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?

Subject to enforceability considerations under the governing law, the lex situs and any other relevant laws (other than Bermuda law), will typically be recognised by the Bermuda courts and enforce contractual arrangements such as lease termination provisions created under foreign laws. The Bermuda courts would also generally recognise self-help remedies by which the counterparties may take possession of the aircraft, for example, by dealing directly with the BCAA pursuant to a deregistration power of attorney to effect a deregistration.

The procedure for repossession of an aircraft will be governed by the provisions of the mortgage and the relevant provisions of the proper law governing the mortgage. There are no specific Bermuda statutory provisions dealing with the repossession of an aircraft. Therefore, the procedure is similar to that used for a claim in respect of personal chattels.

Before the Bermuda courts, the mortgagee can commence proceedings by serving a writ setting out the claim for the mortgage debt (and all related costs) and delivery of the mortgaged aircraft.

The mortgagee can also make a claim for an injunction or other relief that the court can order. An application for an injunction can be submitted before commencing an action for the payment of the mortgage debt or repossession of the aircraft. For ex parte applications, full disclosure must be made to the court (full disclosure meaning everything relating to the application, including anything damaging to the applicant’s case). The Bermuda court has discretion to grant an injunction and, if granted, can make it conditional on certain terms imposed by it.

If an injunction is granted, it will likely take the form of a prohibition on the mortgagor from removing the aircraft from its current location or from disposing of it without the court’s prior permission. When considering whether to grant the injunction, the Bermuda court will have regard to whether the injunction would disrupt passenger travel or business in general.

Enforcement of security

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

See question 22. Further, the Bermuda courts would typically recognise self-help remedies in the context of an enforcement of security interests over the aircraft (and often over the shares of the aircraft-owning vehicle). Bermuda law will generally also respect the secured parties’ security interests in the event of the insolvency of the relevant company (if the registrant is a Bermuda-incorporated company).

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 generally endorsed approach is that the following forms of lien exist as a matter of Bermuda law:

  • seller’s lien arising pursuant to section 40 of the Sale of Goods Act 1978, whereby an unpaid seller may have a lien over the aircraft to the extent the buyer fails to pay the purchase price;
  • salvage lien;
  • possessory lien, at common law, which requires the purported lienholder to have continuous possession of the aircraft upon which it has contributed labour that has improved the aircraft in some way; and
  • contractual lien, for example arising out of a contractual agreement with respect to aircraft repairs, landing charges, etc.

As a matter of Bermuda law, a possessory lien will have priority over a registered mortgage.

Generally, issues of compensation for detentions, requisitioning, etc, are typically also dealt with contractually in the transaction or insurance documentation.

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 regards judgments obtained in English courts (as well as the courts of many other common law jurisdictions, including Scotland, Hong Kong and Australia), Bermuda’s Judgments (Reciprocal Enforcement) Act 1958 (the Reciprocal Enforcement Act) provides for the registration and enforcement of judgments by the Bermuda Court. For such foreign judgment to be registered and enforced in Bermuda, it must satisfy various criteria, including that it be final and conclusive as between the parties thereto and that it be given by a superior court of the relevant jurisdiction.

Judgments obtained in the United States must be enforced at common law rather than under the Reciprocal Enforcement Act. 
Bermuda is a party to the New York Convention, which was extended to Bermuda by the United Kingdom in November 1979. The legislative provisions contained within the Bermuda International Conciliation and Arbitration Act 1993 give effect to the New York Convention in Bermuda. The Convention requires the courts of a contracting state to give effect to private agreements to arbitrate and to recognise and enforce arbitration awards made by a territory of another contracting state (reciprocity).