Irish aircraft lessors take Russian losses claim to court

Irish-based AerCap and Carlyle Aviation Partners are among several aircraft lessors due in a London court on Friday in a key stage in their legal battle with insurers over jets held by Russian airlines.

Aircraft lessors, including leading Irish players, lost billions of euro after ending deals with Russian carriers last year to comply with sanctions imposed following the country’s invasion of Ukraine.

However, insurers are refusing to pay claims against aircraft stranded in Russia as a consequence of the war and the sanctions, sparking multiple lawsuits in London, where most underwriters are based.

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A judge will hear arguments from 10 lessors against their insurers’ efforts to have the case tried in Russia, under whose laws the original contracts were signed.

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The case management hearing is likely to result in a ruling on how courts should deal with the jurisdiction issue, rather than a decision on the question itself.

The English court has amalgamated about 40 claims by lessors including AerCap, Carlyle, Avenue Capital, FTAI Aviation and Merx Aviation against insurers including AIG, AXA, Allianz, Liberty, Lloyd’s and others.

The dispute over where the case should be tried turns on the fact that the airlines that leased the aircraft insured them with Russian companies, which then reinsured these policies in London.

Both the insurance and reinsurance contracts also cover the lessors, which own the aircraft in the first place, and so carry the biggest risk should the planes be lost.

The lessors argue that taking their cases to Russia is unworkable amid the geopolitical tension sparked by the country’s war with Ukraine, and that they would be unlikely to get a fair hearing there.

The insurers maintain that the original contracts were agreed under Russian law and provide for that country’s courts to adjudicate on any disputes, so the cases should be heard there. Consequently, they say that the English courts have no jurisdiction to hear the claims.

The lessors maintain that this is simply an attempt to avoid paying out on what are legitimate insurance policies.

Aircraft stranded

Lessors lodged insurance claims last year after it became clear that they could not recover aircraft leased by Russian airlines following the invasion in February 2022.

While companies managed to recover some planes, large numbers of aircraft were left stranded, forcing the industry to write off billions of euros.

They also warned investors that, while they believed they had legitimate insurance claims, there was no guarantee that the underwriters would pay out.

Russian carriers continued to fly the aircraft but stopped paying rent once the leases were terminated. The lessors regard the planes as lost.

If the English High Court decides to deal with the case, any hearing is unlikely to go ahead until later this year or possibly early 2024. Neither AerCap nor Carlyle would comment on the matter.