CLAWBACK CLAUSE IN AIRCRAFT LEASE AGREEMENTS

Clawback clauses are common in financial agreements, investment contracts and others such as termination lease agreements, as the purpose of this clause is to allow one party to recover money, assets, or benefits that were previously transferred to another. Thus, this clause provides protection in case of loss of profit.

Clawback clause in the Spanish Insolvency Law

Under the Spanish Insolvency Law (“Real Decreto Legislativo 1/2020, de 5 de mayo, por el que se aprueba el texto refundido de la Ley Concursal”) a clawback clause (“acción rescisoria concursal”) is contemplated under article 226.

By applying this provision, it allows an insolvency administrator to reverse certain transactions carried out by the debtor before the insolvency declaration, if they are deemed detrimental to the bankruptcy estate.

Autonomy and the Role of Manufacturers and Software Providers

With autonomous technology, the focus on liability may need to shift toward manufacturers and software developers. For instance, if a crash results from a software malfunction or failure in the drone’s decision-making algorithms, accountability could extend to the developers of these systems. This shift aligns with precedents set in other industries involving high levels of automation, such as autonomous vehicles, where software reliability and data integrity have been focal points of liability discussions.

The Cape Town Convention on international interests in mobile equipment could also be relevant, particularly regarding the financing and leasing of drone taxis. The convention includes provisions that influence asset ownership, leasing rights, and the conditions under which an owner or lessor can exercise control. In the case of autonomous drones, these provisions could serve as a basis to determine whether liability extends to parties holding proprietary or financial interests in the aircraft​.

• Relevant aspects of the clawback clause in accordance with the Spanish Insolvency Law

The main requirements in order to apply for the benefits under article 226 of the Spanish Insolvency Law are as follows:

1. Prejudicial act: there shall be a prejudicial act that should harm the insolvency estate (“masa activa”). The law presumes that certain acts can be automatically considered as prejudicial, unless proven otherwise, such as transfers of assets or early payments of debts not yet due.
2. Debtor: such prejudicial acts shall be carried out by the insolvent debtor.
3. Two years prior to the insolvency situation: the transaction shall have been carried out within the two years prior to the date of the insolvency declaration as well as those made from that date to the date of the declaration, even if there was no fraudulent intent.

• How could this affect the context of aviation leases?

A clawback action in an aircraft lease agreement could arise when the termination of the lease, return of the aircraft, or any related financial transaction unfairly benefits the lessor to the detriment other creditors.

For example, an airline (lessee) leases an aircraft from a lessor under a lease agreement. The lessee is in an insolvent situation and six months before filing for such insolvency, lessee negotiates with lessor the early termination of the lease and returns the aircraft to the lessor. If this transaction disproportionately benefits the lessor while other creditors remain unpaid, it could be subject to clawback and rescission under article 226 of the Spanish Insolvency Law.

However, if the early termination agreement was negotiated and agreed in good faith, provided that the lessee was not in financial distress, a clawback action would likely not apply in that case.

Additionally, if a lease agreement includes clawback clauses for a specific lessor, it may create an imbalance between creditors.

Therefore, clawback clauses are applied to prevent unbalanced treatment between creditors in insolvent scenarios and contemplate the possibility of reversing certain transactions that unfairly benefit specific parties.