Overview

The English High Court has recently held that:

- it is the lex situs (that is, the laws of the jurisdiction where the relevant asset is situated at the time that the interest is created) which determines whether a property interest, such as a mortgage, is effectively created over that asset;

- if the asset is capable of registration and is registered in a different jurisdiction to the lex situs, a mortgage which is valid under the laws of the state of registration but invalid under the domestic laws of the lex situs jurisdiction will be ineffective in England;

- English law will look only to the domestic laws of the lex situs jurisdiction without reference to its conflict of laws rules in deciding the issue of validity of a mortgage.

The decision will have an impact on how mortgage security in relation to aircraft financing transactions is structured and is of particular importance to banks seeking to establish, for Basel 2 purposes, that they have legally enforceable and effective security over an asset which is enforceable in every relevant jurisdiction.

Click on “view briefing” to read more about the significance of this judgment.