ARMENIA Law and Practice Contributed by: Narine Beglaryan, Arianna Adamyan and Anahit Aloyan, Concern Dialog
2.4.4 Damage or Loss Caused by an Asset Under Armenian law, a foreign aircraft or engine owner or lessor under a lease is generally not held strictly liable for damage or loss caused by the leased asset, unless there is fault or specific contractual liability. As a general rule, the lessor does not bear responsi - bility for the selection of the asset or the seller, par - ticularly where the lessee identifies the asset and the seller. This reflects the principle that the lessor’s liabil - ity is limited when the lessee directs the acquisition of the goods. However, the lease agreement may provide that the lessor selects the asset and/or the seller. In such cas - es, the lessor assumes greater responsibility. Specifi - cally, unless otherwise stated in the lease, the lessor is not liable to the lessee for the seller’s failure to fulfil obligations under the sale agreement, except where the lessor was responsible for selecting the seller. In that scenario, the lessee may bring claims against both the seller and the lessor, who will be jointly and severally liable. Accordingly, liability for damage or loss caused by the aircraft or engine generally rests with the lessee or operator, who possesses and controls the asset, and not with the foreign lessor or financier (unless the lessor is expressly made responsible under the agree - ment or is at fault, such as by selecting a defective asset or negligent seller). 2.4.5 Attachment by Creditors Under Armenian law, creditors of a domestic lessee generally may not attach or seize an aircraft leased to the lessee but owned by a different entity, as owner - ship remains with the lessor. Creditors are limited to enforcing claims against the debtor-lessee’s assets, not property belonging to third parties. The leased aircraft also does not form part of the les - see’s bankruptcy estate and is not subject to enforce - ment proceedings, provided that the lessor’s owner - ship rights are clearly documented. In this context, proper registration of the owner and operator in the Armenian aircraft register can serve an important evidentiary function in demonstrating own -
In most cases, VAT is accounted for by the Armenian lessee under the reverse charge mechanism, meaning the lessee reports and pays the VAT on behalf of the foreign lessor. If the lease payments are subject to withholding tax, the Armenian lessee acts as the tax agent and is obli - gated to withhold the applicable tax from the pay - ments and remit it to the Armenian tax authorities. If the lessee fails to withhold and remit the required tax, the Armenian tax authorities may seek to collect the unpaid tax from the lessee and, in certain cases, from the foreign lessor as well. 2.4.2 Effects of Leasing on the Residence of a Foreign Lessor Under Armenian tax law, a foreign lessor will not be deemed to be resident or domiciled in Armenia merely by entering into, or enforcing, a lease agreement with an Armenian lessee. However, if the foreign lessor derives income from the lease that is considered to have an Armenian source under Armenian tax law, the foreign lessor may become subject to Armenian taxa - tion with respect to such income, subject also to the provisions of any applicable double taxation treaty. 2.4.3 Engine Maintenance and Operations Under Armenian law, the lessee is generally responsi - ble for the maintenance, preservation, and both major and current repairs of the leased property, including aircraft or engines, unless otherwise agreed in the lease agreement. Consequently, liabilities related to maintenance and operation are typically imposed on the lessee, not the foreign lessor, unless the lease agreement provides otherwise. Responsibility for maintaining the airworthiness of an aircraft rests with the owner or the operator, depend - ing on who is operating the aircraft at the time. Since a foreign lessor typically does not operate the aircraft, they are generally not responsible for these obliga - tions by default. As a result, a foreign lessor will not usually face lia - bilities related to aircraft or engine maintenance and operations solely by being a party to the lease, unless specific terms in the lease agreement assign these obligations to the lessor.
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