Aircraft leasing companies have won a multibillion-dollar lawsuit against insurers in relation to planes stranded inRussiaafter the invasion of Ukraine in February 2022.
The high court in London ruled in favour of six leasing firms including Ireland’s AerCap and Dubai Aerospace Enterprise (DAE) that had brought a $4.7bn (£3.4bn) lawsuit in one of the biggest insurance disputes ever heard in the UK.
In a 230-page judgment on Wednesday, Mr Justice Butcher ruled that the planes had been “lost” in March 2022 and the aircraft leasing companies could therefore recover losses from their “war risks insurers” AIG, Lloyd’s, Chubb and Swiss Re, as the cause of the loss was “an act or order of the Russian government”.
It is a substantial blow for insurers, which have also faced a separate £2.5bn claim in Dublin. The two cases have been called“mega trials”and involved hundreds of barristers and solicitors involved.
Butcher said the central question to the case was whether the cause of any loss of the aircraft was “a commercial decision of the Russian airlines leasing the aircraft, in which case the all risks insurers would be liable to the claimants, or an act or order of the Russian government, in which case the war risk insurers would also be liable”.
Western sanctions forced aircraft leasing companies to cancel their contracts with Russian carriers by 28 March 2022, initially leaving the industry with losses estimated to be $10bn.
Butcher concluded that “the aircraft have been lost” because Russiahad already seized them before the sanctions deadline, as their “loss occurred on 10 March 2022” when a piece of Russian legislation banned the export of aircraft and aircraft equipment from Russia.
Initially, Russia faced demands to return the “stolen” planes but Moscow refused, prompting the claims in Dublin and London. Many of the planes were re-registered by Russia without their owners’ consent and sold on to Russian airlines.
Butcher said insurers were not prevented by EU or US sanctions from indemnifying the claimants for the loss of aircraft that had been leased to Russian airlines.
The London trial, which ended in February, related to 147 aircraft and 16 standalone engines that the companies could not retrieve after war broke out.
AerCap, the world’s largest aircraft lessor, brought a claim in respect of 116 aircraft and 15 engines, according to the court papers, while DAE was seeking to recover losses from the stranding of 22 aircraft. Court papers show DAE managed to recover three but the rest were “lost” in Russia on 10 March 2022.
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The four other companies claiming over the remaining aircraft were Dubai’s Falcon and Genesis, Merx Aviation and KDAC Aviation Finance, which all have Dublin offices.
Butcher described the case as “an unusually demanding piece of litigation” and said he hoped both sides could agree an order based on his conclusions.
AerCap’s law firm Herbert Smith Freehills Kramer said the judgment secured $1.035bn for the leasing firm, “in addition to substantial recoveries achieved in prior settlements”.
Ireland’s high court was told last month that all the cases in the Dublin court case had either been settled or were in the course of being settled.