What expedited, exceptional procedure is available to the financial lessor to recover the leased asset without filing a full lawsuit before the Economic Court?
If a financial lease contract terminates (whether through rescission or for any other reason) without renewal or the lessee purchasing the asset, and the lessee fails to fulfill the obligation to return the asset, Law No. 176 of 2018 (regulating financial leasing and factoring activities) permits the lessor to submit the lease contract—previously registered with the Financial Regulatory Authority—directly to the clerk’s office of the competent Economic Court. This allows for the issuance of an executive instrument based on the contract, bypassing the need to file a full substantive lawsuit that could take months, in accordance with Article 280 of the Law on Civil and Commercial Procedures.
Does the lessee have the right to object to this directly issued executive instrument, and what is the applicable timeframe?
Yes, any interested party (primarily the lessee) has the right to file an objection to the enforcement proceedings. However, this must be done within a very short timeframe—no more than three days from the date of being served with the executive instrument and the formal notice to perform. This necessitates prompt legal action by the lessee or their accountant immediately upon receipt of the notice, as failure to act within this brief period results in the actual recovery of the asset, making it difficult to halt the process subsequently.
How does a chartered accountant calculate the “accelerated depreciation” rate for assets subject to financial lease contracts, and why does this calculation sometimes become a point of dispute?
The law establishes an accelerated depreciation rate specifically for finance lease assets—set at one and a half (1.5) times the standard rate for assets with a useful life of less than five years—to incentivize this type of financing. In practice, disputes arise when the contracting parties disagree on the classification of the asset’s useful life (i.e., whether it is less than five years or not); this classification directly impacts the asset’s remaining book value when calculating compensation due upon early termination—a purely technical matter handled by each party’s certified accountant.
May the lessee directly sue the supplier or contractor regarding defects in the leased asset, or is their right of action limited to suing the leasing company?
The law permits the lessee to directly pursue the supplier or contractor with all claims that would have been available to the lessor under the contract concluded between the lessor and the supplier—with the exception of a claim to rescind the supply contract itself, a right reserved solely for the lessor. Conversely, the lessor (leasing company) remains liable for its own acts or conduct that prevent the lessee from utilizing the asset, or for errors in the initial selection of the leased asset, unless the lessee has acknowledged in writing that they inspected the asset and received it in accordance with the contract terms.
How is Islamic finance leasing (Ijara) treated from an accounting perspective, and is it subject to the same rules?
No, as the law explicitly stipulates that the accounting standards for Islamic banks and financial institutions apply to any lessor engaging in Islamic-style leasing (Ijara)—distinct from the standard accounting rules applicable to conventional financial leasing. Consequently, a chartered accountant must first precisely determine the contractual structure before applying the accounting standard that corresponds to the nature of the contract.