Buying An Aircraft And Novation Of A Lease In Jordan – Not For The Fainthearted!

Victoria Koob is partner in Holland & Knight's London office

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.

The transfer of Jordanian-registered aircraft may not be a high volume business but in case any such deal arises in the future, here are some things to be wary of and to help set client 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 the case of the Ministry of Finance, part of their approval is the calculation and then payment of stamp duty on each document (approximately 0.3 percent of the purchase price) which is to be filed. As such, a final purchase price - which is the basis for this calculation - needs to be confirmed in the bill of sale and the parties need to be comfortable that this figure will be recorded in the public register. In our deal, the purchase price changed on a daily basis so we needed to be very certain as to when closing was scheduled to avoid any changes in the purchase price and stamp duty (as realistically, MOF was not going to repay any excess paid).

All approvals should be based on agreed form documents with approved translations or further amendments will required before signing.

Timeframe for Approvals:

translation: once transaction documents are in forms agreed by the parties, translations into Arabic can take up to a week as both sides need to agree on the translations; approvals: while the approval process can be started simultaneously with each government department, allow at least a full week for approvals (in case the whole legal team disappears, which is not unheard of) and another day for payment of all fees and expenses and another day for signing. 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...