High Court Allows Aircraft Lenders to Recover Losses from Planes Held in Russia

High Court Affirms Aircraft Lenders’ Right to Recover Losses on Planes Held in Russia

The High Court in London has delivered a landmark ruling affirming that aircraft lenders are entitled to recover losses on planes stranded in Russia, a decision with significant implications for the global aviation and insurance industries. This judgment could trigger multi-billion-dollar payouts from insurers and reshape how the sector manages geopolitical risks.

Background of the Dispute

The case arose from nearly 500 foreign-owned aircraft, valued at over $10 billion, that became immobilized in Russia following the country’s invasion of Ukraine in 2022. Russian authorities enacted legislation prohibiting the export of aircraft and related equipment, effectively preventing lessors from reclaiming their assets. In response, insurers and reinsurers initially denied liability, leading to extensive legal challenges from some of the world’s largest aircraft leasing companies.

A test case was brought before the High Court involving major lessors such as US-Irish giant Aercap, Dubai Aerospace Enterprise (DAE), Merx Aviation, KDAC Aircraft Trading, and Falcon 2019-1 Aircraft. The defendants included prominent insurers like AIG, AXA, Allianz, Liberty, and Lloyd’s. The 12-week trial, which concluded in January, attracted intense scrutiny from stakeholders across the aviation and insurance sectors.

Legal Issues and Court Findings

Central to the dispute was whether the loss of the aircraft resulted from commercial decisions by Russian airlines or was directly caused by Russian government action. This distinction was critical because ‘All Risks’ insurance policies cover losses from any cause except those defined as ‘War Risks,’ while ‘War Risks’ policies specifically cover losses arising from acts of war or government intervention.

In a detailed 230-page judgment delivered on Tuesday, the court determined that the aircraft were lost to the claimants as of March 10, 2022, the date when Russian legislation formally blocked their export. The judge concluded that the losses were attributable to government action, thereby entitling lenders to recover under their ‘War Risks’ policies rather than ‘All Risks’ coverage.

Implications for the Aviation and Insurance Markets

The ruling is expected to have far-reaching consequences. Aeroflot, Russia’s flagship carrier, is now positioned to finalize settlements with Western insurers and leasing firms for the remaining 36 planes out of a total of 228 aircraft it agreed to purchase. Moreover, the decision may establish a precedent for other airlines and lessors navigating geopolitical uncertainties, particularly as the industry continues to contend with the repercussions of Russia’s actions, including the downing of flight MH17 and recent losses from Ukraine’s drone strikes on Russian military aircraft.

Market analysts anticipate that the judgment will prompt insurers and lessors to reassess their exposure to political risks and the adequacy of their insurance coverage in volatile regions. The ruling is likely to intensify scrutiny of political risk insurance and the financial resilience of companies operating in high-risk environments, as the industry seeks greater clarity and protection against future geopolitical shocks.

Three years after the planes were seized, the High Court’s decision provides long-awaited clarity in one of the most complex and high-stakes disputes in recent aviation history.