When exploring investment opportunities in the aviation sector in a specific jurisdiction, it is crucial for lessors, financiers, and investors to gauge the aptitude of the relevant jurisdiction. In essence, a leasing company would scrutinise the legal system and processes in the jurisdiction via its local counsel, along with the jurisdiction’s court system and regulatory apparatuses, and the repossession and deregistration scenarios of aircraft leased to local operators. This underlines the importance of local counsel in any repossession or deregistration process.

The viability and practicality of a leasing company or financier achieving crucial success depend and rely on its local counsel’s sound advice, knowledge, understanding and awareness. Local counsel acts as a pillar supporting the decision-making process where knowledge of the law alone may not be sufficient.

Egypt is no different from other merging market jurisdictions. While local laws and decrees govern many issues, several have yet to be covered or could be considered grey areas and situational. Generally, whatever is not mentioned in code or script may be found in the relevant regulator’s customary practices. This is a defining factor for clients when approaching local legal counsel.

Before 2011, the Egyptian regime governing aircraft repossession and deregistration was defined at best as indifferent and far from lessor-friendly. At the time, regulators – namely, the Egyptian Civil Aviation Authority (ECAA) – were not inclined to consider the option for lessors and financiers to repossess or deregister an aircraft owing to the default of the lessee. The ECAA would state that if the repossession and deregistration were not amicable, then a court order would be provided by the lessor or financier to the ECAA for approval of deregistration.

Clearly and unfortunately, these actions proved detrimental and costly for the Egyptian aviation sector, leaving many lessors and financiers disinterested in investing or bringing aircraft into Egypt. In the author’s opinion, this created a prompt opportunity for growth and expansion.

Following the political turmoil and instability suffered during the 2011 revolution, many private operators were driven to bankruptcy and thousands of employees were let go. This left significant risks and little recourse for aircraft lessors, compounded by the lack of co-operation from bankrupt lessees.

The ECAA was compelled to intervene in order to ensure a smooth repossession and deregistration process. This was then followed by the ECAA’s acceptance of conventional deregistration powers of attorney granted to lessors and financiers. However, during this time, Egyptian state creditors ceased the process by demanding all outstanding payments owed to them. The ECAA interfered once more to broker a settlement of outstanding dues between both parties.

Understandably, this caused frustration and pressure on lessors to pay dues that were not essentially theirs, yet it provided security and protection over their assets. At the time, no aircraft could be repossessed or deregistered until such outstanding dues were settled. Despite the successful attempt, the immediate response of leasing companies was negative. As a result, the industry suffered more as risk increased exponentially – due, in part, to the position taken by Egyptian state creditors.

In 2014, Egypt ratified the Cape Town Convention, which came into force in 2015. No declarations were made under the Aircraft Protocol, however. This frustrated lessors and financiers even more, given that the ratification effectively served no one and remained idle. As a result, the aviation industry did not benefit in the slightest.

Another shift took place in 2019. The Egyptian government ratified a series of new declarations under the Aircraft Protocol following a major leasing transaction with an Egyptian government operator few months earlier. Ratification led to an increase in transaction volume, both at the governmental and private operators’ level.

The applicability of the Cape Town Convention and Aircraft Protocol was seriously tested in 2022, after the USA and EU sanctioned Russia. At the time, multiple Western-owned aircraft leased to Russian operators were left abandoned in Egyptian airports as a result of the sanctions. The ECAA was prompt to act, as many parties laid claim to the aircraft, thereby necessitating a re-examination and further scrutinisation of the Cape Town Convention and Aircraft Protocol by relevant ECAA officers. Upon their re-examination, many interpretations were provided, leaving the parties facing challenges and obscurities.

Although the repossession of the aircraft by the lessors cannot necessarily be attributed to the enforcement of the relevant Irrevocable Deregistration and Export Request Authorisations (IDERAs), it is clear that both legal instruments were thoroughly examined. The ECAA officers were compelled to fully discuss and review them. Additionally, both legal instruments were exposed to Egyptian courts for the first time.

Finally, 2022 did not end without witnessing more precedents. The first deregistration and repossession attempt under the Cape Town Convention’s IDERA proved to be successful.

In conclusion, repossession and deregistration of aircraft in Egypt remain challenging. However, there have been some positive changes in recent years. Both conventional deregistration powers of attorney and IDERAs proved to be successful means of deregistration, despite the lengthy process and the settlement of certain debts that may be required. The former requests to issue court orders to deregister and repossess aircraft are no longer necessary, unless the matter is highly contested.

Based on the author’s dealings with the ECAA, its flexibility, resilience, and propensity to cope with a fast and dynamic industry provide the necessary regulatory support to lessors in their legitimate attempts to repossess and deregister aircraft from Egypt while adhering to international conventions to which Egypt is a party.