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?
Termination of a lease agreement by the lessor does not require any specific form or procedure, except that proof of the due authorisation to do so of the acting individual needs to be provided with a termination notice.
The lessor has no right to self-help under German law should the lessee not surrender possession of the aircraft following the termination of the leasing of the aircraft. Provided that the aircraft is in Germany, repossession must be accomplished by filing a suit in a German court and having the subsequent court ruling enforced by a bailiff. Approval by the German Civil Aviation Authority is required to fly the aircraft out of Germany. Any party that legitimately believes to have a conflicting in rem or security interest may seek to intervene in the repossession proceedings.
If the aircraft is located outside of Germany, the laws in the jurisdiction in which the aircraft is located apply to any repossession and to the enforcement of foreign (German) judgments.
Depending on the circumstances, the lessor may utilise faster provisional judicial measures. However, pursuant to the German Law on the Restriction of Arrest of Aircraft, which implements the Rome Convention (1933), this possibility is restricted if the aircraft is used for state or postal services, public transportation on scheduled routes, or if the aircraft is ready for take-off on a flight for commercial transportation of passengers or goods.
In the case of insolvency proceedings over the lessee’s business in Germany, extraordinary termination rights of the lessee’s administrator apply. Statutory German insolvency law curtails contractual termination rights to the effect that the lessor must not terminate the lease agreement merely on the grounds of the lessee’s insolvency or any non-payment prior to the insolvency filing. The latter restriction does not apply to events of default of a different nature, such as failure to insure, or to any non-payment of rent after the insolvency filing.
Enforcement of security
Outline the basic measures to enforce a security interest. How may the owner lawfully impede the mortgagee’s right to enforce?
The German aircraft mortgage is enforced solely by court procedure. Enforcement requires an enforceable title in the form of a court judgment or a notarial submission to immediate enforcement. The mortgagee must apply for enforcement of the aircraft mortgage with the local court in Braunschweig. The court then appoints a bailiff to enforce the mortgage, who takes the aircraft into custody and commences a public auction process. No self-help is available.
The owner can seek to impede the enforcement process by filing objections against the procedural steps of the enforcement or against the merits of the mortgagee’s entitlement under the mortgage (eg, on the grounds that the debt has already been discharged).
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?
Provided that the defaulting debtor is the legal owner of the aircraft, an aircraft may be detained or – if registered in Germany – encumbered with a German aircraft mortgage as security for:
- undischarged EU Emission Trading Scheme payments;
- unpaid value added tax or customs, or both, in the case of an import of an aircraft;
- due and outstanding Eurocontrol charges; and
- charges for certain official acts and fines, such as examinations and inspections pursuant to the German Air Traffic Act or the German Act on the Civil Aviation Authority.
While we are not aware that this has been tested in German courts, it is our understanding that such liens would generally not take priority over a prior-registered aircraft mortgage.
The creditor of any costs of salvage can claim priority over a registered aircraft mortgage.
In the case of a requisition for use or a requisition of title, remedies and a claim for compensation are available in principle. Details depend on the circumstances and the legal rules on which such requisition is based.
Enforcement of foreign judgments and arbitral awards
How are judgments of foreign courts enforced? Is your jurisdiction party to the 1958 New York Convention?
German courts recognise and enforce a final judgment of a court within the European Union (excluding Denmark) without retrial or re-examination pursuant to Regulation (EU) No. 1215/2012 (Brussels Recast Regulation). As for courts outside of the European Union, German courts recognise and enforce a final judgment subject to specific rules of certain bi- or multi-national treaties if the prerequisites of the German Civil Procedure Code (ZPO) are fulfilled. These prerequisites include the requirement of due service of process and fair trial, and no violation of public policy and reciprocity. Recognition is also granted to an arbitral award pursuant to the ZPO, which refers to the New York Convention (1958).
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