CHINA: An Introduction to Aviation: Finance (PRC Firms)

Key Points to Consider When Carrying Out Aviation Business in China in the New Era

新时代背景下在中国开展航空业务应关注的要点 

To optimise the business environment, China has introduced a series of new laws and regulations in recent years, continuously enriching and improving the existing legal framework and system. Among these new regulations, the Civil Code of the People’s Republic of China (the “Civil Code”) and the accompanying laws, regulations, and judicial interpretations that have been introduced have had a particularly profound impact on aviation business (especially on various types of security arrangements in aviation transactions). Against this background, practitioners in the aviation business in China should pay attention to the following legal and regulatory changes and market practice operation points.

为优化营商环境，中国近些年出台了一系列新的法律法规，不断丰富和完善了原有法律框架和体系。而这其中的诸多新规，特别是《中华人民共和国民法典》（以下简称“民法典”）以及与之配套的法律法规和司法解释的不断出台，对航空业务（尤其是航空交易中的各类担保安排）产生了深远的影响。在此背景之下，在中国开展航空业务的从业者应注意关注如下一些法律法规变化和市场实务操作要点。

Emphasising the importance of security registration 

强调担保登记的重要性 

The Civil Code has absorbed and integrated the provisions related to property rights publicity in the existing laws and regulations, further emphasised the rules of publicity’s defence effect, and clarified that registration is the main method of publicity for the acquisition of security rights to be effective against third parties. Under the guidance of this principle, China is also continuously striving to build a centralised and unified registration organisation and registration system nationwide, providing convenient registration and publicity services for participants in market transactions.

民法典吸收、融合了原有法律法规有关物权公示的规定，进一步强调了公示对抗效力规则，明确登记是担保权取得对抗第三人效力的主要公示方法。在此原则指导之下，中国也在不断努力建设全国集中统一的登记机构和登记系统，为市场交易的参与者提供便捷的登记公示服务。

For some transaction arrangements commonly seen in aviation financing and leasing transactions, financiers and leasing companies conducting aviation business in China should pay attention to completing the relevant registrations involved. Examples include:

• the ownership/mortgage of the aircraft should be registered with the Civil Aviation Administration of China (CAAC);

• the mortgage of spare engines should be registered with the movable property financing unified registration and publicity system maintained by Credit Reference Center of the People’s Bank of China (CRC);

• the pledge of rental and other leasing receivables should be registered with the CRC.

Additionally, as China is also a contracting state of the Cape Town Convention, subject to the declarations made by China when joining the Cape Town Convention, related transaction arrangements (such as cross-border leasing, cross-border mortgages, etc) should also complete the corresponding international interests registration. The Irrevocable Deregistration and Export Request Authorisation (IDERA) should also be registered with the CAAC.

针对航空融资与租赁交易中常见的一些交易安排，融资方和租赁公司在中国开展航空业务的过程中应注意完成可能涉及的相关登记，例如：（1）飞机的所有权/抵押权应于中国民用航空局（“民航局”）完成所有权/抵押权登记；（2）备用发动机的抵押权应于中国人民银行征信中心动产融资统一登记公示系统（“中登网”）完成抵押登记；（3）租金等租赁应收款的质押应于中登网完成应收账款质押登记。此外，由于中国也是开普敦公约的缔约国，受限于中国加入开普敦公约时所做的声明，相关交易安排（如跨境的租赁、跨境的抵押等等）也应完成对应的国际利益登记，且IDERA也应在民航局完成备案登记。

Enriching the types of existing securities 

丰富原有担保的类型 

On the basis of the existing forms of security such as mortgage, pledge, lien, and guarantee, the Civil Code and related judicial interpretations have explicitly affirmed non-traditional forms of security that are not named as traditional forms but may involve security functions, such as retention of title in sales, financial leasing, and assignment for security. It also specifies in detail the methods by which creditors can realise their security rights in such non-typical security arrangements. Examples include the following:

• in retention of title in sales and financial leasing transactions, if the buyer/lessee fails to perform the payment obligations according to the contract, the seller/lessor can request the court to refer to the relevant provisions of the Civil Procedure Law of the People’s Republic of China on “cases of realising security property rights” to receive the amount owed by the buyer/lessee from the proceeds from the auction or sale of the involved property; and

• in assignment for security transactions, if the debtor or a third party and the creditor agree to transfer the property to – and it is owned under the name of – the creditor (and the parties have publicised the change of such property transfer), then the creditor can request the court to refer to the relevant provisions of the Civil Code on security property rights for priority compensation from such property if the debtor fails to perform the due debt.

在原有抵押、质押、留置、保证等担保形式的基础之上，民法典及相关司法解释明确肯定了所有权保留、融资租赁、让与担保等名义上并非传统形式的担保，但却也可能涉及担保功能的非典型担保类型。并详细规定了在此类非典型担保安排中，债权人实现担保权利的方式。例如：（1）在所有权保留买卖和融资租赁交易中，买方/承租人未按约履行付款义务的，卖方/出租人可以请求法院参照《中华人民共和国民事诉讼法》中“实现担保物权案件”的有关规定，以拍卖、变卖标的物所得价款支付买方/承租人欠付的款项；（2）在让与担保交易中，若债务人或者第三人与债权人约定将财产形式上转移至债权人名下，且当事人已经完成财产权利变动的公示的，若债务人不履行到期债务，债权人可以请求法院参照民法典关于担保物权的有关规定就该财产优先受偿。

In the spirit of affirming non-typical securities, the Decision of the State Council on Implementing the Unified Registration of Movable Property and Rights Security (the “Movable Property and Rights Security Registration Rules”) that took effect in 2021 also explicitly includes retention of title in sales and financial leasing as registrable types of security in addition to receivables pledge registration and other conventional mortgage and pledge registrations. The Movable Property and Rights Security Registration Rules also openly specify that other movable property and rights securities that can be registered may undergo registration.

与民法典肯定非典型担保的精神一脉相承，2021年生效的《国务院关于实施动产和权利担保统一登记的决定》（“动产和权利担保登记规则”）在应收账款质押登记及其他常规抵质押登记范围之外，亦明确将所有权保留和融资租赁纳入可登记的担保类型范围，并且也开放式地规定了其他可以登记的动产和权利担保亦能进行登记。

Under the above-mentioned laws and regulations, for retention of title in sales or financial leasing arrangements, the parties should complete registration with the CRC to ensure their rights are fully protected. When it comes to the lease assignment usually seen in aviation financing and leasing transactions, as the Movable Property and Rights Security Registration Rules do not explicitly specify it is one of the registrable types of rights, whether such arrangement can be registered and whether such registration is necessary have yet to be clarified by legislation or tested by judicial judgment.

在上述法律法规的支持下，针对所有权保留或融资租赁安排，当事方应于中登网完成登记，以确保其权益得以充分保障。而对于航空融资与租赁交易中常见的租赁权益让与担保（lease assignment），由于动产和权利担保登记规则并未明确将其规定为可登记的权利类型之一，因此该等安排是否能够进行登记以及是否需要进行登记尚待立法澄清或经司法裁判检验。

Increasing the duty of care requirements for creditors 

提高债权人的注意义务要求 

Although it may not have been the legislative intention, some provisions in the Civil Code and related judicial interpretations – aimed at balancing the interests of all parties and protecting the interests of bona fide third parties – have indirectly increased the duty of care requirements for creditors. Examples of such provisions include the following. 

虽然立法本意可能并非如此，但是民法典及相关司法解释中的一些为了平衡各方权益以及保护善意第三方利益的规定无形中提高了对债权人的注意义务要求。例如：

• Compared with the Property Law of the People’s Republic of China (now invalid), which stipulated that “during the mortgage period, the mortgagor shall not transfer the mortgaged property without the consent of the mortgagee”, the Civil Code allows the mortgagor to transfer the mortgaged property during the mortgage period – unless otherwise agreed by the parties. Based on this, the mortgagee needs to pay attention to explicitly agreeing in the aircraft mortgage contract that “the mortgagor shall not transfer the aircraft without the consent of the mortgagee” and – based on the above-mentioned requirement for security registration publicity – to explicitly reflect such agreements on the aircraft mortgage right certificate issued by the CAAC.

相较于《中华人民共和国物权法》（目前已失效）规定的“抵押期间，抵押人未经抵押权人同意，不得转让抵押财产”，民法典允许抵押人在抵押期间转让抵押财产，除非当事人另有约定。基于此，抵押权人需注意在飞机抵押合同中明确约定“未经抵押权人同意，抵押人不得转让飞机”，并且基于上文提到的担保登记公示的要求，将该等约定明确体现在民航局签发的飞机抵押权证之上。

• Contrary to the provisions of the Guarantee Law of the People’s Republic of China (now invalid), the Civil Code treats guarantees as general guarantees instead of joint and several liability guarantees if the method of guarantee was not stipulated or was unclearly stipulated and treats the guarantee period as six months instead of two years if it was not stipulated or was unclearly stipulated. Based on this legislative change, when signing a guarantee security agreement, creditors need to pay attention to explicitly stipulating the guarantee type as a joint and several liability guarantee and specifying a longer period for the guarantee period.

与《中华人民共和国担保法》（目前已失效）的规定相反，民法典规定保证方式没有约定或约定不明时，按照一般保证而非连带责任保证处理；保证期间没有约定或约定不明时，按六个月而非两年处理。基于这一立法变化，债权人在签订保证担保协议时，需注意明确约定保证类型为连带责任保证担保且将保证期间明确规定为一个较长的期间。

• For guarantees provided by listed companies and their disclosed controlled subsidiaries, the listed company needs to announce and disclose that the guarantee has been passed by the board of directors or the shareholders’ meeting. Based on this, when accepting guarantees, creditors need to pay attention to checking whether the guarantor and the guarantor’s direct and indirect controlling shareholders are listed companies. If so, they need to request the relevant announcement; otherwise, it may affect the effectiveness of the guarantee contract.

针对上市公司以及上市公司已公开披露的控股子公司对外提供担保，上市公司需要就该担保事项已经由董事会或者股东大会决议通过的情况进行公告披露。基于此，债权人在接收担保时，需要注意核查担保提供方以及担保提供方的直接和间接控股股东是否为上市公司，若是，则需要要求其提供相关公告，否则可能会影响担保合同的效力。

Overall, the continuous introduction of new laws and regulations represented by the Civil Code provides a clearer and more systematic legal framework and guidance for the aviation industry, which is beneficial to the healthy development of the aviation industry and also provides a basis for better handling potential legal disputes. How to understand and apply these new laws and regulations accurately in each specific business still requires in-depth analysis based on actual situations.

总体而言，以民法典为代表的新的法律法规的不断出台，为航空产业提供了更为明确、系统的法律框架和指引，这有利于航空产业的健康发展，同时也为更好地处理潜在的法律争议提供了依据。而在每一项具体业务中，应如何准确理解和适用这些新的法律法规，还需结合实际情况进行深入分析。