Billions up in the air: Commercial Court decides Russian aircraft lessor policy claims

As part of the bicentennial celebration of Thomas Cooper’s founding in 1825, Penningtons Manches Cooper is spotlighting a different standout case conducted by the firm across its two centuries of English legal practice for each month of 2025.

This final instalment focusses on the US$4.5 billion litigation known as the ‘Russian aircraft lessor policy claims’ [2025] EWHC 1430 (Comm), which arose out of the detainment of 147 commercial aircraft and 16 aircraft engines in Russia, following its invasion of Ukraine.

War returns to Europe

At dawn on 24 February 2022, there commenced the largest military conflict in Europe since World War II. As many as 190,000 Russian troops, supported by hundreds of tanks and armoured vehicles, invaded Ukraine’s borders along four major axes of advance, aiming for the cities of Kyiv, Kharkiv, Mariupol, and Chernihiv. Ten minutes after a pre-recorded speech was aired at 04.50 am, in which President Putin declared a ‘special military operation’, a coordinated missile and airstrike campaign began against Ukrainian cities, military bases, and airfields. A naval assault commenced at 09.00 am had, by the afternoon, led to the capture of Snake Island; crucial to blockading the port city of Odessa.

International condemnation was swift. Within days, the US, EU, and UK had implemented far-reaching economic sanctions and export controls, which included prohibitions on aircraft leasing and the supply of commercial aircraft and components to Russian interests or for use in Russia.

‘The aircraft are staying here’

On 26 February, the owners of aircraft leased to Russian airlines began issuing notices to recover their assets from Russian territory pursuant to the terms of their leases. A meeting of Russian airlines also took place, attended by the head of the nation’s Federal Air Transport Agency and the government Minister of Transport, Mr Savelyev. According to a pro-Kremlin source, the outcome of that meeting was that Russia’s largest airline, ‘Aeroflot will not give the planes to European leasing companies and will raise the issue of their buyback.’

Other repossession efforts met with mixed success. A total of 78 aircraft were seized outside of Russia, contributing to the rapid contraction of its commercial aviation sector, which also faced severe restrictions on access to replacement parts for its Airbus and Boeing fleets. Responding to the developments, FATA broadcast an announcement on 5 March 2022 recommending that Russian airlines suspend outgoing flights of leased aircraft effective from 6 March, and incoming flights from 8 March, citing the ‘high risk of detention or arrest of Russian airline companies’ aircraft abroad’.

Then, on 10 March 2022, Russia implemented Government Resolution No.311 banning the export of foreign-leased aircraft and aircraft engines. Further new legislation enabled FATA to issue certificates of airworthiness for foreign-leased aircraft on its own registry and for those aircraft to continue operating in Russia. According to Minister Savelyev, Russia had by 22 March 2022 ‘already transferred almost 800 aircraft; we insure them with a Russian insurance company. The aircraft are staying here.’

Commercial Court

A series of policy claims commenced by six of the leasing companies against their war risk and all-risk insurers, in respect of the loss of a total of 147 aircraft and 16 aircraft engines, were tried concurrently by the Commercial Court. Dubbed by the media as a ‘mega trial’, the 50-day hearing was one of the most complex cases to come before the court in recent years. The trial culminated in a 230-page judgment in what Mr Justice Butcher described as ‘by any standards… an unusually demanding piece of litigation’.

Penningtons Manches Cooper acted for the insurer Swiss Re International SE.

Contingent cover

Aercap Ireland Ltd and the other lessor claimants had insured their aircraft and engines under all-risk and war risk policies, providing both contingent cover and possessed cover.

The leases also obliged the lessee airlines to procure insurance on operator policies for the assets, and for the lessors to be named as additional assureds. The lessors’ contingent cover was stated to respond if the lessor ‘is not indemnified’ under the operator policy, whereas the possessed cover was intended to respond when the aircraft were in the possession of the lessors.

Aercap’s primary case was that it was entitled to recover under the contingent cover. The submissions made by war risk insurer Fidelis, and adopted by several other insurers, argued that the contingent cover should respond only to losses falling within the scope of the operator cover that the lessees were obliged to procure, and that cover would not indemnify a loss of possession by the lessor resulting from conversion of the aircraft by the lessee, or by war risk perils which did not deprive the lessee of the aircraft.

However, Mr Justice Butcher was not convinced that it was market practice to align the contingent cover with the scope of the operator cover stipulated for by the lease. Rather, ‘participants in the market regarded contingency cover broadly as ‘back up’ cover; that it would not respond if the Principal Insurance responded; and that the principal risks it typically covered were that the Principal Insurance was not properly in place or was defective.’

Alternatively, Fidelis argued that there should be no contingent cover where the lessee remains in possession. In other words, any claim for loss by deprivation should be assessed from the perspective of the lessee. The judge rejected this contention on the basis that it was at odds with the terms of the policy:

‘Given that what the leases require is that the lessor should be insured in respect of its own interests under a composite policy against all risks and war risks, in my judgment the leases do require the provision of cover which, at least in some circumstances, will respond where the lessee remains in possession of the aircraft or equipment.’

The insurer Chubb European Group SE argued that there was a valid war risk claim under the operator policy, and this ought to preclude the possibility of any recovery under the contingent policy. Chubb contended that the contingency trigger wording ‘is not indemnified’ ought to mean ‘is not indemnified because there is no entitlement to an indemnity under the Principal Insurance’.

Interpreting the natural meaning of the words ‘is not indemnified’ in their commercial setting, the judge determined that the lessors only needed to show that a claim ‘is not paid’ under the operator policy, and were only required to take reasonable steps to try and obtain payment, which the claimants had already done.

Other war risk insurers had argued that the assureds should have to show a practical inability to recover under the operator policy; for example, by being unable to enforce a judgment against the insurer. However, Mr Justice Butcher held that such an onerous requirement would need to have been clearly expressed in the policy wording.

The grip of the peril

Turning to the questions of when the aircraft and engines were lost, and whether such loss was caused by an insured peril, the judge concluded that the loss occurred on 10 March 2022, when Russia’s GR311 ban on exporting foreign-leased aircraft came into force. The ban was held to be the proximate cause of the loss, and constituted a ‘restraint’ or ‘detention’, which were named among the ‘Government Perils’ in the claimants’ war risk cover. As liability for war risks was excluded from the all-risk cover, it followed that the loss was not proximately caused by an all-risk peril.

Mr Justice Butcher found support for this conclusion in contemporaneous pronouncements made by President Putin and Minister Savelyev, from which it was apparent that GR 311 was the legally binding, definitive step taken by Russia’s government to prevent the return of the aircraft, superseding earlier interim measures. GR 311 was enacted at a time when a quick end to the war was no longer plausible and when Western sanctions, and Russian countersanction measures, were expected to persist for the foreseeable future. Furthermore, as Russia is an authoritarian regime, the airlines were expected to obey GR 311 irrespective of their views on the matter.

The timing of this proximate cause brought into play an argument advanced by some insurers to the effect that there was no insurance in existence on 10 March 2022, as those insurers had issued notices of review, which had already brought about the cancellation of cover. The claimants responded by relying on the ‘grip of the peril’ doctrine, which confirms that an assured that is deprived of possession of the insured property by an insured peril before the policy expires may still claim for a total loss even if they have not yet been irretrievably deprived, provided such deprivation follows in the ordinary course of events.

The judge found in favour of the claimants on this issue, as the irrecoverable loss of the aircraft on 10 March 2022 occurred as part of a sequence of events which followed in the ordinary course from earlier measures arising during the policy period: ‘there were operative restraints or detentions prior to 10 March 2022, namely of the Aeroflot Group’s aircraft and engines from 26 February 2022, and of all relevant aircraft and engines from 5 March 2022 by reason of the FATA Message.’

Sanctions

The war risk insurers contended that, regardless,  EU and US sanctions made it illegal for them to pay an indemnity to the claimants.

However, Mr Justice Butcher found that US instrument General Prohibition 10 did not prohibit the existence of the insurances, nor the making of payments under them. In any event, the US sanctions experts had been in agreement that an authorisation to pay the indemnity could have been sought from the US Department of Commerce’s Bureau of Industry and Security. There was no good reason why an authorisation would not have been granted. One of the claimants, Dubai Aerospace Enterprise Ltd, had even already obtained authorisations to engage in activities, such as moving aircraft and engines, and entering into settlements.

It was also held that the payment of an indemnity would not fall foul of articles 3c(2) and (4) of EU Regulation No. 833/2014, as insurance provided to non-Russian lessors is not provided ‘to any person, entity or body in Russia or for use in Russia’.

Fidelis had submitted that if the payments were sanctioned, it would be conducive to the purpose of EU sanctions, as it would help inflict adverse consequences and costs on Russia, and degrade its economy. Allegedly, if such insurance was enforceable, the lessors might be less determined to pursue the lessees for the recovery of their aircraft. The judge found that argument unconvincing, as the insurers would be subrogated to the lessors’ rights of action, and there was no reason to suppose they would be less motivated to pursue the lessees than the lessors would themselves.

To be concluded

The Russian aircraft lessor policy claims together constitute one of the most high-value proceedings the Commercial Court has adjudged in its 130-year history. The contingent cover war risk insurers have sought permission to appeal on a range of issues (permission being denied by Mr Justice Butcher) and the outcome is awaited from the Court of Appeal. In addition, some of the contingent war risk insurers have issued contribution claims against the operator policy war risk insurers. Those claims are at an early stage.

The claims under the operator policies are being separately managed, albeit those claims have been discontinued against the operator policy all-risk insurers. The operator trial is listed for October 2026.

The Ukraine war continues, with its four-year anniversary approaching, and is estimated to have already caused a million casualties.