Oleksiy Demyanenko of Asters in Ukraine looks at regulation in aviation finance
Registration of an aircraft
Civil aircraft are registered in the Civil Aircraft Register maintained by the State Aviation Administration of Ukraine (SAAU). Application for an aircraft's registration may be submitted by the owner of an aircraft or a person authorised by the owner. Record of person's ownership in the Civil Aircraft Register does not evidence title to an aircraft. Information recorded in the Civil Aircraft Register is published on the SAAU's website.
Security over aircraft
Under Ukrainian law security established in relation to aircraft is registered with the State Register of Encumbrances over Movable Property, which is maintained by the Ministry of Justice of Ukraine. The registration is performed based on the encumbrancer's application and establishes the priority of claims at enforcement. The registration fee is Hrn34 (approximately €1).
Registration of international interests
Ukraine has designated the SAAU as an authorising entry point for registration of an international interest under the Cape Town Convention. Upon receipt of an application from the party seeking to effect registration the SAAU issues a unique authorisation code which must be submitted to the International Registry. The authorisation code is issued within 30 business days upon submission of an application.
Ukrainian law restricts a Ukrainian resident’s ability to make a payment abroad and, unless such payment falls under a statutory exemption from the licensing regime of the National Bank of Ukraine (NBU), the resident should only be permitted to make such a payment after having obtained an individual licence from the NBU (Foreign Payment Licence). There is no special exemption, for instance, for lessee's deposit or guarantee payments abroad. As a result, such payment is conditional upon receipt of the Foreign Payment Licence. The Foreign Payment Licence is not required if the payment is performed by a foreign (non-Ukrainian) legal entity, e.g. a special purpose company associated with the Ukrainian lessee.
Transfer of funds from Ukraine under the cross-border aircraft lease agreement in excess of €25,000 is subject to obtainment of the price evaluation act from the State Information and Analytical Center of Monitoring of Foreign Commodity Markets. In the absence of a price evaluation act, transfer of lease payments can be banned by the Ukrainian servicing bank.
An application for deregistration of an aircraft from the Civil Aircraft Register may be submitted by the owner of an aircraft or a person authorised by the owner. An application must be reviewed by the SAAU within 10 business days. Deregistration requires an applicant to provide the original aircraft registration certificate (placed on the board of an aircraft during flights) and present the aircraft for inspection by the SAAU, which may be problematic in the absence of cooperation from the operator.
The ability of a lessor or creditor to repossess an aircraft depends on conditions of lease or finance agreement. Ukraine made a declaration under Article 54(2) of the Cape Town Convention allowing repossession of an aircraft without an application to court. In addition to IDERA, parties normally execute a repossession Power of Attorney. However the benefits of such Power of Attorney are limited as Powers of Attorney issued by Ukrainian entities generally may not be irrevocable.
Choice of law
As a matter of Ukrainian legislation the parties (subject to certain exceptions) are free to choose the law regulating their commercial relationship. In addition Ukraine has acceded to Article VIII of the Aircraft Protocol to the Cape Town Convention, which provides that the parties to an agreement, a contract of sale, or a related guarantee contract or subordination deed may agree on the law governing their contractual rights and obligations.
Enforcement of foreign judgements and arbitral awards
As a general rule a foreign judgment can be recognised and enforced in Ukraine if (i) an international treaty ratified by the Ukrainian Parliament provides for such recognition and enforcement; or (ii) under the reciprocity principle (reciprocity is deemed to exist unless there is evidence that the courts in particular country do not extend reciprocal recognition to Ukrainian judgments). Ukraine has signed and ratified the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards which is considered to be a part of Ukrainian law and further implemented its provisions into national legislation.
The governmental authorities may deprive the owner of the title to an aircraft as an exceptional measure for the reasons of public necessity (epidemic, epizootic and other extraordinary events) on the condition of preliminary and full compensation of its cost. Special rules apply to the military and during states of emergency. In such circumstances the owner may be deprived of the title to an aircraft with subsequent cost compensation.
Operator's insolvency and liquidation proceedings
If an operator is declared insolvent or liquidation proceedings have been launched the administrator or liquidator cannot include an aircraft into the liquidation estate and impose the rights of any creditor in priority of the owner. If an aircraft is, nevertheless, included into the liquidation estate, the owner will have a segregation right and may contest the liquidator in court.