- Legal Framework and Competent Authorities
Purchasing or selling an aircraft registered in the Italian Civil Aviation Registers requires an extensive knowledge of the Italian Navigation Code (“INC”) – which includes a specific section on navigation by air –, as well as of the special legislation at EU level and of the international conventions governing all aspects of aviation. In addition, a deep knowledge of the practice of international and domestic contracts is necessary to be able to efficiently assist clients, especially non Italian individuals or entities, interesting in purchasing or selling an aircraft in Italy.
The Italian central authority for civil aviation and transport by air is the Ministry of Infrastructures and Transports (“Ministry of Transports”). For the operational profiles of navigation by air, the competent body is the National Authority for Civil Aviation (Ente Nazionale per l’aviazione civile or “ENAC”), which operates under the direction and control of the Ministry of Transports. Specifically, according to Article 687, first paragraph of the INC, ENAC acts as the regulatory authority in charge of technical regulation, certification, supervision and control in civil aviation, through its central and local offices, and deals with the application of quality systems implementing the European regulations.
- Buying an Italian registered aircraft
Buying or selling am Italian registered aircraft is often regarded as a new experience by those who doe not deal on an ordinary basis with the Italian legal system and the Italian aviation authorities. Although the process is not so different from those followed internationally, there are a few peculiar issues that are totally local and that need to be addressed efficiently in order to be able to close a transaction smoothly and quickly.. Below we shall outline the procedure followed in Italy and emphasize the most important differences with the international practice.
2.1. Preliminary remarks
The purchase of an aircraft falls under the provisions of the Italian Civil Code (“ICC”) providing for the transfer of the right of ownership of movable assets. However, several aspects are governed by Articles 864-865 and 894 of the INC.
According to Article 864 of the INC, the deeds related to the ownership of aircrafts or quotas thereof (by way of example, modification or termination of ownership or quotas) shall be in writing in order to be valid. If such deeds are executed abroad, legalization shall be compliant with the requirements set by Italian law (ie. In the majority of cases the documents shall be legalized by a Notary Public and completed with an Apostille pursuant to the Hague Convention of 1961).
Furthermore, Article 865 of the INC sets forth that the above deeds shall be recorded in the National Aviation Register (Registro Aeronautico Nazionale, “RAN”) and noted in the registration certificate. The office in charge of recording the deed is ENAC or the Consular Authority that shall immediately forward the documentation to ENAC (see Article 866 of the INC).
Only public deeds or authenticated written private agreements conforming to the provisions of the ICC are recordable. That is why a transaction to transfer the title to an Italian aircraft is usually performed before an Italian Notary by means of a public deed.
2.2. Initial contacts between Buyer and Seller and Letter of Intent
After having selected an aircraft that may be of interest, the potential Buyer will initiate contact with the Seller, often by means of a Broker, in order to gather information on the aircraft technical and operational performance as well as on the asking price.
If Buyer and Seller find an agreement on the main terms of the transaction, it is advisable that the parties’ attorneys shall draft an offer letter (or a letter of intent), which is usually legally non-binding, except for exclusivity clauses and regulation of any expenses incurred due to – for example – inspection activities.
With the letter of intent, the parties, inter alia, identify the aircraft, establish the minimum technical and operational performance to be guaranteed at closing, mention the warranties to be provided by Seller and/or Buyer, regulate the inspection activities.
2.3. Inspecting and flying the aircraft
At this stage, it is a good rule for the Buyer to fly the jet or, in case he/she is not experienced enough, to find a pilot who could fly the aircraft to assess its performance.
A necessary step is to conduct a pre-purchase inspection on the jet documents (such as journey log book, certificate of registration, certificate of airworthiness, insurance policies etc.) as well as on engines and structural components.
If the Buyer is happy with the results of the inspection, the parties will negotiate the binding terms and conditions of the sale, with the assistance of their respective lawyers.
2.4. Sale and purchase agreement or Preliminary Agreement
As a general rule, in Italy the title to an aircraft is transferred through a sale and purchase agreement, whereby the Seller and the Buyer regulate all the aspects of the transaction, including the payment of deposits, if any. The international practice generally provides for the execution of a MOU, Memorandum of Understanding, or of a Sale and Purchase Agreement to define all aspects of the transaction. Title is then transferred at closing through the execution of a Bill of Sale.
In Italy, it is not unusual that the Seller requires the execution of a Preliminary Agreement, which is an undertaking by both parties to execute the final sale and purchase agreement, provided that certain conditions are fulfilled. Since the Preliminary Agreement is legally binding (i.e., each party could ask a Court to rule that a final agreement be executed, even against the other party’s will, yet provided that the established contractual conditions are met), it is of great importance for the Buyer/Seller to evaluate its contents by means of an experienced aviation lawyer.
Usually, the Seller requires the payment of a deposit, which would prove that the Buyer is serious about the purchase. If the transaction is completed, the deposit would be applied to the purchase price. If not, the deposit would be either returned to the Buyer or kept by the Seller. A good solution to avoid possible disputes with regards to the restitution of the deposit is to use an escrow service. Buyer pays the deposit to a third party (a lawyer or, in Italy, more often a Notary) who will hold it in trust.
Lastly, with regards to the law governing the sale and purchase agreement, according to Regulation EC/593/2008, the Parties are free to determine the applicable law. If the parties do not make an express choice, the applicable law will be the law of the country where the Seller has its usual residence unless, based on the examination of all the circumstances of the case at hand, there is a closer connection with another country.
In this respect, it is important to mention that, even if the parties to the sale and purchase agreement decide that their relationship shall be subject to a foreign law (for example English Law), certain material elements of the contract and of the relationship between the parties are nonetheless automatically subject to and governed by mandatory rules of Italian Law such as, .inter alia:
- procedural rules and mandatory filings with the competent fiscal authorities concerning the registration of the agreement as well as of any deed transferring total or partial ownership of the aircraft;
- procedural rules and mandatory filings with the competent authorities concerning the construction of aircraft;
- issuance of interim and urgency measures by the competent tribunals;
- arrest of the aircraft and of any movable or immovable goods located in Italy.
2.5. Conditions to be met for the sale
The effectiveness of the sale and purchase agreement (or, in case of a Preliminary Agreement, the obligation to execute the final agreement) is generally made dependent upon, inter alia:
- a satisfactory title and lien search;
- the successful results of a more detailed inspection of the aircraft and aircraft documents;
- confirmation that no tax is due.
At this stage, the role played by aviation lawyers is of paramount importance, since the above assessments shall be mostly performed by legal and tax advisors.
2.6. Bill of Sale
Once the sale and purchase agreement is executed and effective, there is a further step usually necessary to register the aircraft in a foreign registry: the execution of a Bill of Sale.
The Bill of Sale is a 1 or 2-page document signed by the Seller that identifies the aircraft, the Buyer, the sale price and acknowledges the transfer of title to the aircraft.
However, as indicated above, the practice of transferring the title to an aircraft on the basis of the execution of a Bill of Sale, although generally accepted internationally, may be subject to some questions or objections in Italy. Seller of an Italian aircraft may object that title is transferred with the execution of the sale and purchase agreement, especially if signed before an Italian Notary, and that the execution of a Bill of Sale is not necessary or required. Particularly, a typical objection is that the Bill of Sale does not indicate the price at which the aircraft is sold rather only states the standard clause “1 Euro/Dollar or any other valuable consideration”. In addition, the Bill of Sale may make reference to the governing law of a country other than the governing law indicated in the sale and purchase agreement. All these aspects often arise when dealing with Italian sellers, especially if the aircraft is purchased from a bankrupt estate or similar procedures, and need to be dealt with the utmost attention in order to avoid complications when registering the aircraft in a foreign registry or if the buyer intends to resell it to another person or company.
2.7. Post-sale legal guarantees under Italian law
When buying an Italian pre-owned aircraft, especially of this is part of a bankrupt estate or it is sold within the framework of legal proceedings, it is not unusual that the seller imposes to the buyer that the aircraft is sold on “as is, where is” basis. The only warranty that the seller provides is that the aircraft is sold free from any mortgages, liens and encumbrances This implies that the buyer of the aircraft has made the necessary inspections on the aircraft and that he/she does not have any objections to rise. The further consequence is that the seller will not provide any warranty on the aircraft and the only warranties applicable are those provided under the ICC..
Pursuant to Article 1490, first paragraph of the ICC, the Seller shall warrant that the aircraft is free from defects which would render the good unfit for its use or considerably diminish its value. Such guarantee can be limited or excluded by agreement. However, such limitation or exclusion would not be effective in case the Seller has concealed the defects in bad faith (Article 1490, second paragraph of the ICC).
The guarantee does not apply if the Buyer was aware of the defects at the moment of the sale or if they were easy to recognize. However, in this latter case the guarantee applies if the Seller has declared that the good was free from defects (Article 1491 of the ICC).
Pursuant to Article 1492 of the ICC, in the cases indicated under Article 1490, the Buyer may alternatively request the termination of the sale and purchase agreement or the reduction of the price. In case of termination, the Seller shall return the price and indemnify the Buyer of all the expenses incurred in connection with the sale, whereas the Buyer shall return the sold good (Article 1493 of the ICC).
In any case, the Seller shall compensate the damages suffered by the Buyer, unless it proves that it was not aware of the defects without negligence. The Seller shall further compensate the damages suffered by the Buyer as a consequence of the defects (Article 1494 of the ICC).
Lastly, with regards to the limitation period to exercise the guarantee (Article 1495 of the ICC), the Buyer shall report the defects to the Seller within eight (8) days of when it discovers them, unless the parties have agreed on a different term or a different term is provided for by law. Failing such reporting, the Buyer may not exercise the guarantee. However, this reporting obligation does not apply in case the Seller has acknowledged or concealed the defect. The general limitation period to exercise the guarantee is one (1) year from the delivery of the sold good.
- Registration procedure
This procedure applies in case the Buyer of the aircraft intends to register it in the RAN.
The Register Office of Aircraft (Ufficio Registro Aeromobili, “URA”), a branch of ENAC, is responsible for the management of the RAN and the Register of Aircraft Under Construction.
According to Article 750 of the INC:
“Aircraft shall be registered in the National Aviation Register, managed by ENAC, if they meet the nationality requirements provided by Article 756. The registration is requested by the owner who meets the requirements of Article 756. The aircraft is identified with the nationality and enrolment marks”.
Nationality and enrolment marks are identification elements: the Italian nationality mark is represented by the capital letter “I”, while the enrolment mark is made of four letters and changes from aircraft to aircraft. In order to be authorized to fly, those marks shall be visible, in accordance with ENAC regulations. If requested by the builder, temporary marks can be assigned while the aircraft is under construction, according to Article 754 of INC.
Pursuant to Article 756 of INC, Italian nationality requirements are met when the aircraft (or most of it) belongs to:
“the State, Regions, Provinces, Municipalities, or other Italian local government or private corporation or to another European member State; to Italian citizens or citizens of other EU Member States; companies established or having a registered office in Italy or in another EU Member State whose capital (or most of it) is owned by Italian citizens or citizens of other EU Member States; Italian legal persons or legal persons of another EU Member State whose shareholding has the above characteristics and the president, the majority of the directors and the managing director of which are Italian citizens or citizens of other EU Member States”.
Pursuant to Article 751 of INC, aircraft registered in foreign national aviation registers cannot be registered, at the same time, in the RAN. Nevertheless, a waiver to the above rule is provided by Article 756, second paragraph of INC, according to which ENAC may allow for the inclusion in the RAN of an aircraft held by a company having an operating license, even if such company is not the owner of the aircraft. In this case, the national aircraft registration and the certificate of registration shall expressly specify that the holder of the aircraft is not the owner and shall provide indication of title of possession. In such a case, the owner’s obligations arising out of the registration are transferred to the holder of the aircraft. Following registration of an aircraft pursuant to the above rule, ownership rights and rights in rem over the aircraft are automatically subject to Italian law.
In order to obtain the registration, in cases of purchase of an aircraft or of quotas thereof, the applicant shall submit the following documents to the RAN:
- Form PP/URA-Rev.1, duly filled and executed by the buyer of the aircraft (or by the assignee/transferee of the quotas, as the case may be).
- Photocopy of the identity card of the person signing the form;
- Formal deed of transfer of the ownership or of the quotas, as the case may be, duly recorded with the Italian Tax Revenue Office (“Agenzia delle Entrate”).
- Two forms named “recordation notes” (“Note di Trascrizione”).
If the Seller is a Company:
- Evidence of the signatory powers of the person who executed the deed (e.g., power of attorney);
- Certified copy of the board (or management body) minutes adopting the resolution to sell the aircraft;
- Certificate of good standing issued by the competent Register of Businesses not more than three months before the request of registration;
- Original Certificate of Registration of the aircraft;
- Receipt of the payment of the stamp duties.
Any subsequent transfer of ownership (or quotas), mortgages or major changes and renovations made to the aircraft that could materially alter its type and value, shall be duly communicated to the RAN.
- Certificate of Airworthiness
Air navigation is allowed once the aircraft is registered in RAN and an Airworthiness Certificate is issued. According to Article 31 of the 1944 Convention on International Civil Aviation (also known as Chicago Convention, ratified in Italy by the Legislative Decree 6 March 1948, no. 616 and entered into force on 8 June 1948), every aircraft engaged in international navigation shall be provided with a Certificate of Air-worthiness issued or rendered valid by the State in which it is registered.
The Airworthiness Certificate grants an authorization to operate an aircraft in flight, according to Article 764 of INC. Once the certificate is issued, it is periodically verified in compliance with EU law.
The Airworthiness Certificate is aimed at proving the aircraft efficiency and it represents a generic technical license granted by ENAC. According to Article 763 of INC, the aircraft shall be airworthy, properly equipped and appropriate in relation to its intended use.
- De-registration procedure
The de-registration procedure is generally perceived by the Buyer of an Italian aircraft as lengthy, tortuous and somewhat difficult to understand if compared with the practice of foreign registers. Particularly, it is the length of time that it is required to obtain the certificate of deletion that causes frustration. However, if properly assisted, it is possible to shorten the time required for the deletion from the RAN.
Article 760 of INC provides for the de-registration procedure in the following cases:
- (actual or assumed) loss of the aircraft;
- the aircraft has been dismantled;
- loss of the nationality requirements set forth by Article 756;
- registration in another national aviation register;
- re-delivery to the owner in the cases listed in Article 756, second paragraph (see Section 3. above);
- filing of an application in order to register the aircraft in another EU member state.
In the cases under (c) and (d) above, ENAC, after having received the deregistration application, shall publish in the RAN – as well as in its local office having jurisdiction on the district where the aircraft is normally located when grounded – a notice of deregistration. By such notice, interested people (creditors) are invited to exercise their rights within 60 days of the publication. Once the 60-day period has elapsed, the aircraft can be deregistered, provided that no objection has been raised against the deregistration.
In case of objection, ENAC may approve the deregistration only in compliance with the terms and the procedures of Article 759, third and fifth paragraphs. So, by way of example, the deregistration may be completed in case the objection has been rejected by means of a final Court ruling or the recorded claims have been cancelled with the consent of the respective creditor or in case a bank guarantee is provided to cover any claim filed within the above 60-day period. Such guarantee shall be for a maximum amount equal to the aircraft’s value as assessed by ENAC. ENAC establishes terms and conditions to provide such guarantee.
In case the Buyer applies for de-registration for the purposes of registering the aircraft in another EU member State, he/she shall make a declaration to ENAC. ENAC, after having verified the absence of claims recorded in the RAN, de-registers the aircraft, following the withdrawal of registration and airworthiness certificates. The de-registration shall be promptly communicated to the Social Security Found for the aviation personnel (“Fondo di previdenza per il personale di volo dipendente dale aziende di navigazione aerea”), noted in the RAN and published according to ENAC regulations.
- Charges and taxes
The Italian Parliament approved in December 2011 an emergency budget plan (“Law Decree 6 December 2011 no. 201”) that has introduced new taxes on private aircrafts for recreational or business use. The tax regime is stated in Article 16.
The tax is applicable to those categories listed in Article 744 of the INC, registered in the RAN. In particular, Article 16, fourteenth paragraph of the Law Decree establishes several exemptions: the tax does not apply, inter alia, to State aircraft, aircraft operated by airline or air charter companies, certified training organizations, or to newly built aircraft registered by the constructor and waiting to be sold.
The tax is due by the registered owner, usufructuary, beneficiary or the lessee unless an exemption applies. The amount of the tax varies according to the duration of the certificate of airworthiness and is due at the time of the issuance/renewal of the certificate. In case of a certificate lasting less than a year the tax due is equal to 1/12 of the amounts indicated below multiplied by the number of months of duration (see Article 16, twelfth paragraph).
According to Article 16, eleventh paragraph, the tax is applied at proportional rates based on the aircraft’s maximum takeoff weight, and is due on an annual basis as follows:
| Aircraft maximum takeoff weight (MTOW) | Tax rate (in Euros) |
| Up to 1,000 kg (2,200 lb) | 0,75 per kg |
| Up to 2,000 kg (4,400 lb) | 1,25 per kg |
| Up to 4,000 kg (8,800 lb) | 4,00 per kg |
| Up to 6,000 kg (13,220 lb) | 5,00 per kg |
| Up to 8,000 kg (17,600 lb) | 6,65 per kg |
| Up to 10,000 kg (22,000 lb) | 7,10 per kg |
| Above 10,000 kg (22,000 lb) | 7,60 per kg |
Special regime applies to helicopters that are subject to the tax at twice the rate of fixed–wing aircraft, using the same weight scale. In addition, gliders, hot air balloons, sailplane, motor-glider and aerostat are subject to the Tax in a fixed amount of 450 Euros per year.
Concerning non-Italian registered aircraft, unless an exemption applies, the tax is applicable to aircraft stationed (even if the stay is not continuous) in Italy for more than 6 months, during the course of one year. The tax is due from the month following the 6 months time limit. Once the aircraft station beyond the 6 months limit, the tax is due for the amount of 1/12 of the rates indicated in Article 16, eleventh paragraph, if the stay is less than a year. The tax must be paid before leaving the Italian territory. Such regime does not apply to foreign States aircraft, State military aircraft, and the categories listed in Article 16, fourteenth paragraph.