Zephyrus Capital Aviation Partners 1D Ltd and Others v Fidelis Underwriting Ltd and Others
| Jurisdiction | England & Wales |
| Judge | Mr Justice Henshaw |
| Judgment Date | 28 March 2024 |
| Neutral Citation | [2024] EWHC 734 (Comm) |
| Court | King's Bench Division (Commercial Court) |
| Docket Number | Case No: CL-2022-000637 |
In the Matter of the Russian Aircraft Operator Policy Claims (Jurisdiction Applications)
[2024] EWHC 734 (Comm)
THE HONOURABLE Mr Justice Henshaw
Case No: CL-2022-000637
and the cases listed in Annex A
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
KING'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Rolls Building, Fetter Lane,
London, EC4A 1NL
Tom Weitzman KC, Michael Holmes KC, Josephine Higgs KC, Philip Hinks, Kate Holderness, Sarah Martin, Stephen Du, Henry Moore, and Douglas Grant (for all the MLB Claimants), Stephen Hofmeyr KC (for the Aircastle and Carlyle MLB Claimants), Harry Matovu KC and Kyle Lawson (for the Avenue MLB Claimants), Alex Milner KC (for the Voyager MLB Claimants), Robert-Jan Temmink KC and Tom Nixon (for the Merx MLB Claimants), Chirag Karia KC, Peter Stevenson and Benjamin Joseph (for the GTLK MLB Claimants) (all instructed by Morgan, Lewis & Bockius UK LLP)
Stephen Midwinter KC, Charlotte Tan and Edward Ho (instructed by Herbert Smith Freehills LLP) for the AerCap Claimants
Alistair Schaff KC, Alexander MacDonald and Frederick Alliott (instructed by Clifford Chance) for the Clifford Chance Claimants
Matthew Reeve KC and Joseph England (instructed by McGuireWoods London LLP) for Genesis GASL Ireland Leasing A-1 Limited
Christopher Loxton (instructed by Fieldfisher LLP) for the Fieldfisher Claimants
David Quest KC (instructed by Wordley Partnership) for Shannon Engine Support Limited
Guy Blackwood KC, Aidan Christie KC, John Bignall, James Hatt, Tom Bird and Robert Ward (instructed by Weightmans LLP, DAC Beachcroft LLP, DLA Piper UK LLP and The Air Law Firm) for the Hull All Risks Defendants
Bankim Thanki KC, Andrew Neish KC, Akhil Shah KC, Susannah Jones, Kate Livesey, Rangan Chatterjee, Nick Daly and Max Kasriel (instructed by Holman Fenwick Willan LLP, CMS LLP and Shoosmiths LLP (local agent of Kennedys Legal Solutions Pte Ltd)) for the Hull War Risks Defendants
Hearing dates: 7, 8, 12 and 13 February 2024
Draft judgment circulated to parties: 18 March 2024
Approved Judgment
| (A) INTRODUCTION | 4 |
| (B) FACTUAL BACKGROUND | 7 |
| (1) Ownership and leasing of aircraft | 7 |
| (2) The insurance and reinsurance contracts | 13 |
| (3) Events following (further) Russian invasion of Ukraine | 28 |
| (a) Western Sanctions | 28 |
| (b) Russian Counter-Measures | 30 |
| (4) Notices of Cancellation of reinsurance | 33 |
| (5) Notices of Termination of Leasing | 34 |
| (6) Basis of insurance claims | 36 |
| (7) The jurisdiction challenges | 37 |
| (8) Settlements | 38 |
| (9) The LP Claims pending in the Commercial Court | 39 |
| (10) Ultimate ownership of the Claimants | 41 |
| (C) ISSUES | 43 |
| (D) PRINCIPLES: STAYS AND FAIR TRIALS | 46 |
| (1) The test | 46 |
| (2) Relevance of foreseeability | 51 |
| (3) Degree of likelihood or risk of an unfair trial | 59 |
| (4) Relevance of whether jurisdiction clause freely adopted | 65 |
| (5) Approach to evidence | 68 |
| (6) General approach | 71 |
| (E) LIKELY SUBSTANTIVE ISSUES | 74 |
| (F) STATE INTERFERENCE/SELF CENSORSHIP | 85 |
| (1) The expert evidence | 85 |
| (2) Influences on the judicial process in Russia | 88 |
| (a) Dr Gould-Davies's evidence | 89 |
| (b) Person X's evidence | 93 |
| (c) Professor Antonov's evidence | 95 |
| (d) Mr Pirov's evidence | 105 |
| (e) Mr Zubarev's evidence | 107 |
| (f) (Provisional) conclusions from this evidence | 107 |
| (3) Financial interest: Russian reinsurers | 107 |
| (4) War risks perils: war, invasion and hostilities | 113 |
| (5) War risks perils: confiscation, seizure etc. and political action | 129 |
| (6) Cape Town issue: validity of Russian decrees. | 145 |
| (7) Direct/subrogated claims against Russian airlines or state | 147 |
| (G) APPROACH TO OTHER PARTICULAR ISSUES | 150 |
| (1) Right to terminate leasing | 150 |
| (2) Right to repossession/redelivery of Aircraft | 156 |
| (H) “UNFRIENDLY FOREIGN STATE” CASES | 157 |
| (1) Rejection/exclusion of claims | 158 |
| (2) Interim measures | 171 |
| (3) Invalidation of contracts/payments | 180 |
| (4) Enforcement of judgments | 182 |
| (5) Discussion | 185 |
| (6) Beneficial ownership of the present Claimants | 186 |
| (I) FORESEEABILITY OF UNFAIR TRIAL | 189 |
| (J) OVERALL CONCLUSION ON FAIR TRIAL ISSUES | 192 |
| (K) MULTIPLICITY OF PROCEEDINGS | 193 |
| (1) Principles | 193 |
| (2) Application | 198 |
| (L) PUBLIC POLICY | 205 |
| (1) Principles | 205 |
| (2) Application | 215 |
| (M) GENUINE DESIRE FOR TRIAL IN RUSSIA | 219 |
| (1) Principles | 219 |
| (2) Application | 220 |
| (N) OTHER FACTORS | 221 |
| (O) EVIDENTIAL POSITION OF ALL RISKS REINSURERS AND CERTAIN CLAIMANTS | 222 |
| (P) COLLATERAL CONTRACT CLAIMS | 225 |
| (Q) CONCLUSIONS | 227 |
| ANNEX A: PARTIES AND CLAIMS | 229 |
| ANNEX B: LP PROCEEDINGS CAUSATION/LOSS ISSUES | 234 |
(A) INTRODUCTION
This judgment concerns challenges to the jurisdiction of the English court to hear claims under Operator Policies in respect of aircraft which have remained in Russia following its February 2022 invasion of Ukraine.
The Claimants are owners and lessors, financing banks (or their assignees) or managers of certain aircraft and/or aircraft engines which were leased to Russian airlines under leases governed by English, Californian or New York law (the “ Leases”).
The Leases generally required the lessee airlines to insure the aircraft in respect of hull all risks and war risks. Unless the insurer was itself part of the London and international market, the Leases also generally required the lessees to ensure that reinsurance was obtained, for the vast majority of the insured risk, under contracts of reinsurance on the same terms as the underlying insurance and containing a cut through clause (“ CTC”).
Following the February 2022 invasion of Ukraine, the Claimants issued default and termination notices under Leases, relying on various grounds for termination, which differed from case to case but which included the imposition of sanctions on Russia by the EU and/or the UK and/or the USA (“ Western Sanctions”), material adverse change, failure to maintain insurance/reinsurance required under Leases and/or failure to pay sums due under Leases.
Following the issue of such termination notices, the Russian airlines failed to return the aircraft to the Claimants, and they remain in Russia some two years later. That has led to market-wide litigation, relating originally to 306 aircraft together with 40 engines, and now (after some settlements) to 208 aircraft together with 31 engines. The sums claimed in the present proceedings were originally around US$13.5 billion and are now, after settlements, around US$9.7 billion.
The Russian airlines insured the aircraft, against hull all risks and war risks, with Russian insurance companies, who reinsured the vast majority of their risk with various London and international market reinsurers, including the Defendants and Russian reinsurers. I refer to the Defendants as the “ All Risks Defendants” and the “ War Risks Defendants”, according to the categories of cover they have reinsured in the present cases.
The Claimants say they were provided with the certificates of insurance and certificates of reinsurance, as required under the Leases, which are said by the Claimants to evidence the terms of the insurance taken out by Russian airlines with Russian insurers and the reinsurances taken out by Russian insurers with reinsurers including the Defendants. The certificates of insurance refer to insurance contracts incorporating AVN67B or similar wording, under which the Claimants' interests as “ Contract Parties” were noted and the Claimants were included as “ Additional Insureds”. The certificates of reinsurance also refer to and/or set out and/or summarise the terms of the CTCs said to be contained in the reinsurance contracts.
The Claimants bring claims against the Defendants (relying inter alia on CTCs in or said to be in the reinsurance policies) in respect of the loss of the aircraft, under the all risks cover and/or the war risks cover.
The Defendants have disclosed reinsurance slips which they say contain and/or evidence the reinsurance policies. Each such slip identifies the Russian airline as the Original Insured and its Russian Insurer as the Reinsured, and contains Russian governing law and Russian exclusive jurisdiction clauses (“ EJCs”) on which the Defendants rely. These slips also include a summary of some of the terms of the underlying insurance purchased by Russian airlines, and, in most cases, a CTC.
The Claimants say they did not receive copies of the reinsurance slips at the time the reinsurances were placed, and note that the certificates of reinsurance do not refer to the jurisdiction clauses contained in the reinsurance contracts. However, save as noted below, the Claimants accept for the purpose of the present applications that the Defendants have a good arguable case that:
i) the reinsurance policies in relation to which the Claimants bring their claims contain the Russian law and jurisdiction agreements on which the Defendants rely;
ii) the underlying insurance policies placed by the Russian airlines contain Russian law and jurisdiction agreements;
iii) as a matter of Russian law, the Russian law and jurisdiction agreements are valid; and
iv) as a matter of Russian law, the Claimants' claims referred to above would fall within the scope of the Russian law and jurisdiction clauses.
The AerCap Claimants have confirmed that, for the purposes of the present applications (a) they accept that the Defendants have shown a good arguable case that there are Russian law and jurisdiction clauses in the reinsurances and those of the...
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