GERMANY Law and Practice Contributed by: Konrad Schott, Jan Brinkmann and Johannes Vogel, Freshfields
2.10.2 Declarations Made Concerning Conventions See 2.10.1 Conventions in Force . 2.10.3 Application of Article XIII of the Protocol on Matters Specific to Aircraft Equipment
• during preliminary insolvency proceedings and irre - spective of the termination of the lease agreement, the competent insolvency court can order, upon the insolvency administrator’s application, that the aircraft shall remain with the insolvency estate against compensation in case it is material for the continuation of the insolvent lessee’s operations; and • the lessor is barred from terminating the lease agreement on the grounds of payment defaults or general deterioration of the lessee’s creditworthi - ness prior to the insolvency filing or on the grounds of the insolvency itself. 2.9.10 Impact of Domestic Lessees’ Winding-Up In the insolvency of an aircraft lessee, and despite the continuation of the aircraft lease agreement (see 2.9.5 Other Effects of a Lessee’s Insolvency ), the insolvent lessee often lacks the liquidity necessary to fund the contractually agreed maintenance of the aircraft. During preliminary insolvency proceedings, lease rentals might not necessarily be paid (in full). If the lease agreement continues beyond the formal open - ing of insolvency proceeding, claims for lease rentals incurred following the formal opening of insolvency proceedings constitute preferred claims against the insolvency estate. Any remaining lease security deposit (if any) would be available to the lessor to cover outstanding claims, but the insolvent lessee will very likely not replenish the security deposit (despite the lessee’s contractual obligation to do so). Maintenance reserves would usually remain with the lessor. The treatment of the maintenance reserves will very much depend on the underlying contractual arrangements. The exercise of set-off and retention rights against the insolvent party is widely restricted as a matter of statutory German insolvency law. 2.10 Cape Town Convention and Others 2.10.1 Conventions in Force Germany has not ratified the Convention on Interna - tional Interests in Mobile Equipment or the related Protocol on Matters Specific to Aircraft Equipment.
See 2.10.1 Conventions in Force . 2.10.4 Enforcement of Conventions See 2.10.1 Conventions in Force . 2.10.5 Other Conventions See 2.10.1 Conventions in Force .
3. Aircraft Debt Finance 3.1 Structuring 3.1.1 Restrictions on Lending and Borrowing Lenders who offer loans in Germany are subject to German banking supervision by the German Banking Regulator ( Bundesanstalt für Finanzdienstleistung- saufsicht ) and to the German Banking Act ( Kredit- wesengesetz ). There are no particular statutory restrictions on bor - rowers in conjunction with the use of the loan pro - ceeds. However, borrowers have to abide by rules that generally apply to the use of monies (eg, compliance with sanctions) and with the applicable contractual use of proceeds provisions. 3.1.2 Effect of Exchange Controls or Government Consents Exchange controls between member states and between member states and third countries are pro - hibited in the EU. For statistical purposes, all inbound and outbound cross-border payments in excess of EUR12,500 (or the equivalent in any foreign currency) have to be reported by German residents (Inländer) to the German Federal Bank ( Deutsche Bundesbank ) within a period of seven calendar days of such inbound or outbound payment pursuant to the German Foreign Trade Ordinance ( Außenwirtschaftsverordnung ). Also, a German court must give effect to foreign exchange regulations pursuant to Article VIII 2 (b) of the Articles of Agreement of the International Monetary Fund.
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