Security

Security document (mortgage) form and content

What is the typical form of a security document over the aircraft and what must it contain?

Pursuant to articles 93, 103 and 104 of the Civil Aviation Law, notwithstanding the fact that they are movable property, aircraft and aircraft engines are subject to mortgage as provided under the Civil Code for real estate. As a result, the corresponding documents must be authentic acts, declared before and drafted by Dominican notary public and drafted in Spanish.

Pursuant to article 2132 of the Civil Code, the secured amount must be included in the mortgage document itself in order for it to be deemed valid for registration. While the economic terms of the deal do not have to be expressly included, it is recommendable to include reference to the corresponding loan document (eg, loan agreement executed on a date by the parties) in order to more readily ensure the application of relevant provisions in a potential foreclosure.

Other security interests that may be recorded over aircraft or aircraft engines in the National Aircraft Registry are privileges and seizures. Pursuant to articles 102 and 105 of the Civil Aviation Law, the following are privileged creditor rights that may directly encumber registered aircraft as a result of the corresponding certified court order:

  • fees and duties on air transport;
  • attorneys’ fees and court costs;
  • sums owed to the previous owner of registered aircraft; and
  • due salaries and severance payments.
Security documentary requirements and costs

What are the documentary formalities for creation of an enforceable security over an aircraft? What are the documentary costs?

Depending on the type of security in question, different formal requirements will apply. As mentioned, mortgages over aircraft or aircraft engines can only be incorporated via authentic act declared before and drafted by a notary public in the presence of two witnesses, which in turn must be certified by the office of the Attorney General prior to filing before IDAC.

Much like the case discussed in question 8, the costs involved in obtaining prior certifications and registrations for securities are generally minimal, although they can certainly add up whenever a large volume of documents is involved.

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.

Assuming all documentary requirements discussed above have been met, perfection is obtained via registration before the RNA as indicated in article 104 of the Civil Aviation Law. The registration of security interests is carried out via written request addressed to the General Director of IDAC, which must include the following:

  • a description of the aircraft or engine in question;
  • nature, amount and status of the lien;
  • designation of the court issuing the order, whenever applicable;
  • designation of the court file to which the order corresponds, whenever applicable;
  • transcription of the corresponding court order, whenever applicable;
  • personal particulars (individual or corporation) of the person against whom the measure has been ordered; and
  • if the requesting entity is a corporation, a duly authorised representative must make the request. If the request is made in-house, it must be printed on the corporate letterhead and be stamped with the company seal.

Supporting documentation, in turn, must include the following:

  • the document validly incorporating the security interest in question (eg, a faithful, certified copy of the authentic act containing the mortgage agreement or a certified court order, as applicable);
  • a copy of the registration certificate for the corresponding aircraft; and
  • in the case of corporations, the corporate authorisation required by the corresponding by-laws for both the representative signing the request and for the specific task being requested. If these documents are foreign, they must be:
    • valid pursuant to the laws of the jurisdiction of origin;
    • duly apostilled or certified by consular authorities as applicable; and
    • to the extent that they are drafted in a language other than Spanish, accompanied by a Spanish translation certified by a locally accredited judicial interpreter.

Regarding costs, IDAC charges a service fee of 200 Dominican pesos for the registration of security interests. As in the case of transfer documentation, prior registration before the corresponding Civil Registrar’s office is required. Additional costs are limited to the generally minor expenses represented by required notarisations and certifications. Again, the fees referenced herein are current as at the date of publication, but are subject to change as is the prerogative of the corresponding authorities.

Registration of security

How is registration of a security interest certified?

Registration of the security interest can be certified by requesting and obtaining a legal status certificate from IDAC for the aircraft or engine in question. No registration certificate is issued for the security interest, and the aircraft’s registration certificate does not necessarily include registered liens.

Effect of registration of a security interest

What is the effect of registration as to third parties?

Registration makes the security interest in question opposable to third parties, such as unsecured creditors, as of the date and time of its registration. Based on section 47.29 of RAD-47, registrations are deemed to have been made on the date and time in which the corresponding request was completed and duly filed before IDAC. Priority operates based on this date and time with regards to other registered security interests over the same aircraft.

The National Aircraft Registry’s main purpose is to allow third parties to transparently obtain information on the legal status of aircraft. However, third parties should not rely on the information contained in a given aircraft’s registration certificate, since it may not include all relevant information on security interests or may be outdated. A legal status certificate from IDAC is the recommended source of information, since it should provide all current data.

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?

Under Dominican law, security interests are in rem rights and, as a result, pursue the asset itself, not the person that owns it. In the event of novation, a new registration would be required given that, under Dominican law, the original loan would be deemed terminated, along with all accessory obligations, such as the security interest. Hence a new security interest would have to be incorporated and registered regarding the new loan generated as a result of novation.

We note, however, that transfer of the loan to a new debtor is not considered to have novatory effect over said loan and hence would not strictly require a new registration. The obligation remains the same and the new lender is deemed to have rights of subrogation with regards to the original lender’s prerogatives both under the loan and its accessories.

With regard to trusts, we note that Dominican law has only recently recognised and implemented the concept of the trust via the enactment of Law No. 189-11 and its corresponding regulations on 16 July 2011 and 2 March 2012, respectively. The use of a trust would effectively allow far more flexibility with regard to being able to make structural changes without the need to make new registration of security interests. However, given the current absence of significant costs to obtain registration of mortgages over aircraft before the National Aircraft Registry, the use of a trust, while convenient, might not necessarily be cost-effective.

Security over spare engines

What form does security over spare engines typically take and how does it operate?

Given that the definition of ‘aircraft engine’ provided under the Civil Aviation Law covers spare engines (eg, engines intended to be used in aircraft), these may also be the object of mortgage agreements registered before IDAC.

Unless otherwise specified, a security interest over an aircraft includes security interest over its installed engines. An effective security interest would not be created over an engine that is not installed on the aircraft in question or specifically referenced in the corresponding mortgage agreement.

Whenever an engine is encumbered as a result of being installed in an encumbered aircraft, we understand that said engine would cease to be encumbered upon being replaced by another engine or upon being expressly released from encumbrance by the corresponding parties. If that engine has been encumbered individually (eg, spare engine), then as a result of the in rem nature of the encumbrance, it would only become unencumbered when the parties expressly release it.