HUNGARY Law and Practice Contributed by: Szabolcs Mestyán, John Fenemore, Balázs Rokob and Nóra Kertai, Lakatos, Köves & Partners
3.2.3 Trust/Trustee Concepts Hungary is not party to the Hague Convention on Trusts 1986 and therefore trusts cannot be estab - lished under Hungarian law. Whether or not a security trust would be effective in protecting the rights of its beneficiaries is untested. It is customary for the secu - rity trust to be enhanced by a parallel debt structure or more commonly the nomination by the secured credi - tors of the security trustee as a security holder for the purposes of Hungarian law. It has become market practice in Hungary in recent years to use the security holder concept (often in addi - tion to appointing a non-Hungarian law security trus - tee). Pursuant to the Hungarian Civil Code, a “security holder” ( zálogjogosulti bizományos ) may be appointed by the secured creditors under the security agreement or under a separate document. The security holder would be entitled to act under Hungarian law in its own name for the benefit of the secured creditor(s) regardless of whether the status of the secured credi - tors as beneficiaries of the trust is recognised by Hun - garian law. 3.2.4 Assignment of Rights to an Aircraft by a Borrower to a Security Trustee Hungarian law recognises the concept of assignment by way of security (including in relation to insurances) and there is no restriction on the form of such assign - ment. 3.2.5 Assignment of Rights and Benefits Without Attendant Obligations Under Hungarian law, the assignment of rights and benefits without attendant obligations is permitted and there are no specific requirements in respect of such assignment. 3.2.6 Choice of Foreign Law A security assignment or guarantee can be governed by English or New York law. Aircraft lease agreements are generally governed by English or New York law, so it is advisable that the security assignment is gov - erned by the same law, since, further to Rome I Regu - lation, the governing law of the security assignment shall govern all important enforcement-related mat - ters in respect of agreement.
3.2.7 Formalities/Mandatory Terms to Create and Perfect Security Assignments To the extent that the security assignment is governed by Hungarian law, the assignor should: • notify third-party debtors of the assignment; or • provide the assignee with a document evidencing the assignment vis-à-vis third parties. Prior to notification, third-party debtors should per - form their obligations in favour of the assignor. There are no specific formality requirements in respect of assignment agreement. However, Hungar - ian authorities may require the translation of foreign language documents into Hungarian to be admissible in evidence in such legal proceedings. 3.2.8 Domestic Law Security Instruments Hungary is not party to the Cape Town Convention. Accordingly, it is advisable to create a Hungarian law mortgage over aircraft registered in Hungary, as the recognition of foreign law security interests in court enforcement proceedings is untested. As a perfection requirement, the Hungarian law mort - gage needs to be registered with the Hungarian Air - craft Register and (with respect to the engines) the Security Interest Register. Although notarisation is not a formal requirement, it is market practice to incorpo - rate mortgage agreements into notarial deeds in order to ensure that they are directly enforceable. 3.2.9 Domestic Registration of Security Assignments Governed by Foreign Laws From a Hungarian law perspective, it is possible but not required to register foreign law-governed security assignments, eg, with the Hungarian Aircraft Register. However, such registration is not a perfection require - ment under Hungarian law. The registration of security assignments in Hungary is rarely applied in aircraft financing transactions. Separately, where an entity incorporated under Hun - garian law (eg, the operator of the aircraft) is involved in any security assignment as assignor, the security assignment can and is recommended to be registered with the Hungarian Security Interest Register (regard -
247 CHAMBERS.COM
Powered by FlippingBook