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?

Self-help remedies are recognised under the laws of Hong Kong, subject to the terms of the lease and provided it does not amount to a breach of the peace.

However, if the lessee considers that the lessor’s repossession of the aircraft is not justified or is not in compliance with the express provisions in the lease agreement, the lessee may seek an injunction order from the court to restrain the lessor’s repossession of the aircraft. The court may allow the lessee to seek damages from the lessor if the lessor’s repossession of the aircraft is found to be unjustifiable.

In this case, judicial intervention is required and the lessor will need to commence proceedings in court to seek repossession of the aircraft.

Enforcement of security

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

As mentioned above, self-help remedies are recognised under the laws of Hong Kong.

There are usually provisions in an aircraft mortgage that set out the specific repossession procedures following an event of default.

These express provisions in the mortgage will allow the mortgagee to take possession of the aircraft and subsequently re-market (that is, re-lease or sell) the aircraft without a court order, provided the repossession is not contested by the mortgagor (for example where the mortgagor’s non-compliance is being disputed).

Although an automatic stay applies in certain insolvency proceedings, a secured creditor will be able to freely appoint a receiver over the relevant secured assets, and the court would be expected to grant leave for such a receiver to take possession of and deal with those assets.

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 liens and detention rights could give rise to priority claims over aircraft owners or secured parties:

  • common law liens: such liens will give the creditor a right to detain the aircraft until outstanding debt has been repaid. Common law liens are usually possessory in nature, for example, repairer’s or mechanic’s liens;
  • airport charges: pursuant to the Airport Authority Ordinance (Cap. 483), the Hong Kong Airport Authority is entitled to detain any aircraft in respect of unpaid and outstanding charges, and may apply to the court for leave to sell the aircraft if the charges are not paid within 60 days of detention of the aircraft;
  • profit taxes: under the Inland Revenue Ordinance (Cap. 112), the Commissioner of Inland Revenue may commence court proceedings to recover any unpaid profits tax of the aircraft owner or charterer as civil debts. The Commissioner of Inland Revenue may apply to the court to seize and sell the aircraft to satisfy the judgment debt; and
  • air passenger departure tax: under the Air Passenger Departure Tax Ordinance (Cap. 140), the Director General of Civil Aviation has a lien over any aircraft of the relevant operator, for the amount of the tax assessed. The Director General of Civil Aviation may take possession of, remove, sell or otherwise dispose of the aircraft to recover the amount of tax.
Enforcement of foreign judgments and arbitral awards

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

The Hong Kong courts will generally enforce a final and conclusive foreign judgment without re-examination of the merits absent fraud and circumstances where it would be contrary to public policy.

Yes. Hong Kong is a party to the New York Convention (1958), with a reservation made by China that the Convention will only apply to disputes that are recognised as commercial under the national law of China.

In respect of Mainland China and Hong Kong, there are six mutual judicial assistance arrangements over civil and criminal matters, the most influential of these associated with putting in place a consent jurisdiction between concerned parties (Consent Jurisdiction Arrangement). In January 2019, the Supreme People’s Court (China) and the Department of Justice of the Hong Kong Special Administrative Region executed the Arrangement on Reciprocal and Enforcement of Judgments in Civil and Commercial Matters by the Courts of the Mainland and of the Hong Kong Special Administrative Region (2019 Arrangement), which will provide, once in effect, that recognition and enforcement is no longer preconditioned on written agreements to jurisdiction. The Consent Jurisdiction Arrangement will be annulled on the effective date of the 2019 Arrangement. The effective date will be announced once relevant procedural formalities have been complied with.