Aircraft Leasing under the Law of the Republic of Serbia and International Sources

Aircraft are essentially movable objects which, in legal transactions, enjoy the status of immovable property, and therefore aircraft leasing is a specific procedure.
It is regulated by the Law on Obligations and the Law on Obligational and Property Relations in Air Transport, while the supervisory and administrative aspects of this procedure, including approvals and registration, are contained in the Law on Air Transport.
At the international level, important sources are the Chicago Convention (Article 83 bis), the regional ECAA (European Common Aviation Area) and EU Regulation (EC) 1008/2008, as well as the New York Convention on Arbitration. Serbia is not a signatory to the Cape Town Convention, and therefore aircraft leasing is governed through domestic registers and contractual security instruments.

Concepts and Types of Aircraft Lease (wet/dry)

The Law on Air Transport explicitly allows leasing “with crew” (wet) and “without crew” (dry).

A domestic air carrier, before taking an aircraft on lease, must obtain prior approval from the Civil Aviation Directorate.
When a domestic air carrier leases an aircraft to a foreign air carrier, prior approval is required depending on whether the aircraft is leased with or without crew. Namely, if the aircraft is leased without crew – prior approval from the Directorate is obtained. If, however, the aircraft is leased with crew, it is sufficient to notify the Directorate of the aircraft lease.
Essential elements of an aircraft lease agreement are the type of lease, conditions for maintenance and use of the aircraft, and supervision of the use of the aircraft.

At the regional level, as a signatory and ratifier of the ECAA, Serbia harmonizes its regulations with EU law. Regulation (EC) 1008/2008 regulates, among other things, wet-lease arrangements (particularly from third countries) and requires safety standards equivalent to those of the EU.

Aircraft Lease under the Law on Obligational and Property Relations in Air Transport

By an aircraft lease agreement, the lessor undertakes to deliver a specific aircraft to the lessee for use, and the lessee undertakes to pay a certain rent in return.
The law stipulates that such agreement must be concluded in written form, but in practice it is also notarized in the form of a notarial deed, and, when necessary, in a bilingual version. This certainly facilitates registration and enforceability of the clause.

Obligations of the lessor and the aircraft crew

The lessor must deliver the aircraft to the lessee in a condition fit for use in accordance with the agreed or customary purpose.
When the aircraft is leased with crew, the crew is obliged to carry out the instructions of the lessee, except where such instructions would endanger the safety of the aircraft, passengers, baggage, goods or third parties.

Maintenance of the aircraft and costs during the lease term

The lessee must maintain the aircraft during the lease term, and after the expiry of the lease, return the aircraft in the same condition as received, taking into account normal wear and tear.
Maintenance costs during the lease are generally borne by the lessee, unless otherwise agreed. The lessee does not bear the costs of maintenance necessary to remedy hidden defects existing at the time the aircraft was delivered, nor the costs for loss of the aircraft due to force majeure.
In addition to the costs, the lessor is liable for damage caused by defects that render the aircraft unusable or reduce its usability for the agreed or customary purpose, if such defect existed at the time of delivery to the lessee.

Rent

Unless otherwise agreed, rent is paid monthly in advance, starting from the day of delivery of the leased aircraft.
If the lessee was prevented from using the aircraft due to the lessor’s fault or because of a hidden defect existing at the time of delivery, the lessor is not entitled to rent for that period.
The lessor may unilaterally terminate the agreement by declaration if rent is not paid within 15 days of maturity, and may claim damages suffered due to non-compliance by the lessee. The lease may remain in force if the lessee pays the due rent before receiving the termination notice.

Duration and termination of the lease and notice period

A lease agreement may be concluded for a fixed or indefinite period, and may be extended or terminated only in written form (with or without notarization).
An aircraft lease agreement concluded for an indefinite period may be terminated with a notice period of not less than three months.
The lease terminates in case of destruction of the aircraft or its permanent unserviceability, as well as in circumstances that could not be foreseen or prevented, and which prevent the lessee from using the aircraft during the lease.

Withdrawal from the agreement

If repairs to the aircraft, the costs of which are borne by the lessor, last or are expected to last longer than the lease term or the purpose of the agreement, the lessee may withdraw from the agreement by written declaration.
The lessee is entitled to a refund of a proportional part of rent paid for the time during which he was prevented from using the aircraft, regardless of whether he withdrew from the agreement.
The lessee is entitled to a refund of a proportional part of rent paid for the time during which he was prevented from using the aircraft, regardless of whether he withdrew from the agreement.

Delay in returning the aircraft

If the lessee fails to return the aircraft upon expiry of the agreed lease term, he must pay proportional compensation equal to double the agreed rent for the excess time.
If the lessee is at fault for the delay, he is also liable for any damage suffered by the lessor in addition to the double rent.

Doubt as to the type of agreement concluded

In case of doubt whether an aircraft lease agreement or a contract of carriage for a fixed period has been concluded, it is deemed to be a contract of carriage for a fixed period.

Sublease

The lessee may sublease the aircraft to another party only on the basis of the lessor’s written consent.

Aircraft registration

Aircraft are entered into the Aircraft Register of the Republic of Serbia and the Aircraft Records of the Republic of Serbia, public registers maintained by the Civil Aviation Directorate.
Upon entry, a certificate of registration is issued. There is also the possibility of provisional registration (e.g. upon import, deletion from a foreign register, etc.).
In practice, “usage rights” may also be registered – e.g. the lessee is entered as user, with the purpose of publicity and insight into who actually uses the aircraft (such entry never constitutes real rights).

Allocation of responsibilities in aircraft leasing

Article 83 bis of the Chicago Convention, to which Serbia is a signatory (successor), allows part of the safety oversight of an aircraft to be transferred from the State of Registry to the State of the Operator when the aircraft operates under a lease (wet or dry). The purpose of this protocol is to avoid double oversight or lack of oversight, and to clearly establish responsibility. It is used mainly for long-term dry lease arrangements.

Only certain functions under the Convention may be transferred – those concerning operational safety:
• Rules of the air (Article 12),
• Radio equipment (Article 30),
• Airworthiness, i.e. the airworthiness certificate (Article 31),
• Licensing of crew (Article 32(a)).

The allocation of responsibilities is always carried out through a bilateral 83 bis agreement between two states. Serbia has such bilateral arrangements with Montenegro and San Marino.
In practice, the signatories – the State of Registry (lessor) and the State of the Operator (lessee) – conclude an 83 bis agreement specifying: the aircraft, the exact functions transferred, and the duration. From that moment, the State of the Operator performs controls and inspections for the transferred functions, and the State of Registry is relieved of responsibility for those functions.

It is important to note that 83 bis does not change:

·       Aircraft registration – it remains in the same state (nationality and markings remain unchanged),

·       Ownership and contractual rights and obligations from the lease – these are governed by the agreement and national law.
The 83 bis arrangement deals solely with safety oversight, not property rights.

In wet lease arrangements (aircraft with crew), liability towards passengers always remains with the lessee, and from the consumer’s standpoint it is irrelevant that the carrier has leased the aircraft to perform the planned transport.

International regimes 

Serbia is not a contracting state to the Cape Town Convention and its Aircraft Protocol – there is no registration of interests in the International Registry, so publicity and priority rely on the national Aircraft Register and (when necessary) the Register of Pledges over Movable Assets.

Conclusion

Aircraft leasing in Serbia is regulated by national and international sources, and while there is a certain freedom of contract, many institutes are regulated by mandatory norms.
The distinction between wet and dry lease is not only operational but also legal (certificates, responsibilities, insurance, due diligence).
For contracting parties this practically means:

·       precisely define the type of lease and operational control,

·       obtain prior approvals from the Civil Aviation Directorate,

·       regulate maintenance, insurance and sublease conditions,

·       register the user for publicity,

·       verify pledge encumbrances.

Finally – avoid ambiguities: if in doubt, the contract is legally treated as a contract of carriage for a fixed period, not a lease.
Successful aircraft leasing in Serbia begins with timely obtained approvals, and the most important factor is a clear contract. In the absence of more detailed regulations, contractual discipline and registers are your best protection.

Law Firm Petrović Mojsić & Partners