1. Registration – Aircraft can only be registered on the UAE register if they are owned by a UAE national, a corporation having its principal place of business in the UAE or a UAE government department (a Qualifying Person) or leased to a Qualifying Person. The UAE General Civil Aviation Authority (GCAA) usually records the name of the owner, lessee and any mortgagee of the aircraft on the certificate of registration.
  2. Cape Town Convention - The UAE has signed and ratified the Cape Town Convention on International Interests in Mobile Equipment (2001) (the Convention) and the Protocol to the Cape Town Convention on Matters Specific to Aircraft Equipment (2001) (the Protocol and together with the Convention, the Cape Town Convention) – but some uncertainty remains as to how a UAE court would resolve conflicts between certain provisions of the Cape Town Convention and provisions of UAE domestic law. The UAE is not on the list of countries which qualify for a discount from the minimum premium rate charged by export credit agencies as a result of their accession to the Cape Town Convention. Registration of international interests over UAE registered aircraft requires an authorisation code to be obtained from the GCAA. Details of the application procedure for the authorisation code can be found on the GCAA’s website.
  3. Choice of Law – The UAE has acceded to Article VIII of the Protocol which provides that the parties to an agreement, contract of sale, guarantee agreement or subordination agreement may agree on the law which is to govern their contractual rights and obligations in whole or in part. Nonetheless in disputes the UAE courts have a tendency to decide on public policy grounds that UAE law should apply to a contract notwithstanding the express choice of the governing law of the parties. It is unclear whether the accession by the UAE to the Cape Town Convention would mean in practice that a UAE court would respect the choice of a law other than UAE law as the governing law of a lease.
  4. Enforcement of Judgments and Arbitration - There is no reciprocity of enforcement of judgments between England and the UAE and it is very unlikely that a UAE court would enforce the judgment of an English court without re-examining the merits of the decision. As such, for contracts involving a UAE counterparty, it is advisable to explore alternative options such as arbitration or submission to the courts of the Dubai International Financial Centre (DIFC).

The UAE is party to the New York Convention on Recognition and Enforcement of Foreign Arbitral Awards 1958 (New York Convention) so an arbitral award made in a New York Convention contracting state should be recognised and enforceable within the UAE subject to certain exceptions. However, there have been mixed results when such enforcement has been attempted in the UAE courts. As an alternative, selecting the DIFC as the seat of arbitration could provide another means of recognising and enforcing arbitral awards within the UAE via the provisions of the DIFC Law No. 1 of 2008 on arbitration and Dubai Law No. 12 of 2004 establishing the judicial authority of the DIFC.

Finally, pursuant to Dubai Law No.16 of 2011 the jurisdiction of the courts of the DIFC was extended to include the ability to hear any claim where the parties had expressly submitted to DIFC jurisdiction. The DIFC is a self standing common law jurisdiction within the Emirate of Dubai and its courts would respect the choice of a foreign law to govern contracts. In theory judgments of the DIFC courts should be capable of ratification by the Dubai courts and thus capable of enforcement within the wider UAE without a further examination of the merits of the decision, but Law No.16 is relatively new and largely untested.
It is important that these issues are discussed with practitioners who have specialist knowledge of dispute resolution in the UAE in order to ensure that the most appropriate forum is selected for the relevant contract.

  1. Tax - There is no stamp duty in the UAE and no withholding tax on lease rentals.
  2. Security over Aircraft - UAE law does recognise the creation of security over a moveable object such as an aircraft – however, one of the requirements for such security is that the mortgagee has possession of the aircraft.  UAE Federal Law No. 18 of 1993 relating to the law of Commercial Transactions (the Commercial Code) does provide grounds for the mortgagee to be deemed to be in possession if certain criteria are satisfied. The installation of name plates on the aircraft and engines, the fact that the aircraft registration certificate will include details of the mortgagee’s interest and, of course, the fact that the mortgage will usually be registered as an international interest under the Cape Town Convention are considered factors which will help establish such deemed possession. Given that aircraft will be operating internationally it is, however, common to take an English law mortgage (if the aircraft can be in England at the time the mortgage is granted) or New York law mortgage over UAE registered aircraft.
  3. Rights and responsibilities of Lessor and Lessee - UAE federal law (and notably the UAE Federal Law No. 5 of 1985 relating to the law of Civil Transactions (the Civil Code)) sets out the main provisions of UAE law which relate to leasing. As a matter of UAE law, a lease is a contractual right to the use of an asset and it does not confer any proprietary right in the asset itself. The provisions of the Civil Code assume that the lessor will be responsible primarily for ensuring the continued enjoyment of the leased asset by the lessee and that the lessee will cease to be liable under the lease to the extent that its enjoyment of the leased asset is interrupted. As such the provisions of the Civil Code may conflict with the allocation of risks and responsibilities between lessor and lessee typically seen in commercial leasing transactions. It is generally thought that in a negotiated commercial leasing transaction the terms of the contract itself are likely to prevail over the terms implied by the Civil Code due to the importance ascribed to freedom of contract under UAE law.
  4. Sovereign Immunity – Issues of sovereign immunity can arise when dealing with certain UAE airlines and these require careful consideration as a matter of both UAE federal law and the laws of individual Emirates.
  5. Repossession and Deregistration – The UAE does not recognise “self help” remedies and, consistent with that approach, has elected pursuant to Article 54(2) of the Convention that any remedies under the Cape Town Convention which are not expressed to require court approval may only be exercised with the leave of the court. Nevertheless pursuant to the Civil Aviation Regulations and pursuant to a new revision of the Civil Aviation Advisory Publication No.58, the GCAA has established a procedure for the enforcement of an Irrevocable De-Registration and Export Request Authorization (IDERA) which ostensibly does not require court approval. However, in our view, and based on past discussions we have had with the GCAA on this point, we would not expect the GCAA to take action under an IDERA in a contentious scenario without a court order. The UAE has also applied Article X of the Protocol in full which contains provisions for “speedy relief” although to our knowledge these provisions are as yet untested in the UAE.
  6. Lessee Insolvency – UAE insolvency legislation is little used and insolvency can be a lengthy and expensive court led procedure. At the time of writing there is a new draft federal insolvency law in circulation, but the timetable for implementing the legislation has been delayed. The UAE opted for Alternative A as part of its accession to the Cape Town Convention but doubts remain as to how the UAE courts would apply the time limits and process established in the Cape Town Convention in practice. In reality it is more common in the UAE for companies who are in financial difficulties to enter into restructuring discussions with their creditors rather than to use formal insolvency procedures.