JAPAN Law and Practice Contributed by: Taro Omoto, Yusuke Nakajima and Makoto Sakai, Mori Hamada & Matsumoto
Maintenance Reserves The treatment of the payment obligations of the lessee with respect to the maintenance reserve (supplemen - tal rent) is the same as that of the lease rentals. The treatment of the amount deposited to the lessor as maintenance reserve is the same as that of the lease security deposit. 2.10 Cape Town Convention and Others 2.10.1 Conventions in Force Japan has not signed the Convention on International Interests in Mobile Equipment and the related Protocol on Matters specific to Aircraft Equipment. 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 Japan is not a party to the 1948 Geneva Convention on the International Recognition of Rights in Aircraft or the 1933 Rome Convention on the Unification of Certain Rules relating to the Precautionary Arrest of Aircraft. 3. Aircraft Debt Finance 3.1 Structuring 3.1.1 Restrictions on Lending and Borrowing In principle, registration under the Money Lending Business Act (Act No 32 of 13 May 1983) is required to provide loans in Japan, unless otherwise specifi - cally permitted under other laws. There are no material restrictions on borrowers using the loan proceeds. 3.1.2 Effect of Exchange Controls or Government Consents 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 There are no exchange controls or government con - sents that would be material to any financing or repa -
secured creditors are not subject to such restrictions, in principle. There is no limitation on the period for such restrictions. However, please note that, in the case of a lessee’s insolvency, since the aircraft is an asset of the owner rather than the lessee, the owner’s lender may enforce its mortgage (as long as an enforcement event under the mortgage exists) irrespective of the lessee’s insol - vency proceeding. 2.9.8 Liquidation of Domestic Lessees In general, the lessee (as debtor) or its creditors, including the lessor, may make a petition with the court for the commencement of insolvency proceed - ings. Upon the petition, the court will make an order of commencement of insolvency proceedings if it finds the grounds for such proceedings. 2.9.9 Ipso Facto Defaults The validity of an ipso facto termination clause (ie, a clause providing for automatic termination, or giving the lessor the right to terminate the lease, upon a peti - tion for insolvency proceedings) is likely to be denied by the court, considering court precedents. 2.9.10 Impact of Domestic Lessees’ Winding-Up If a Japanese lessee becomes subject to an insol - vency proceeding, the effect will be as follows. Aircraft Unless the lease is terminated, the lessee may con - tinue to use the aircraft. Lease Rentals Unpaid lease rentals accrued before the commence - ment of the insolvency proceeding may only be paid in accordance with the insolvency plan (usually with material discount). The lease rentals accrued after the commencement of the insolvency proceeding may be paid from the insolvency estate at any time without going through insolvency proceedings. Lease Security Deposit The lease security deposit held by the lessor is not affected.
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