To which major air law treaties is your state a party?

South Africa is not a party to the Rome Convention (1933), but is a party to the Chicago Convention (1944), the Geneva Convention (1948), the Cape Town Convention (2001) and the New York Convention (1958). The conventions to which South Africa is a party remain in effect.

Domestic legislation

What is the principal domestic legislation applicable to aviation finance and leasing?

The principal legislation in South Africa that regulates aviation in general is the Civil Aviation Act No. 13 of 2009.

Governing law

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?

Generally speaking, the parties are free to choose the governing law in contracts, and South Africa will generally enforce the law chosen by the parties unless the law in question is against public policy.

Title transfer

Transfer of aircraft

How is title in an aircraft transferred?

A bill of sale would be effective to transfer title to an aircraft provided the parties intend and agree that this will be the document of conveyance through which beneficial title will be transferred by way of constructive delivery.

Transfer document requirements

What are the formalities for creating an enforceable transfer document for an aircraft?

In general there are no such formalities in relation to a bill of sale. Documents executed outside South Africa may, however, require authentication to be used in formal court proceedings in South Africa.

Registration of aircraft ownership and lease interests

Aircraft registry

Identify and describe the aircraft registry.

South Africa maintains an operators registry. There is no separate engine registry.

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?

The South African Civil Aviation Authority (CAA) distinguishes between registered and beneficial ownership. The entity or person registered as the owner of an aircraft with the South African aircraft registry need not be the beneficial owner.

Only entities that are South African nationals (defined, in the case of companies, with reference to a 75 per cent minimum holding) may be the registered owner of an aircraft under local rules.

The rules of the local civil aviation authority do not allow for the filing of lease agreements or similar instruments or of ownership interests other than the interests of the registered owner. There is also no mechanism in South Africa through which the owner of an interest in an aircraft may register such interest with any registry other than the aircraft registry maintained by the CAA.

There is further no mechanism in South Africa under which an owner’s, operator’s or lessee’s rights in an engine may be separately registered. An interest in an engine may only be registered together with the interest in the airframe to which such engine relates.

Registration of ownership interests

Summarise the process to register an ownership interest.

Registration of an ownership interest may be obtained by filing the prescribed form (CAR47A-2) with the CAA together with supporting documents, including supporting signing authorities for the relevant entity. In general there are no formalities for local documents but those documents (eg, powers of attorney), executed outside South Africa and which are to be used in an application for registration of an aircraft in South Africa may require notarisation and apostille to be effective. Also, local documents may require to be certified as true and correct copies to be accepted by the CAA.

Title and third parties

What is the effect of registration of an ownership interest as to proof of title and third parties?

As mentioned above, the aircraft registry distinguishes between registered and beneficial title. In short, nothing substantive can be gleaned from the registry in relation to a registered title interest, as this will only inform as to registered and not beneficial title. Put another way, it would not be possible to draw any conclusions as to the identity of the beneficial titleholder of an aircraft nor as to the quality of the title held by such person through an inspection of the aircraft register. Furthermore, other interests in an aircraft, such as lease interests, can also not be determined by reference to the said register.

Registration of lease interests

Summarise the process to register a lease interest.

As mentioned, the registration of lease interests is not currently possible under the current rules of the CAA.

Certificate of registration

What is the regime for certification of registered aviation interests in your jurisdiction?

Certificates of registration over aircraft registered in South Africa are only issued by the CAA. The registration certificate reflects the details of the registered owner of the aircraft. As mentioned above, it is not possible to glean any information regarding the beneficial ownership of an aircraft from the certificate of registration.

If a South African aircraft mortgage is registered over an aircraft the details of the mortgagee will be reflected on the certificate of registration. The mortgagee will need to apply to have the details of the mortgage reflected on the certificate of registration. This is typically done at the time of filing for the registration of the relevant mortgage.

Under the current rules of the CAA it is not possible to obtain a separate certificate of registration in relation to an engine nor to separately register interests in relation to aircraft engines.

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?

Both the registered owner and the mortgagee of an aircraft would need to consent to the deregistration of the aircraft with the CAA.

As the registered owner of the aircraft would need to file for deregistration of the aircraft by executing the prescribed form, the registered owner could, by not executing such form, effectively block the deregistration of the aircraft. The same would apply to a mortgagee where the mortgage interest of such mortgagee had been registered against title to an aircraft.

The export of the aircraft would be separately regulated, but the export could only be effected once deregistration had been achieved. As mentioned, the registered owner of an aircraft may well be the operator and therefore an operator in these circumstances could ‘block’ the deregistration and export of the aircraft even if either of these actions is sought by the mortgagee or beneficial owner of the aircraft in question.

Powers of attorney

What are the principal characteristics of deregistration and export powers of attorney?

Deregistration powers of attorney are habitually used in domestic aircraft financing and leasing transactions. Typically, these instruments allow the holder of the power of attorney to deregister and export the aircraft. Although these instruments may be expressed to be irrevocable they may be revocable in the instance of the grantor’s insolvency.

Deregistration powers of attorney may be granted to more than one holder (where the holders’ interests are distinct), although this is typically done under the auspices of separate documents.

Although these instruments are widely used in aircraft financing and leasing transactions in South Africa, we are not aware of any instance where a document of this nature has been relied on to effect deregistration of an aircraft. Although there is no reason for these documents not to be effective to achieve the purpose for which they are expressed to be given, the concern is that administrative barriers may be encountered from the aviation authority. This may then necessitate the use of formal proceedings to achieve the required result.

It is not possible to register or file deregistration powers of attorney under the rules of the CAA.

Deregistration powers of attorney are now filed together with mortgage filings or other relevant changes to aircraft registration.

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.

There are no particularly notable requirements of the IDERA used in South African finance and leasing transactions.

These documents are typically filed with the CAA for counter-signature. This process is not always handled with alacrity by the relevant authority, so delays in this regard should be anticipated.

Apart from the foregoing there are no formal registration requirements relating to IDERAs.

The CAA does not have any preferred way to deal with the financier as the beneficiary’s certified designee.

Typically IDERAs are used alongside deregistration powers of attorney, although the precise interface between the operation of these documents has not, to our knowledge, been tested locally.


Security document (mortgage) form and content

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

In South Africa, security over aircraft may only be taken and registered by way of an aircraft mortgage registered with the CAA.

An aircraft mortgage may be obtained by the filing of a prescribed form (MAR 2.1) with the CAA. The form identifies the mortgagor and mortgagee as well as the relevant cause of indebtedness and the amount secured. As the form itself is fairly rudimentary the practice has been to accompany the prescribed form with a mortgage agreement in financing transactions. The mortgage agreement is simply attached to the prescribed form as an annexure.

It is preferable, for enforcement purposes, that the mortgage agreement also be regulated by South African law. The mortgage agreement mentioned is used to supplement the detail provided on the prescribed form by the inclusion of customary aircraft mortgage provisions including provisions relating to the hypothecation of replacement engines.

The prescribed form and the form of mortgage agreement are in English. The form of mortgage agreement may also be used to record the more detailed provisions of the underlying indebtedness (eg, details as to the payment of principal, interest and the dates on which such amounts are payable).

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 formalities directly relating to the completion or filing of the prescribed form mentioned above. However, where the prescribed form is executed locally under a power of attorney obtained from a foreign entity, then the power of attorney typically requires notarisation and apostille in order to be accepted by the CAA. The power of attorney must also be accompanied by a signing authority.

There are no stamp duties associated with the filing or registration of a local aircraft mortgage. There are, however, costs payable to the CAA for the registration of a local aircraft mortgage. These costs are nominal in foreign currency terms (less than US$150 at current rates of exchange).

There is no requirement that the documents be translated as all documents are in English.

There will be local counsel costs associated with the preparation of the mortgage agreement.

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.

An aircraft mortgage can only be created in South Africa by the registration of form MAR 2.1 with the CAA, as detailed above. It is only through this process that an enforceable and perfected security interest will be created.

To register an aircraft mortgage the mortgagee needs to file the documents mentioned below with the CAA. To do this an appointment needs to be made with the said authority. The filing of multiple instruments (eg, deregistration of any prior mortgage and registration of one or more new mortgages) may well require separate appointments for the filing of each instrument. It is therefore preferable that these appointments be made in advance, particularly where the exigencies of a particular financing transaction may require the mortgage to be filed at a particular time (such as on closing).

The prescribed form must be accompanied by an authorised signatories list as well as relevant signing authorities. As mentioned above, if the mortgage documents are being executed locally under a power of attorney then the executed power of attorney, duly notarised and apostilled where required, must also be filed. The form MAR 2.1 also needs to be accompanied by an application to amend the registration of the aircraft. This is done by way of a further prescribed form, CAR47A-2. Form CAR47A-2 also needs to be accompanied by the signing authorities of the person applying to amend the registration of the aircraft. At least three representatives of the applicant are required to authorise the entr of the said application.

Once all the required documents have been filed with the CAA, there is typically a seven-working day waiting period for registration. Practically, however, the time period for registration of aircraft mortgages may exceed this, although it is unusual to wait more than 14 days for registration.

Once registered, the mortgage will be regarded as effective and enforceable on the date on which the filing for its registration was made. There is no requirement for renewal. Once registered, the aircraft mortgage will remain effective and enforceable until deregistered.

See above in regard to the costs of registration of an aircraft mortgage.

Registration of security

How is registration of a security interest certified?

Once an aircraft mortgage has been registered with the CAA the Authority will endorse the details of the mortgage onto the current certificate of registration for the relevant aircraft. The endorsement will not necessarily list the priority of the relevant aircraft mortgages. Once an aircraft mortgage has been registered, the updated certificate of registration is issued together with the confirmation of registration of the related aircraft mortgage.

Effect of registration of a security interest

What is the effect of registration as to third parties?

Priority in South African mortgages can only be created by way of order of registration. There is no priority notice system in place.

The noting of the aircraft mortgage on a certificate of registration comprises constructive notice to third parties of the existence of an aircraft mortgage over the aircraft. In general, third parties may rely on the aircraft mortgage information contained on a certificate of registration, but this does not preclude the possibility of administrative error and therefore the aircraft mortgage information so contained cannot be conclusively regarded as correct.

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 single creditor financings security is generally taken directly by the relevant creditor. This applies to both local and foreign financings.

In local financings where there are multiple creditors and a single cause of indebtedness (such as a single loan agreement with multiple lenders participating through a single tranche), it may be possible for more than one mortgagee to be noted as such on the aircraft mortgage.

To cater for changes in lenders, however, South African security arrangements in syndicated financings are typically structured through what is locally called a ‘debt guarantor structure’. The effect of this arrangement is to simulate, through a series of contractual arrangements and by the use of a special-purpose debt guarantor, the effect of a typical security trust or security agency arrangement. Security trusts and security agency arrangements are not deployed in South African financings owing to a quirk of South African law and there is a question mark over whether registered security of this nature may be held by more than one person or through agency.

Although South African law and the local courts will respect and enforce foreign law, security trusts and security agency arrangements, this can become more complicated where, for example, a foreign law form of aircraft mortgage agreement (eg, one under English or New York law) is registered together with the prescribed form MAR 2.1, which is a South African law document.

The use of debt guarantor arrangements described above will obviate the need to update the aircraft security each time there is a change in creditor.

There is no formal way in which an aircraft mortgage may be amended once registered. We have seen the filing of amendment documents to registered mortgages but, as mentioned, there are no regulations in force to suggest that this practice works legally. In other words, if an amendment document was filed in relation to a registered aircraft mortgage, it may be that the registered mortgage would remain unamended. The only foolproof way in which a registered aircraft mortgage can be amended is by filing for deregistration and filing a new mortgage. This can obviously give rise to many complications in a secured financing.

Although not tested in South African law it would seem that a registered aircraft mortgage would create a real right of security over the asset. The mortgage agreement, however, might be regarded as creating only a personal right as it is really the prescribed form that creates the enforceable security interest over the aircraft.

Security over spare engines

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

The law allows for the registration of an aircraft mortgage over an airframe and its engines. There is no mechanism through which an engine can be separately hypothecated by way of an aircraft mortgage.

If a security interest was required over an engine this would need to be obtained through the registration of special notarial security in South Africa. This type of security is akin to a fixed charge and is inflexible, particularly in relation to any replacement or sale of the engine in question.

When an aircraft mortgage is registered over an aircraft the aircraft mortgage will also cover the engines. The security interest will be effected even though the relevant engine is not installed at the time of the creation of the security interest as long as it relates to the airframe being mortgaged.

The prescribed form MAR 2.1 does not allow for the mortgaging of replacement engines. This is something that is usually achieved through the use of the mortgage agreement described above.

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?

Absent agreement repossession would need to be pursued by way of formal proceedings in the High Courts of South Africa. Usually this would be done by way of application proceedings. These proceedings may be launched on an urgent basis and without notice to the counterpart where the circumstances require.

There are no general rights of self-help available to lessors or lenders.

In circumstances where lease termination is contested court proceedings may be required to establish the right to terminate and that such right has been properly exercised.

A lessee may lawfully impede an owner’s right to exercise default remedies by contesting the basis upon which the default has been called and, in turn, the right to exercise the relevant remedies. This presupposes that there are grounds for the lessee to contest.

Enforcement of security

Outline the basic measures to enforce a security interest. How may the owner lawfully impede the mortgagee’s right to enforce?

Absent agreement, security interests would need to be enforced by way of formal proceedings in the High Courts of South Africa. Usually this would be done by way of application proceedings. These proceedings may be launched on an urgent basis and without notice to the counterparty where the circumstances require.

There are no general rights of self-help available to lessors or lenders.

An aircraft may be detained by way of ex parte proceedings where the circumstances require. Usually this would be where, if the counterparty were to be given notice of the proceedings, there would be a risk of the aircraft being moved to avoid detention.

A local owner may lawfully impede a mortgagee’s right to enforce security by contesting the basis upon which the underlying default has been called and, in turn, the right to exercise the relevant enforcement remedies. This presupposes that there are grounds for the owner to contest.

The laws of insolvency may well affect the rights of an enforcing creditor.

Simplistically, in the context of a lease, the liquidator would have an election as to whether or not to abide by the terms of the lease. If the liquidator elected to abide by the lease he or she would need to make sure that the insolvent debtor performed all its obligations under that instrument. If the liquidator elected to terminate the lease then the lessor would be entitled to repossess the asset.

In the context of a secured loan the enforcing creditor would need to work through the liquidator to enforce the security held by it over the asset. This would entail agreeing the valuation of the asset with the liquidator or causing the asset to be sold by way of a public auction. The proceeds of the valuation or sale of the asset would be paid to the secured creditor from the insolvent estate on the winding up of the estate.

Mention is also to be made of section 84 of the South African Insolvency Act (Act No. 24 of 1936) in the context of conditional sale transactions. In terms of this provision, notwithstanding any reservation of ownership by the conditional seller of the asset, ownership of the asset will pass to the insolvent conditional purchaser. The conditional seller is, however, afforded a statutory hypothec over the asset to secure its claim against the insolvent conditional purchaser.

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 following liens and rights may have priority over aircraft ownership or an aircraft security interest, namely, expropriation, nationalisation and requisition rights of the state, all forms of possessory liens, liens for unpaid flight charges and other taxes and duties.

Compensation should be payable by the state for the exercise of any of the aforesaid rights. Although the governing legislation does provide for the mechanism to contest the level of compensation offered, from a practical stance, it may be difficult to effectively exercise this right.

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, South Africa is a party to the New York Convention. Foreign judgments may be enforced by way of a fresh action instituted in South Africa or by bringing an application to enforce a foreign judgment.

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?

In local transactions there are no taxes that apply to lease payments or loan repayments under prevailing legislation. In relation to transfers of aircraft, however, VAT may be payable by the transferee to the transferor at the prevailing rate (currently 14 per cent).

Where an aircraft based in South Africa or in South African airspace is being sold between two non-residents, no VAT or other taxes will be payable on the transfer of the aircraft. This presupposes, however, that, inter alia, neither of the non-residents was registered or required to be registered as a vendor for South African VAT purposes.

In circumstances of a local borrower or lessee, no taxes would apply to payments to the foreign lender or lessor. Foreign lessors under operating leases may, however, be required to register for VAT purposes in South Africa. In almost all instances an application for exemption from this obligation is filed by the foreign lessor. Absent an exemption, rental and other payments under the lease in question might be subject to VAT.

In general, there are no withholding taxes on loan or lease payments due to non-residents. There is a question mark, however, around withholding taxes applicable to payments under local guarantees issued for these obligations, but the consensus seems to be that no withholding taxes would apply to these payments under current law.

Gross-up provisions would be effective in South Africa.

Exchange control

Are there any restrictions on international payments and exchange controls in effect in your jurisdiction?

No South African resident may incur any obligation to any non-resident without exchange control approval. The relevant approval is issued by the Financial Surveillance Department of the South African Reserve Bank. The approval needs to cover the entry into by the local entity of the relevant instrument as well as the performance by such entity of all its obligations under that instrument. Foreign lessors and lenders need to ensure that the application for the said approval is wide enough to cover all forms of payments due under the relevant instrument.

Generally, the relevant approval is applied for by the local entity, usually through its retail bankers. The approval may take up to six to eight weeks to obtain and therefore this timing parameter needs to be borne in mind when entering into transactions of this nature.

Sometimes the relevant approval can be time-limited and attention should be paid to this to ensure that the approval limits do not precede the time for performance of the obligations under the relevant instrument.

Default interest

Are there any limitations on the amount of default interest that can be charged on lease or loan payments?

The only restriction is under the relevant exchange control rules, where, under current regulations, normal interest or similar charges payable on cross-border instruments may not exceed the equivalent of the South African prime rate (currently 10.5 per cent per annum) plus 200 basis points. This excludes default interest; however, the rate of default interest should not be excessive as it is unlikely that this will be allowed under the exchange control rules.

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?

Import VAT is payable on the import of an aircraft into South Africa, other than on a temporary basis.

There may be costs associated with the export of an aircraft, although these should be nominal if the import VAT is paid.

Generally speaking, the obligation to pay the relevant duties falls on the local entity, although, in the context of a repossession, it is likely that, for practical purposes, such costs may need to be paid by the foreign entity seeking the export.

Insurance and reinsurance

Captive insurance

Summarise any captive insurance regime in your jurisdiction as applicable to aviation.

There is no captive insurance regime relevant to aviation in South Africa. There is also no domestic requirement that insurances be placed in South Africa.

Generally in local or smaller transactions, insurances are placed in the local market (these may be reinsured through the foreign markets). In almost all transactions involving a cross-border element the requirement is that insurances be placed in the internationally accepted aviation markets.

Cut-through clauses

Are cut-through clauses under the insurance and reinsurance documentation legally effective?

Generally the requirement for cut-through clauses appears in cross-border leasing or lending transactions. The insurances under these transactions are generally placed in the internationally accepted aviation markets. The enforceability or otherwise of these clauses will thus depend on the governing law of the relevant instruments. South Africa will generally enforce these arrangements if they are enforceable under the governing law of the jurisdiction by which they are expressed to be governed.


Are assignments of reinsurance (by domestic or captive insurers) legally effective? Are assignments of reinsurance typically provided on aviation leasing and finance transactions?

Assignments of reinsurances are not typically provided in aviation leasing and finance transactions. We are not aware that any assignment of reinsurance has been tested locally. See question 31 in regard to cut-through clauses. We believe that similar principles will apply to an assignment of reinsurance.


Can an owner, lessor or financier be liable for the operation of the aircraft or the activities of the operator?

Strictly speaking the answer is no, but there is always the spectre of a delictual (tort) or other derivative claim in this context.

Strict liability

Does the jurisdiction adopt a regime of strict liability for owners, lessors, financiers or others with no operational interest in the aircraft?

The owner of an aircraft carries strict liability for damage that it causes under the governing legislation in South Africa. The owner for this purpose is the registered owner of the aircraft and not the beneficial owner. Certain prescribed insurances are required to be effected by the registered owner to cover this liability.

Third-party liability insurance

Are there minimum requirements for the amount of third-party liability cover that must be in place?

Yes. The limits were set some time ago, however, and are inadequate and do not reflect current market requirements.