Aviation Finance & Leasing 2021

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Law and Practice

Contributed By Agcaoili & Associates
Reposted (Updated: July 30, 2021)
Chambers and Partners website

  • 1. Aircraft and Engine Purchase and Sale
    • 1.1 Sales Agreements
      • 1.1.1 Taxes/Duties Payable upon Execution of the Sales Agreement The situs of sale of movable property for purposes of taxation is the place where the sale is consummated. When an aircraft or an engine is within Philippine territory at the time of the consummation of an aircraft or engine sale agreement, income derived from the agreement will be deemed income derived from Philippine sources, subject to income tax. Conversely, if an aircraft owned or produced by a non-resident foreign person is sold outside Philippine territory, the transaction would not be taxable in the Philippines. The execution of an aircraft or engine sale agreement will likewise entail the payment of documentary stamp tax. The tax will be payable as a consequence of an original or copy of the aircraft or engine sale agreement which enters the Philippines physically or electronically. The tax shall be levied, collected and paid for, “wherever the document is made, signed, issued, accepted, or transferred when the obligation or right arises from Philippine sources or the property is situated in the Philippines, and at the same time such act is done or transaction had.” (Section 173, National Internal Revenue Code). 
      • 1.1.2 Enforceability against Domestic Parties In order to ensure its enforceability against a domestic party, it is advisable for a sale agreement to be written in or translated into English, signed, notarised and, if executed outside Philippine territory, apostilled or consularised, depending on the country of execution. A notarised document has in its favour the presumption of regularity, and can be contradicted only by clear and convincing evidence (Manuel vs Sarmiento, G.R. No 173857, 21 March 2012).
    • 1.2 Transfer of Ownership
      • 1.2.1 Transferring Title In a contract of sale, transfer of title occurs when the sale is perfected and consummated. A contract of sale is perfected at the point at which there is a meeting of minds on the object of the contract and the price. Consummation takes place upon delivery of the object of the contract (BIR Ruling No DA-512-04, 30 September 2004). Unless otherwise stipulated, the transfer of title to an aircraft extends to include the engines and all installed parts such as auxiliary power units (APUs). Philippine-registered aircraft are generally owned by and leased to corporations, which by law are vested with a legal personality that is separate and distinct from those of their stockholders. The sale of shares of stock comprising a controlling interest in a corporation is not recognised as a sale of its aircraft and or engines or transfer of legal title over them. However, from a practical point of view, the acquisition of an ownership interest in an entity that owns an aircraft or engines may effectively result in a change in beneficial interest over those aircraft or engines.
      • 1.2.2 Sales Governed by English or New York Law The transfer of title to an aircraft or engine physically delivered in the Philippines will be recognised if the covering bill of sale is governed by English or New York law. The choice of foreign law will be upheld as a valid choice of law in any action in the Philippines, subject to that foreign law being pleaded and proven in the action. In the event of failure to prove the foreign law, it will be presumed that the foreign law is the same as the laws of the Philippines on the matter. Furthermore, the choice of foreign law must not violate Philippine law, morals, good customs, public order or public policy.
      • 1.2.3 Enforceability against Domestic Parties A bill of sale written in English need not be translated into Filipino. If the bill of sale is in a foreign language other than English, an accompanying English translation of that bill of sale should be executed for it to be enforceable against a domestic party. For the purpose of registration, the bill of sale should be notarised and if executed outside Philippine territory, apostilled or consularised, depending on the country of execution.
      • 1.2.4 Registration, Filing and/or Consent from Government Entities A bill of sale should be registered with the Civil Aviation Authority of the Philippines (CAAP) in order for it to be valid and effective in rem from the date of its registration. However, if unregistered, the bill of sale shall remain valid and effective against the parties, their successors-in-interest and assignees and any such persons having actual notice thereof (Section 49, Civil Aviation Act of 2008). For the purpose of registration, the bill of sale should be notarised and, if executed outside Philippine territory, apostilled or consularised, depending on the country of execution. The bill of sale must be supported by a Director’s or Corporate Secretary’s Certificate attesting to the board resolution authorising the parties to enter into the transaction and identifying the signatories thereto. Upon submission of all the requirements, the bill of sale will be registered and a Certificate of Registration will be issued by the CAAP within 45 to 60 business days, under existing pandemic constraints. There are no other government applications or consents required as a prerequisite to the execution and delivery of a bill of sale.
      • 1.2.5 Taxes/Duties Payable upon Execution of a Bill of Sale For taxation purposes, the situs of sale of movable property is the place where the sale is consummated. When an aircraft or engine is within Philippine territory at the time of consummation of the bill of sale, income derived from such an agreement will be deemed income from Philippine sources subject to income tax. Conversely, if an aircraft owned or produced by a non-resident foreign person is sold outside Philippine territory, the transaction would not be taxable in the Philippines. The execution of a bill of sale will entail payment of documentary stamp tax “wherever the document is made, signed, issued, accepted, or transferred when the obligation or right arises from Philippine sources or the property is situated in the Philippines” (Section 173, NIRC).
  • 2. Aircraft and Engine Leasing
    • 2.1 Overview
      • 2.1.1 Non-permissible Leases
        Engine leases are generally recognised and permissible in the Philippine aviation industry. Spare-parts leases are not common, but not prohibited. Operating leases, wet leases and finance leases are permissible, legally recognised and commonly transacted and registered in the CAAP.
      • 2.1.2 Application of Foreign Laws
        A lease involving either a domestic party or an asset situated in the Philippines can be governed by foreign law.
        However, the choice of foreign law must not violate Philippine law, morals, good customs, public order or public policy.
      • 2.1.3 Restrictions Concerning Payments in US Dollars
        There are no material restrictions imposed on domestic lessees making rent payments to foreign lessors in US currency. 

        The purchase and outward remittance of foreign exchange for payments to be made under a lease are neither trade-related, not usually foreign-loan trade, nor foreign investment-related. Hence, prior Bangko Sentral Ng Pilipinas (Central Bank of the Philippines) (BSP) approval is not needed for the purchase of foreign exchange to be remitted pursuant to an aircraft lease. All that is needed for the purpose, if the lessee is to source its foreign exchange from the Philippine banking system, is the latter’s written application supported by documents relating to the underlying lease rental payments, to be submitted to an authorised agent bank.

        If a lessee intends to source its foreign currency-denominated lease rental payments from its own foreign currency deposits maintained with Philippine banks, not even the aforementioned application is necessary.
      • 2.1.4 Exchange ControlsThere are no exchange controls that could prevent rent payments under a lease or any repatriation of realisation proceeds therefrom.
    • 2.1.5 Taxes/Duties Payable for the Physical Execution of a Lease
    • The execution of a contract of lease in the Philippines will entail the payment of documentary stamp tax for each year of the term of the contract. Documentary stamp tax will be payable as a consequence of an original or copy of a lease being brought into the Philippines physically or electronically (Section 173 of the National Internal Revenue Code (NIRC)).
    • 2.1.6 Licensing/Qualification of Lessors
    • The lessor need not be licensed nor otherwise registered to do business in the Philippines to enter into an aircraft and/or engine lease transaction with a domestic lessee.
  •  3. Aircraft Debt Finance
  •  3.1 Structuring
  •  3.1.1 Restrictions on Lending and Borrowing
  • A finance lease involving local operators may involve (i) the creation of a special-purpose vehicle (SPV) or orphan trust created by banks and other lenders to hold title to, and lease aircraft to, a domestic carrier/operator, or (ii) a contract directly with a foreign aircraft lessor. In both cases, parties are generally free to enter into contracts involving commercial terms and conditions that do not violate Philippine law, public order or public policy. These contracts may contain stipulations and covenants which govern borrowers’ use of loan proceeds. In most cases, borrowers are the owners/lessors, which are essentially foreign registry orphans trusts and SPVs, and loan agreements are governed by foreign law with a venue of suit in foreign courts.
  •  3.1.2 Effect of Exchange Controls or Government Consents
  • Section 2 of the Bangko Sentral ng Pilipinas (BSP) Circular No 1389, as amended, provides that Authorised Agent Banks (AABs) may sell foreign exchange to residents upon the latter’s written application for any non-trade purpose, without the need of prior BSP approval. However, foreign exchange for payment of domestic obligations that are foreign loan- or foreign investment-related may be sold by AABs to residents upon showing that BSP approval and/or registration has been obtained for the loan or investment. AABs selling foreign exchange for remittance abroad shall ensure that taxes, when required, have been paid and that the remittance is net of any such taxes.
  • If the borrower or obligor sources its foreign currency-denominated payments from its own foreign currency deposits maintained with Philippine banks, no application or approval will be necessary.
  •  3.1.3 Granting of Security to Foreign Lenders
  • Philippine law allows debtors to provide security to foreign lenders in the form of personal property, guarantees and special contracts such as mortgages, pledges, letters of credit and security assignments.
  •  3.1.4 Downstream, Upstream and Cross-Stream Guarantees
  • Downstream, upstream or cross-stream guarantees in favour of lenders are widely recognised and are of customary usage in Philippine business and commercial transactions. In the local aviation industry, CAAP registration of guarantees and other collateral and security interests ensure that these become valid and effective in rem.
  •  3.1.5 Lenders’ Share in Security over Domestic SPVs
  • It is advisable for a lender to take share security over a domestic SPV that owns the financed aircraft, because collateral such as a security interest over shares of stock constitutes a lien that creates a preference in favour of a lender as a secured creditor. Such rights and preferred status are protected by Philippine law in terms of enforcement of security interests in bankruptcy or insolvency.
  •  3.1.6 Negative Pledges
  • A negative pledge is recognised in the Philippines.
  •  3.1.7 Intercreditor Arrangements
  • There are no material restrictions or requirements imposed on inter-creditor arrangements.
  •  3.1.8 Syndicated Loans
  • The concept of agency and the role of an agent such as the facility agent under a syndicated loan are widely recognised in the Philippines.
  •  3.1.9 Debt Subordination
  • It is usual for creditors to execute subordination agreements or inter-creditor agreements wherein they agree to give priority to one debt over another in respect of securing repayment from a borrower.
  •  3.1.10 Transfer/Assignment of Debts under Foreign Laws
  • The transfer or assignment of all or part of an outstanding debt under an English or New York law-governed loan is permissible and widely recognised in the Philippines.
  •  3.1.11 Usury/Interest Limitation Laws
  • The usury law in the Philippines was suspended by Central Bank Circular No 905, effective 1 January 1983. With its suspension, the parties to loan agreements are given much latitude in binding themselves under interest rates, provided these are not proven to be oppressive and unconscionable.
  •  3.2 Security
  •  3.2.1 Typical Forms of Security and Recourse
  • A typical form of security in an aviation finance transaction is a chattel mortgage over a Philippine-registered aircraft. Any such mortgage or security interest should be registered with the CAAP in order to be valid against all persons aside from the person by whom the mortgage is executed.
  • Under Philippine law, the contracting parties can stipulate in their contract that, in the case of default or non-payment of the mortgage debt, the creditor may sell at a private sale and without previous advertisement or notice, the property mortgaged for the purpose of applying the proceeds thereof to the payment of the debt. Furthermore, it is customary for the mortgage to provide for extrajudicial foreclosure in the event of default or non-payment. For this purpose only, the mortgagee who is usually appointed attorney-in-fact for the mortgagor may take possession of the aircraft without judicial intervention. The aircraft would then be sold at a public auction by the Sheriff or by any other public officer after the usual formalities of the posting of the notice of sale. If the mortgage is foreclosed extra-judicially, the mortgagee may, after 30 days from the time of default, cause the aircraft to be sold at a public auction upon ten days’ notice to the mortgagor.
  •  3.2.2 Types of Security Not Available
  • International treaties to which the Philippines has conformed, such as the Geneva Convention on International Recognition of Rights in Aircraft are recognised and accepted as part of the law of the land. Hence, security interests recognised under the aforesaid treaty can be constituted upon aircraft and/or engines, while those which are prohibited or not recognised under the treaty are not recognised under Philippine law.
  •  3.2.3 Trust/Trustee Concepts
  • The concept of a trust and the role of a security trustee are recognised in the Philippines.
  •  3.2.4 Assignment of Rights to an Aircraft by a Borrower to a Security Trustee
  • A borrower may assign to a security trustee its rights to an aircraft under an aircraft lease, including in relation to insurance. An aircraft mortgage may be entered into by and between a borrower and its creditor(s), or directly with the latter’s agent, such as a security trustee.
  •  3.2.5 Assignment of Rights and Benefits without Attendant Obligations
  • Certain fundamental obligations of the lessor cannot be assigned or avoided, such as the obligation to deliver the aircraft in an airworthy condition, or to maintain the lessee in peaceful and adequate enjoyment of the lease for the duration of the contract (Article 1654, Civil Code). Certain representations and warranties in an aircraft lease may not be avoided by either existing or new lessors, even if agreed upon in lease contracts, if the waiver or renunciation of rights under such clauses, terms and conditions would be unenforceable, unconscionable or violative of Philippine law, public order or public policy.
  •  3.2.6 Choice of Foreign Law
  • A security assignment or a guarantee does not have to be governed by the laws of the Philippines and may be governed by foreign law, such as English or New York law.
  • However, the choice of foreign law must not violate Philippine law, morals, good customs, public order or public policy.
  •  3.2.7 Formalities/Mandatory Terms to Create and Perfect Security Assignments
  • A security assignment is consummated upon execution and will be perfected and deemed valid and effective in rem upon filing and registration in the CAAP. If unregistered, the security assignment will nevertheless be binding between the parties, their successors in interest and assignees and persons with actual notice thereof.
  • A security assignment can only be registered if it appears in a public document, ie, it must be duly notarised, and if executed abroad, apostilled or consularised, depending on the country of execution.
  • A security assignment must be supported by Director’s or Corporate Secretary’s Certificates attesting to the board resolution authorising the parties to enter into the transaction and identifying the signatories thereto.
  • The security assignment need not be translated into Filipino if it is written in the English language. If the security assignment is in a foreign language other than English, an accompanying English translation will be required.
  •  3.2.8 Domestic Law Security Instruments
  • There is no other domestic law security instrument that must be taken by a financier in addition to a security assignment governed by English or New York law.
  • The Philippines is not a Contracting State under the Cape Town Convention.
  •  3.2.9 Domestic Registration of Security Assignments Governed by Foreign Laws
  • A security assignment governed by English law or New York law or domestic law may be registered in the CAAP.
  •  3.2.10 Transfer of Security Interests over Aircraft/Engines
  • The transfer of security interests over an aircraft andor engines will be recognised and deemed valid and effective in rem once registered in the CAAP.
  •  3.2.11 Effect of Changes in the Identity of Secured Parties
  • Under Philippine law, the change in the identity of secured parties may be brought about either by conventional (contractual) subrogation (Article 1301, Civil Code) or by assignment of credit (Title VI, Book IV, Civil Code). In conventional subrogation, the debtor’s consent is necessary; in assignment of credit, it is not required.
  • Accordingly, if the identity of the secured parties under a security assignment changes after its execution by way of conventional subrogation, the security interests will not be jeopardised if the consent of each of the original creditor, the new creditor, the original debtor, and the new debtor, as the case may be, are obtained in writing and preferably in a public instrument.
  • If the change in creditors is brought about by an assignment of credit where the consent of the debtor is not required, the security interest will similarly not be jeopardised.
  •  3.2.12 “Parallel Debt” Structures
  • Provisions in transaction documents which may create parallel debt arrangements intended for the benefit of security trustees will be upheld in finance lease agreements entered into by domestic carriers/lessees as vital components of the structure for project financing.
  •  3.2.13 Effect of Security Assignments on Residence of Secured Parties
  • A secured party under an isolated transaction such as a security assignment consummated in the Philippines will not be deemed to be a resident, domiciled in, carrying on or doing business in the Philippines as a result of its being a party to, or its enforcement of, its security assignment.
  • However, any income derived by the secured party will be considered to have been derived in the Philippines and will be subject to the payment of Philippine income tax.
  •  3.2.14 Perfection of Domestic Law Mortgages
  • A domestic law mortgage over aircraft or engines will be perfected upon due execution and registration in the CAAP.
  •  3.2.15 Differences between Security over Aircraft and Spare Engines
  • There is no difference between the form of security (or perfection) between aircraft and engines, which are essentially chattel mortgages over movable property.
  •  3.2.16 Form and Perfection of Security over Bank Accounts
  • A pledge is a typical form of security that may be constituted over a bank account (such as a lease-receivables account), and this variety of special contracts has been further enhanced under the Personal Property Security Act (RA No 11057), which was enacted into law on 17 August 2018. The law provides for the creation, perfection, determination of priority and enforcement of security interests in personal property. The law, however, does not apply to aircraft, which are governed by the Civil Aviation Authority Act of 2008. Nevertheless, a security interest may be created over a bank account in aircraft finance and operating lease transactions.
  •  3.3 Liens
  •  3.3.1 Third-Party Liens
  • A third party can take or register a lien over an aircraft or engines. Certain third parties’ rights will constitute liens affecting aircraft or engine, whether or not registered in the CAAP, such as:
  • the tax liens imposed by the National Internal Revenue Code of the Philippines and the Tariff and Customs Code for failure to pay Philippine taxes and/or customs duties;
  • the statutory lien imposed by the Director General of the CAAP under Section 73 of the Civil Aviation Authority Act of 2008 (Republic Act 9497) for non-payment of charges and other fees and failure to pay administrative fines arising from violation of rules and regulations of the CAAP;
  • the lien imposed by the Manila International Airport Authority (MIAA) for failure to pay dues, charges and fees or concessions for any service provided by the MIAA; and
  • the possessory liens under Article 2241 of the Civil Code of the Philippines for the unpaid price of movables sold, credits for the making, repair, safekeeping or preservation of personal property such as an aircraft.
  • In the case of repairer’s cost and similar liens, the cited Civil Code provision is fairly comprehensive to include the pre-agreed contract price for the repair, safekeeping or preservation of the aircraft, as opposed to the actual cost thereof.
  • The language of the pertinent provisions of the Civil Aviation Authority Act of 2008 (Republic Act 9497) is comprehensive enough to include the imposition of a fleet lien by the Director General of the CAAP, who is given the power to impose a lien on personal and real properties, “and other assets of persons, corporations, partnerships, and such other entities that shall be in default, or fail to perform their obligations, or fail to pay the fines and other penalties imposed for violations of the law, rules and regulations of the Authority” (Sections 73 and 74, supra).
  • Properties and assets levied upon may be sold and the proceeds thereof shall be applied to the satisfaction of the obligation after due notice and hearing.
  •  3.3.2 Timeframe to Discharge a Lien or Mortgage
  • Under prevailing COVID-19 quarantines and reduced staffing patterns, security interests registered in the CAAP may be discharged and cancelled within a period of 90 calendar days from complete submission of the appropriate document(s) to the CAAP.
  •  3.3.3 Register of Mortgages and Charges
  • The CAAP is the sole aircraft registry in which conveyances affecting title to or interest (including leases, mortgages, assignments and other security interests) over Philippine-registered aircraft and engines are recorded.
  •  3.3.4 Statutory Rights of Detention or Non-consensual Preferential Liens
  • Statutory rights of detention or non-consensual preferential liens may arise over an aircraft for non-payment of Philippine taxes, customs duties, airport authority charges, CAAP administrative fines and fees.
  • The language of the pertinent provisions of the Civil Aviation Authority Act of 2008 (Republic Act 9497) is comprehensive enough to include the imposition of a lien on a fleet-wide basis, by the Director General of the CAAP. The Director General is given the power to impose a lien on personal and real properties, “and other assets of persons, corporations, partnerships, and such other entities that shall be in default, or fail to perform their obligations, or fail to pay the fines and other penalties imposed for violations of the law, rules and regulations of the Authority” (Sections 73 and 74).
  •  3.3.5 Verification of an Aircraft’s Freedom from Encumbrances
  • A potential purchaser of an aircraft may search the CAAP registry, the sole aircraft registry in which transactions affecting title to or interest over Philippine-registered aircraft are recorded, to verify that an aircraft is free of encumbrances.
  •  3.4 Enforcement
  •  3.4.1 Differences between Enforcing Security Assignments, Loans and Guarantees
  • There are no relevant differences in enforcing a security assignment as opposed to enforcing a loan or a guarantee.
  • A recovery on a loan, guaranty or security assignment may be achieved by filing suit in court under a jurisdiction and governing law agreed upon by the parties in the pertinent transaction documents. Such actions would be in the nature of recovery of a sum of money in the case of an unsecured loan, or obtaining a writ of replevin from a court preparatory to extrajudicial foreclosure of chattel mortgage in the case of an aircraft mortgage. In the case of a guarantee, the alternative causes of action would be for specific performance and/or recovery of a sum of money. The causes of action will be essentially the same for recovery against a security assignment, except that the latter case will involve more parties, such as lenders or finance parties, possibly represented by a security trustee, the lessor/borrower/assignor and the lessee, depending on the structure and documentation of the transactions.
  •  3.4.2 Security Trustees’ Enforcement of their Rights
  • If the security assignment provides that the lessor may validly grant to a security trustee certain rights under an aircraft lease agreement, and the lessor has contractually agreed that the security trustee may enforce those rights on the basis of a notice and acknowledgment executed by the lessor and the lessee, under Philippine law such a notice and acknowledgment would be valid and effective against both the lessor and the domestic lessee/operator. Such an agreement will not violate Philippine law, morals, good customs, public order or public policy and would therefore be protected under the parties’ freedom of contract.
  •  3.4.3 Application of Foreign Laws
  • The choice of foreign law to govern a finance or security document, and the submission to a foreign jurisdiction and venue, may be agreed upon by the parties, and such an agreement would be upheld as valid and effective in any action in the courts of the Philippines.
  • However, the choice of foreign law must not violate Philippine law, morals, good customs, public order or public policy.
  •  3.4.4 Recognition and Enforcement of Foreign Judgments and Arbitral Awards
  • Philippine courts will recognise and enforce a final judgment of a foreign court without re-examination of the facts from which it prescinds. In order to be recognised and enforced, the foreign judgment must have been rendered by a foreign tribunal of competent jurisdiction with notice to the parties involved; it must not have been obtained through collusion, fraud or clear mistake of fact or of law in rendering the foreign judgment, it must have become final and executory, and it must not be contrary to the public policy or the good morals of the Philippines.
  • Recognition and enforcement of a foreign arbitral award in the Philippines is governed by the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention) and the Special Rules of Court on Alternative Dispute Resolution promulgated by the Supreme Court of the Philippines on 1 September 2009 (A.M. No 07-11-08-SC) (Rules). In resolving a petition for recognition and enforcement of a foreign arbitral award, the court will not disturb the arbitral tribunal’s determination of facts and/or interpretation of law.
  •  3.4.5 Secured Parties’ Right to Take Possession of Aircraft
  • If the security agreement grants the secured party the authority to repossess the aircraft without the need for judicial proceedings, and the lessee would be willing to relinquish possession of the aircraft voluntarily, the secured party may do so without the need for a court order. In a hostile scenario, in which the lessee refuses to relinquish possession, a court order would be necessary in order to recover possession.
  • Self-help remedies in the protection of property rights are recognised under Philippine law only to a limited extent, eg, theft, robbery, vandalism or destruction, and an act constituting an abuse of right may be subject to criminal prosecution for Grave Coercion, a felony. Hence, a court order is indispensable to the lawful recovery of possession of movable property from a hostile or unwilling lessee, mortgagor or person in possession.
  •  3.4.6 Domestic Courts Competent to Decide on Enforcement Actions
  • Most regional trial courts in the Philippines have specially created commercial courts which are assigned exclusively to hear and decide cases involving commercial and corporate disputes, including aviation and maritime, financial rehabilitation and insolvency and various other similar actions.
  • Presiding Judges assigned to these courts have undergone rigorous specialised training and are experienced in deciding enforcement actions in such cases.
  •  3.4.7 Summary Judgments or Other Relief
  • A secured party may obtain a summary judgment by filing a motion at any time after an answer has been served by the defendant and that answer shows that, except as to the amount of damages, there is no genuine issue as to any material fact and that the secured party is entitled to a judgment as a matter of law. The motion for summary judgment must be accompanied by supporting affidavits, depositions or admissions upon all or any part favourable to the lessor’s causes of action (Rule 35 of the 1997 Rules of Civil Procedure).
  • If warranted, a secured party may likewise avail of the pertinent provisional remedies of (i) preliminary attachment (Rule 57), (ii) preliminary injunction (Rule 58), and (iii) replevin (Rule 60). The latter provisional remedy will require the posting of a bond executed to the adverse party in double the value of the property in dispute.
  •  3.4.8 Judgments in Foreign Currencies
  • A secured party under a security agreement/aircraft mortgage may obtain a judgment award payable in foreign currency stipulated in the parties’ transaction documents. 
  •  3.4.9 Taxes/Fees Payable
  • A secured party will not be required to pay taxes in connection with the enforcement of a security agreement or aircraft mortgage.
  • However, court filing fees and sheriff’s fees may be assessed in connection with the enforcement and/or foreclosure of an aircraft mortgage.
  •  3.4.10 Other Relevant Issues
  • The nation’s flag carrier Philippine Airlines, Inc (PAL), is in the final stages of preparation for initiating Chapter 11 proceedings before the US Bankruptcy Court situated in the Southern District of New York. This action has long been speculated and will be closely observed, not only by the local business community but also by foreign lessors, banks and other institutions which maintain a financial interest in the Philippine aviation industry. It will set a precedent in terms of one of the country’s oldest, most prestigious and ubiquitous business and social institutions resorting to bankruptcy protection in a foreign court and under foreign law, rather than before Philippine courts, under the FRIA and its related laws and regulations.
  •  4. Other Issues of Note
  •  4.1 Issues Relevant to Domestic Purchase, Sale, Lease or Debt Finance of Aircraft
  • The impending PAL Chapter 11 proceedings before the US District Court of New York will involve material issues and a material court judgment which will be relevant to the purchase, sale, or debt finance of aircraft registered in the Philippines or involving a domestic party.
  •  4.2 Current Legislative Proposals
  • There are no current proposals before the legislature relating to the foregoing items.