AUSTRIA Law and Practice Contributed by: Farid Sigari-Majd and Mathias Lehner, Freshfields
Transferring Title ). If there is any doubt as to the compliance of the foreign law document with such requirements, the lenders may wish to consider taking an Austrian law-governed pledge over the aircraft in addition to the foreign law security document. The Austrian law-governed aircraft pledge can be pre - pared at a relatively low cost, and there are no specific formal or registration requirements. The parties need to comply with perfection requirements imposed by Austrian (property) law. There is no public register for security assignments or receivables pledges in Austria for Austrian or foreign security interests. 3.2.10 Transfer of Security Interests Over Aircraft/ Engines Engines would usually be considered either as “inde - pendent” components ( selbständige Bestandteile ) of an aircraft or as an accessory ( Zubehö r). Either way, engines would be capable of being subject to a secu - rity interest separate from the aircraft. Any security interest created over the engines would also have to comply with perfection requirements for security interests under Austrian (property) law. 3.2.11 Effect of Changes in the Identity of Secured Parties Depending on the circumstances, a change in the identity of the secured parties may have an impact on the security interest. In practice, the concept of a security trustee is used to mitigate the consequences of such a change. 3.2.12 “Parallel Debt” Structures 3.2.9 Domestic Registration of Security Assignments Governed by Foreign Laws “Parallel debt” structures are commonly used in Aus - tria to put the security trustee in a position where it may enforce a claim on behalf of the entire syndicate of creditors. 3.2.13 Effect of Security Assignments on Residence of Secured Parties A non-Austrian secured party would not generally be deemed to be resident, domiciled, carrying on busi -
ness or subject to (corporate) income taxation in Aus - tria as a result of its being a party to, or its enforce - ment of, a security assignment. 3.2.14 Perfection of Domestic Law Mortgages As stated at 3.2.2 Types of Security Not Available , Austrian law does not recognise the concept of a reg - istered aircraft mortgage, but the parties may create a pledge over moveable assets ( Fahrnispfandrecht ). Traditionally, the following perfection requirements have been recognised in Austria: • physical delivery of the pledged asset to the pledgee; • otherwise removing the asset from the control of the pledgor (eg, by locking it up and restricting access); • if the asset is already with the pledgee, an agree - ment that the pledgee shall hold the asset as pledgee going forward; or • an instruction to a third party to hold possession of the asset to the instruction of the transferee. In practice, perfection by way of instruction to the operator to hold possession of the aircraft to the instruction of the pledgee is the only commercially reasonable means for perfection of a pledge in the context of aircraft finance transactions. Usually, per - fection is supplemented by affixing signs or notices evidencing the pledge to the aircraft, which makes it more difficult for a third party to argue that it has bona fide acquired a security or ownership interest in the aircraft ranking prior to the interest of the pledgee. Moreover, it is recognised under Austrian law that the security interest under a pledge will not imme - diately lapse if – after the perfection of the security interest, eg, by physical delivery to the pledge – the asset is temporarily returned into the possession of the pledgor. 3.2.15 Differences Between Security Over Aircraft and Spare Engines The security interest available in respect of an aircraft and spare engines is the same (ie, pledge over move - able assets), and so are the perfection requirements.
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