Aircraft owners step up fight against Russia insurance hearings

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Some of the world’s largest aircraft owners, including AerCap and Carlyle Aviation Partners, which are pursuing claims against insurers for planes stranded in Russia, are preparing to step up their fight against the cases being heard in Moscow.

AerCap, the world’s largest aircraft lessor, and others believe they have valid claims for the loss of their aircraft and engines that they have been unable to recover from Russian airlines in the wake of the invasion of Ukraine last year. Although the western lessors terminated the leases on the aircraft after sanctions were imposed on Moscow, the carriers have refused to hand over the planes and are continuing to fly them.

More than 500 aircraft, worth an estimated $10bn, were stuck in Russia at the time sanctions were imposed. Lessors managed to retrieve some of the planes but around 400 are still in the country and the companies subsequently lodged insurance claims last year.

A London High Court judge on Friday ruled to combine claims for ten lessors, including AerCap, Carlyle, Avenue Capital and Merx Aviation, against several insurers, including AIG, into one combined hearing to be held in February next year. 

The hearing will now determine the issue of jurisdiction. 

Russian airlines that leased the aircraft had insured them with domestic companies which then reinsured the risk with western insurers. Those insurers have maintained that as the original contracts were agreed under Russian law, the cases should be heard in Moscow. 

The lessors have argued that taking their cases to Russia is impractical given the continuing conflict with Ukraine. 

In a written submission presented in court on Friday, AerCap noted that challenges around the jurisdiction would focus on whether, “even if the exclusive Russian jurisdiction clauses apply, the English court should exercise its discretion to allow the claims to proceed in England in any event, on the basis that there is a real risk that it will not be possible for the parties to obtain a just determination [of the claims] in Russia”.

Carlyle Aviation Partners similarly argued in its submission that “there are strong reasons why the court should not enforce those [jurisdiction] agreements, namely that the claimants would not receive a fair trial in Russia and/or that it would be against public policy to give effect to the alleged agreements”.

A spokesperson for Carlyle Aviation said insurers had been “in breach of their contractual obligations for many months and have failed to provide coverage for losses”.

“To then insist the cases should be heard in Moscow is not only completely unworkable given the grave situation that exists today, it is also a gross exploitation of Russia’s invasion of Ukraine and further avoids paying out on legitimate claims.”

Several insurers contacted by the FT, including AIG and Lloyd’s of London, declined to comment. AerCap was unavailable for comment.