Our corporation is based in Germany and owns an aircraft which is operated by a Slovak air carrier and which is registered in the Slovak Aircraft Register. We are consolidating our external financing, and our bank asked us for additional security for the provision of better financing conditions. We offered to pledge the aircraft, which we are leasing to a Slovak company. Our bank wants to establish and effect the pledge primarily under German law. The bank wants to register that pledge in the Slovak Aircraft Register and have the pledge appear on the Aircraft Certificate. Will Slovak authorities register the pledge, which is governed by German law, or is it necessary to establish a pledge governed by Slovak law as well?
According to section 26 subsection 5 of Act 143/1998 Coll. on Civil Aviation (the “Slovak Aviation Act”), relevant details regarding a pledge established over any aircraft which are registered in the Slovak Aircraft Register can be registered thereof. These details include the subject of the pledge, the identification of the pledgee, and the specification of the claim secured by the pledge. The pledge over the aircraft is registered by the Slovak Transport Authority in the Slovak Aircraft Register and is in the public part of the register. According to section 26 subsection 6 of the Slovak Aviation Act, the Slovak Transport Authority is supposed to publish these details on its web site. In practice, however, the list of aircraft published on the web site of the Slovak Transport Authority does not include any details of the pledges with respect to the aircraft registered in the Slovak Aircraft Register; it seems that these details can only be obtained upon request. Nonetheless, the details of the pledge are registered on the Aircraft Certificate.
Section 26 subsection 11 of the Slovak Aviation Act clearly stipulates that the registration of pledge details in the Slovak Aircraft Register does not constitute a pledge over the aircraft or over any part of it. The registration of the pledge in the Slovak Aircraft Register thus has a purely evidential character. It serves for the publicity of the pledge since anyone who proves that it is necessary for the protection of their rights can get the extract from the Slovak Aircraft Register. The details of the pledge are also included in the Aircraft Certificate issued by the Slovak Transport Authority for each aircraft registered in the Slovak Aircraft Register (the Aircraft Certificate must be on board the aircraft during its operation).
The registration of the pledge in the Slovak Aircraft Register does not constitute the pledgee’s security interest in the aircraft. Such a security interest can be constituted in line with relevant and applicable laws, which set out the conditions of the constitution of the security interest in movable assets. You mentioned that your bank wants to establish the pledge primarily under German law. This is acceptable for the Slovak authorities from the point of view of the pledge’s registration in the Slovak Aircraft Register. As explained, the registration of pledges in the Slovak Aircraft Register only serves for evidential purposes. The Slovak Transport Authority does not require the pledge to be constituted under Slovak law. The authority only requires the submission of evidence confirming that the pledge has been established. If the pledge over your aircraft is validly constituted under German law, the Slovak Transport Authority will want to see evidence of the German pledge’s existence (e.g. the Pledge Agreement or the confirmation of the pledge’s perfection in the German Register of Pledges if that is required under German law).
According to Slovak law, the pledge over the aircraft (or any other movable asset) would only be constituted upon the registration of such a pledge in the Slovak Notarial Central Register of Pledges. However, this would apply only if the agreement under which the pledge is being established is governed by Slovak law. Please note that, according to Slovak private international law, a security interest in the aircraft could only be created in line with Slovak law if the aircraft is in the Slovak Republic at the time the pledge agreement is executed.
This arises under Act 97/1963 Coll. on International Private and Procedural Law. This law stipulates that the origination and termination of rights in rem with respect to movable assets is governed by the law of the country where the movable asset is at the time when the act which constitutes the origination or the termination of such a right occurred.
According to Slovak international private law, Slovak law cannot be the law governing the creation of the security interest over the aircraft if that aircraft is not in the Slovak Republic at the time of the execution of the pledge agreement.
The short answer to your question is that the Slovak Transport Authority will register the pledge based on the German law-governed pledge agreement, and it is not required for the pledge over the aircraft registered in Slovakia and operated by the Slovak air carrier to be governed by Slovak law.
Your bank may decide to establish a separate pledge over the aircraft in line with Slovak law. In that respect, it would be necessary for the aircraft to be on Slovak territory at the time of the registration of the Slovak pledge in the Slovak Notarial Central Register of Pledges. However, if your bank only wants to assure that any third party who would want to acquire or otherwise obtain any interest in the aircraft is clearly informed that the aircraft is subject to the pledge, it is sufficient, in our view, to register the pledge in the Slovak Aircraft Register.
