ARMENIA Law and Practice Contributed by: Narine Beglaryan, Arianna Adamyan and Anahit Aloyan, Concern Dialog
3.1.9 Debt Subordination Generally, debt may be subordinated through contrac - tual subordination or by virtue of law, such as in the case of shareholder subordinated loans. 3.1.10 Transfer/Assignment of Debts Under Foreign Laws The transfer or assignment by a creditor of all or part of an outstanding debt under a loan governed by Eng - lish or New York law is permissible and recognised. 3.1.11 Usury/Interest Limitation Laws At the time of entering into the loan agreement, the interest rate may not exceed twice the official bank interest rate set by the Central Bank of the Republic of Armenia. The maximum annual amount of contractual penalties may not exceed four times the Central Bank’s official interest rate. In addition, the total amount of all penalties stipulated in the contract may not exceed the outstanding prin - cipal amount of the debt at the relevant time. The concept of liquidated damages is not recognised under Armenian law. 3.2 Security 3.2.1 Typical Forms of Security and Recourse In a typical domestic aviation finance transaction, the forms of security commonly granted include: an air - craft mortgage, a share pledge, an account pledge, a guarantee and a security deposit. The choice and structure of these security instruments depend on the specifics of the transaction and the arrangements agreed upon by the parties involved. 3.2.2 Types of Security Not Available Under Armenian law, collateral may include any prop - erty, including property rights (claims), except for: • property withdrawn from civil circulation (ie, not legally transferable); • claims that are inextricably linked to the identity of the creditor (eg, alimony, compensation for per - sonal injury or harm to health);
mon and recommended practice to include a share pledge as collateral. 3.1.6 Negative Pledges Negative pledges are prohibited under Armenian law. An agreement restricting the pledgor’s right to pledge property as collateral is null and void. 3.1.7 Intercreditor Arrangements Debt Subordination Armenian law does not explicitly regulate intercredi - tor agreements or the mechanisms for debt subor - dination. However, under the principle of freedom of contract, parties are generally free to enter into agree - ments that govern their mutual rights and obligations, including debt subordination arrangements. Pledge Subordination The Civil Code of the Republic of Armenia allows co-pledgees to enter into an agreement establishing the order of priority for the satisfaction of their claims against the debtor, including provisions for the dis - proportionate distribution of enforcement proceeds. 3.1.8 Syndicated Loans Armenian legislation does not specifically regulate syndicated loan agreements. However, pursuant to the principle of freedom of contract established in Armenian civil law, parties are permitted to enter into any contract, provided that mandatory legal provi - sions are observed. In practice, when a syndicated loan involves financ - ing an Armenian entity, an Armenian bank is often appointed as a joint and several creditor, as well as the security agent for the facility and any collateral located in Armenia. In such cases, the relationships between the lenders, the agents, and the borrower are typically governed by foreign law, most commonly, English law. Where the security package includes collateral over domestic assets registered under Armenian law, the corresponding security agreement is generally gov - erned by Armenian law, and the Armenian bank acts as the local security agent.
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