SPAIN Law and Practice Contributed by: Alfonso López-Ibor and Olivia López-Ibor, Lopez-Ibor Abogados
2. Aircraft and Engine Leasing 2.1 Overview 2.1.1 Non-Permissible Leases
2.2 Lease Terms 2.2.1 Mandatory Terms for Leases Governed by English or New York Law Mandatory terms such as parties, rent or term are usu - ally included in the leases governed by English or New York law. 2.2.2 Tax and Withholding Gross-Up Provisions Gross-up provisions can be enforced as contractual provisions between the parties but cannot be opposed to third parties or to the Spanish authorities. 2.2.3 Parts Installed or Replaced After a Lease’s Execution A lease agreement can be modified under the principle of freedom of contract to cover subsequent additions to the aircraft such as replaced parts and spare parts. 2.2.4 Risk of Title Annexation Engines are movable properties under Spanish law and are generally considered separate or detach - able parts of aircraft. Engines may, and usually are, purchased, leased and disposed of separately from the airframe, and can be removed from the airframe without detriment to either the airframe or the engines themselves. 2.2.5 Recognition of the Concepts of Trust/Trustee Spain is not a party to the Hague Convention on Trusts 1986. The concepts of “trust” and ”trustee” are unknown under Spanish law and not recognised by the Spanish property registers but usually accepted by the Movable Asset Registry and the Aircraft Reg - istry. 2.3 Lease Registration 2.3.1 Notation of Owner’s/Lessor’s Interests on Aircraft Register The interest of the owner or a lessor of an aircraft may be noted in the relevant Spanish register. In Spain there are two registers: • The Aircraft Register is an operator and administra - tive register that provides a Spanish registration mark to an aircraft, granting it Spanish nationality under the Chicago Convention (1944).
There are no types of operating/wet/finance leases or leases concerning only engines or parts not permis - sible nor recognised. However, a lessor engaging in finance leasing must hold a banking licence in Spain. 2.1.2 Application of Foreign Laws A lease involving either a domestic party or an asset situated in Spain can be governed by a foreign law, pursuant to Article 3 of the Regulation (EC) No 595/2008 of 16 June 2008 (Rome I). 2.1.3 Restrictions Concerning Payments in US Dollars There are no exchange controls in Spain and transfer of money is free to OECD and EU countries and most other third countries subject to applicable sanctions dictated by the Spanish authorities, the European Union or the United Nations. However, local banks may scrutinise payments to and from a very limited number of countries, such as Iran, Russia, Lebanon, and Syria under the provisions of Law 19/2003 of 4 July 2003 on the legal regime governing the movement of capital and foreign economic transactions and on certain measures to prevent money laundering. 2.1.4 Exchange Controls There are no particular exchange controls that could prevent rent payments under a lease or any repatria - tion of realisation proceeds. 2.1.5 Taxes/Duties Payable for Physical Execution of a Lease Generally, lease payments are tax-exempt when they relate to aircraft that are operated for international commercial flights. However, specific circumstances surrounding the lease should be considered individu - ally. See 1.1.1 Taxes/Duties Payable Upon Execution of the Sales Agreement . 2.1.6 Licensing/Qualification of Lessors A lessor does not have to be licensed or otherwise qualified in Spain to do business with a domestic lessee (however, an exception is given in 2.1.1 Non- Permissible Leases ).
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