Specific Features of Financial Lease Agreements for Air and Water Transport

Under the sanctions imposed on the Russian transport sector, the procedures governing the conclusion, performance, and termination of financial lease agreements for air and water transport in Russia are undergoing change. The paper examines the qualifying characteristics of financial lease agreements for air and water transport, as the legal characterization of such agreements is crucial to the allocation of the risk of deterioration or loss of transport vehicles and to the determination of the parties' rights and obligations. The paper substantiates the conclusion that, by their legal nature, such agreements constitute either financial lease agreements or bareboat charter agreements with a subsequent purchase option (bareboat charter agreements on terms of leasing), where the lessor acquires a transport vehicle for the lessee from a seller under a supply contract, as well as where a watercraft or aircraft is constructed under an independent contractor agreement. The author outlines possible approaches to negotiating the specific terms of financial lease agreements for air and water transport in order to ensure a balance of the parties' interests and describes civil-law mechanisms capable of encouraging transport-sector entities to enter into and duly perform such agreements.

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