a practical guide to european business aviation law
May 27, 2019
With multiple countries, languages and jurisdictions, Europe is complicated. This is particularly true for the Business Aviation industry, which often finds itself struggling to navigate across this multifaceted landscape. Attorney and co-author of the new EBAA Guide to Business Aviation Law in Europe Giulia Mauri explains
Anyone who has ever bought or sold an aircraft in Europe knows all too well that European harmonization is still a long way away. Even though Europe has done wonders in terms of harmonizing safety requirements and facilitating intra-European leasing, national laws and regulations still apply to registering and deregistering an aircraft, security interests like pledges and mortgages, and of course taxation.
What this means for aircraft owners, financiers and operators is that, overall, the current European landscape makes it quite cumbersome to finance, import, export, register and deregister an aircraft.
So in the spirit of EBACE, we figured this was the perfect opportunity to try to bring some clarity to this complicated landscape.
The Peculiarities of Buying a Private Jet
Financing and leasing of commercial airlines is quite different from the financing of private jets and aircraft used in Business Aviation. Because commercial airlines have been working with operating leases for many decades, they can easily predict their fleet’s needs and plan ahead by leasing the best suited types of aircraft available on the market. Professional lessors have been present in this market for a very long time, and through the years they have shaped the market in such a way that makes it quite predictable. Contractually, very complex operating lease agreements are usually negotiated that typically include clauses forbidding the airline to deregister the aircraft from the original country.
Moreover, lessors in the airline sector can predict relatively well what the residual value of their aircraft will be at the end of the lease. This allows lessors to partially take a risk on the value of the asset and the evolution of the leasing market. And as was mentioned above, aircraft are usually leased for long periods of time and they do not change the country of their registration very often. This all means that the leasing conditions of a commercial airliner are much more predictable than those of a private jet.
To say that the process for buying a business jet is very different would be a bit of an understatement. Until recently, the financing of business jets has been mainly done through loans coupled with a security on the aircraft, most often in the form of a mortgage. However, some years ago, new types of financing options started to become available – a result of the business jet lessors having a bigger presence in the market.
Furthermore, the mobility of a business aircraft is higher than in the commercial airline sector due to the purchase and sale of new aircraft models, change of operators, or change of country of registration and use of the aircraft. This high rate of mobility means that aircraft financiers, owners and operators must be familiar with the laws applicable in different countries in relation to aircraft registration, security and taxation.
Moreover, business jets can be used under private or commercial aviation rules. As a result, lessors must inquire as to the use of the aircraft and verify how private or commercial aviation is regulated in different countries. But this is easier said than done. As I mentioned in one of my previous articles in BART International, there is no general European definition for what constitutes private aviation. Therefore, each Member State of the European Union has developed its own rules which, needless to say, differ greatly from one country to another. This means determining what laws will govern the registration or an aircraft, its operation and the security taken on it will not always be an easy task – a task that will only get even more complicated when the aircraft changes country of registration.
The EBAA Business Aviation Law Booklet
Perhaps surprisingly, there aren’t many references, books or articles that one can use to navigate this complex industry. Thus, after having worked in the Business Aviation sector for many years, Frédérique Jos of BRJ Avocats and myself realized that the market needed an instrument that could serve as a first point of reference, something that provided users with basic information when considering buying, selling or financing a business jet.
Together with a strong network of expert lawyers working in the Business Aviation sector, and with the fundamental support of the European Business Aviation Association, in 2016 we launched the first edition of the EBAA’s Business Aviation Law Booklet. This booklet offers readers the information we would have loved to have had when we started our career in Business Aviation: a basic reference guidebook on Business Aviation law organized by jurisdiction.
After the success of the first edition, we decided to add new jurisdictions to the booklet. We also decided to add several new sections, including one completely dedicated to taxation and one all about business aircraft registration in Europe. This new edition, also supported and published by the EBAA, was launched during the EBAA’s Associate Members Advisory Council Convention in March of this year. It can be downloaded for free via the EBAA website (www.ebaa.org/publications/ebaa-business-aviation-law-in-europe-2019/), and paper copies will be available at the EBAA booth during EBACE.
Providing Information and Raising Awareness
What this guidebook makes clear is that each and every European country has its own peculiarities. This point is made driven home in the book’s country specific questionnaire, which, for example, outlines how each country has its own rules pertaining to security. In some countries, a mortgage may be taken and must be indicated on the registration certificate of the aircraft. However, in other countries, although mortgages do not exist, a pledge can be taken. These pledges must in turn be recorded in national security registries separated from the registration one.
The last part of the booklet comprises of a comparison table showing the different documents and procedures needed to register an aircraft in different European countries. As every operator knows, these procedures vary tremendously. For example, not all countries accept English as a working language, some countries require notarized documents, and others have very complex procedure to de-register aircraft. This chart lays out what is required – and what is not – in an easy to understand manner.
Originally, we saw this booklet as a working tool geared towards helping practitioners and to make owners (and future owners alike) aware of the complexity of the Business Aviation industry and of the need to always work with professional advisors with experience in this sector. With this second edition, we take this idea another step further. Now, this booklet is positioned to make civil aviation authorities and institutions aware of the fragmentation of the current regulations applicable in this sector and the important differences that exist when it comes to aircraft registration and de-registration.
It is a contradiction to think that such a mobile and international asset is subject to so many different national constraints. But unfortunately, that is the reality of the situation. We hope this booklet helps raise awareness in that respect and maybe even help launch a debate about what could be done to harmonize certain aspects of aircraft financing, including aircraft registration and deregistration.
Attorney Giulia Mauri is a partner at Pierstone Brussels. She has more than 20 years’ experience in advising national and international clients on all aspects of aviation and transport-related transaction, including asset-finance and leasing, regulatory issues, carrier’s liability and litigation matters. She also acts as a mediator and is the co-founder of Mediation4Aviation, a mediation platform dedicated to the aviation industry. Giulia co-chairs the European and Legal Affairs Committee of the European Business Aviation Association and is an active member of the Industry Affairs Group of the European Regions Airline Association. www.pierstone.com/team/giulia-mauri; firstname.lastname@example.org; +32 02 899 23 62.