Enforcement and Security over Aircraft – Procedure in Serbia

Although an aircraft is a movable object, in legal transactions it is treated similarly to immovable property: rights and encumbrances are “visible” through the Aircraft Register, and the satisfaction and protection of claims are carried out under special procedural rules. Enforcement and security over aircraft have their specific features.

When enforcement and security over aircraft may be allowed

In order to enforce a court decision ordering performance of an obligation, or to secure a claim against an aircraft, the aircraft must be located in the territory of the Republic of Serbia.
An exception provides that enforcement and security over aircraft may also be allowed against an aircraft not located in the territory of Serbia if it is registered in the Aircraft Register. Therefore, since aircraft by their nature frequently cross borders, registration in the domestic register “links” the aircraft with Serbian jurisdiction for the purposes of enforcement and security.
The recommendation is, therefore, that when agreeing on security of claims by aircraft, the procedure should be followed through to completion, i.e. to registration in the Aircraft Register.

What cannot be subject to enforcement and security over aircraft

The law protects certain public functions and traffic safety:

1. State aircraft, aircraft for medical transport and aircraft for firefighting cannot be subject to enforcement or security over aircraft.

2. A foreign aircraft in distress (overflight, landing due to force majeure or for aviation safety reasons, or by order of the competent authority) – while such reasons last – also cannot be subject to enforcement and/or security.

However, if proceedings are conducted for claims arising precisely during the overflight or stay in Serbia, enforcement or security may be allowed even against an aircraft in distress. This balances the protection of aviation safety with the protection of creditors whose claims arose from that particular stay of the aircraft on domestic territory.

Protection of the debtor’s business activity when the aircraft is a core asset

As a rule, an aircraft which constitutes a core asset and is necessary for the performance of the principal activity of a company, another legal entity or an entrepreneur cannot be subject to sale in enforcement.

However, there are, and quite frequently, exceptions where this protection does not apply:

• when enforcing a claim secured by a contractual pledge over the aircraft (e.g. aircraft mortgage),
• when enforcing a claim secured by a statutory pledge (e.g. costs of custody, search or salvage of the aircraft, extraordinary expenses necessary for preservation),

and additionally when it concerns claims arising from:

1. damage on the ground (death or bodily injury caused by the aircraft in flight, as well as injuries to persons on board resulting from the operation of that aircraft),

2. search and rescue, assistance or custody of the aircraft,

3. contracts of carriage or other contracts for the use of the aircraft,

4. supply or repair of the aircraft and its equipment.

What this means in practice

Although protection of a core asset is important so that the carrier may perform its activity, the law clearly prioritizes safety and preservation of the aircraft, compensation of injured parties and proper payment of operating expenses related to the aircraft’s exploitation.

Creditors from these grounds will pierce the protection and proceed to sale for satisfaction, as in such specific cases their interest in satisfaction outweighs the interest in the carrier’s survival.

Interim measure of detention and custody of aircraft

The law, in principle, does not allow seizure of an aircraft “at the last moment.” This means that an interim measure of detention and custody of an aircraft during performance of public air transport will not be allowed if the aircraft is about to take off or is continuing an already commenced flight.
Of course, there is an exception: an interim measure may be allowed if proceedings are conducted for claims arising precisely in relation to that flight (e.g. unpaid charges, fuel for that specific flight, etc.).
The same rule applies to foreign aircraft, subject to reciprocity. Thus, in the case of a foreign aircraft, the bilateral relationship with the state of registration will be verified, as well as how Serbian aircraft are treated in that other state.
If an interim measure is ordered to secure a monetary claim, the aircraft may be released from detention or custody if the air carrier provides security in the amount of the claim, provided that such security is available and transferable in favor of creditors.
To prevent multiple blocking of the same aircraft for the same debt, Serbian law introduces a rule that once a domestic court releases an aircraft from detention upon provision of security, no other domestic court may allow a new detention of that or any other aircraft for the same claim and the same creditor, provided that the given security remains available or transferable.

Jurisdiction of courts in enforcement and security over aircraft

Jurisdiction to decide on a motion for enforcement or security lies with the court in whose territory the Register in which the aircraft is registered is kept.
Jurisdiction to carry out the enforcement itself lies with the court in whose territory the aircraft is located at the time of enforcement.

If the matter concerns a foreign aircraft or a domestic aircraft not entered in the Register, jurisdiction to decide on the request and carry out enforcement lies with the court in whose territory the subject of enforcement is located at the time of filing the motion.
Jurisdiction to decide on motions for interim measures and to carry them out lies with the court in whose territory the aircraft is located at the time of filing the motion or at the time of enforcement of the measures.
Even when enforcement or security is carried out against objects located on the aircraft for the purpose of transport, jurisdiction again lies exclusively with the court carrying out enforcement or security over the aircraft itself. This prevents dispersal of jurisdiction among multiple courts.

Role of the Directorate in enforcement and security over aircraft

The law introduces a special procedural channel for efficiency and transparency of proceedings. Namely, the Civil Aviation Directorate is the body to which are submitted:

• a motion for forced sale of an aircraft registered in the Register,

• a motion for establishment of a compulsory judicial pledge, and

• a motion for pre-registration of such right, on the aircraft or on a right registered over it.

The Directorate is obliged to promptly forward these motions to the competent court. The time of submission to the Directorate is considered the time of submission to the court.
The purpose of this legal fiction is to protect creditors from procedural risks. It is considered that the Directorate will maintain records more precisely than courts, which are burdened with various other demands.

Mutatis mutandis application of provisions on enforcement and security in water transport

Unless otherwise provided by the Law on Air Transport, the provisions of the law governing enforcement and security in water transport apply mutatis mutandis to proceedings of enforcement and security over aircraft, as well as security over objects on them.

Conclusion

Aircraft are subject to a special procedural regime with numerous “slippery” points: many exceptions, protection of core assets, limited interim measures, reciprocity for foreign aircraft, provision of security and specific court jurisdiction (separation of decision-making and enforcement), with proceedings commencing before the Directorate.
When potential cross-border circumstances are added, it is clear why it is useful to have an aviation law expert who can follow all these steps.

Law Firm Petrović Mojsić & Partners 

Related articles: 

Pledge over Aircraft in Serbia 

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