BRAZIL Law and Practice Contributed by: Renata Iezzi, Nicole René Gomes e Cunha and Marcela Correa, Basch & Rameh
tion finance transactions involving Brazilian-registered aircraft. 3.2.2 Types of Security Not Available There are no specific restrictions on the forms of secu - rity that could be taken by a creditor over a Brazilian- registered aircraft. 3.2.3 Trust/Trustee Concepts See 2.2.5 Recognition of the Concepts of Trust/Trus- tee . 3.2.4 Assignment of Rights to an Aircraft by a Borrower to a Security Trustee Pursuant to a mortgage, a borrower may assign its rights to an aircraft or under an aircraft lease (including insurance) to a security trustee; see 2.7 Lease Assign- ment/Novation . 3.2.5 Assignment of Rights and Benefits Without Attendant Obligations Brazil allows for the assignment of rights and benefits without a lessor’s attendant obligations. For exam - ple, a foreign lessor of a Brazilian-registered aircraft on lease to a Brazilian lessee is allowed to assign its rights and benefits under the lease, including its rights and benefits under relevant insurance, by way of security, to a foreign security trustee located in the US (who may hold such security on trust for a chang - ing pool of beneficiaries), without assigning the atten - dant obligations of the lessor under an aircraft lease. 3.2.6 Choice of Foreign Law See 2.2.1 Mandatory Terms for Leases Governed by English or New York Law , 2.6.6 Domestic Courts’ Recognition of Foreign Judgments/Awards and 3.1.10 Transfer/Assignment of Debts Under Foreign Laws . The Brazilian Aeronautical Code establishes that, when registered with the RAB, a mortgage creates a lien over a Brazilian-registered aircraft. Brazil is a contracting state under the Cape Town Convention, and qualifying mortgages should be registered in the International Registry. The Aeronautical Code further provides that rights in rem over Brazilian aircraft are to be governed by Brazilian laws.
Since the Cape Town Convention came into force in Brazil, it is arguable that parties are free to choose the governing law of a mortgage; however, the validity of foreign law mortgages in Brazil has not yet been tested. Nonetheless, lenders are increasingly relying solely on Cape Town Security Agreements as secu - rity, especially in ABS and warehouse transactions. If agreements do not take the form of Brazilian law mort - gages, they are not registered at the RAB and do not establish liens under the Brazilian Aeronautical Code. 3.2.7 Formalities/Mandatory Terms to Create and Perfect Security Assignments Aircraft lease security assignments usually have no Brazilian parties and are rarely governed by Brazilian laws; therefore, the question of the creation and valid - ity of the contractual provisions must be addressed by counsel in the relevant jurisdiction. To be enforceable in Brazil, a security assignment should be registered with the RAB or an RTD, with a notice of assignment to, and acknowledgement from, the Brazilian lessee; see 2.3.8 Requirements for Doc- uments Concerning Registration . 3.2.8 Domestic Law Security Instruments A security assignment of rights under a lease and an acknowledgement of the security assignment from the Brazilian operator (describing, inter alia, the assign - ee’s right to exercise the lessor’s remedies thereunder, such as repossession) should be obtained and regis - tered with the RAB. Parties should also consider the need to take out a Brazilian law mortgage (see 3.2.6 Choice of Foreign Law ). Domestic law security instruments and/or local law filings are not mandatory to enable Cape Town fil - ings, which follow the requirements provided for in the Convention and Protocol to determine whether a security instrument creates a registerable international interest. The average costs of executing a domestic law secu - rity instrument and completing local law filings vary, and include:
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