Questions and Answers: Aircraft Reclamation and Security Enforcement in Panama

enforcement actions

Return after termination of the rental agreement

Outline the basic post-tenancy take-back procedures. How can the renter lawfully interfere with the owner’s rights to claim for default?

In the event of a breach of the lease agreement, the lessor would have to initiate either ordinary or special court proceedings to regain possession of the aircraft. Panamanian law has no self-help remedies.

Termination of lease must be registered with the public register and filed with the Civil Aviation Authority and the aircraft’s certificate of operation with the lessee as the operator must be cancelled. There are no other non-contractual procedures or requirements applicable to the termination of the lease.

enforcement of security

Outline the basic measures for enforcing a security interest. How can the owner lawfully obstruct the mortgagee’s right of enforcement?

The mortgage can be enforced in or out of court if the parties have agreed on the latter form of enforcement in the contract.

The mortgagee may institute either executive or special court proceedings to enforce his rights under the mortgage.

If the debtor has repaid at least half of the loan, the court orders the aircraft to be sold under the terms of the executive proceeding, except that there is only one auction and the principal amount is the amount owed plus costs and expenses. If no bidder is willing to pay the price, the aircraft is awarded to the mortgagee. The obligations from the mortgage expire when the property is sold in court.

If the debtor has paid less than half of the amount owed, the aircraft is awarded to the mortgagee and the secured claim is forfeited. The debtor may apply for the sale of the aircraft to a party other than the mortgagee within 10 days of the notice of sale, provided he deposits with the court an amount sufficient to cover the cost of the sale and persuades the court that she will pay the balance due in the event that the sale price does not cover the amount due. If the mortgage permits the mortgagee to take possession and manage the aircraft, the court may permit the mortgagee to assume management of the aircraft pending its sale in court.

If the parties agree to an out-of-court foreclosure in the contract, they must appoint a legal representative who must take the necessary steps to notify the mortgage lender of the foreclosure. Once the mortgagor receives the notice of foreclosure, they can hand over the aircraft to the mortgagee or object to the foreclosure proceedings.

In the event of extrajudicial enforcement, the value of the aircraft will be determined by an expert jointly appointed by both parties in the contract or in a later agreement.

The aircraft can be detained by an ex parte application.

According to the Aviation Act 21 of 2003, the following claims take precedence over all other claims:

  • national taxes on the plane;
  • aircraft mortgage;
  • the salaries and other social benefits due to the crew; and
  • the amounts owed to the aviation sector as a result of the operation of the aircraft on its last flight.

The priority among multiple mortgages on the aircraft is determined by the date of entry in the public register.

Priority Liens and Rights

What liens and rights take precedence over aircraft ownership or an aircraft safety interest? If an aircraft can be taken, impounded or detained, is there any form of compensation available to an owner or mortgagee?

According to the Aviation Act 21 of 2003, the following claims take precedence over all other claims:

  • national taxes on the plane;
  • aircraft mortgage;
  • the salaries and other social benefits due to the crew; and
  • the amounts owed to the aviation sector as a result of the operation of the aircraft on its last flight.

The priority among multiple mortgages on the aircraft is determined by the date of entry in the public register.

In addition, Panama has made the following statement in relation to Article 39 of the Cape Town Convention (2001):

With respect to Article 39 of the Convention, the following non-consensual rights and interests shall prevail over an international interest registered under the Convention:

(a) all sums owed or which may be required of the obligor in the form of salaries, pensions and other social security benefits and employment allowances owed in respect of employees of that obligor;

b) all amounts owed or liable to be owed by the debtor in the form of tax and parafiscal contributions owed in respect of employees of that debtor;

c) all amounts due or which may be due from the debtor in the form of taxes, duties or contributions levied under the domestic laws of Panama to the Panamanian State or to the decentralized agencies collecting such revenue;

d) the right of Panama to arrest, seize or confiscate mobile equipment and aircraft equipment in the event of a violation of the Customs or Criminal Laws of Panama; and

e) Legal costs related to the foreclosure of the mortgage and national taxes for the aircraft.

These different priorities can create legal conflicts that would need to be resolved by the Panamanian judiciary once a case of this nature is presented.

Executive interference in relation to expropriation or confiscation of aircraft (or other property) is rare in Panama. The Panamanian Constitution specifically provides for the confiscation or expropriation of private property in the event of war, national disaster, or the suspension of constitutional rights. The government could order an aircraft to be requisitioned in return for payment of compensation.

When an aircraft is pledged or impounded, the amount of compensation for expropriation is deposited with the National Bank and creditors are informed of the action to be taken in this regard.

Enforcement of foreign judgments and arbitral awards

How are judgments of foreign courts enforced? Is your jurisdiction party to the 1958 New York Convention?

A final judgment of a competent foreign court would be recognized and enforced in the courts of Panama, without retrial of the original claim, by instituting exequatur proceedings in the courts of Panama and finding by such court that:

  • the country’s courts would, in similar circumstances, recognize a final judgment of the courts of Panama;
  • the judgment was given as a result of a personal lawsuit;
  • the judgment was rendered after personal service on the accused (including service on a procedural representative of the accused);
  • the cause of action on which the judgment was based does not violate public policy in Panama;
  • the documents evidencing the judgment are in authentic form in accordance with the law of the competent foreign court and have been duly legalized by a Panamanian consul or in accordance with the Hague Convention (1961) on the Legalization of Documents; and
  • a copy of the final judgment was translated into Spanish by a licensed translator in Panama.

Panama is a signatory to the New York Convention (1958).

A final judgment of a foreign arbitral tribunal on a foreign arbitral award would be recognized and enforced in the courts of Panama and may be refused only if one of the following occurs:

  • at the request of the party against whom it is asserted, if that party proves in the General Business Court of the Supreme Court of Justice that:
    • one of the parties to the arbitration agreement was legally incapacitated under the law applicable to it or said agreement is void under the law to which the parties have made it subject or, failing that, the law of the country in which the arbitration award was made became;
    • the party against whom the award is being invoked has not been properly informed of the appointment of an arbitrator or the arbitration or has been unable for any reason to defend itself;
    • The award relates to a dispute that was not provided for in the arbitration agreement or did not fall within the terms of the arbitration submission, or contains decisions that go beyond the scope of the arbitration clause or the arbitration submission (however, if the terms of the arbitration award, relating to matters submitted to arbitration, which may be separated from those which have not been submitted to arbitration, the former may be recognized and enforced);
    • the constitution of the arbitral tribunal or arbitration did not comply with the agreement reached between the parties or, if there is none, with the law of the country in which the arbitration took place; or
    • the award has not yet become binding on the parties or has been set aside or stayed by a court of the country in which it was made or under the law of which it was made – if a court has been requested to set aside the award in accordance with applicable law the competent court to which the application for recognition and enforcement is addressed, defer its decision if it deems appropriate and, upon application by the party applying for recognition and enforcement, also order the other party to provide reasonable and reasonable guarantees ;
  • if the court finds:
    • according to the Arbitration Act, the matter in dispute may not be settled by arbitration; and
    • the recognition or enforcement of the arbitral award would be contrary to the international public order of Panama; and
  • if the application for enforcement is not accompanied by the following documents:
    • a duly certified original or certified copy of the award;
    • a duly certified original or certified copy of the arbitration agreement; and
    • an official translation into Spanish if the language of the arbitration is not Spanish.

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