JAPAN Law and Practice Contributed by: Taro Omoto, Yusuke Nakajima and Makoto Sakai, Mori Hamada & Matsumoto
3.2.2 Types of Security Not Available It is not possible to create an aircraft mortgage over the engines only, although an aircraft mortgage on an aircraft covers the engines installed in that aircraft. See also 3.2.15 Differences Between Security Over Aircraft and Spare Engines . A pledge cannot be created over an aircraft registered in Japan. 3.2.3 Trust/Trustee Concepts The concept of a trust and the role of the security trustee are recognised under the Japanese Trust Act, although security trusts are not often used in Japan. However, the validity of the security trust structure created under foreign law is not necessarily clear in Japan. In this regard, in a cross-border aircraft financing transaction involving a security trust struc - ture established under foreign law, a security interest governed by Japanese law is sometimes created to secure the parallel debt, in order to avoid using the foreign security trust structure. 3.2.4 Assignment of Rights to an Aircraft by a Borrower to a Security Trustee A borrower can assign its rights under an aircraft lease or insurance to a security trustee, pursuant to a security assignment. Although it is possible for the owner to assign the right to the aircraft (ownership) to a security trustee pursuant to a security assignment, it is not practically used as the amount of registration tax is considerably high. 3.2.5 Assignment of Rights and Benefits Without Attendant Obligations It is possible to assign only the rights, without also assigning the attendant obligations of the lessor under an aircraft lease. 3.2.6 Choice of Foreign Law Security Assignment Regardless of the parties’ choice of governing law, under the Japanese conflict of laws rules, the effect of an assignment of claims vis-à-vis the obligor or a third party is mandatorily governed by the law applicable to the claims assigned.
Guarantee The parties can choose the governing law of a guaran - tee, so it may be governed by English or New York law. 3.2.7 Formalities/Mandatory Terms to Create and Perfect Security Assignments Under Japanese law, a security assignment can be created by an agreement between the assignor and the assignee. It is perfected by: • a notice to the obligor with a certified date ( kakutei hidzuke ); • the consent of the obligor with a certified date ( kakutei hidzuke ); or • registration in the claim assignment registration file maintained by the Legal Affairs Bureau (in the case of monetary claims, and this perfection is valid only vis-à-vis a third party, not an obligor). In practice, the consent of the obligor is obtained, and the parties have it stamped by a public notary with a certified date. Failure to perfect results in the assignee not being able to assert its security interest against a third party. A security assignment is not required to be translat - ed, certified, notarised or legalised to be enforceable against a Japanese party. However, if a party submits the agreement to the court as evidence, a Japanese translation must be attached. 3.2.8 Domestic Law Security Instruments If the claims to be assigned under a security assign - ment include claims governed by Japanese law, the obligor’s consent with a certified date should be obtained in relation to such claim assignment; see 3.2.7 Formalities/Mandatory Terms to Create and Perfect Security Assignments . Obtaining a certified date stamp from a notary public costs JPY700 per document.
3.2.9 Domestic Registration of Security Assignments Governed by Foreign Laws
For the purpose of perfection, if the governing law of a claim is foreign law, the security assignment cannot be registered, but the security assignment for an engine located in a foreign jurisdiction can be registered pur -
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