October 29, 2018

Buying an Aircraft and Novation of a Lease in Jordan – Not for the Fainthearted!

Holland & Knight Aviation Law Blog
Victoria Koob

Holland & Knight recently advised a client in connection with the purchase of an Airbus A320-200 aircraft registered in Jordan. With a timeframe of just over 10 months from receiving the first draft of the novation agreement to close, several issues that almost led to the deal being scrapped completely and a minor panic that the financing availability end date would pass before we transferred title, this was a deal that kept on giving.

For those who may be planning to buy or sell Jordanian-registered aircraft, here are some things to be wary of and consider in setting expectations on closing timeframes.

1. Approval from Local Authorities

The Ministry of Finance (MOF) and both the Airworthiness Department and the Legal Department of the Civil Aviation Regulatory Commission (CARC) need to provide their approval to the transaction and the documents before the parties can look to close. In addition, the MOF approval requires the payment of a stamp duty on each document to be filed.

As a practical matter, all approvals should be based on agreed form documents with approved Arabic translations, otherwise further amendments will be required before signing. Once transaction documents are in forms agreed by the parties, translations into Arabic must be obtained and each of seller and buyer should agree on the translations. Then, when translations have been agreed, the approval process can be started with each government department. Assuming approvals are obtained, the parties will then need to arrange for payment of all fees and expenses and another day for signing.

As a result, even after the buyer and seller negotiate and agree on the sale agreement and other transaction documents, it could still take weeks to agree on translations and obtain government approvals.

2. Signing of Documents

All documents that have been approved by CARC and the MOF then need to be signed in person in front of a CARC representative by an attorney of each transaction party appointed under a POA shortly before closing. CARC requires that this POA and certain other authorization documents be notarized, legalized at the Arab Chamber of Commerce and then super-legalized in Jordan.

Again, the legal certification of documents can sometimes take weeks and the parties should also allow time for appointments to be made with CARC.

3. Closing

CARC typically prefers the closing to occur in Jordan, during Jordanian business hours and while the aircraft is on the ground, which is a combination often hard to align with tax advice and flight schedules, particularly when the engines are off-wing as in our deal. However, in our experience, CARC will sometimes allow for exceptions such as temporary new certificate of registration which may facilitate a closing.

4. Timing

When transacting business in Jordan, parties should remember to factor into all timing considerations:

  • local holidays such as Eid when very little seems to happen either in Jordan or any of the local embassies;
  • the working week is Sunday through to Thursday;
  • banks and other government authorities have opening hours between 8:30 am and 3:30 pm (less during the holidays!); and
  • CARC requirements and processes are largely not prescribed in any law or regulation and hence are often subject to the vagaries of who is in charge and how convincing a case legal counsel can run about commercial demands.

In coordination with local counsel in Jordan, Holland & Knight has gained valuable insights in advising clients looking to buy and sell Jordanian-registered aircraft (including leased commercial aircraft).

For more information on undertaking these kinds of transactions in Jordan, please feel free to contact Victoria Koob or Perla de Anda.

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