PORTUGAL...What international aviation conventions has your jurisdiction signed and/or ratiﬁed? The following aviation conventions are in place in Portugal: i. The Chicago Convention

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Aviation Finance & Leasing: Portugal

PDF Generated: 30-07-2021 2/8 © 2021 Legalease Ltd

PORTUGALAVIATION FINANCE & LEASING

1. What international aviation conventionshas your jurisdiction signed and/orratified?

The following aviation conventions are in place inPortugal:

The Chicago Convention of 1944 oni.International Civil Aviation;The 1948 Geneva Convention on theii.International Recognition of Rights in Aircraft;The 1958 Convention on the Recognition andiii.Enforcement of Foreign Arbitral Awards;Warsaw Convention for the Unification ofiv.Certain Rules Relating to InternationalCarriagecby Air, signed on 12 October 1929;Montreal Convention for the Unification ofv.Certain Rules for International Carriage by Air,signed on 28 May 1999.

2. If your jurisdiction has signed andratified the Cape Town Convention: a.Which qualifying declarations (opt-in andopt-out) has your jurisdiction made underthe Cape Town Convention? b. Does theCape Town Convention take priority overconflicting national law?

a.Which qualifying declarations (opt-in and opt-out) hasyour jurisdiction made under the Cape Town Convention:

N/A – The Cape Town Convention is not in force inPortugal.

b. Does the Cape Town Convention take priority overconflicting national law?

N/A – The Cape Town Convention is not in force inPortugal.

3. Will a court uphold the choice of a

foreign governing law in respect of thefollowing contracts and if so, please alsostate any conditions or formalityrequirements to this recognition a. Leaseand b. Security document (for example,mortgage)?

a. Lease The parties are free to choose the applicablelaw and the choice of English law would be respected.

b. Security document (for example, mortgage) TheMortgage Agreement must be governed by Portugueselaw. Portuguese rules of conflict of laws provide that thecreation and assignment of interests over any means oftransportation subject to registration are governed bythe laws of the country of the relevant registry (article46(3) of the Civil Code).

The creation of a mortgage over an aircraft that isregistered in Portugal at the time of creation of suchsecurity, this security must take the form of a mortgagegoverned by Portuguese law, and it must be registeredwith RAN to become valid, effective and enforceable inPortugal.

4. Please confirm whether it is (i)customary and (ii) necessary to also take alocal law mortgage and if so, why?

It is necessary because non-Portuguese law mortgagecreated over an aircraft while such aircraft is registeredin the Portugal registry would not be considered a validmortgage by the Portuguese courts.

It is customary in Portugal for an aircraft lender to createand register an aircraft mortgage (“hipoteca”) on aPortugal registered aircraft in order to have priority overunsecured creditors.

5. Are foreign judgments recognized andenforceable by courts of your jurisdiction



and if so, please also state any conditionsor formality requirements to thisrecognition (for example, do you require alocal court order confirming suchrecognition)?

The article 36 of Regulation (EU) no. 1215/2012 of theEuropean Parliament and of the Council, of 21 December(Brussels I Regulation recast), the judgments renderedby the courts of another EU member state areautomatically enforceable in Portugal, without anyspecial procedure being required. Likewise, pursuant toarticle 39 of the same regulation, a judgment given in anEU member state, which is enforceable in that EUmember state, shall be enforceable in Portugal withoutany declaration of enforceability being required.

In what concerns the decisions rendered by courts ofnon-EU countries the Portuguese Code of Civil Procedureprovides that their enforceability is dependent upon priorreview and confirmation by the competent Portuguesecourt. This assessment is carried out in accordance witha specific procedure set forth in articles 978-985 of saidCode. The party wishing to recognize a foreignjudgment, namely to have it enforced in Portugal, shallprovide the original of the judgment duly authenticatedor a copy duly certified of the same. If the judgment isnot in Portuguese, the requesting party shall alsoprovide a duly-certified translation in this language.Once the application for recognition is fled, together withthe documents identified above, the opposing party issummoned to, within 15 days, submit its opposition.

6. Is your aircraft registry an owner-register (registering ownership interests)or an operator-register (registeringinterests as operator)? Please also stateany conditions, procedural steps orformality requirements for suchregistration and explain how this isevidenced (for example, the issuance of aCertificate of Registration)

The Portuguese aircraft registry is an owner registry. Themain details registered are the identity of the Owner, thedetails of the Aircraft (e.g., manufacturer and year ofmanufacture, model, serial number, number of engines)and its use. Aircraft leases and mortgages may beregistered. Fractional ownerships and the percentagesheld in the ideal quota of an aircraft are also registrable.

In order to proceed with registration, an application formmust be completed and signed, and a fee must be paid.

The following documents are required:

Agreement or document of sale (Bill of Sale);i.Deregistration certificate from theii.Aeronautical Registry of the country ofprevious registration or certificate of non-registration;Customs clearance certificate in the case ofiii.an imported aircraft belonging to a non-EUcountry;Two photographs of the aircraft, with aiv.photograph of the front and a profile with themarks of nationality and registration paintedin 9×12 format, borderless and printed withnatural colours.

Documents issued in foreign countries must be signedby a notary and be legalized by a notary involved withthe affixing of the Apostille as per Articles 3 and 4 of theHague Convention of 05.10.1961 on the Suppression ofthe Requirement Legalization for Foreign PublicDocuments, or duly notarized and legalized bydiplomatic or consular officer from the Portugueseembassy or consulate there. Documents issued inPortugal shall contain the signatures of the legalrepresentatives recognized under the law with the words“in the capacity and authority to act”.

The aircraft registration is evidenced by a Certificate ofRegistration issued by the Portugal aircraft register(ANAC).

7. Is there a security document register inyour jurisdiction where a mortgagee’sinterests will be recorded? If so, pleasealso state any conditions, procedural stepsor formality requirements for suchregistration and explain how this isevidenced (for example, the issuance of acertificate or official stamp on the securitydocument)

Aircraft mortgages governed by Portuguese law onPortuguese registered aircraft are registered on thePortuguese aircraft register. Such mortgage shall grantthe mortgagee a security that shall be effective in remover the specific mortgaged aircraft, and enforceabletowards all, against any third parties, namely commoncreditors of the mortgagor and subsequently registeredmortgagees.

To record and perfect the registration of a mortgage, thefollowing basic documents are required:

a notarized and apostilledi.



mortgage;a petition by the aircraft owner toii.the chairperson of ANAC applyingfor the mortgage registration; anda notarized and apostilled power ofiii.attorney enabling a local counsel(or other appropriaterepresentative) to sign the above-mentioned petition on behalf of theowner and proceed with the flingfor the mortgage registration.

Note that the registration of a mortgage created underPortuguese law is mandatory and an essential legalrequirement for the mortgage to be valid and effective,even with relation to the parties thereto.

Charges for a mortgage will be calculated in accordancewith the actual mortgage total amount (which will beconverted into euros for the calculation of registrationcharges if the mortgage is denominated in anothercurrency). The registrar will calculate the amountpayable for the registration of each mortgage based onthe mortgage total amount.

8. What is the effect of registration of: a.Ownership interest (for example, proof oftitle to third parties of ownership) b. Lease(for example, perfects the status of theLessor under the Lease) c. Securitydocument (for example, secures priorityover later registered security). If there areany interests that could rank prior to thesecurity document please state these

a. Ownership interest (for example, proof of title to thirdparties of ownership) The aircraft certificate ofregistration is prima facie evidence of the aircraftownership.

b. Lease (for example, perfects the status of the Lessorunder the Lease) Registration of a lease by the aircraftowner will only protect the owner against its potentialliability for damages caused by the aircraft while it is onlease. The main aim of the lease registration is to provethe identity of the aircraft operator.

c. Security document (for example, secures priority overlater registered security). If there are any interests thatcould rank prior to the security document please statethese The mortgage shall grant the mortgagee a securitythat shall be effective in rem over the specificmortgaged aircraft, and enforceable towards all, againstany third parties, namely common creditors of the

mortgagor and subsequently registered mortgagees.

On the other hand, the mortgage registration providespublic notice of the mortgage towards any third party,which can rely on its existence.

The mortgage is a right in rem (i.e. a right related to thelegal asset and not a mortgagee’s personal right). Forthis reason, the mortgage will follow every subsequentlegal change of the aircraft, such as the transfer of theaircraft title.

9. What types of lease are recognized inyour jurisdiction (for example, translation,notarization, apostille, legalization etc.)?

The laws of Portugal recognize the usual types of leases,such as operative leases, finance leases, wet leases, etc.

Documents issued in foreign countries must be signedby a notary and be legalized by a notary involved withthe affixing of the Apostille as per Articles 3 and 4 of theHague Convention of 05.10.1961 on the Suppression ofthe Requirement Legalization for Foreign PublicDocuments, or duly notarized and legalized bydiplomatic or consular officer from the Portugueseembassy or consulate there. Documents issued inPortugal shall contain the signatures of the legalrepresentatives recognized under the law with the words“in the capacity and authority to act”.

An aircraft lease will have to be translated intoPortuguese before it is produced before a Portuguesecourt.

10. What formalities are required toperfect Lessor’s rights under a lease inyour jurisdiction?

Lessor’s rights under a lease are granted by the leaseinterest registration in the Portuguese aircraft register.To complete the registration, the Portuguese aircraftregister requires a copy of the leasing contract.

11. Are the ownership rights relating toengines recognized as separate anddistinct from the ownership of the rest ofthe aircraft in your jurisdiction? Pleasehighlight any separate registration, filingor additional formalities that are requiredto be completed to perfect Lessor’s



interest in the engines

Yes, it is possible to perform the registration ofautonomous ownership rights relating to engines.However, there is no specific separate engine register.Engines are registered with the Portuguese aircraftregister.

12. What form does security over aircraftgenerally take in your jurisdiction?

In Portugal, the typical security over Portugueseregistered aircraft is a Portuguese aircraft Mortgage(“hipoteca”).

13. Are there any particular terms orcharacteristics that such a securitydocument must take (for instance, a cap onthe secured liabilities)?

Such mortgage shall grant the mortgagee a security thatshall be effective in rem over the specifc mortgagedaircraft, and enforceable towards all, against any thirdparties, namely common creditors of the mortgagor andsubsequently registered mortgagees.

A mortgage document shall contain some relevantinformation regarding:

the name and personal information of the1.mortgagor and the mortgagee;the type, model, registration marks and serial2.number of the mortgaged aircraft;the secured monetary amount.3.

The mortgage may comprise any incidental obligationsprovided they are mentioned in the mortgage title andduly registered. It may cover all forms of interestpayments, namely those usually contemplated in a leaseagreement, as well as any additional amount related tothe foreclosure or collection costs, such as attorney’sfees, court costs and related expenses. The agreedinterest rate should be expressly mentioned in themortgage document for registration purposes.

The total mortgage agreement must indicate theamount, comprising:

the principal amount;the costs, charges and expenses arising outof, or in connection with, the enforcement ofthe mortgage, including (but not limited to)court fees, litigation fees, lawyer’s fees andany other disbursements made by themortgagee in order to enforce its rights under

the mortgage, up to an amount equivalent, forthe purpose of registration, to 10 per cent ofthe principal amount; andthe maximum amount of interest over theoutstanding principal amount, which will yieldover a period of 36 consecutive calendarmonths (the maximum period permitted byPortuguese law).

14. Are there any perfection requirementsfor such security document? If so, pleasestate any conditions, procedural steps,formality requirements or documentation(for example, corporates, list of directorsetc.) required to effect this

The registration of a mortgage created under Portugueselaw is mandatory and an essential legal requirement forthe mortgage to be valid and effective, even withrelation to the parties thereto.

The mortgage must be notarized and legalized with theHague Apostille, or at the nearest Portuguese consulate.To record and perfect the registration of a mortgage, thefollowing basic documents are required:

a notarized and apostilled mortgage;a petition by the aircraft owner to thechairperson of Portuguese aircraft registerapplying for the mortgage registration;a notarized and apostilled power of attorneyenabling a local counsel (or other appropriaterepresentative) to sign the above-mentionedpetition on behalf of the owner and proceedwith the fling for the mortgage registration.

Basically, when filing the request for registering theaircraft mortgage with the aircraft register, themortgagee will have to provide the aircraft register with,inter alia, proof of its legal existence, and evidence thatthe signatory of the request is duly empowered.

15. Summarize any captive insuranceregime in your jurisdiction as applicable toaviation.

There is no specific requirement under Portuguese lawregarding a captive insurance regime specificallyapplicable to aviation.

16. Are cut-through clauses under theinsurance and reinsurance documentation



legally effective in your jurisdiction?

Cut-through clauses under insurance and reinsurancedocumentation are legally effective in Portugal sincethey are not contrary to mandatory rules, public order ormorality.

17. Are there minimum requirements forthe amount of third-party liability coverthat must be in place in your jurisdiction?

Regulation (EC) No. 785/2004, as subsequently amendedby Regulation (EU) No. 285/2010, establishes minimumamount for insurance cover for passengers, baggage andcargo. As a member of the EU, the general requirementsof third party liability coverage foreseen under EU lawapply in Portugal as well.

18. Can a mortgagee (or equivalentsecurity interest holder) or lessor followingan event of default under a mortgage (orequivalent security document) or lease,respectively, take possession of theaircraft without judicial intervention inyour jurisdiction? Please also state anyconditions, procedural steps, formalityrequirements or documentation (forexample, original, legalized, translatedLease/Mortgage, corporates etc.) requiredto effect this

There are no remedies available in Portugal to enable amortgagee or a lessor to take the possession of theaircraft without judicial intervention. In the event ofmortgagor or lessee’s default or of any violation ofmortgagor’s or lessee’s obligations, the mortgagee orthe lessor must bring action before the competent Court.

19. How can a mortgagee (or equivalentsecurity interest holder), lessor under alease or designee/beneficiary of an IDERAderegister the aircraft? Please also stateany conditions, procedural steps, formalityrequirements or documentation (forexample, original, legalized, translatedLease/Mortgage/IDERA etc.) required toeffect this

The IDERA is a measure regulated by the Cape TownConvention which has not been ratified by Portugal yet.

20. Can the government or the lesseelawfully prevent the repossession orderegistration and if so, in whatcircumstances

The lessee can lawfully prevent the repossession byfiling an opposition before the Court which ordered themeasure. In this case, the lessee must prove that theowner/lessor is not entitled to claim the repossession ofthe aircraft.

21. If judicial intervention is required,please describe the process? Please alsostate any procedural steps, length of timeto complete and advise as todocumentation required

In case repossession by a Lessor needs a court order,the documentation required is mainly the lease, proof ofthe lessee’s default and of the lease termination.

22. How is legal title transferred under thelaws of your jurisdiction? Please also stateany conditions, procedural steps, formalityrequirements or documentation (forexample, corporates etc.) required toeffect this

In aircraft sale transactions, a bill of sale or a purchaseagreement is generally accepted as a document whichevidences transfer of title.

The new owner should apply for registration ofownership with Portuguese aircraft register for thetransfer to become valid and effective as regards thirdparties.

The bill of sale or purchase agreement must benotarized, and the signature notarization should statethe signatories’ authority. Documents issued or executedin other jurisdictions must be legalized through apostille(the Hague Convention of 5 October 1961), or by aPortuguese consulate, before being fled for registrationin Portugal.

23. Are there any restrictions on the saleof an aircraft following enforcement (forexample, the requirement to obtain a courtorder or conduct a public auction or otheraction in order to sell the aircraft upon



enforcement)

Where enforcement has taken place through actions inthe Portuguse courts, the creditor’s rights will depend onwhat exactly was requested from the court (e.g.,repossession, seizure of asset, recognition of title, etc.).In general terms, non-owners of an asset cannot sellsuch asset directly, but only through a court-controlledsystem (usually a public auction).

24. Would lease rentals be subject to tax(for example, withholding or income tax)?Please also state if there are anyconditions for such tax to be imposed andany steps usually taken to mitigate this

The tax aspects of aircraft finance transactions must beanalyzed on a case-by-case basis, and the relevanttreaties to avoid double taxation need to be reviewed (ifapplicable).

However, as a rule, withholding tax will be levied overthe aviation-related lease payments whenever thelessee is a Portuguese tax resident entity and the lessoris a non-Portuguese tax resident entity (without apermanent establishment located in Portugal to whichthe rental income is attributable). This withholding taxon the lease rents would be levied at a 25 per cent fatrate (domestic rate), except where a double tax treatyentered into by Portugal applies.

The EU Council Directive 2003/49/EC of 3 June 2003,applicable to interest and royalty payments madebetween associated companies of different memberstates, shall also be considered.

25. Would a sale of an aircraft in yourjurisdiction incur sales tax? Please alsoprovide details of amount or calculationand any steps usually taken to mitigatethis

The domestic transfer of an aircraft should originate thepayment of Portuguese VAT. Purchaser shall be liable forVAT at the general rate of 23%. A VAT exemption shallbe applicable if the purchaser is an airline operating forreward chiefly on international routes.

In case of an intra EU sale/purchase or transfer of title ofan aircraft, the transfer of used aircraft should originatethe payment of Portuguese VAT if the purchaser is aconsumer or it does not have a valid EU VAT number.Otherwise, VAT will not be levied in Portugal, but it maybe due in the country of the purchaser under the reverse

charge mechanism. The sale of new aircraft to anotherEU country is not subject to VAT in Portugal but VATshould in principle be levied in the country ofdestination.

26. Are there any restrictions on theimport or export of aircraft in yourjurisdiction and would such importation orexportation incur any liability as tocustoms or taxes? Please also state if anyconsents or approvals are required and theprocedural steps taken to obtain these,and any procedural steps or formalityrequirements to mitigate any taxes

As indicated, the tax aspects must be analyzed on acase-by-case basis, taking into account the relevanttreaties to avoid double taxation (if applicable). ValueAdded Tax and customs duties are generally payableupon import of an aircraft, subject to exemptionsdepending on the tax and customs regime of the aircraftand on the future use of the aircraft.

27. Are there any foreign exchangerestrictions on transfers of funds

There are no restrictions on international payments norexchange controls in effect in Portugal, and capitalimport and export, as well as cash conversion to othercurrencies, are, in general, free as regards both EU andnon-EU countries.

28. How successful have foreign creditorsand lessors been in enforcing their securityand lessor rights over and successfullyrepossessing aircraft in a timely manner?

Practical experience indicates that foreign creditors andlessors have not experienced particular difficulties inrecovering their assets from Portuguese airlines.

29. What government led reforms affectingcreditor and lessor rights are currentlyunderway in the aviation sector in yourjurisdiction?

There is no reform currently in discussion in the aviationsector.



30. Please describe any interesting legaldevelopment in your jurisdiction (forinstance, decided court cases or arbitralawards) which affect creditor and lessorrights?

There is not legal development our relevant courtdecision to be highlighted.

31. Please discuss any relevantgovernmental regulations implemented inyour country to help alleviate the financial

and other difficulties faced by airlines inyour jurisdiction caused by CoVid 19 andwhether that will impact rights of lessors(who lease aircraft to the airlines) andlenders (who finance such aircraft whichare mortgaged in favour of the lenders)?Are such governmental regulationsexpected to be in place until the difficultiesfaced by airlines caused by the CoVid 19subside or are they more long term?

To assist the Portuguese flag company, the Governmentinjected 1.2 billion euros in TAP.

Contributors

Joana Andrade CorreiaPartner [email protected]

Júlio Martins JúniorManaging associate [email protected]

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