i Aviation

Denmark is a small country, but the air traffic industry in Denmark is nevertheless of quite some size. Copenhagen Airport is generally the Nordic hub for international traffic with just short of 30 million international passengers, making it by far the largest international airport in the Nordic region.

The sizeable Scandinavian Airlines System Denmark-Norway-Sweden (SAS) is historically the main Nordic airline, with its joint Danish, Swedish and Norwegian ownership, although it is meeting strong competition from Norwegian Air Shuttle, and, while other Danish-incorporated air carriers are of a number and size as would be expected for a country of Denmark’s size, charter-operation airlines have found a good foothold.

Denmark covers the home-ruled territories, Greenland and the Faroe Islands. The airborne connections to these territories are indispensable parts of Denmark’s infrastructure, and the air traffic within the territories – great parts of which are fairly inaccessible – is vital.

Apart from operating the main route, Copenhagen–Kangerlussuaq, Greenland’s flag carrier, Air Greenland, is one of the largest helicopter operators in Europe.

The oil and wind industry in Denmark also requires helicopter support operations.

There is no specialised aviation finance community in Denmark, and by far most aircraft are financed through foreign credit providers. Danish aircraft finance deals involving Danish credit providers are generally done on a ‘relationship’ basis as opposed to being asset-driven deals. On the operational leasing side, the situation is the same, with no real aircraft lessor community, but with one major exception, the Danish-incorporated Nordic Aviation Capital, being the world’s largest turboprop lessor.

ii Shipping

Denmark is a leading nation in the shipping industry and has a global maritime industry with established shipping activities and advanced technologies. Moreover, Denmark is among the leading nations in terms of the development of eco-friendly solutions that minimise the shipping industry’s effect on the environment.

Denmark has a strong tradition within the shipping and maritime industry, and the Danish shipowning companies are among the most influential and advanced both in Denmark and within the global shipping arena. Throughout the past 150 years, globalisation has also been a major factor, and large shipowning companies such as ØK and Maersk have been driving factors behind the globalisation and vast internationalisation of the Danish transport and shipping industry.

Denmark offers a highly stable and favourable regulatory framework for the shipping industry, and the Danish government pursues a long-term and sustainable industrial policy, which offers long-term advantages and beneficial conditions. The regulatory framework, particularly the Danish International Register of Shipping and the Danish tonnage tax regime, is among the decisive factors that make Denmark a popular shipping nation and preferred flag state for both shipowners and charterers. The Danish tonnage tax regime was introduced in 2002, and the scope was extended to include capital gains on the sale of vessels in June 2007. Furthermore, a new Tonnage Tax Act was passed in late 2015, under which ship owners may decide to quantify their taxable income pursuant to the new rules.2 Furthermore, Denmark has a beneficiary taxation system for sailors.3 Thus, the offshore sector has been a growing market in Denmark for many years.

The scale of Danish shipping reached a historic high in 2016. This can be illustrated by means of numbers and statistics: Denmark is the seventh-largest shipping nation in the world; the Danish fleet carries roughly 10 per cent of all goods that are transported globally; around 4 per cent of the world merchant fleet is operated by operators domiciled in Denmark; and roughly 5 per cent of the tonnage in the world is controlled in Denmark.4

As regards the ship finance industry, Denmark has a long history of ship finance and there are a number of strong and well-established players in the ship finance community.

Alongside the Danish-incorporated banks that specialise in ship finance, where Danske Bank, Nordea and Danish Ship Finance are particularly notable, there is a strong presence by foreign banks that also provide finance to Danish shipping companies, the majority of those being European, but with Asian banks also well represented.

Some Danish shipowners have turned to the bond market and in recent years successfully issued bonds through the Danish, European, US and – not least – Norwegian markets.

iii Rail

For rail operations, Denmark is typical for Europe with the major passenger operator, DSB, being state-owned and with smaller, regional operators generally being owned by the municipalities and local interests. Historically, rolling stock has been and is still to a large extent owned by the operators, and self-financed.

The Danish market has, however, been undergoing a liberalisation process, and Denmark has now had the presence of private operators for quite some years, in respect of both intercity and regional traffic.

With the liberalisation of rail operations came the operational rail lessors, where the English rolling stock operating companies are still dominant, but German rolling stock lessors have also made their way into the Danish market.

The operational leasing model seems to be the most popular financing model, and the lending market to Danish operators does, accordingly, not seem to be significant. No Danish financiers offer specialised rolling stock leasing or lending.


Apart from generally applicable laws on banking, contracts, insolvency, etc., there are no specific laws governing the financing of aircraft, ships or rolling stock. Security rights, including mortgages, over Danish-registered aircraft and ships are, however, governed by legislation, but there is no specific legislation governing such rights over rolling stock assets.

Denmark has recently adopted the Cape Town Convention on International Interests in Mobile Equipment (the Cape Town Convention) and the Protocol thereto on Matters specific to Aircraft Equipment. There are no immediate plans by the government of Denmark to propose the adoption of the Cape Town Convention’s protocol on rail equipment, and it would anyhow require that the rail community request the adoption, which it has not yet done.

For aviation finance and leasing documentation, English and New York law are probably the most common choices of governing law, except in respect of mortgages over Danish-registered aircraft, vessels and other Danish assets where Danish law is often opted for. With a substantial established Danish ship finance community, Danish-law ship finance documentation from Danish financiers to Danish shipowners is quite common, but there has also been a tendency for these deals to move towards English law. For ship finance by foreign banks or by syndicates including both Danish and foreign banks, English law seems to be the preferred choice. For rail leasing, there is probably a 50–50 split between Danish and English law, but that is closely connected to the fact that the main passenger operator, DSB, is state owned and is generally reluctant to enter into contracts governed by laws other than Danish law.

i Domestic and international law and regulation

Operation, maintenance, safety and security in respect of Danish-registered aircraft are governed by the Danish Air Navigation Act and various EU regulations, including European Aviation Safety Agency regulations, and the registration of aircraft and rights over same are governed by the Danish Air Navigation Act, the Danish Cape Town Act (incorporating the Cape Town Convention and the Aircraft Protocol thereto) and the Act on Rights over (Smaller) Aircraft.

Registration of aircraft with the Danish Aircraft Nationality Register, which is an owners register, brings the aircraft within the jurisdiction of Denmark, and Danish regulations as to operation, airworthiness, crew, etc. are applicable. With the adoption of the Cape Town Convention, registration of rights over aircraft (and engines) is now generally handled through the International Registry established under the Cape Town Convention and its aircraft protocol. The convention came into force in Denmark on 1 February 2016 and Denmark has ratified the convention in compliance with the Organisation for Economic Co-operation and Development qualifying declarations required to obtain the Cape Town Convention discount from export credit agencies, financing or guaranteeing the finance of aircraft. For smaller aircraft, the Cape Town Convention does not apply and rights over such aircraft may be registered with the Danish Register of Rights over (Smaller) Aircraft, maintained by the Danish Civil Aviation Administration.

Denmark is also a party to the 1948 Geneva Convention on Recognition of Rights in Aircraft and, subject to the Cape Town Convention, is obliged to respect and uphold certain qualifying rights over aircraft, provided that they are duly registered in another Geneva Convention state. Denmark has also ratified the 1933 Rome Convention on Precautionary Arrest of Aircraft restricting the arrest of aircraft in certain circumstances, subject, however, to the Cape Town Convention.


Generally, Danish shipping is regulated by the Danish Merchant Shipping Act, and by international conventions and regulations and directives from the EU; the tonnage and seafarers’ tax regimes are also important constituents to the Danish legislative regulation of shipping.

Registration of ships and security rights over ships are governed by the Danish Merchant Shipping Act. Registration of merchant ships take place either in the Danish Ships Registry or the Danish International Register of Shipping; registration with the latter bestows certain advantages on ships operating internationally.

An unusual feature in Danish ship finance is the Danish Ship Finance Institute (DSF), which is statutorily governed by the Act on the Ship Finance Institute and generally funds itself by way of bond issues on NASDAQ OMX Nordic. DSF lends directly to shipowners solely for the purpose of financing ships.

Apart from the Danish Ship Finance Institute, no special legal framework on ship finance applies in Denmark.

Denmark ratified the 1952 Arrest Convention and the 1967 Brussels Convention on Maritime Liens and Mortgages, and has implemented both in the Danish Merchant Shipping Act.


The operation of rolling stock is governed by the Danish Railway Act and various EU regulations. The establishment and certain corporate and finance aspects in respect of DSB, the state-owned rail operator, is governed by special legislation.

There are no specific regulations in respect of financing, leasing and encumbering rolling stock, neither are there any Danish registers of title to or security rights over rolling stock, but the encumbering of rolling stock is subject to general rules on security over assets.


i Regulatory capital and liquidity

Danish financial institutions are generally regulated by the Danish Financial Business Act. Also, the Capital Requirements Regulation (CRR) applies in Denmark. The Capital Requirements Directive (CRD IV) has been implemented into Danish law by way of the Danish Financial Business Act. The CRR regulates, inter alia, the calculation of capital base, risk-weighted assets, liquidity and large exposures, whereas the CRD IV concerns, inter alia, process matters in determining solvency requirements. The CRR and CRD implement Basel III.

ii Supervisory regime

Danish banks and other financial institutions are supervised by the Danish Financial Supervisory Authority.

Lending is not a regulated activity in Denmark and lenders need not to operate under a bank licence. If, however, the lender is also licensed as a bank (i.e., if the lender also conducts regular banking activities, such as holding money deposits), its lending activities will be governed by the capital and liquidity requirements applicable to such banks.


i Security

International interests over Danish registered aircraft may be registered with the International Registry established under the Cape Town Convention and the Aircraft Protocol.

Registration of international interests in respect of airframes and engines (mortgage or similar) with the International Registry is necessary to obtain protection against claims from third parties, including any bankruptcy estate of the aircraft owner.

The ranking of rights against a Danish-registered aircraft (i.e., their order of priority to the aircraft and any sale proceeds) will depend on the actual circumstances giving rise to the rights. Rights will generally be ranked according to the time when the encumbrances arose or were perfected, and so the position can be stated tentatively only. However, generally, the ranking would be as follows:

  • a salvage charges and indispensable expenses (indispensable expenses covering extraordinary expenses for the preservation of the aircraft) pursuant to the Air Navigation Act (this encumbrance falls away if not registered with the International Registry or, as the case may be, the Registry of Rights over (Smaller) Aircraft within three months of the relevant event);
  • b statutory charges for public duties if set out in the enactment in relation to the subject public duty (currently, there are no such enactments in place);
  • c certain levies of execution based on detention rights relating to betterments and preservation of the aircraft;
  • d registered rights; and
  • e unregistered rights.

In addition to a mortgage, it is usual to assign the insurances that are taken out or will be taken out by the owner or operator of an aircraft, and certain other types of security may be normal, depending on the structure of the transaction. Such assignment should also be registered with the International Registry.


Under Danish law, three different types of mortgage deeds can be registered over Danish registered vessels:

  • a an ordinary mortgage deed;
  • b an owner’s mortgage deed; and
  • c a letter of indemnity.

Each of these has to be duly registered with the Danish Ship Registry or, as the case may be, the Danish International Register of Shipping, in order to obtain protection against claims from – and/or acquisitions by – third parties, including the bankruptcy estate of the owner of the vessel. A mortgage deed usually includes – besides the vessel itself – machinery, marine engines, radio equipment and other inventory acquired by the owner. If the vessel is registered as a newbuild, the mortgage also includes the materials for the building of the vessel. The provisions on claims ranking are found in the Merchant Shipping Act, which are based on the 1967 Brussels Convention on Maritime Liens and Mortgages. The relevant factor is the nature of the claims, which are divided into three categories with the following ranking: maritime liens (e.g., wages, port or canal duties, personal injury and third-party damage claims), registered rights and other claims.

In addition to a mortgage deed, it is common to assign insurances and charter earnings and certain other types of security, depending on the structure of the transaction, including pledges over earnings accounts and, in special purpose vehicle finances, share charges.


As in many other jurisdictions, Denmark does not maintain a register of title or rights in respect of rolling stock. The procedure for mortgaging rolling stock is the same as applies generally to moveables.

The owner of any rolling stock would grant the mortgage in favour of the lender and the mortgage could then be registered with the Personal Registry (a register of, inter alia, chattel mortgages for both corporate and natural persons). If the owner of the rolling stock is a foreign company, there may be certain practical challenges to having the mortgage registered in the Personal Registry, but it is and has proved possible.

In addition to a mortgage, it is typical to make an assignment of the insurances that are taken out or will be taken out by the owner or operator of the rolling stock, insofar that the owner or operator is not self-insured, which is generally the case for state or municipality-owned operators. Certain other types of security may be normal depending on the structure of the transaction.

ii Financing of contracts

Danish airlines typically seek operational leasing or unsophisticated debt finance structures for the financing of their fleet, including new aircraft. In respect of new aircraft, an airline would generally either (1) contract with the manufacturer itself and put in place prior to delivery finance for sale or leaseback, and maybe also arrange for pre-delivery payment finance; or (2) have a lessor order the aircraft from the manufacturer or, as many lessors have ordered aircraft without having identified the lessee, commit to take delivery of the ordered aircraft upon its delivery from the manufacturer.


Newbuildings contracted by a shipowner would typically be financed by traditional ship finance debt at a size equivalent to a certain percentage of the ship’s contract price or market value (in recent years generally being between 60 and 80 per cent). The payment of the newbuilding contract price is typically split up in instalments, often payable on (1) contract signing, (2) steel cutting, (3) keel laying, (4) launch and (5) delivery, so the shipowner may take out pre-delivery instalment finance, which would be against an assignment of the shipbuilding contract and such refund guarantees as may have been provided to the shipowner as security for the yard’s repayment obligation in respect of instalments if the ship is not delivered (in a timely manner).


The operator would typically contract for the rolling stock with the manufacturer itself and finance through state appropriations for state-owned operators and own funds for municipality-owned operators, possibly with state support. Alternatively, either upon having contracted for the rolling stock with the manufacturer or in connection with the contracting, the operator may arrange with a lessor or financier to novate into the contract, take delivery of and lease the rolling stock to the operator.

iii Enforcement

Self-enforcement of security over vessels and rolling stock is not available under Danish law and any out-of-court sale is subject to the mortgagor’s consent. Generally, a power of attorney to sell rendered by the mortgagor to the mortgagee prior to the default triggering the security enforcement may not be upheld by the Danish courts, whereas such powers rendered in connection with the triggering default would generally be upheld.

Enforcement of assets such as vessels and rolling stock would typically be commenced by way of arresting the asset. For arrests in Denmark, the arrest rules are laid down in the Danish Administration of Justice Act, and the Merchant Shipping Act for certain ship arrests. Arrests of these three types of assets generally follow the same provisions, and fall under the jurisdiction of Denmark’s bailiff’s courts that are located at the district courts.

Under Danish law, a vessel may be arrested in accordance with the rules set forward in the Merchant Shipping Act and the Danish Administration of Justice Act. Pursuant to the Merchant Shipping Act, a vessel can only be arrested for a maritime claim against the owner of the vessel. Section 91 of the Merchant Shipping Act lists exhaustively those types of maritime claims that allow for the arrest of the vessel as security for the claim under the Merchant Shipping Act. However, under the Danish Administration of Justice Act, a vessel can be arrested as security for any claim.

With the ratification of the Cape Town Convention, self-help remedies were introduced (e.g., in respect of the sale of an aircraft by the mortgagor). Procedures have still to be established in respect of the practical handling of the self-help remedies set out in the Cape Town Convention, but it is expected that some court assistance will be required.

iv Arrest and sale

The general prerequisites for the bailiff’s court to make an arrest are as follows:

  • a the creditor must have a claim for the payment of money for which there presently is no means of execution. Thus, if statute grants to the creditor of a claim an immediate right of execution (e.g., for airport and air navigation charges), arrest is only possible if the claim is due and unpaid; and
  • b it must be shown that the prospect of obtaining payment at a later stage will otherwise be significantly reduced.

Before the arrest of the aircraft, ship or rolling stock, the court may require the creditor to provide adequate security (as calculated by the court) for any possible damage or inconvenience to the owner of the asset that may arise from the arrest.

Arrest does not entitle the creditor to sell the asset, but it prevents the use of the asset in a way that could jeopardise the creditor’s rights. It may also be possible for the owner to avoid the arrest of the asset if sufficient security is provided.

If arrest is made or has been prevented by the owner by way of providing security for the claim, the creditor will have to issue a writ against the owner within a certain period after the arrest order has been rendered (or the arrest has been prevented) to have the court confirm that the arrest was legally and validly made for a valid claim against the owner (or confirm that had the arrest not been prevented, it would have been justified).

With respect to aircraft, the Danish Arrest of Aircraft Act (implementing the 1933 Convention on Precautionary Arrest of Aircraft) limits arrest in certain circumstances; for instance, aircraft that are exclusively appropriated for state service, actually in service on a regular public transport line (together with the indispensable reserve aircraft), or appropriated for the carriage of persons and goods for reward, where the aircraft is ready to start on that carriage, are prevented from being arrested. The act does not apply to arrests of aircraft registered in a state that is not a party to the said 1933 Convention. Furthermore, the Act does not apply to aircraft objects to which the remedies in the Cape Town Convention and the Protocol apply.

Judicial sale

The rules on forced sale of moveable property, which includes aircraft, ships and rolling stock, are laid down in the Danish Administration of Justice Act Chapters 49–50. The rules set out below also apply to the forced sale of stock of spare parts mortgaged in connection with an aircraft.

A trustee that is seeking a forced sale of moveable property from a bankruptcy estate must follow the same procedure as a creditor. Prior to commencing a forced sale, the creditor must give the debtor one week’s prior written notice with demand for payment of the outstanding amount.

A forced sale must be announced in the Danish Official Gazette prior to the sale and the bailiff’s court will usually require that an announcement be inserted in one or two relevant newspapers; this announcement must be inserted twice. If the subject moveable property is an aircraft or a ship and is registered in a foreign registry, the sale must further be announced at the place of the registry, and information also sent to the registry. The bailiff’s court informs the owner and any other known rights holders in respect of the moveable property of the auction.

The bailiff’s court conducts the forced sale. If the bailiff’s court finds that a better price can be obtained it can order that a second and final auction be held. Usually, a set of standard terms is used but it is recommended that individual prepared terms be worked out when it is a sale of these asset types.

iv Insolvency regulation in Denmark

Denmark is not a party to the European Insolvency Regulation, and insolvency proceedings initiated in Denmark will thus be subject only to the provisions of the Danish Insolvency Act, which incorporates two formal proceedings: winding up proceedings, and reorganisation or administration proceedings.


i Recent cases

There are no recent cases specifically relating to finance for aircraft, ships and rolling stock.

ii Developments in policy and legislation

Since the ratification of the Cape Town Convention and the aircraft protocol thereto, there have not been developments in policy or legislation.

iii Trends and outlook

As indicated above, operational leasing seems to be the most favoured finance model and indications are that the operational lease market will continue to grow.

SAS, the largest operator in Denmark, reflagged part of its Danish and Swedish fleets to the Cape Town Convention Member State Norway, reportedly following a request from some of its lenders. With ratification of the Protocol to the Cape Town Convention, Denmark may experience a growth in Danish-registered aircraft.


The Danish shipping market has generally been in consolidation mode, although new, rapidly expanding players have set sail in recent years. The Danish shipping community appears to be moving out of the global financial crisis. During the crisis, Denmark experienced a great deal of activity in shipping debt trading, something that is likely to come to an end in a more consolidated market.

As a positive to come out of the crisis, there has been an increasing amount of funding from third-party players such as private equity funds, and it seems likely that private equity players will play a more important and decisive role in the future of the shipping industry, including as finance providers.


If the Rail Protocol to the Cape Town Convention is ratified, it will enhance the possibilities of attracting rolling stock finance to Denmark. Also, according to the media, there have been discussions between the Ministry of Transport and DSB, the state-owned operator, concerning certain internal restructurings, which may also create rolling stock finance possibilities.


1 Morten L Jakobsen is a partner at Gorrissen Federspiel.

2 The consolidated act of 6 August 2015 No. 945.

3 The Sailors Taxation Act of 27 May 2005 No. 386.

4 Statistics from the Annual Logbook of 2016 of the Danish Shipowners’ Association and Danish Shipping Statistics of November 2016 available at the Danish Shipowners’ Association website: www.shipowners.dk/en/om-os/danmarks-rederiforening/.