Security Rights and Aircraft Liens in Finland
Security Rights and Aircraft Liens in Finland
Aircraft financing, leasing and maintenance arrangements in Finland typically involve several layers of security. Understanding how security rights, retention rights and aircraft liens operate under Finnish law is essential for airlines, lessors, MRO providers and financiers. This article provides a practical overview of the key concepts, priority rules and enforcement mechanisms applicable to aircraft-related security interests in Finland.
Lien Rights Under Finnish Law
The exact equivalent of a lien under Finnish law remains unclear. In Finland, the term is often used to describe security rights arising from rights of retention, explicit statutory provisions, or hypothecation/pledge. For the purposes of this article, a lien under Finnish law refers to a statutory right entitling a creditor to a preferred claim over the value of a specific object. This right is protected against title changes without requiring a declaration of intent from the parties involved. Our aviation and transport law specialists will guide you through every aspect of aircraft liens and aviation law in Finland.
Distinction Between Lien and Right of Retention
Theoretically, a lien and a right of retention differ. A right of retention allows a party to retain possession of an object as security for payment of claims related to that object. Similar to a lien, the right of retention remains unaffected by changes in title and, under certain conditions, enables the sale of the retained property to satisfy the claim. In practice, this closely aligns with the legal effects of a lien.
Aircraft Liens in Finland
Definition of Aircraft and Registration Requirements
Under the Finnish Aviation Act (864/2014), an aircraft is defined as a device deriving lift from air reactions rather than from ground or water surfaces. Aircraft with Finnish nationality must be registered in the Finnish Transport Register, managed by Traficom. Registration requirements include clear identification, even for aircraft under construction.
Priority Claims and Security Rights
The Aircraft Mortgage Act (211/1928) establishes a priority order for certain claims, including:
- Claims secured by a creditor's right of retention.
- Damage claims under the Aviation Act.
These rights, while not matching the strict legal definition of a lien, produce similar legal effects and are treated as liens in this context.
Registration of Aircraft Liens
Finland does not provide a specific registration mechanism for aircraft liens as such. However, certain rights, such as unpaid service charges, can be recorded in the Aircraft Register. Priority liens as defined in the Aircraft Mortgage Act automatically outrank registered mortgages without requiring separate registration.
Salvage Liens on Aircraft
The Aviation Act mandates search and rescue operations, with the state compensating participants for injury or damage under the Damages Act (412/1974). However, inconsistencies in legislative updates mean that salvage costs no longer enjoy a statutory lien under the current framework. This has implications for parties engaging in salvage and recovery operations involving aircraft.
Contractual Liens and Hypothecation
Finnish law does not recognise contractual liens in a strict sense. Instead, hypothecation provides a comparable security arrangement. Hypothecary rights are formalised through registered mortgages, which create valid security only when entered into the Aircraft Register with the aircraft owner’s written consent. In practice, aircraft mortgages are a central tool in aircraft financing structures.
Enforcement and Priority of Aircraft Liens
Priority Order of Claims
The Aircraft Mortgage Act sets the following priority order for claims:
- Retention rights with accrued interest.
- Damage claims under the Aviation Act.
- Registered mortgages, ranked by the order in which they are filed.
This hierarchy is crucial in insolvency scenarios and distressed enforcement, where multiple creditors seek recovery from the same aircraft.
Enforcement Mechanisms
Retention rights can typically be enforced through a public auction without court intervention, provided statutory conditions are met. For damage liens or mortgages, a court judgment is required before the aircraft can be sold through public auction or voluntary sale. The proceeds are then distributed between creditors according to the statutory priority rules.
Unpaid Airport Charges and Detention Rights
Airport operators may detain aircraft for unpaid airport fees and charges, but they cannot sell the aircraft without a court order. While departure on scheduled international flights cannot be prevented solely due to non-payment, the right of detention serves as a practical tool to secure outstanding fees and incentivise settlement.
When to Contact an Aircraft Lien Specialist in Finland
Navigating the interaction between statutory liens, retention rights, aircraft mortgages and contractual security arrangements requires careful analysis of Finnish aviation and security law. Early legal input is particularly important in cross-border transactions, repossession scenarios and insolvency situations involving aircraft or aircraft components located in Finland.
Our Transport, Maritime & Logistics service provides focused advice on aircraft liens, aviation law and related security structures under Finnish law. We support airlines, financiers, operators and service providers in structuring robust security, assessing enforcement options and managing risk.
Our team offers tailored advice to safeguard your interests and optimise your legal strategy. Contact us today for expert support in aviation and transport law.
Disclaimer: This article is for informational purposes only and does not constitute legal advice. For case-specific guidance, please contact our lawyers.