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Enforcement of Security

Aviation Finance & Leasing - Our partner responds

Basic measures to enforce a security interest over an aircraft in Panama.

How may the owner lawfully impede the mortgagee’s right to enforce?

The mortgage may be executed judicially or extrajudicially when the parties have agreed to the latter form of enforcement in the contract.

The mortgagee may pursue either executive or special judicial proceedings for the enforcement of its rights under the mortgage.

If the debtor has repaid at least one-half of the loan, the court will decree the sale of the aircraft in accordance with the terms of executive proceedings, except that there will only be one auction and the base amount will be the sum owed plus costs and expenses. If there is no bidder willing to pay the price, the aircraft will be adjudicated to the mortgagee. The obligations arising under the mortgage are extinguished by the judicial sale.

If the debtor has paid less than one-half of the amount owed, the aircraft will be adjudicated to the mortgagee and the obligation secured will be extinguished. The debtor may, within 10 days of being notified of the sale, request the sale of the aircraft to a party other than the mortgagee, provided that it deposits with the court an amount sufficient to cover the expenses of the sale, and satisfies the court that it will pay the balance owed in the event that the sale price does not cover the amount owed. If the mortgage allows the mortgagee to take possession and administer the aircraft, the court may allow the mortgagee to take over the administration of the aircraft pending its judicial sale.

When the parties agree in the contract to an extrajudicial execution, they must appoint a legal representative who must take the necessary steps to notify the execution to the mortgagor. Once the mortgagor receives the notice of execution, he or she may deliver the aircraft to the mortgagee or file an opposition to the execution process.

In the case of extrajudicial execution, the value of the aircraft will be fixed by an expert appraiser appointed jointly by both parties in the contract or in a later agreement.

The aircraft may be detained by way of an ex parte application.

According to the Aeronautical Law the following claims have priority over all other claims:

  • national taxes over the aircraft;

  • aircraft mortgage;

  • the salaries and other social benefits due to the crew; and

  • the amounts owed to the air transport sector on account of the operations of the aircraft in its last flight.

The priority among several mortgages on the aircraft will be determined by the date of registration at the Public Registry.

More info on Aviation Finance & Leasing in Panama – Contact:

María de Lourdes Marengo (

PATTON MORENO & ASVAT, the experienced legal guidance you can trust.

- An extract of the Aviation Finance & Leasing Guide 2021, originally published by Getting the Deal Through / Lexology


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