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Ensuring the sustainable operation of aircraft and supporting Russian civil aviation: what market participants need to know

Recently adopted acts amend the procedure for the registration of rights to and transactions with aircraft, as well as the procedure for performing agreements on the lease of foreign aircraft and aircraft engines. The amendments were adopted as measures to counter the effects of international sanctions on Russian civil aviation.

Amendments regarding the procedure for registering aircraft and transactions with such assets

On 14 March 2022, Federal Law* No. 56-FZ amended the Russian Air Code and other Russian legislative acts (the “Law”).

The Law has vested the Russian Government with the powers in 2022 to determine the procedure of state registration of civil aircraft in the Russian State Register of Civil Aircraft, the rights to and transactions with aircraft. To implement these powers, on 19 March 2022 the Government adopted Regulation* 411.

Regulation 411 establishes the features of registration for civil aircraft owned by lessors from “unfriendly” foreign states, the list of which is compiled by the Government, and operated by Russian lessees. The list of the “unfriendly” states is comprised of, in particular, EU member states (including Ireland), US, UK and Singapore.

Thus it is no longer required to provide for the purposes of registration of aircraft:

  • documents evidencing the ownership of the operated aircraft (the applicants should only submit copies of the lease agreements); and
  • a document evidencing the exclusion of the operated aircraft from the foreign register of the civil aircraft, provided that the applicant submits a notice or letter from the competent authority of the country in which the airworthiness certificate of the operated aircraft was cancelled or suspended.

In addition, the Law has reduced the term of state registration of rights to aircraft in Russia from one month to ten days.

Procedure for performing obligations under contracts on lease of aircraft and aircraft engines

Pursuant to the Law, on 19 March 2022 the Government adopted Regulation* 412 specifying the features of the performance of agreements on lease of the operated aircraft and aircraft engines operated by Russian lessees and owned by lessors of the “unfriendly” states (the “Lease Agreements”). The provisions of Regulation 412 apply to Lease Agreements entered into before 24 February 2022.

Settlements under the Lease Agreements must be made in a special manner, namely Russian residents must make lease and other payments under the contracts providing for the acquisition of, lease of aircraft, auxiliary power units and/or aircraft engines (the “Obligations”) to foreign persons (and their controlled persons, except for those registered in Russia) connected with the “unfriendly” states (the “Restricted Persons”) by crediting funds in roubles to a type “S” account opened with a Russian bank in the name of a lessor that is a Restricted Person.

(For more details, see our previous eAlert: “Russian President signs decree on the temporary procedure for payments to certain creditors”.)

The Obligations to companies which are Restricted Persons will be deemed duly performed in 2022 if they are discharged to:

  • some of their affiliated resident companies by transferring funds to such a company’s account with a Russian bank or VEB.RF state corporation in roubles (regardless of the currency of the Obligation) in the amount of the rouble equivalent at the Bank of Russia’s official exchange rate as of the payment date; and
  • some of their affiliated non-resident companies which are not Restricted Persons by transferring funds in the national currency of the state of incorporation of such companies or in roubles (regardless of the currency of the Obligation) in the amount of the rouble equivalent at the Bank of Russia’s official exchange rate as of the payment date.

A detailed procedure for making settlements under the Obligations to the persons specified above is set out in the rules established by Government Regulation* No. 635 dated 11 April 2022.

Other procedures for discharging obligations

The Russian Government Commission for Control over Foreign Investments is entitled to issue permissions to discharge the Obligations to Restricted Persons not in the special manner described above, but in accordance with the provisions of the contract or otherwise.

Additional provisions

Lessees are obliged to ensure the operation, maintenance and repair of the operated aircraft, aircraft engines, insurance of the operated aircraft and reinsurance of the risks connected with insuring the operated aircraft.

The lessee’s export of the operated aircraft and aircraft engines outside of Russia is generally prohibited subject to certain exceptions.

We will continue to monitor these developments and keep you informed of any changes.

* In Russian

Authors

Konstantin Baranov
Konstantin Baranov
Partner
Head of Banking & Finance
Moscow