Introduction
\nThe recent litigation between FW Aviation (Holdings) 1 Limited and VietJet Aviation Joint Stock Company is one of the most significant aircraft finance disputes involving Vietnam in recent years. The proceedings before the English High Court and subsequently the English Court of Appeal addressed fundamental issues relating to aircraft leasing, loan assignments, termination rights, enforcement, aircraft repossession and export.
\nThe lenders and investors ultimately prevailed. They recovered possession of the aircraft and obtained judgments exceeding USD 181 million. However, the recovery process required years of litigation, extensive enforcement efforts, multiple court proceedings in different jurisdictions and substantial additional costs.
\nThe most important lesson is therefore not that the financiers eventually won.
\nThe most important lesson is that aircraft finance transactions should be structured so that enforcement becomes unnecessary or, if necessary, can be completed quickly and predictably.
\nThe objective of an aircraft financing transaction is not obtaining a judgment years later.
\nThe objective is recovering and exporting the aircraft immediately after default.
\nFor financiers, lessors, export credit agencies, banks, Japanese Operating Lease with Call Option investors, aviation funds and institutional investors considering aircraft transactions involving Vietnam, the FW Aviation case provides valuable lessons.
\nLesson 1: Treat Vietnam Enforcement as a Separate Transaction Workstream
\nMany international financiers focus heavily on financing documentation governed by English law or New York law.
\nTypical attention is devoted to:
\n\u2022\tlease agreements;
\n\u2022\tfacility agreements;
\n\u2022\tsecurity assignments;
\n\u2022\tguarantees;
\n\u2022\ttrust structures; and
\n\u2022\tgoverning law provisions.
\nWhile these documents are essential, they are only part of the transaction.
\nEvery aircraft financing involving Vietnam should contain a dedicated Vietnam enforcement workstream that is developed simultaneously with the financing documents.
\nThis workstream should address:
\n\u2022\taircraft registration;
\n\u2022\tderegistration procedures;
\n\u2022\texport procedures;
\n\u2022\tregulatory approvals;
\n\u2022\tpowers of attorney;
\n\u2022\trecognition of security interests;
\n\u2022\tinteraction with aviation authorities; and
\n\u2022\tpractical recovery logistics.
\nThe enforceability package should be viewed as equally important as the financing package itself.
\nLesson 2: Ensure a Fully Effective Irrevocable Deregistration and Export Request Authorisation
\nOne of the most important protections available under the Convention on International Interests in Mobile Equipment and the Protocol on Matters Specific to Aircraft Equipment is the Irrevocable Deregistration and Export Request Authorisation.
\nThis document allows a designated creditor or authorised representative to request deregistration and export of the aircraft following default.
\nHowever, many transactions incorrectly assume that merely obtaining the authorisation is sufficient.
\nBest practice requires:
\n\u2022\tproper execution;
\n\u2022\tproper filing with the Civil Aviation Authority of Vietnam;
\n\u2022\tconfirmation of acceptance;
\n\u2022\tregular verification that the authorisation remains effective;
\n\u2022\tidentification of the authorised party; and
\n\u2022\tperiodic review during the life of the transaction.
\nThe FW Aviation dispute demonstrates that recovery planning cannot rely on a single document.
\nThe entire enforcement chain must function effectively.
\nLesson 3: Obtain Comprehensive Powers of Attorney
\nAircraft recovery involves far more than deregistration.
\nFinanciers should secure comprehensive and durable powers of attorney covering:
\n\u2022\tderegistration applications;
\n\u2022\texport applications;
\n\u2022\tcustoms procedures;
\n\u2022\tmaintenance records;
\n\u2022\ttechnical documentation;
\n\u2022\tinsurance administration;
\n\u2022\tairport coordination;
\n\u2022\taircraft storage arrangements; and
\n\u2022\tferry flight approvals.
\nThese powers should survive termination and remain effective throughout enforcement proceedings.
\nMany recovery efforts fail not because legal rights are unclear but because practical implementation becomes difficult.
\nLesson 4: Create Immediate and Unambiguous Termination Rights
\nOne of the key issues before the English High Court was whether lease termination was valid.
\nThe Court confirmed that the financiers possessed immediate termination rights following payment defaults.
\nFuture transactions should ensure that default provisions are drafted with maximum clarity.
\nDocumentation should provide that:
\n\u2022\tnon-payment constitutes an immediate event of default;
\n\u2022\ttermination rights arise automatically or immediately upon notice;
\n\u2022\tno unnecessary additional enforcement event is required;
\n\u2022\tno ambiguity exists regarding acceleration rights; and
\n\u2022\tremedies become available without procedural uncertainty.
\nThe stronger the drafting, the smaller the scope for later disputes.
\nLesson 5: Draft Assignment Provisions for Future Market Conditions
\nA central argument advanced by VietJet concerned whether FW Aviation qualified as a permitted transferee under the financing documents.
\nAlthough the English courts ultimately ruled in favour of FW Aviation, the dispute highlights the importance of broad assignment language.
\nAircraft financing documents should expressly permit transfers to:
\n\u2022\tbanks;
\n\u2022\tfinancial institutions;
\n\u2022\taircraft lessors;
\n\u2022\tprivate credit funds;
\n\u2022\tdistressed asset investors;
\n\u2022\tspecial situations funds;
\n\u2022\tsecuritisation vehicles;
\n\u2022\tinvestment funds; and
\n\u2022\taffiliates.
\nThe aviation finance market continues to evolve rapidly.
\nDocumentation should anticipate future financing structures rather than relying on narrow definitions.
\nLesson 6: Build Relationships with Relevant Authorities Before Problems Arise
\nMany financiers only begin interacting with local authorities after default occurs.
\nThis is often too late.
\nBefore funding, financiers should ensure that procedures and expectations are understood regarding:
\n\u2022\taircraft deregistration;
\n\u2022\taircraft export;
\n\u2022\tcustoms requirements;
\n\u2022\tairport access;
\n\u2022\tstorage arrangements;
\n\u2022\tmaintenance records; and
\n\u2022\toperational coordination.
\nThe objective is not obtaining preferential treatment.
\nThe objective is ensuring procedural certainty.
\nWhen default occurs, uncertainty becomes the enemy of enforcement.
\nLesson 7: Establish an Aircraft Recovery Plan Before Closing
\nEvery major aircraft financing should include a recovery protocol prepared before funds are disbursed.
\nThe protocol should identify:
\nDay 1 \u2013 declaration of default;
\nDay 2 \u2013 grounding instructions;
\nDay 3 \u2013 insurance notifications;
\nDay 4 \u2013 export preparations;
\nDay 5 \u2013 technical inspections;
\nDay 6 \u2013 ferry permits;
\nDay 7 \u2013 aircraft relocation.
\nThe precise timetable will vary, but the principle remains constant.
\nRecovery planning should occur before default, not after default.
\nLesson 8: Obtain Vietnam Legal Opinions Focused on Practical Enforceability
\nTraditional legal opinions often address:
\n\u2022\tcorporate capacity;
\n\u2022\tauthority;
\n\u2022\tvalidity; and
\n\u2022\tenforceability.
\nThese opinions remain important but are not sufficient.
\nFinanciers should also require analysis of:
\n\u2022\tpractical deregistration procedures;
\n\u2022\texport mechanics;
\n\u2022\tadministrative challenges;
\n\u2022\tlocal litigation risks;
\n\u2022\tinjunction risks;
\n\u2022\texpected timelines; and
\n\u2022\tpotential regulatory obstacles.
\nPractical enforceability often determines recovery outcomes more than theoretical legal validity.
\nLesson 9: Structure Transactions to Minimise Dependence on Litigation
\nThe FW Aviation case demonstrates an important reality.
\nWinning litigation does not recover aircraft.
\nOperational enforcement recovers aircraft.
\nThe best aircraft financing structures are designed so that:
\n\u2022\trights are clear;
\n\u2022\tderegistration is straightforward;
\n\u2022\texport procedures are established;
\n\u2022\tpowers of attorney are available; and
\n\u2022\toperational control can shift rapidly after default.
\nCourt proceedings should be the contingency plan.
\nThey should never be the primary strategy.
\nLesson 10: Conduct Regular Enforcement Stress Tests
\nEvery aircraft financing transaction should be subjected to periodic enforcement reviews.
\nFinanciers should ask:
\nWhat happens if the airline stops paying tomorrow?
\nWhat happens if aircraft continue operating after default?
\nWhat happens if local proceedings are initiated?
\nWhat happens if shareholders challenge regulatory actions?
\nWhat happens if export procedures are delayed?
\nIf clear answers do not exist, the transaction remains exposed.
\nThe FW Aviation matter demonstrates that these risks are not theoretical.
\nThey are real and foreseeable.
\nWhat Financiers Should Avoid
\nSeveral mistakes should be avoided.
\nFirst, financiers should not assume that obtaining a favourable foreign judgment automatically resolves enforcement issues.
\nJudgments establish rights.
\nExecution recovers assets.
\nSecond, financiers should not rely exclusively on an Irrevocable Deregistration and Export Request Authorisation.
\nAdditional documentation and operational planning remain essential.
\nThird, financiers should not wait until default occurs before developing enforcement strategies.
\nPreparation before default is far more effective than reaction after default.
\nFourth, financiers should avoid narrow assignment language that restricts future transfers.
\nThe modern aviation finance market increasingly includes private credit funds, distressed asset investors and alternative financing providers.
\nFinally, financiers should not underestimate the possibility of parallel local proceedings, regulatory challenges or administrative delays.
\nThese risks should be anticipated from the beginning.
\nConclusion
\nThe FW Aviation litigation should not simply be viewed as a creditor victory.
\nIt should be viewed as a practical lesson for the global aviation finance community.
\nThe financiers ultimately recovered the aircraft and obtained substantial monetary judgments. Nevertheless, recovery required years of litigation, multiple proceedings and significant enforcement efforts.
\nThe central lesson is therefore clear.
\nSuccess in aircraft finance is not measured by obtaining a judgment.
\nSuccess is measured by recovering and exporting the aircraft quickly, lawfully and predictably when default occurs.
\nFor financiers investing in Vietnam, the most effective strategy is not preparing to win a lawsuit.
\nIt is structuring the transaction so that a lawsuit becomes unnecessary.
\n***
\nFor more information on the above, please do not hesitate to contact the author Dr. Oliver Massmann under omassmann@duanemorris.com. Dr. Oliver Massmann is the General Director of Duane Morris Vietnam LLC.<\/p>\n","protected":false},"excerpt":{"rendered":"
Introduction The recent litigation between FW Aviation (Holdings) 1 Limited and VietJet Aviation Joint Stock Company is one of the most significant aircraft finance disputes involving Vietnam in recent years. The proceedings before the English High Court and subsequently the English Court of Appeal addressed fundamental issues relating to aircraft leasing, loan assignments, termination rights, … <\/p>\n