedings would be necessary.

Law No. 13 of 1990 (the Law of Civil Procedure) allows a creditor, an owner of an asset or a plaintiff with a valid claim against a defendant to attach an asset in possession of the other party. Therefore, in the event of a dispute over the right to possession of the aircraft to remove or export the aircraft from Qatar, then the owner or lessor or the security trustee (as the case may be) may pursue attachment of the aircraft by court proceedings in Qatar.

An attachment of the aircraft may support retrieval proceedings provided a prima facie claim can be proved by way of documentary evidence, such as the relevant transaction documents. An attachment application would have to be filed in the courts in Qatar along with relevant documentary evidence in support of the application. If the attachment application is successful, an attachment order is granted by the judge and sent by the court bailiff for attachment of the aircraft. Within 10 days of any successful attachment application, a merits case for damages or retrieval needs to be filed in support of the attachment proceedings. Failing this, the attachment order will be considered void.

Enforcement of security

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

Enforcement of security is not unusual in Qatar, and courts in Qatar will order the sale of the secured asset if the outstanding debt is proven and the security has been properly created. It is important to note that enforcement is a court-led process and self-help remedies are not permitted.

The enforcement process may differ depending on the nature of the debt (commercial or non-commercial) and the nature of the assets (movable, immovable, listed shares).

Enforcement involves the secured party filing a claim for the whole amount outstanding on a debt and requesting the court to both acknowledge the security and confirm the secured party’s preferred position. The property may then be sold and subject to any preferred creditors’ rights; the proceeds of such disbursement will be applied towards the satisfaction of the debt. An expert may be appointed by the court to establish factual points relating to principal and interest.

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?

The following are instances of liens under the Civil Code and Commercial Code:

  • article 280(1) of the Civil Code - if the possession of a movable is with a contractor and the contractor has used resources in relation to that movable (eg, carrying out repairs and maintenance), such person may refrain from returning the movable until such time as it has received full payment;
  • article 281(2) of the Civil Code - the movable object over which a person is exercising a lien may be sold (i) if there is an emergency, in which case the sale can be carried out without a court order; and (ii) pursuant to a court order - in both cases the request for sale can be made if the item may deteriorate;
  • article 118 of the Commercial Code - if the full price of the goods sold has not been paid, the seller may retain such goods under his or her custody until full payment is made; and
  • article 197 of the Commercial Code - if goods have been transported, the carrier has a lien over such goods until full payment has been received.

In view of the provisions above, if repairs have been made to the aircraft or certain parts have been installed on the aircraft and have not been paid for and the aircraft is in the possession of the relevant contractor, the contractor may exercise a lien over the aircraft until payment has been made.

Note that the QCAA, in its letter of understanding issued at the time of registration of the aircraft or security interest, states that it will not record any liens until it receives consent from the owner, lessor or security trustee or agent.

With regard to state’s or government entities’ right of confiscation, nationalisation or requisition of assets, the government of Qatar may at its discretion confiscate, nationalise or requisition an asset by way of an appropriate decree under exceptional circumstances.

Enforcement of foreign judgments and arbitral awards

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

With regard to enforcement of foreign judgments, under article 379 and 380 of the Law of Civil Procedure, to enforce a judgment of a foreign court the applicant must prove that a judgment issued by a court in Qatar is enforceable in the jurisdiction of the foreign court. In addition, a judgment of a foreign court (excluding a foreign arbitral award) may be enforced in a court in Qatar if:

  • no court in Qatar has jurisdiction in the dispute and the foreign court did have jurisdiction;
  • the parties in relation to which the judgment was issued were given due notice of the proceeding and were represented at the proceeding;
  • the foreign judgment is final; and
  • the judgment does not contradict any judgment issued in Qatar, and contains nothing that would be in breach of public policy, order or morals.

Enforcement of foreign judgments would depend on the existence of a reciprocal arrangement between Qatar and the foreign jurisdiction for enforcement of foreign judgment. In the absence of reciprocal arrangement, it will be difficult to directly enforce foreign judgments in Qatar.

With regard to enforcement of foreign arbitral awards, Qatar formally acceded to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the Convention) on 30 December 2002. As a result, the enforcement of foreign awards (ie, those that are issued from a seat outside Qatar and thus subject to the procedural laws of a foreign state) should occur pursuant to the terms of the Convention. Under the terms of the Convention the courts in Qatar will be entitled to refuse to enforce a foreign arbitration award only on certain narrowly defined grounds set out in the Convention.

Taxes and payment restrictions

Taxes

What taxes may apply to aviation-related lease payments, loan repayments and transfers of aircraft? How may tax liability be lawfully minimised?

Qatar has recently issued Law No. 24 of 2018 relating to income tax law (the New Income Tax Law), which will replace the current income tax law (Law No. 21 of 2009). The executive regulations under the New Income Tax Law are yet to be issued by the Ministry of Finance. Until such time, the executive regulations under the old income tax law will continue to be applicable, without prejudice to the provisions of the New Income Tax Law.

Under the New Income Tax Law, the general corporate income tax rate is charged at 10 per cent for companies that are resident in Qatar and generally non-residents with permanent establishments in Qatar.

Non-residents without a permanent establishment in Qatar are now subject to a withholding tax charged at the rate of 5 per cent in respect of royalties, interest, commissions and services performed in Qatar by non-residents. There is no withholding tax imposed on product sales from non-residents.

Presently, there is no stamp duty, registration duty, transfer duty or other similar taxes or charges in Qatar. Also, VAT is not applicable in Qatar. It is expected that Qatar will implement VAT some time in 2020.

Under the executive regulations issued under the previous income tax law, interests on transactions, facilities and loans with banks and financial institutions are not subject to withholding tax.

Where taxes or duties are applicable, it is possible to include gross-up provisions in the relevant documents.

Exchange control

Are there any restrictions on international payments and exchange controls in effect in your jurisdiction?

There are no exchange control restrictions. The only restrictions emanate from the anti-money laundering legislation which restricts payments to sanctioned entities (sanctioned by the Qatar Central Bank (QCB) and United Nations).

Default interest

Are there any limitations on the amount of default interest that can be charged on lease or loan payments?

Under the laws of Qatar, there is no concept of ‘interest’ and as a general rule, interest on loans is not permitted in Qatar pursuant to the provisions of the Civil Code in transactions involving non-financial institutions. However, where financial institutions are involved, the QCB under Law No. 13 of 2012 (the QCB Law) permits licensed financial institution to apply interest in accordance with the instructions issued by the QCB. The QCB Law applies to financial institutions licensed by the QCB. Relying on the provisions of the QCB Law, the Qatari courts have adopted a very conservative view in respect of interest or default interest that may be claimed, even in circumstances when loans are provided by financial institutions in Qatar.

In respect of default interest, the view taken by the courts is slightly uncertain. In certain cases, the court of cassation has enforced payment of default interest at the rate agreed between the parties. However, more recently the court of cassation has allowed payment of a lump sum to the banks instead of amounts calculated at agreed rates, keeping in view the principles of justice. There is no concept of binding precedents in Qatar.

Customs, import and export

Are there any costs to bring the aircraft into the jurisdiction or take it out of the jurisdiction? Does the liability attach to the owner or mortgagee?

In accordance with the Gulf Cooperation Council (GCC) Customs Union, outlined in Law No. 41/2002 and implemented as the GCC Unified Customs Law on 1 January 2003, Qatar imposes a 5 per cent ad valorem tariff on the cost, insurance and freight invoice value of most imported products. However, the GCC has approved exemptions from customs duties for approximately 400 goods, including aircraft.

There are no export restrictions and no export duties apply to take the aircraft out of Qatar.

Insurance and reinsurance

Captive insurance

Summarise any captive insurance regime in your jurisdiction as applicable to aviation.

Insurance in Qatar is regulated by QCB Law. The QCB issued decision No. (1) of 2016 on executive instructions for insurance sector and principles of governance of insurance companies, pursuant to the provisions of the QCB Law, which came into force in April 2016 (the QCB Insurance Regulations). The QCB Insurance Regulations govern insurance companies incorporated (as joint stock companies) in Qatar (including their branches), representative offices and branches of foreign insurance companies and all natural and artificial persons providing insurance services in or through Qatar. Article 95 of the QCB Law states that money and property located in Qatar may not be insured in another country (ie, insured in Qatar by insurance companies regulated by the QCB). However, there is no restriction on reinsurance outside Qatar.

Further, the CAA Law also requires that the aircraft crew, passengers and cargo and third parties on the ground must be insured by a certified insurance company under the laws of Qatar if the aircraft is registered in Qatar.

A minimum percentage of cover that a local insurer is obliged to retain is not prescribed.

Cut-through clauses

Are cut-through clauses under the insurance and reinsurance documentation legally effective?

Typically, the Civil Code provides that an insured or beneficiary is only able to raise a claim against the insurer and the insurer is liable to compensate the insured or beneficiary even where the insurer has reinsured the risks.

As a general principle of contracts, the Civil Code states that a contract may earn a right for a third party but cannot prescribe an obligation on a third party. As such, when the insurer or ceding company is unable to make payments to the insured or beneficiary because of insolvency or bankruptcy, a cut-through clause would be generally effective and allow the insured or beneficiary a right of direct recourse against the reinsurer.

Much would depend on the manner in which the cut-through clause is drafted in the contract of reinsurance and should ensure that the rights of the insured or beneficiaries, and the relevant circumstances under which such rights arise, are specifically identified.

Reinsurance

Are assignments of reinsurance (by domestic or captive insurers) legally effective? Are assignments of reinsurance typically provided on aviation leasing and finance transactions?

Yes, assignment of reinsurances are typically provided on aviation leasing and financing transaction and necessary notices are issued to, and acknowledgments are received from, the reinsurer.

Liability

Can an owner, lessor or financier be liable for the operation of the aircraft or the activities of the operator?

The CAA Law makes it clear that in respect of all operation-related matters, the operator is responsible for ensuring compliance with the applicable laws. Article 37 of CAA Law states that the owner of an aircraft shall remain responsible for its operation in all situations as provided under the CAA Law. In respect of compensation for damages, Article 79 of the CAA Law states that the general rules of liabilities under Qatar law would be applied except where a person suffers damage on land as a direct result of an aircraft in flight or an object that fell from such aircraft, in which case the registered owner or operator shall be liable. The CAA Regulations define an ‘owner’ of the aircraft as the owner recorded in the aircraft register and reflected in the certificate of registration. The lessor of an aircraft that is subject to a lease agreement would also be considered as the ‘owner’ and may be recorded as such on the certificate of registration.

Article 212 of the Civil Code sets out the general rules of liabilities in respect of damage caused by objects that require special care, which includes aircraft. Article 212 of the Civil Code states that the custodian or guardian of such an object would be liable for any compensation required to be made for any damage caused by the object unless the custodian or guardian is able to prove that the damage occurred for reasons beyond its control.

Where the lease agreement is clear that all such liabilities are those of the operator (lessee) of the aircraft, such liabilities will not be passed on to the lessor, owner or financiers of the aircraft provided that such parties are able to establish that they are not the registered owners of the aircraft and were not in possession or control of the aircraft or in any way involved in the operation of the aircraft as a result of which damage has been caused to any third party.

Strict liability

Does the jurisdiction adopt a regime of strict liability for owners, lessors, financiers or others with no operational interest in the aircraft?

See question 33.

Third-party liability insurance

Are there minimum requirements for the amount of third-party liability cover that must be in place?

The CAA Law requires that the aircraft crew, passengers and cargo and third parties on the ground must be insured. In this regard, the QCAA has issued a Finance Fitness Assessment Guidance Material for Air Operator Certificate Applicants and Holders (Guidelines), last updated in October 2018. The Guidelines are for (i) operators of air ambulances, aircrafts with capacity of up to 20 seats or outsized air cargo operators and (ii) regular passenger, non-scheduled passenger and all cargo operators.

With regard to the minimum level of insurance for passengers, baggage and cargo, the following limits apply:

  • passengers - at 250,000 SDR* per passenger (10,000 SDR for aircraft capacity up to 20 seats or less than 10 tonnes maximum take-off weight);
  • baggage - 1,000 SDR per passenger; and
  • cargo - 17 SDR per kg.

a* SDR is special drawing right, which is an international currency unit defined by the International Monetary Fund. As at 15 April 2019 Qatari riyal 1 = 0.198 SDR approximately.

With regard to third-party liability, the following applies:

Category

Maximum take-off weight (kg)

Minimum insurance (million SDRs)

1

< 5,999

7

2

6,000-11,999

18

3

12,000-24,999

80

4

25,000-49,999

150

5

50,000- 99,999

300

6

200,000- 99,999

500

7

> 500,000

700

Update and trends

Recent developments

Are there any emerging trends or hot topics in aviation finance and leasing in your jurisdiction?

There are two jurisdictions in the State of Qatar, namely Qatar and the Qatar Financial Centre (the QFC). The QFC is a business and financial centre with its own laws and regulations. The QFC predominantly comprises financial service firms, insurance companies, law firms, accountancy firms, asset management or investment firms, etc. The QFC offers various corporate and holding structures.

In January 2019, the Qatar Finance and Business Academy (QFBA) and the QFC Authority collaborated to deliver a four-day seminar on aviation financing addressing topics such as export credits, capital markets, tax leases, common financing tools, etc.

The QFBA considers aviation financing to open up opportunities for new age finance professionals of Qatar and would certainly offer them a competitive edge. In future, the QFC may be considered to be a conducive environment for aviation finance companies, leasing companies, manufacturers and support services. Last year, Airbus set up a limited liability company under the QFC to provide advisory and consulting services in Qatar.