MALAYSIA Law and Practice Contributed by: Shelina Razaly Wahi and Vincent Chan Siew Onn, Abdullah Chan & Co
tors notwithstanding that the lease documents pro - vided for security deposits and maintenance reserves to be held by the lessors. Security deposits and main - tenance reserves paid pursuant to lease agreements are regarded, subject to the specific language used in the lease documents, as the absolute property of the lessors and not securities over the assets of AAX. As such, the security deposits are considered as being the property of the lessors. 2.10 Cape Town Convention and Others 2.10.1 Conventions in Force The Convention and the Protocol are in force in Malay - sia, by virtue of the International Interests in Mobile Equipment (Aircraft) Act 2006. It is not necessary to obtain AEP codes for registering international inter - ests in Malaysia. 2.10.2 Declarations Made Concerning Conventions Malaysia has made declarations under Articles 39 (1) (a), 39 (1)(b), 40, 53 and 54 (2) of the Convention as well as under Articles XXX(1), (2) and (3) of the Pro - tocol. 2.10.3 Application of Article XIII of the Protocol on Matters Specific to Aircraft Equipment Article XIII of the Protocol has been adopted into domestic Malaysian law. An IDERA would need to be filed with CAAM and will then be notated on the Air - craft Register. 2.10.4 Enforcement of Conventions The Malaysian courts have had very limited experi - ence in enforcing the Convention or the Protocol. In the case of AirAsia X Berhad v BOC Aviation Lim- ited and 14 Others [2021] LNS 188, it was held that the scheme (of arrangement as sought by AirAsia X) is an insolvency-related event under Article XI of the Protocol, relying on the facts that: • the scheme is formulated in the context of an insol - vency procedure; • the scheme is also an arrangement that is collec - tive in that it is “concluded on behalf of creditors generally or such classes of creditors as collec - tively represent a substantial part of indebtedness”; and
• the court’s approval is required for its implementa - tion. In addition, the phrase “(no) obligations (of the debtor) under the agreement” as stated in Article XI(10) of the Protocol includes the obligation of the debtor to pay the rentals under the agreement. Reading Article XI(7), (10) and (11) together, the court concluded that in the event the debtor chooses not to terminate the agree - ment when an insolvency-related event has occurred or the creditor does not exercise its right to repos - sess the aircraft, the obligations under the agreement including the obligations to pay the rentals cannot be modified by the debtor unless with the consent of the creditor. However, the court then went on to state that the proposed scheme was seeking to compromise the lessors’ claims for damages and was unrelated to Article XI(10) of the Protocol and, in this instance, AirAsia X did not require the consent of the lessors in respect of the proposed 99.95% haircut on the les - sors’ claims. 2.10.5 Other Conventions Malaysia is not a party to the 1948 Geneva Convention on the International Recognition of Rights in Aircraft and 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 A Malaysian resident may borrow in foreign currency up to MYR100 million equivalent from a foreign lender. Any sums above this amount will be subject to BNM approval. 3.1.2 Effect of Exchange Controls or Government Consents Prior approval from the BNM is necessary for any lending or granting of security not explicitly permitted under the BNM notices. Residents are permitted to make or receive foreign currency payments to or from non-residents for any purpose. Non-residents may repatriate funds, including income or proceeds from the sale of ringgit assets (such as property in Malay -
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