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?

Austrian law leasing agreements (or related tripartite agreements) usually foresee irrevocable powers of attorney by lessee and operator granting rights to the owner or lessor to repossess and (de)register the aircraft. A lessee will not be in a practical position with regard to the competent authorities (airports, Austro Control) to obstruct repossession by the owner or lessor. An operator may invoke its right of retention until its fees and costs with respect to the aircraft are paid in full.

Although a court order does not in principle need to be obtained by the lessor if retention of title in the aircraft is validly existing and the underlying obligation becomes due and payable subject to proper termination, court proceedings might have to be opened (as a last resort) to regain possession from an obstructive operator.

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 measures must be in line with respective regulations that principally provide for creditors’ entitlement to an out-of-court realisation of the pledge (ie, repossession and sale of the aircraft) provided that the underlying claim has become due and payable and the debtor or pledgor have been warned of the realisation of the pledge. The creditor shall wait with the realisation for one month after having warned the pledgor to realise the pledge; this stay period is shortened by law to one week in the case that both parties are entrepreneurs. We recommend additional clarification within the security agreement (pledge agreement) that an out-of-court realisation of the pledge will take place in the event of a termination owing to the lessee’s payment default. Alternatively, the creditor may enforce the pledge via the court.

In the course of initiation of insolvency proceedings over the assets of the lessee, the lessor has a right of extraction from the assets under insolvency as owner of the aircraft.

In the course of initiation of insolvency proceedings over the assets of the pledgor, the pledgee (as secured creditor) would be entitled to a separate and preferential satisfaction (right to segregation) from the proceeds of the sale of the aircraft by the insolvency administrator appointed by the competent court.

If the proceeds from the sale, for example, do not cover all the creditor’s claims, the creditor would have to register the remaining outstanding claims in the insolvency proceedings. In this case, the creditor (in respect of claims against the debtor) would be treated the same as other unsecured creditors (claims).

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?

Austrian statutory law does not provide for detention of the aircraft in respect of unpaid airport charges, air navigation charges or other unpaid debts.

Rights of liens to the aircraft may be based on claims against the legal owner of the aircraft. Claims against the operator, however, may not create a right of lien against the aircraft. An existing right of lien does not generally impact the validity of an existing aircraft security interest such as a pledge.

Unless there is suspicion of a criminal act in connection with the aircraft or its owner, or both, the Austrian state will not, in practice, confiscate an aircraft.

Enforcement of foreign judgments and arbitral awards

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

Before judgments of foreign courts can be enforced in Austria, they need to be recognised in respective court proceedings. For judgments of courts of the European Union, Regulation (EU) No. 1215/2012 of 12 December 2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (recast) (Brussels Ia Regulation) is applicable, which provides for a simplified procedure, which aims at facilitating circulation of foreign judgments within the EU member states. Other foreign judgments need to follow the national provisions on the recognition of foreign judgments set out in the Austrian Enforcement Act, unless bilateral treaties exist which provide for mutual recognition and enforcement of judgments, in which case these rules prevail.

Austria is party to the Convention on the Recognition and Enforcement of Foreign Arbitral Award of 1958 (the New York Convention).