Enforcement measuresRepossession 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?
UAE law has made a declaration under article 54(2) of the Cape Town Convention at the time of its accession and, as a result, any remedies under the Cape Town Convention that do not require a court judgment are not recognised by the UAE. Accordingly, self-help remedies are not available and a court order must be obtained. Under the proceedings applicable in the UAE, the claimant that requires the repossession of an aircraft may file a court application for an attachment. Under such attachment procedure, the aircraft needs to be clearly identified. If the attachment procedure is initiated prior to the substantive proceedings for the recovery of the debt, it is mandatory that, within eight days of the granting of the attachment order, such substantive proceedings are initiated by the claimant. It is possible for the claimant to request that the attachment order is granted ex parte by the relevant court of the UAE. Following the obtainment of a judgment from the court, a public auction would be ordered and supervised by the court to sell the asset. The court has the power to order new public auctions if it considers that the offer of the higher bidder is not sufficient. The auction is published in UAE newspapers. All documents brought to the court shall be in Arabic and the following documents are required:
- original agreements (such as the lease agreement) applicable to the case;
- evidence of non-payment of the debt;
- evidence of any other default than with respect of the debt payment;
- evidence of title and certificate of registration in respect of the aircraft; and
- evidence of the authority of the owner’s solicitor before the court.
The proceedings described above are subject to clarification of the implementation of the provisions of article 27 of Federal Law No. 20 of 2016, which allow self-help remedies for the enforcement of mortgages over movable assets registered with the Emirates Movable Collateral Registry subject to parties agreeing not to resort to the courts and accordingly to sale of the asset at its ‘market value’. Likewise, at present, the proceedings described above shall prevail until clarification of the regime applicable to aircraft mortgage following the implementation of Federal Law No. 20 of 2016.
The proceedings applicable in the UAE entail the payment of court fees, which depend on the value of the claim and have a maximum cap (except in cases filed before the Abu Dhabi court). According to Law No. 21 of 2015 regarding the new fees of the Dubai Court in Dubai, before the court of first instance and civil actions, the court fee represents 6 per cent of the claim, provided that the amount is not less than 500 UAE dirhams, and is subject to the following caps on the basis of tranche values of the claims:
- 20,000 UAE dirhams if the claim value is less than 500,000 dirhams;
- 30,000 dirhams if the claim value is between 500,000 dirhams and 1 million dirhams; and
- 40,000 dirhams if the claim value is more than 1 million dirhams.
If provisional orders, such as an attachment order, are sought, a further fee of 50 per cent of the initial filing fee is payable subject to a cap of 10,000 UAE dirhams. The length of the procedures depends, as in any other jurisdiction, on the nature and the complexity of the matter and, in the event of a case that does not raise any exceptional controversial matters, a proceeding before the courts of first instance usually takes around six months.
Within the UAE, the authority of the Dubai International Financial Centre (DIFC) court to perform functions of arbitration assistance is provided for by DIFC Law No. 1 of 2008 and Dubai Law No. 16 of 2011, and the arbitration sentences of the DIFC court are recognised by the courts of the UAE without examination of the merits of the decision, subject to certain conditions (eg, the arbitral sentence does not contravene public order considerations).
Outside the UAE, arbitration sentences should be recognised and enforceable in the UAE as it is a party to the New York Convention, but only to the extent that such arbitral sentences have been rendered by a contracting state to the New York Convention. Other regional or bilateral treaties, such as with certain countries of the Gulf Cooperation Council (GCC), may also facilitate the recognition of foreign judgments and arbitral sentences.Enforcement of security
Outline the basic measures to enforce a security interest. How may the owner lawfully impede the mortgagee’s right to enforce?
In respect of the enforcement of a security interest and the repossession of an aircraft following an event of default, self-remedies are not available under UAE law and the procedure is the same as stated above in respect of repossession by an owner subject to our observations in connection with the implementation of Federal Law No. 20 of 2016. Regarding the list of documents required before the courts, the secured creditor(s) shall provide an original or a certified copy of the security document and the underlying financing documents in addition to the evidence of the non-payment of the debt, the events of default, the evidence of title and the certificate of registration as well as the proof of the authority of the solicitor that represents the secured creditor before the court.
The only limitation to the strict requirement for a court order in the UAE may reside in the procedures for the enforcement of an IDERA as set out under the Civil Aviation Regulations. The Civil Aviation Regulations do not expressly require the intervention of a court and give effect to the protection mechanisms of the secured creditors under the Cape Town Convention and its Protocol. However, it should be noted that it is doubtful whether the GCAA would give effect to an IDERA in the presence of a serious contestation without requiring a court judgment. In the event of a repossession leading to the deregistration of the aircraft, the Civil Aviation Regulations provides that all fees and amounts due and payable to the GCAA shall be cleared prior to such deregistration. The provisions of article X of the Protocol to the Cape Town Convention, which are applicable in the UAE, provide for an expedite enforcement; however, as we are not aware of any significant precedent, it is not possible to give a detailed overview of a repossession scenario and the enforcement of an IDERA in the UAE.
As to insolvency proceedings under the domestic law of the UAE, the main provisions can be found in the Commercial Code, Federal Law No. 2 of 2015, as amended by the Bankruptcy Law (Law No. 9 of 2016), and, more recently, the Federal Decree-Law No. 18 of 2017 and the Federal Decree-Law No. 7 of 2018, which provide for a new protective composition procedure. We take the view that this procedure does not interfere with the rights of secured creditors to enforce their respective security with the permission of the court.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?
In the UAE, the liens and rights (including international interests under the Cape Town Convention) in favour of secured creditors have first priority as set out under the new Bankruptcy Law over, inter alia, costs in respect of any liquidation proceedings, unpaid salaries and wages of the employees of the debtor and amounts due to governmental bodies. UAE law does not provide for specific provisions in respect of the state’s or government entities’ right of confiscation, nationalisation or requisition of assets in particular circumstances, but the government of the UAE, under its constitutional rights and sovereign prerogatives, could decide to operate the requisition, nationalisation, confiscation or take other expropriation actions by way of a national decree in the event of exceptional circumstances such as in times of war.
A claim could be filed against a government-owned operator by the owner of an aircraft or a secured creditor, but, in certain circumstances, a non-objection confirmation from the local competent government authority would need to be obtained.Enforcement of foreign judgments and arbitral awards
How are judgments of foreign courts enforced? Is your jurisdiction party to the 1958 New York Convention?
As mentioned above, the UAE is a party to various regional or bilateral treaties concerning the recognition of foreign judgments and arbitral awards that may facilitate the recognition of foreign judgments and arbitral awards.
In the absence of such treaties, an arbitral award issued outside the UAE should be recognised and enforceable in the UAE provided that such arbitral award was rendered by a contracting state to the New York Convention, to which the UAE is a party, such as the United States and the United Kingdom. The new Federal Law No. 6 of 2018 on arbitral awards sets out new rules applicable to the arbitration procedures in the UAE. If the parties have decided that Federal Law No. 6 of 2018 would apply to commercial arbitration conducted outside the UAE, the foreign arbitral award may benefit from the res judicata status set out under this Federal Law No. 6 of 2018. The arbitral award should be enforceable following a pro forma ratification by a federal or local Court of Appeal in the UAE in accordance with article 52 of the Federal Law No. 6 of 2018. The relevant Court of Appeal should render its decision within 60 days of an application for ratification by a party.
The enforcement of a foreign final judgement in the UAE is subject to the conditions set out under the Federal Law No. 11 of 1992 as amended by the Federal Law No. 10 of 2014. From a procedural standpoint, the party that requires the enforcement of a foreign judgment should first apply for the ratification of the foreign judgment before the Court of First Instance. This party should provide evidence to the Court of First Instance that the foreign judgment is enforceable in the foreign jurisdiction and supply a certified and legalised copy of this judgment. Subject to the ratification of the foreign judgment by the Court of First Instance, this party would then file a summons before the execution court for the enforcement of the ratified foreign judgment. Further conditions should be satisfied in respect of the arbitral award including satisfactory evidence that the foreign judgment rendered by a competent court of the foreign jurisdiction and is final and binding. When a regional or bilateral treaty applies, the jurisdiction of the foreign court may not be reviewed depending on the specific rules set out in the relevant treaty.