ARMENIA Law and Practice Contributed by: Narine Beglaryan, Arianna Adamyan and Anahit Aloyan, Concern Dialog
• certain government-issued securities that are non- pledgeable under their issuance terms; • rights that are legally non-transferable to third par - ties. • Additionally, indivisible property – which is property that cannot be divided without altering its purpose – cannot be pledged in part. Whether an engine can be pledged separately from the aircraft depends on whether the engine is legally considered indivisible from the aircraft. In cases where the engine is not used for aircraft operation, it can be subject to pledge as a separate movable property. Under Armenian law, when an aircraft is pledged, the description of the collateral typically includes engine information. Warranties are not considered property or property rights under Armenian law, and therefore cannot be the subject of a pledge. Insurance proceeds may be pledged as collateral. 3.2.3 Trust/Trustee Concepts Under Armenian law, the concept of a trust is not rec - ognised. In cross-border financing transactions involving both foreign lenders and Armenian security, a typical solu - tion is for an Armenian bank to act as both a joint and several creditor and the domestic security agent. In such cases: • the contractual relationship between the Armenian bank (acting as agent) and the foreign lenders is usually governed by foreign law, most commonly English law; and • The relationship between the Armenian bank and the pledgor is governed by Armenian law, in accordance with Armenian legislation requirements for creating and enforcing security interests. 3.2.4 Assignment of Rights to an Aircraft by a Borrower to a Security Trustee Among the measures of securing the fulfilment of obli - gations, pledge and suretyship are traditionally recog -
nised under Armenian law as the primary forms of in rem and personal security, respectively. However, the list of available security instruments is not exhaustive. Armenian law does not expressly regulate security assignments as a separate form of security. A secu - rity assignment is similar in structure to a pledge of claims, which is recognised under Armenian law. Due to the lack of specific legislative provisions and judicial practice, the enforceability of security assignments under Armenian law remains uncertain. In practice, security assignments are governed by for - eign law, under which they are common practice and enforceable. 3.2.5 Assignment of Rights and Benefits Without Attendant Obligations It is possible to assign only the rights and benefits without also assigning the attendant obligations of the lessor in an aircraft lease. 3.2.6 Choice of Foreign Law A security assignment or guarantee may generally governed by English or New York law, as long as its terms do not conflict with Armenian public policy to be enforceable in Armenia. 3.2.7 Formalities/Mandatory Terms to Create and Perfect Security Assignments Depending on the structure of the security assignment agreement, it may be necessary to notify the third- party debtor in order to prevent the debtor from fulfill - ing its obligations by making payments to the assignor rather than the assignee. In the event of judicial proceedings in Armenia, the security assignment must be translated into Armenian and may also be required to be certified, notarised, apostilled or legalised in order to be enforceable against a domestic party. 3.2.8 Domestic Law Security Instruments Armenian law applies to the pledge agreement for an aircraft registered in Armenia, except for agreements between the parties that do not regulate the creation, transfer, or termination of ownership and other prop - erty rights to the aircraft.
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