On Friday, March 29, 2019, the Aviation Working Group (AWG) published FAQs, e-terms, and draft contracts relating to its Global Aircraft Trading System (GATS). Those documents and other materials published by fixed-wing commercial aircraft financiers suggest that GATS is really designed for that market. The FAQs are, however, drafted expansively, and the GATS e-terms expressly contemplate that business aviation participants could use GATS.
Perhaps GATS will work well for fixed-wing commercial aviation market participants. Business aviation participants should proceed with caution for the reasons set out in this article.
Eric Lewin was delighted to be a member of the panel that discussed, “Has Cape Town Made a Difference?,” at the Corporate Jet Investor conference in London in January. At the end of the time allotted, Mr. Lewin, along with his fellow panelists, characterized his view of the Cape Town Convention in one of three words chosen by the moderator.
One way to characterize Mr. Lewin’s view is that the Cape Town Convention was a solution looking for a problem that did not exist. After all, if bankruptcy risk is so great, why is there not less, and/or more expensive, capital? Since becoming effective, any value the Cape Town Convention has is marginal; it has been much more effective in creating a Gordian Knot. Perhaps market participants should consider and advocate for radical solutions.
Lex situs continues to result in: economic and potential environmental waste; and unnecessary risk for parties to English law governed aircraft finance, sale, and purchase transactions where the aircraft is located outside of England at closing. This article focuses on English law governed mortgages over aircraft, though it occasionally addresses transfers of title to and releases of mortgages over aircraft where convenient to show how lex situs can affect an entire transaction. This article also considers potential impacts of Brexit on the enforcement of English judgments within Europe. This article concludes that legislation should override lex situs.
Market participants at EBACE 2018 continued to discuss broker intermediated undisclosed back-to-back sale and purchase transactions of corporate aircraft. Theoretically, brokers who intermediate undisclosed back-to-back sale and purchase transactions have a greater risk profile under general principles of US contract and tort law than they do under general principles of English contract and tort law. The legal analysis is insufficient by itself to determine whether to pursue a back-to-back transaction. A more complete, three-dimensional analysis also includes business judgment and consideration of ethics.
Formalities impact transactions. They are more than a mere logistical exercise; they matter. A recent English case – which turns on the failure to obtain a single handwritten signature – demonstrates that not complying with formalities can result in catastrophe. That case also demonstrates how bad facts can make bad law, and it provides fertile ground for a number of questions. Above all, that case serves as a reminder to transaction parties and their counsel to exercise vigilance as they structure and execute their transactions, particularly where conflicts of law issues are involved.
The Climate Bond Initiative has created “Climate Bonds,” an iteration of green bonds. Climate Bonds bear a certification that issuers and investors can rely on as to the environmental standard of the assets and projects underlying eligible debt instruments. The certification scheme for Climate Bonds is structured to preserve certifier integrity, apparently avoiding some of the issues that plagued the credit ratings agencies during the subprime crisis. Like other, successful climate change initiatives, issuing Climate Bonds is voluntary.
Tax rates, credits, exemptions, and deductions all exist because legislators have determined that they serve policies that benefits society, whether broad or narrow, direct or indirect. From this perspective, too much is being made of the VAT import regime concerning corporate aircraft since the publication of the Paradise Papers.
A business case for smart contracts argues that smart contracts will reduce transaction costs, performance risk, and transaction settlement times because they will simplify and automate tedious and repetitive processes currently performed by humans, and they will eliminate unnecessary intermediaries. Based on these assumptions, and without significant improvements in technology, smart contracts will be useful for transactions with straightforward performance mechanics that can be easily automated and that do not rely on observation or judgment.
This article surveys the use of special purpose vehicles (SPVs) in corporate and general aviation finance transactions to identify when they add value for both financiers and their clients. Among other things, it highlights how corporate and general aviation financings require an approach that differs from that used in standard commercial aviation financings. This article includes an examination of bankruptcy remoteness.