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To which major air law treaties is your state a party? Is your state a party to the New York Convention of 1958?
Belgium is a state party to:
- the 1933 Rome Convention on precautionary arrest of aircraft (in force 1937);
- the 1944 Chicago Convention on international civil aviation (in force 1947);
- the 1948 Geneva Convention on the international recognition of rights in aircraft - although no registry has been established by Belgium - (in force 1994); and
- the 1958 New York Convention on the recognition and enforcement of foreign arbitral awards (in force 1975, with a reserve on its application to awards made only in the territory of another contracting state).
By contrast with the European Union, of which Belgium is a member state, Belgium did not ratify the 2001 Cape Town Convention on international interests in mobile equipment.
What is the principal domestic legislation applicable to aviation finance and leasing?
Aviation law is regulated at national level by the 10 June 1937 Act amending the 16 November 1919 Act regulating air navigation.
Operating leasing activities are subject to the provisions of EC Regulation 1008/2008 on common rules for the operation of air services in the Community and those laid down in the Belgian Civil Aviation Authority (CAA) circular OPS No. 5.
The finance leasing industry is regulated under Royal Decree No. 55 of 10 November 1967, as amended from time to time, which provides that companies, which as a habitual activity enter into finance leases, require a prior licence and are subject to supervision by the Ministry of Economic Affairs. The condition for obtaining such licences are further detailed in the Ministerial Decree of 20 September 2012.
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?
Under the Belgian International Private Law Code, rights over aircraft registered in a public registry are governed by the law of the state of registration.
Sale and purchase agreements will be governed by the law expressly chosen by the parties.
However, the choice may be limited by any overriding principles of Belgian public policy and by the discretion of the courts to apply mandatory provisions of any jurisdiction with which the lease has a close connection, if such provisions are meant to be applicable whatever the chosen law. In addition, the Belgian courts may apply Belgian law if it appears clearly impossible to determine the substantive rules of the chosen law. In case of insolvency of the owner or lessee, Belgian law will also apply to determine issues of title to or security over an aircraft if said aircraft is registered in Belgium.
Transfer of aircraft
How is title in an aircraft transferred?
Under Belgian law, a sale and purchase agreement is deemed full and valid once the parties have agreed on the price and the specifications of the aircraft. Parties should therefore be particularly vigilant regarding the risk transfer before the delivery of the aircraft. A bill of sale is not required but a written document will be used as a proof of the existence of the agreement. The classical airframe sale and purchase agreement will contain provisions regarding the price, the specifications, the condition precedents, the time and place of transfer, the warranty of absence of any liens and liability disclaimers.
Transfer document requirements
What are the formalities for creating an enforceable transfer document for an aircraft?
Under Belgian law there are no specific formalities to be accomplished to validly transfer an aircraft. Sale and purchase documentation is only used as evidence of the transaction. However, it may have to be translated in the event of litigation into the proceedings language, which can be French, Dutch or German. Export, tax, customs and aircraft registration formalities must also be complied with in parallel.
Registration of aircraft ownership and lease interests
Identify and describe the aircraft registry.
The Belgian aircraft registry is an operator registry in which the owner of the aircraft does not need to be mentioned. The registration procedure is detailed in the Royal Decree regulating air navigation of 15 March 1954 and includes the submission of several documents, such as a certificate of nationality, proof of rights over the aircraft, customs certificate etc. Some article 83-bis arrangements about the transfer of supervision of aircraft have been made between Belgium and other jurisdictions on an ad hoc basis and are available on the International Civil Aviation Organisation’s website. There is no specific engine registry in Belgium.
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?
Registration of an aircraft lease is not possible in Belgium. However, the operator must file with the Belgian CAA its title of ownership or lease to be able to register the aircraft. Furthermore, the Belgian registry is not a register of title or of other rights. Except for aircraft or engine pledges (see below), there is no specific register in which security rights over aircraft or engines can be registered. A pledge over aircraft or engines can be registered by the pledgee since 1 January 2018 in the electronic registry over movable assets (Registre National du Gage or Nationaal Pandregister).
Registration of ownership interests
Summarise the process to register an ownership interest.
Title and third parties
What is the effect of registration of an ownership interest as to proof of title and third parties?
Registration of a pledge or communication to the Belgian CAA of any pledge documentation does not constitute a proof of title. If the operator and the owner of the aircraft registered are the same entity, and the aircraft has been registered in the name of the owner, the registration certificate may be used as a prima facie proof of ownership pending the communication of additional evidence.
Registration of lease interests
Summarise the process to register a lease interest.
It is not possible to register a lease in Belgium. A copy of the lease must be filed with the Belgian CAA, but this does not constitute registration of the lease.
Certificate of registration
What is the regime for certification of registered aviation interests in your jurisdiction?
The aircraft registration merely indicates the name of the operator, the manufacturer’s serial number and the aircraft type. Sometimes the existence of a lease may be indicated with the name of the lessor and lessee, but it is not always the case and it depends on the will of the Belgian CAA. We are not aware of any indication of possible security interest or engine ownership on the certificate of registration.
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?
Deregistration will normally be requested by the operator that registered the aircraft. Deregistration is nevertheless automatic when the aircraft is no longer in use, or has been lost for six months, or where the prerequisites for registration are no longer fulfilled. However, any interested party can request deregistration. In practice, a power of attorney, duly authenticated by a public notary, in favour of the financiers or lessor is often attached to the security or lease agreement. Unless the validity of the power of attorney is disputed, the deregistration certificate is issued quickly.
Powers of attorney
What are the principal characteristics of deregistration and export powers of attorney?
A power of attorney, duly authenticated by a public notary, in favour of the financiers or lessor is often attached to the security or lease agreement. However, even if the power of attorney is expressly said to be irrevocable, it can be revoked at any time, particularly in the case of bankruptcy or judicial composition of the lessee. Nevertheless, revocation can be considered as an event of default, depending on the circumstances.
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.
The 2001 Cape Town Convention on international interests in mobile equipment was not ratified by Belgium.
Security document (mortgage) form and content
What is the typical form of a security document over the aircraft and what must it contain?
Aircraft mortgages are not known under Belgian law. Pledges are generally used as a substitute. Since 1 January 2018, their effectiveness depends either on their registration in the electronic pledge registry (Registre National du Gage or Nationaal Pandregister), or on the continued possession of the aircraft by the pledgee or a third-party holder (where, in practice, the operator will act as third-party holder). The pledge agreement should contain at least a description of the pledged asset, the maximum value of the guaranteed debt and the designation of the related secured debt.
Security documentary requirements and costs
What are the documentary formalities for creation of an enforceable security over an aircraft? What are the documentary costs?
There are no specific documentary formalities for the creation of a pledge. Since 1 January 2018, creation is effected through electronic registration.
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.
In Belgium it is in principle not necessary to file security documents with the Belgian CAA or in any other registry. Since 1 January 2018, the creation of a pledge over an aircraft or its engines is effected through electronic registration. The registration process essentially requires the filing of the following information in French or in Dutch and in the pledge agreement language: the contact details of the pledgor and the pledgee, a description of the owner’s pledged asset, a description of the related secured debt (which in general will be a loan agreement) and the determination of the maximum guaranteed value in euros. The costs associated with the registration of a pledge over an aircraft are generally around €500 for a 10 year registration and €200 for a deregistration.
Registration of security
How is registration of a security interest certified?
Pledges registered in the electronic registry (Registre National du Gage or Nationaal Pandregister) are documented by an acknowledgment of registration which contains in a short format the electronic registration number, the name of the pledgor and pledgee, the description of the pledged asset, the designation of the secured debt, the maximum guaranteed value in euros, the pledge expiration date and the date of registration. The electronic registration is, however, made by the pledgor and is not verified by the Ministry of Finance running the registry.
Effect of registration of a security interest
What is the effect of registration as to third parties?
A registered pledge will normally take priority over unregistered and later registered security interests. But specific privileges and liens may coexist over the same aircraft, such as maintenance, repair and operations (MRO) privileges for repairs made on the aircraft, warehouse liens for unpaid rent and Eurocontrol’s liens over unpaid charges.
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?
In Belgium, security over aircraft generally takes the form of a security deposit, parent company guarantee, assignment of receivables or insurance proceeds, or a pledge. The pledge is the most common form.
Security over spare engines
What form does security over spare engines typically take and how does it operate?
As movable goods, engines in lease and finance agreements are traditionally secured by a pledge. As a conflict may arise if there is also a pledge over the airframe, recognition of rights agreements are generally signed between the involved parties.
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 not allowed under Belgian law. Lessors or financiers must initiate court proceedings to obtain the authorisations to repossess the aircraft if the lessee does not voluntarily release possession of the aircraft. Lessors and financiers will generally submit a unilateral interim motion requesting conservatory seizure of the aircraft with transfer of its custody to a third party until a final decision is handed down.
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 self-help remedies are not allowed under Belgian law, the enforcement of the pledge must be authorised by the competent court, with the possibility for the pledgor to challenge the act of the pledgee, which will monitor the sale of the aircraft, and which is generally organised by way of a public auction. This procedure responds to the fact that under Belgian law the pledgee is only allowed to claim all or part of the proceeds of the sale of the pledge. By way of exception, under the 2013 Act on the creation and enforcement of security interests in movable assets, self-remedy is possible under specific conditions, if provided in the pledge agreement, since 1 January 2018.
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?
Several liens and rights will have priority over aircraft ownership or other security over aircraft. This includes MRO privilege for repairs made on the aircraft, warehouses lien for unpaid rent and Eurocontrol’s liens over unpaid charges. It should also be mentioned that Brussels Airport and other regional airports have the power to deny take-off authorisation until outstanding landing rights are paid. Belgian authorities may also seize an aircraft if it infringes the Belgian legal and regulatory provisions.
Enforcement of foreign judgments and arbitral awards
How are judgments of foreign courts enforced? (In particular English and New York court judgments?) Is your jurisdiction party to the 1958 New York Convention?
Taxes and payment restrictions
What taxes may apply to aviation-related lease payments, loan repayments and transfers of aircraft? How may tax liability be lawfully minimised?
The Belgian tax regime is complex and depends on the type of lease and the location of the parties involved. As a general principle, rents and loan payments to a lessor or lender who is not a Belgian tax resident are subject to a 27 per cent withholding tax, save for exceptions such as double tax treaties. VAT at a rate of 21 per cent may also apply to rents and aircraft purchase. However, a VAT exemption may be obtained from the Ministry of Finance for remunerated international carriage of persons or goods as per article 42 of the VAT Code.
Are there any restrictions on international payments and exchange controls in effect in your jurisdiction?
Next to the anti-money laundering legislation and specific sanction regimes, cross-border electronic payment should be made through an authorised bank. No official consent is required. Transfer can easily be done in OECD currencies.
Are there any limitations on the amount of default interest that can be charged on lease or loan payments?
Parties are free to set the amount of default interest that can be charged on the lease or loan payments. However, Belgian courts may decide, irrespective of the law governing the agreement, to reduce it if it is considered disproportionate.
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 order to register an aircraft in Belgium, the operator must provide to the Belgian CAA a DL2 form from the Ministry of Finance evidencing that customs duties have been paid. The export of an aircraft is subject to custom formalities and in most cases to a prior licence. Save for exceptions, the three regions of Belgium, namely Brussels, Flanders and Wallonia, are now responsible for the issuance of such licences.
Insurance and reinsurance
Summarise any captive insurance regime in your jurisdiction as applicable to aviation.
In Belgium, it is not required that insurance be placed with insurers incorporated in Belgium. Nevertheless, as for aircraft registered in Belgium, insurance must be placed with an insurance company authorised to sell insurance products in Belgium. Reinsurance can be placed anywhere, but non-European reinsurance companies may need approval from the National Bank of Belgium as per the 2016 Act on insurance and reinsurance companies that offer their products in Belgium.
Are cut-through clauses under the insurance and reinsurance documentation legally effective?
There is no legal relationship between the reinsurer and the insured party under Belgian reinsurance law, with the consequence that the insured party cannot directly seek payment from the reinsurers. To our knowledge the validity of cut-through clauses in the event of insolvency of the insurer has not been disputed before Belgian courts.
Are assignments of reinsurance (by domestic or captive insurers) legally effective? Are assignments of reinsurance typically provided on aviation leasing and finance transactions?
We are not aware of any issue regarding the transfer of reinsurance portfolios. Assignment of reinsurances are typically provided in aviation leasing and finance transactions.
Can an owner, lessor or financier be liable for the operation of the aircraft or the activities of the operator?
Under Belgian civil law, only the person having custody over the aircraft is liable for any damage caused in the operation of the aircraft. Owners, lessors and financiers should not be liable for operation of the aircraft by the operator, unless the damage stems from their own negligence under general principles of tort.
Does the jurisdiction adopt a regime of strict liability for owners, lessors, financiers or others with no operational interest in the aircraft?
The 1952 Rome Convention on surface damage, which has been ratified by Belgium, provides that in cases where the identity of the owner of the aircraft is mentioned in the Belgian registry, the owner will be considered as the operator of the aircraft, with the consequence that it could be liable for the surface damage caused by the aircraft, unless the owner demonstrates that it is not the operator of the aircraft.
Strict liability also exists on the aircraft manufacturer under the 1991 Product Liability Act. If the manufacturer is based outside the European Union, strict liability will attach to the importer of the aircraft.
Third-party liability insurance
Are there minimum requirements for the amount of third-party liability cover that must be in place?
Aviation insurance in Belgium is regulated by the European Regulation No. 785/2004 on insurance requirements for air carriers and aircraft operators, which sets minimum insurance limits.
The authors would like to thank Ms Giulia Mauri, who contributed to a prior edition of this chapter
Update and trends
Update and trends
Are there any emerging trends or hot topics in aviation finance and leasing in your jurisdiction?
The 2013 Act on the creation and enforcement of security interests in movable assets finally entered into force on 1 January 2018 with the consequence that pledges can now be created without the previous need of transfer of the possession of the aircraft to a third-party holder. This is effected through registration in a national electronic registry. The electronic registry, however, still needs to be adapted to meet the industry’s needs as it remains difficult to verify if there is any recorded pledge over an aircraft or engine if only the manufacturer’s serial number or engine serial number is known.