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?

Nigeria made declarations under article 54(2) of the CTC to the effect that any remedies available to the creditor under the CTC that are not expressed under the relevant provision to require application to court may be exercised without court action and without leave of court. Therefore, if the interest of the lessor in the aircraft is registered as an international interest under the CTC and Aircraft Protocol, a court order is not required to activate the remedies stipulated in article 11 of the CTC, which allows a lessor to terminate a lease agreement and repossess the aircraft. In practice, however, there have been cases where a lessee has impeded the right of the lessor by obtaining orders of injunction restraining the lessor from exercising the self-help remedies before such remedy is activated.

If the lease is not subject to the CTC and Aircraft Protocol, the lessee may proceed to court to have questions surrounding the lease determined by the court.

Notably, one of the grounds upon which an aircraft owned by a foreign person but leased to persons permitted to register aircraft in Nigeria can only remain in the registry is if the lease remains in effect. Upon the termination of such a lease, deregistration and repossession are treated together. The lessor gives reasonable prior notice in writing of the proposed repossession to NCAA that the lease has been determined.

If the lease is determined by default, the NCAA requires evidence that the lessee has been given time to remedy the default but has failed to do so and that the default persists. The NCAA ensures that the incident of default is within the terms agreed by the parties and that the lessee has indeed defaulted before it proceeds to notify the lessee and any other interest holder of the proposed deregistration and request for repossession.

Enforcement of security

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

In line with the declaration made by Nigeria under article 54(2) of the CTC to the effect that any remedies available to the creditor under the CTC that are not expressed under the relevant provision to require application to court may be exercised without court action and without leave of court, a chargee can exercise the default remedies set out in article 8 of the CTC (take possession or control of the object charged; sell or grant a lease of any such object; collect or receive any profit or income arising from the management of or use of such object) without recourse to court. It is usual to have terms in the mortgage agreement giving the mortgagee the right to exercise such self-help remedies without recourse to court.

Yes, the aircraft can be detained by way of an ex parte application once the conditions necessary for the grant of an injunction are present (eg, that the mortgagee has a legal right to the asset, that the mortgagor owes monies and is unable to pay and the security for the monies is the aircraft asset that, if not detained, may be made unavailable by the mortgagee).

If the security interest is created under the CTC and Aircraft Protocol, the procedure to be adopted in the event of an insolvency of the debtor is as set out in Alternative A of article XI to the Aircraft Protocol. This is line with the declaration made by Nigeria pursuant to article XXX(3) of the Aircraft Protocol. As required, the waiting period within which the debtor is expected to give possession of the aircraft object to the creditor upon the occurrence of the insolvency-related event is 30 calendar days.

For agreements made outside the CTC, the holder of a fixed charge over an asset takes precedence in insolvency proceedings over other creditors of the debtor.

Again, in practice, it is possible, contrary to the terms of the contract, for a chargor to impede the right of the chargee by obtaining orders of injunction restraining the chargee from exercising the self-help remedies before such remedy is activated.

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?

In line with the declarations made by Nigeria, the following categories of non-consensual right or interest have priority under the law over an interest in an object equivalent to that of the holder of a registered international interest and shall have priority over a registered international interest, whether in or outside insolvency proceedings:

  • liens in favour of works for unpaid wages arising since the time of a declared default under a contract to finance or lease the subject object for services performed relating to that object; and
  • liens in favour of repairers of an object in their possession to the extent of services performed on and value added to that object.

In addition, certain rights have been declared by Nigeria as registerable non-consensual rights and interest that are to be registered at the International Registry and regulated accordingly. These interests include:

  • rights of a person obtaining a court order permitting attachment of an aircraft object in partial or full satisfaction of a legal judgment;
  • liens or other rights of a state entity relating to taxes or other unpaid charges;
  • liens of a salvor for unpaid charges in respect of salvage services provided to an aircraft object when it is waterborne;
  • liens of a person providing towage services to an aircraft object when it is waterborne in respect of unpaid charges; and
  • liens of a bailee of an aircraft in respect of unpaid charges for the bailment of that aircraft object.

It is usual to find terms relating to state confiscation or requisition in mortgage agreements executed in Nigeria. The Nigerian Constitution provides that no movable property shall be compulsorily acquired by the government except in the manner and for purposes provided by a law that among other things, provide for the prompt payment of compensation and gives any person claiming such compensation a right of access to a court of law or tribunal for the determination of his interest and the amount of compensation to a court of law or tribunal.

Section 44 of the Constitution is, however, without prejudice to any general law relating to, among other things, the imposition or enforcement of any tax, rate or duty. For instance, the FIRS is empowered to sell distrained goods or chattels to satisfy a taxpayer’s assessed tax obligation if the taxpayer fails to pay the assessed tax and any cost or charges incidental to the distrain. By this provision, the FIRS can validly distrain and sell an aircraft or any of its parts or equipment to satisfy the tax obligation of the owner of the aircraft or equipment.

Enforcement of foreign judgments and arbitral awards

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

Foreign judgments are enforced in Nigeria in accordance with the provisions of the Foreign Judgments (Reciprocal Enforcement) Act, Chapter F35, Laws of the Federation of Nigeria 2004 (the 2004 Act) and the Reciprocal Enforcement of Judgments Act 1922, Chapter 175, Laws of the Federation and Lagos 1958 (the 1958 Act). Section 3 under Part 1 of the 2004 Act (which contains provisions for the registration of foreign judgments) provides that where the Minister of Justice of the Federation of Nigeria is satisfied that in the event of the benefits conferred by Part 1 of the 2004 Act being extended to judgments given in the superior courts of any foreign country, substantial reciprocity of treatment will be assured with regard to the enforcement in that foreign country of judgments made by a superior court in Nigeria, the Minister may, by order, direct the extension of Part 1 to that foreign country. No such order has been made by the Minister of Justice to date. Section 10(a) of the 2004 Act allows the enforcement of foreign judgments of countries to which Part 1 of the 2004 Act has not been extended, provided that such applications for enforcement are made within 12 months of the foreign judgment or within such other time as the court may permit. Judgment under the 2004 Act includes an arbitral award. Foreign arbitration awards are thus enforced in the same manner as foreign judgments under the 2004 Act.

Certain foreign judgments may also be enforced under the 1958 Act. This Act deals with the registration and enforcement of judgments obtained in Nigeria and the United Kingdom and other parts of Her Majesty’s (Queen of the United Kingdom) dominion and territories and was not repealed by the 2004 Act as was decided by the Nigerian Supreme Court in the case of Witts & Busch Ltd v Dale Power Systems plc.

In addition to the above statutory provisions, Nigeria is also a party to the New York Convention and arbitration awards are enforced in accordance with the Convention.