Global Aircraft Owners Contest Moscow Jurisdiction in Battle for Stranded Assets

Prominent global aircraft lessors such as AerCap and Carlyle Aviation Partners are intensifying their legal battle over claims against insurers for their aircraft currently marooned in Russia. The major contention is the venue of the hearing, which the insurance companies propose should be in Moscow.

The Irish lessor AerCap, alongside other lessors, assert that their claims for lost aircraft and engines, unreturned by Russian airlines post-Ukraine invasion, are legitimate. Following the imposition of sanctions against Russia, these Western lessors ended their aircraft leases. However, the airlines have not returned the planes, continuing their operation instead.

Approximately 500 aircraft, valued around $10 billion, were stranded in Russia when sanctions were enforced. Some planes have been retrieved by the lessors, but roughly 400 remain in Russia, leading these companies to file insurance claims last year.

A recent ruling by a London High Court judge mandated that the claims of ten lessors, including industry leaders like AerCap, Carlyle, Avenue Capital, and Merx Aviation, against multiple insurers such as AIG, would be consolidated into a single hearing scheduled for February next year.

The impending hearing is set to resolve the question of jurisdiction.

The leased aircraft were insured by Russian airlines through domestic companies, which then reinsured the risk with Western insurers. These insurers argue that as the initial contracts were agreed under Russian law, the cases should be adjudicated in Moscow.

However, the lessors counter that moving their cases to Russia is unrealistic due to the ongoing Ukrainian conflict.

In a written statement presented in court last Friday, AerCap underlined that the crux of the jurisdictional challenges is to ascertain whether the English court should permit the claims to proceed in England regardless of any Russian jurisdiction clauses. This is premised on the perceived risk of an unjust determination of the claims in Russia.

Carlyle Aviation Partners echoed this sentiment in their submission, stating compelling reasons to not enforce the jurisdiction agreements. They contend that a fair trial in Russia would not be guaranteed and enforcing the alleged agreements could contravene public policy.

A representative of Carlyle Aviation expressed dissatisfaction with the insurers, stating that they have been violating their contractual obligations for months and neglecting to cover losses. The spokesperson decried the proposal to hold the hearings in Moscow as infeasible and an exploitation of the Ukraine crisis, thereby evading the settlement of rightful claims.