BRAZIL Law and Practice Contributed by: Renata Iezzi, Nicole René Gomes e Cunha and Marcela Correa, Basch & Rameh
2.4.4 Damage or Loss Caused by an Asset When financing an asset on a lease, a foreign aircraft or engine owner, lessor or financier would not be liable under the doctrine of strict liability as a result of dam - age or loss caused by the asset, provided the lease has been registered as described in 2.3.4 Registration of Leases With the Domestic Aircraft Registry . 2.4.5 Attachment by Creditors The lessee’s indebtedness does not apply to an asset that belongs to a third party. However, from time to time, airport authorities in Brazil have threatened to impose a lien or hold leased aircraft grounded for overdue and unpaid airport charges; see 3.3.1 Third-Party Liens . 2.4.6 Priority of Third Parties’ Rights Generally, owners’ or lessors’ interests have not been subordinated to third-party interests, with the possible exception of tax, airport and air traffic control authori - ties (see 3.3.1 Third-Party Liens ). 2.5 Insurance and Reinsurance 2.5.1 Requirement to Engage Domestic Insurance Companies Brazilian operators must purchase primary insurance from Brazilian underwriters. 2.5.2 Mandatory Insurance Coverage Requirements The Brazilian Aeronautical Code states a minimum obligatory level of liability insurance, which does not meet industry standards. Lease agreements usually require industry-standard cover to complement the statutory insurance. 2.5.3 Placement of Insurance Outside of Jurisdiction A minimum of 40% of all reinsurance risks must be offered by Brazilian primary insurers to Brazilian-based reinsurers (who typically take considerably less). 2.5.4 Enforceability of “Cut-Through” Clauses Cut-through clauses are valid only if the primary insurer is insolvent. Otherwise, proceeds must be pro - cessed through the primary underwriter. Nevertheless,
cut-through clauses are common in aviation insurance policies. 2.5.5 Assignment of Insurance/Reinsurance Assignments of insurance/reinsurance are permitted in relation to aircraft leases or finance agreements. Increasingly, parties rely on loss beneficiaries named in policies in lieu of assignments. 2.6 Lease Enforcement 2.6.1 Restrictions on Lessors’ Abilities Upon an event of default under a lease agreement, the lessor has the right to exercise remedies provided thereunder, including, without limitation, terminating the lease. This right is covered by the Brazilian Civ - il Code, the Code of Civil Procedure and the Cape Town Convention (Articles 10 and 13). Termination must be preceded by a notice of default extending a last opportunity to cure the default. Subsequently, if the lessee does not remedy the event of default, a new notice should be sent, unilaterally terminating the lease agreement. Other than the irrevocable deregistration and export request authorisation (IDERA), self-help remedies are not valid or enforceable in Brazil. If an operator does not voluntarily tender the aircraft in Brazil, then a les - sor would have to file a lawsuit seeking repossession. If the aircraft is physically located in another jurisdic - tion, then the repossession rules of that jurisdiction might apply for the taking of physical possession. Since the implementation of the Cape Town Conven - tion, it has been important to separate the deregis - tration and exportation processes. For deregistration through IDERAs, ANAC acts expeditiously and issues the deregistration confirmation within five working days. For the exportation process, the tax authori - ties have never issued regulations relating to export clearances. Therefore, export authorisation must be considered on a case-by-case basis. There are no restrictions on a lessor’s ability to sell the aircraft following termination of the lease; however, a sale would not necessarily relieve the buyer of export authorisation requirements.
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