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 appointed under a power of attorney (POA) shortly before closing. This POA and certain other authorization documents need to have been notarized, legalized at the Arab Chamber of Commerce and then super-legalized in Jordan.
Once closing has occurred, it is necessary to return to CARC to date all relevant documents and to collect any duplicate copies which are not used for filing purposes.
Timeframe for Signing Documents:
- legal certification: allow at least three weeks for certification of the POAs and other authorization documents to be completed and for originals to make their way to Jordan;
- signing and dating: allow time for appointments to be made with CARC, for the relevant attorneys for each party to fly to Jordan (local counsel generally do not agree to sign on behalf of their clients), and then a further half day for the physical signing
CARC's preference is for closing to occur in Jordan, during Jordanian business hours and while the aircraft is on the ground. This is a combination hard to align with tax advice and flight schedules, particularly when the engines are off-wing as in our deal. Fortunately for us, local counsel were able to persuade CARC to issue a temporary new certificate of registration to be provided electronically to the airline once they had received payment of all fees and documents had been signed – the only requirement then was that the airframe (but not the engines) be on the ground in a pre-determined location (but not necessarily Jordan).
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; and
- banks and other government authorities have opening hours between 8:30 A.M. and 3:30 P.M. (less during the holidays!).
Lastly, CARC requirements and processes are not prescribed in any law or regulation and hence are subject to the vagaries of who is in charge and how convincing a case local counsel can run about commercial demands.
For any further information please feel free to contact Victoria Koob, William Amo or Perla de Anda.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.