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High Court begins hearing mammoth case over indemnity for aircraft worth $2.5bn stranded in Russia

World’s second and third largest lessors, SMBC and Avolon, along with BOC Aviation, CDB Aviation, NAC Aviation and Hermes are plaintiffs in case

A trial involving claims by aviation leasing firms over insurers’ alleged refusal to provide indemnity, which has opened before Ms Justice Eileen Roberts at the High Court, involves an estimated 180 lawyers.

Tue Jun 11 2024 - 18:02

The High Court has begun hearing what is expected to be a months-long trial involving claims by aviation leasing firms over insurers’ alleged refusal to provide indemnity after billions of euro worth of aircraft were detained in Russia following its invasion of Ukraine.

The world’s second and third largest lessors, SMBC and Avolon, along with BOC Aviation, CDB Aviation, NAC Aviation and Hermes, are the six plaintiff groups bringing proceedings against dozens of insurers and reinsurers such as Lloyds, Chubb, AIG and Fidelis.

The plaintiffs say when the Russians invaded Ukraine on February 24th, 2022, the aircraft were subject to aircraft lease agreements with Russian airlines.

Following the imposition of EU sanctions on Russia, the leasing firms sought the return of the aircraft, but they were not returned.

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The firms are seeking orders and declarations including that they are entitled to cover under either “war risk” or “all risk” policies.

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The insurance firms deny the all risks or war risks policies are engaged. It is argued by some insurers that there has not been a physical loss of the planes yet, or that the planes are still in the course of being repossessed.

Alternatively, it is claimed that the leasing agreements were voluntarily ended or that western sanctions prevent insurers from providing cover.

The case, which opened before Ms Justice Eileen Roberts, involves an estimated 180 lawyers.

It is scheduled to last a number of months, and special facilities have been provided in the Phoenix House Courtroom to accommodate the large number of lawyers, including remote access via the Trialview online facility.

Paul Gallagher SC, opening the case on behalf of the plaintiffs on Tuesday, said the Russian invasion had the “most catastrophic consequences” for his clients because the Russian state made a decision to detain the planes.

These planes were of “immense value for each of the clients, which had a very significant effect on their business”, counsel said.

Apart from a very limited number of returns, the planes have been retained for more than two years, he said.

There were a number of “striking features” about the case, including the manner in which the defendants had dealt with it, he said.

While there has been a general denial of the claims, there had been “varied defences” put forward which in many cases were contradictory and in some actually absurd, he said. Some of them cannot agree on the meaning of their own insurance policies, he said.

It was not what was to be expected from insurance companies of many years’ standing, he said.

Almost every issue that could be raised by the insurers had been raised, including whether some of the plaintiffs were in fact insured, he said.

While as a matter of law the defendants were entitled to adopt the position they have, their approach and the variety of arguments being made by them was confusing and “bewildering”, counsel said.

The plaintiffs were being told to prove every aspect and every issue, he said. Some of the differences between the parties are what the plaintiffs say are semantic and not of substance and would not result in a different outcome, he said.

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