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 following steps must be taken in order to take repossession of an aircraft:

  • The lease agreement must be formally terminated by a termination agreement executed by the lessor and lessee.
  • The right of lease registered with the Ministry of Land, Infrastructure and Transport (MOLIT) must then be deregistered or cancelled.
  • Finally, the aircraft must be deregistered and registered with the relevant aviation authority in the jurisdiction of return before the aircraft can be physically ferried out of South Korea.

Applications to deregister the right of lease and the aircraft may be made simultaneously. In order to deregister the right of lease and the aircraft, the lessor and lessee must submit to the MOLIT an application to deregister the right of lease or aircraft (as relevant), signed by or affixing the company seal of the lessee. Applicants must also attach a certified copy of the lease termination agreement and:

  • where a party affixes its company seal to execute a document or an agreement, a certificate of seal (with a validation or issue date of less than three months); or
  • where a party executes a document or an agreement by signature of its authorised signatory, the original documents authorising such signatory.

Once the right of lease and the aircraft have been deregistered, the lessor must register the aircraft with the relevant aviation authority to which it will be returned and provide evidence of such registration to the Seoul Registration Aviation Administration (SRAA) before the aircraft can be physically ferried out of South Korea. Once evidence of registration of the aircraft in the jurisdiction of return is received, the SRAA will carry out final checks on the aircraft to ensure that it is fit for ferrying and notify the lessor of the aircraft’s airworthiness. At this point, the aircraft may be ferried out of the country. As a rule, an export certificate of airworthiness is not required to ferry an aircraft out of South Korea but if the jurisdiction to which the aircraft will be returned requires one, the lessor may apply for one to be issued. The regulations do not specify whether any other documents must be submitted with the application, but the SRAA may specify this separately at the time of application.

The law does not allow for a party to unilaterally apply to deregister or cancel the right of lease and the aircraft. Therefore, if the lessee proves to be uncooperative, the lessor will need to obtain a decision from the relevant court or arbitral tribunal (as applicable) confirming that the lease agreement has terminated before proceeding to unilaterally apply to deregister the right of lease and the aircraft. Either a decision of the tribunal or a court judgment will be sufficient for the lessor to unilaterally proceed with deregistering or cancelling the right of lease and deregistering 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?

A secured party cannot enforce a security interest privately, but rather must partake in a voluntary auction or disposition by public sale in accordance with the Civil Execution Act. Enforcement of security interests in registered aircraft tends to be similar to the compulsory execution procedures for ships (Article 187 of the Civil Execution Act and Article 106 of the Civil Execution Regulation). In contrast, enforcement of security over unregistered aircraft, unregistered lightweight aircraft, ultralight aircraft and foreign aircraft occurs through a corporeal movables execution procedure.

Where a foreign aircraft is in South Korean airspace or is stationed at a domestic airport, airport zone or airfield, the enforcement procedures of South Korea apply as lex fori. As there is no foreign aircraft register in South Korea, registration of provisional attachment or transfer of ownership due to sale is not possible. As such, the provisions relating to the procedure for entering in the register do not apply to the compulsory execution against foreign aircraft (Articles 186 and 187 of the Civil Execution Act).

If, following establishment of security, the debtor becomes subject to a rehabilitation procedure, the secured party becomes a creditor under the Debtor Rehabilitation and Bankruptcy Act. A rehabilitation secured interest refers to a security interest that exists when the rehabilitation procedure is commenced and which was created as a result of a cause arising before the rehabilitation procedure was commenced. Rehabilitation secured creditors cannot exercise their rights individually but must partake in a rehabilitation procedure and benefit from indemnity or change of rights in accordance with a rehabilitation plan.

If the debtor becomes bankrupt, the secured party has the right to foreclose outside bankruptcy with respect to the property that is the object of the security and this right may be exercised without resorting to bankruptcy procedures (Articles 411 and 412 of the Debtor Rehabilitation and Bankruptcy Act).

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 priority of distributions on an enforcement of aircraft security interest is the same as for enforcement of a security interest in real estate. For example, in relation to a security interest established before the statutory deadline of a tax receivable in a sale asset, distributions will be made in the following order:

  • costs of enforcement;
  • any improvement costs or preservation costs incurred by a third-party purchaser of a mortgaged property (Article 367 of the Civil Act);
  • wages for the last three months and retirement benefits, among others, for the final three years of service (Article 38(2) of the Labour Standards Act and Article 12(2) of the Guarantee of Employees’ Retirement Benefits Act);
  • national and local taxes and surcharges imposed in relation to the aircraft that is the subject of enforcement (Article 35(1)(3) of the Framework Act on National Taxes and Article 99(1)(3) on the Framework Act on Local Taxes);
  • a security interest established over a sales asset before a statutory deadline of a national or local tax claim;
  • wages other than the wages under Article 38 of the Labour Standards Act and Article 12 of the Guarantee of Employees’ Retirement Benefits Act and other claims arising in connection with labour relations;
  • national taxes, local taxes and any collection charges for arrears;
  • employment insurance, industrial accident compensation premium, national health insurance premium and national pension premium; and
  • other general claims.
Enforcement of foreign judgments and arbitral awards

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

Foreign judgments or arbitral awards may be enforced by South Korean courts. As of May 1973, South Korea is a signatory of the 1958 New York Convention. In order to enforce a foreign ruling or arbitral award in South Korea the following requirements set out in Article 217 of the Civil Procedure Act must be satisfied:

  • The judgment has been finally and conclusively given by a court having valid jurisdiction in accordance with the international jurisdiction principles under South Korean law and the applicable treaties.
  • The defendant has been duly served with a service of process (other than by publication or similar means) in sufficient time to enable it to prepare its defence in conformity with the applicable laws or respond to the action without being served with process.
  • Recognition of the judgment is not contrary to the public policy of South Korea in light of the substance of the judgment and the procedures of litigation.
  • Either judgments of South Korean courts are accorded reciprocal treatment in the jurisdiction of the court which issued the judgment or the requirements for the recognition of a foreign judgment in the jurisdiction of the court which issued the judgment are not considerably prejudicial and substantially different in material aspects from those in South Korea.
  • South Korean courts have issued a judgment of execution in accordance with Article 26 of the Civil Execution Act.