Q&A: Aircraft repossession and security enforcement in Malta
Takeover after termination of the lease
Describe basic repossession procedures after lease termination. How can the tenant legally interfere with the landlord’s rights to seek remedies for non-performance?
Under Section 14 of the First Schedule to Chapter 503 of the Laws of Malta (the Aircraft Registration Act), in the event of default under a lease, the lessor may:
- terminate the contract and take possession or control of any aircraft object to which the contract relates; Where
- seek a court order authorizing or directing any of these acts.
In addition to these remedies, the lessor may, in accordance with Article 15 of the first schedule of the Aircraft Registration Act, insofar as the lessee has consented thereto at any time:
- obtain the de-registration of the aircraft; and
- ensure the export and physical transfer of the aircraft object from the territory in which it is located.
However, the lessor may not exercise these remedies without the prior written consent of the holder of any registered interest ranked in order of priority to that of the lessor.
The above remedies also apply to a conditional seller under a retention of title agreement.
Describe basic steps to enforce security. How can the landlord legally interfere with the mortgagee’s right to enforce?
Against a secured creditor, in the event of default, the secured creditor may (under section 12 of the First Schedule to the Aircraft Registration Act and to the extent that the grantor has agreed at any time) exercise one or more of the following remedies:
- take possession or control of any aeronautical object entrusted to it;
- sell or lease such aircraft object; and
- collect or receive any income or profit arising from the management or use of such aircraft object.
Alternatively, the Charged Person may apply for a court order authorizing or ordering any of the acts mentioned above.
It should be noted here that a secured creditor proposing to sell or lease an aircraft object must give reasonable notice in writing of the proposed sale or lease to interested persons.
Privileges and priority rights
What privileges and rights will have priority over ownership of an aircraft or security over an aircraft? If an aircraft can be taken, seized or detained, is any form of compensation available to an owner or mortgagee?
Pursuant to Section 42 of the Aircraft Registration Act, the following debts are secured by a special lien on the aircraft, together with any proceeds of any indemnity arising out of any accident and any insurance proceeds, provided that the said privilege does not apply in relation to an indemnity due under a liability policy:
- legal costs incurred in connection with the sale of the aircraft and the distribution of the proceeds thereof pursuant to the execution of any mortgage or other enforceable title;
- fees and other charges due to the Director General of Civil Aviation under the applicable laws of Malta in respect of the aircraft;
- salaries due to the crew for their employment on the aircraft;
- any claim due to the holder of a right of pledge for the repair, conservation of the aircraft to the extent of the service rendered and the value added to the aircraft;
- expenses incurred for the repair, preservation of the aircraft to the extent of the service rendered and the value added to the aircraft; and
- aircraft salvage wages and costs.
The following debts are also secured by a special lien on the aircraft, together with any proceeds of any indemnity resulting from any accident and any insurance proceeds, other than a liability policy, but only if entered in the Register international :
- taxes, duties or levies due to the Government of Malta in respect of the aircraft; and
- salaries and costs of assistance or salvage relating to the aircraft.
Enforcement of foreign judgments and arbitral awards
How are foreign court judgments enforced? Is your jurisdiction party to the 1958 New York Convention?
Malta being a member of the European Union, Regulation (EU) No 1215/2012 of the European Parliament and of the European Council of 12 December 2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters s applies to Malta. This involves filing a petition with the Maltese court asking the court to make the judgment of a court in an EU Member State enforceable in Malta. The only defenses that can be invoked by opponents are the defenses referred to in Article 45 of Regulation (EU) No 1215/2012. For judgments from non-EU countries, legal action must be taken asking the court to enforce that judgment in Malta.
Malta is a party to the United Nations New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (June 10, 1958). Foreign arbitral awards may be registered with the Malta Arbitration Center in accordance with Rules 53 to 57 of the Arbitration Rules. Once registered with the Malta Arbitration Centre, the foreign arbitral award becomes enforceable in Malta.