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, enforcement, aircraft repossession and export.
The 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.
The most important lesson is therefore not that the financiers eventually won.
The 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.
The objective of an aircraft financing transaction is not obtaining a judgment years later.
The objective is recovering and exporting the aircraft immediately after default.
For 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.
Lesson 1: Treat Vietnam Enforcement as a Separate Transaction Workstream
Many international financiers focus heavily on financing documentation governed by English law or New York law.
Typical attention is devoted to:
- lease agreements;
- facility agreements;
- security assignments;
- guarantees;
- trust structures; and
- governing law provisions.
While these documents are essential, they are only part of the transaction.
Every aircraft financing involving Vietnam should contain a dedicated Vietnam enforcement workstream that is developed simultaneously with the financing documents.
This workstream should address:
- aircraft registration;
- deregistration procedures;
- export procedures;
- regulatory approvals;
- powers of attorney;
- recognition of security interests;
- interaction with aviation authorities; and
- practical recovery logistics.
The enforceability package should be viewed as equally important as the financing package itself.
Lesson 2: Ensure a Fully Effective Irrevocable Deregistration and Export Request Authorisation
One 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.
This document allows a designated creditor or authorised representative to request deregistration and export of the aircraft following default.
However, many transactions incorrectly assume that merely obtaining the authorisation is sufficient.
Best practice requires:
- proper execution;
- proper filing with the Civil Aviation Authority of Vietnam;
- confirmation of acceptance;
- regular verification that the authorisation remains effective;
- identification of the authorised party; and
- periodic review during the life of the transaction.
The FW Aviation dispute demonstrates that recovery planning cannot rely on a single document.
The entire enforcement chain must function effectively.
Lesson 3: Obtain Comprehensive Powers of Attorney
Aircraft recovery involves far more than deregistration.
Financiers should secure comprehensive and durable powers of attorney covering:
- deregistration applications;
- export applications;
- customs procedures;
- maintenance records;
- technical documentation;
- insurance administration;
- airport coordination;
- aircraft storage arrangements; and
- ferry flight approvals.
These powers should survive termination and remain effective throughout enforcement proceedings.
Many recovery efforts fail not because legal rights are unclear but because practical implementation becomes difficult.
Lesson 4: Create Immediate and Unambiguous Termination Rights
One of the key issues before the English High Court was whether lease termination was valid.
The Court confirmed that the financiers possessed immediate termination rights following payment defaults.
Future transactions should ensure that default provisions are drafted with maximum clarity.
Documentation should provide that:
- non-payment constitutes an immediate event of default;
- termination rights arise automatically or immediately upon notice;
- no unnecessary additional enforcement event is required;
- no ambiguity exists regarding acceleration rights; and
- remedies become available without procedural uncertainty.
The stronger the drafting, the smaller the scope for later disputes.
Lesson 5: Draft Assignment Provisions for Future Market Conditions
A central argument advanced by VietJet concerned whether FW Aviation qualified as a permitted transferee under the financing documents.
Although the English courts ultimately ruled in favour of FW Aviation, the dispute highlights the importance of broad assignment language.
Aircraft financing documents should expressly permit transfers to:
- banks;
- financial institutions;
- aircraft lessors;
- private credit funds;
- distressed asset investors;
- special situations funds;
- securitisation vehicles;
- investment funds; and
- affiliates.
The aviation finance market continues to evolve rapidly.
Documentation should anticipate future financing structures rather than relying on narrow definitions.
Lesson 6: Build Relationships with Relevant Authorities Before Problems Arise
Many financiers only begin interacting with local authorities after default occurs.
This is often too late.
Before funding, financiers should ensure that procedures and expectations are understood regarding:
- aircraft deregistration;
- aircraft export;
- customs requirements;
- airport access;
- storage arrangements;
- maintenance records; and
- operational coordination.
The objective is not obtaining preferential treatment.
The objective is ensuring procedural certainty.
When default occurs, uncertainty becomes the enemy of enforcement.
Lesson 7: Establish an Aircraft Recovery Plan Before Closing
Every major aircraft financing should include a recovery protocol prepared before funds are disbursed.
The protocol should identify:
Day 1 – declaration of default;
Day 2 – grounding instructions;
Day 3 – insurance notifications;
Day 4 – export preparations;
Day 5 – technical inspections;
Day 6 – ferry permits;
Day 7 – aircraft relocation.
The precise timetable will vary, but the principle remains constant.
Recovery planning should occur before default, not after default.
Lesson 8: Obtain Vietnam Legal Opinions Focused on Practical Enforceability
Traditional legal opinions often address:
- corporate capacity;
- authority;
- validity; and
- enforceability.
These opinions remain important but are not sufficient.
Financiers should also require analysis of:
- practical deregistration procedures;
- export mechanics;
- administrative challenges;
- local litigation risks;
- injunction risks;
- expected timelines; and
- potential regulatory obstacles.
Practical enforceability often determines recovery outcomes more than theoretical legal validity.
Lesson 9: Structure Transactions to Minimise Dependence on Litigation
The FW Aviation case demonstrates an important reality.
Winning litigation does not recover aircraft.
Operational enforcement recovers aircraft.
The best aircraft financing structures are designed so that:
- rights are clear;
- deregistration is straightforward;
- export procedures are established;
- powers of attorney are available; and
- operational control can shift rapidly after default.
Court proceedings should be the contingency plan.
They should never be the primary strategy.
Lesson 10: Conduct Regular Enforcement Stress Tests
Every aircraft financing transaction should be subjected to periodic enforcement reviews.
Financiers should ask:
What happens if the airline stops paying tomorrow?
What happens if aircraft continue operating after default?
What happens if local proceedings are initiated?
What happens if shareholders challenge regulatory actions?
What happens if export procedures are delayed?
If clear answers do not exist, the transaction remains exposed.
The FW Aviation matter demonstrates that these risks are not theoretical.
They are real and foreseeable.
What Financiers Should Avoid
Several mistakes should be avoided.
First, financiers should not assume that obtaining a favourable foreign judgment automatically resolves enforcement issues.
Judgments establish rights.
Execution recovers assets.
Second, financiers should not rely exclusively on an Irrevocable Deregistration and Export Request Authorisation.
Additional documentation and operational planning remain essential.
Third, financiers should not wait until default occurs before developing enforcement strategies.
Preparation before default is far more effective than reaction after default.
Fourth, financiers should avoid narrow assignment language that restricts future transfers.
The modern aviation finance market increasingly includes private credit funds, distressed asset investors and alternative financing providers.
Finally, financiers should not underestimate the possibility of parallel local proceedings, regulatory challenges or administrative delays.
These risks should be anticipated from the beginning.
Conclusion
The FW Aviation litigation should not simply be viewed as a creditor victory.
It should be viewed as a practical lesson for the global aviation finance community.
The financiers ultimately recovered the aircraft and obtained substantial monetary judgments. Nevertheless, recovery required years of litigation, multiple proceedings and significant enforcement efforts.
The central lesson is therefore clear.
Success in aircraft finance is not measured by obtaining a judgment.
Success is measured by recovering and exporting the aircraft quickly, lawfully and predictably when default occurs.
For financiers investing in Vietnam, the most effective strategy is not preparing to win a lawsuit.
It is structuring the transaction so that a lawsuit becomes unnecessary.
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For more information on the above, please do not hesitate to contact the author Dr. Oliver Massmann under [email protected]. Dr. Oliver Massmann is the General Director of Duane Morris Vietnam LLC.