Executive Summary
This judgment concerns insurance claims by six aircraft leasing companies (AerCap, DAE, Falcon, KDAC, Merx, Genesis) over aircraft and engines leased to Russian airlines that have not been returned following Russia’s February 2022 invasion of Ukraine. The lessors seek indemnity under their “Lessor Policies” (LPs), specifically under “Contingent Cover” and “Possessed Cover” provisions. The case addresses the interpretation of these coverages amid complex geopolitical sanctions regimes and the impact of Russian government actions and Western sanctions on aircraft repossession.
Sanctions Highlights
- The aircraft lessors’ claims are directly affected by EU, UK, and US sanctions imposed on Russia post-February 2022 invasion.
- Sanctions restrict the repossession and return of Western-leased aircraft and engines, triggering insurance claims.
- The judgment references US sanctions (OFAC), EU sanctions, and export controls impacting aircraft leasing and insurance settlements.
- Insurers have raised defenses based on sanctions compliance and limitations on recoveries due to these restrictions.
- The case highlights the intersection of sanctions law with insurance policy interpretation, especially regarding “war and allied perils” and “all risks” cover.
Emerging Risks
- Prolonged inability to repossess aircraft due to sanctions and Russian government measures increases risk exposure for lessors and insurers.
- Potential for further sanctions tightening or new export controls could exacerbate asset immobilization.
- Legal uncertainty over insurance coverage scope in sanction-impacted loss events may lead to increased litigation.
- Risk of asset devaluation and loss of control over leased aircraft in sanctioned jurisdictions remains high.
- Insurers face contingent liabilities linked to geopolitical developments beyond their control.
Geopolitical Impact
- The case underscores the broad geopolitical fallout from Russia’s invasion of Ukraine, involving multiple jurisdictions: UK, US, EU, Russia.
- Sanctions regimes by the US, EU, and UK have effectively immobilized Western-leased aircraft within Russia.
- Russian government actions (e.g., GR 311 decree) have legally impeded aircraft repossession.
- The dispute reflects tensions between Western sanctions enforcement and Russian countermeasures.
- The involvement of multiple countries (including UAE, Canada, China, and others) in the aviation leasing and insurance markets highlights global interdependencies affected by the conflict.
Economic Intelligence
- The aircraft leasing sector faces significant financial losses due to aircraft and engine immobilization.
- Insurance claims potentially aggregate into hundreds of millions of USD, with AerCap’s claim alone involving a US$300 million aggregate limit discussion.
- The case reveals the economic impact of sanctions on asset liquidity and insurance market stability.
- Recovery efforts and insurance settlements are complicated by sanctions compliance risks.
- The aviation industry’s exposure to geopolitical risk is heightened, affecting leasing, insurance pricing, and risk management.
Strategic Recommendations
- Lessors and insurers should conduct thorough sanctions compliance reviews before pursuing repossession or claim settlements.
- Legal strategies must carefully interpret “Contingent” vs. “Possessed” cover in light of sanctions-imposed losses.
- Stakeholders should monitor evolving sanctions and export control regimes closely to anticipate further operational constraints.
- Diversification of leasing portfolios away from high-risk jurisdictions is advisable to mitigate future geopolitical risk.
- Insurers should enhance risk modeling to incorporate geopolitical and sanctions-related contingencies.
- Collaborative engagement with regulators and policymakers may help clarify insurance coverage and sanctions enforcement boundaries.
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**Source Notes:**
Case Title: *AerCap Ireland Ltd v AIG Europe SA & Ors (Russian Aircraft Lessor Policy Claims)* [2025] EWHC 1430 (Comm)
Link: https://empyreanprotocol.com/litigation/view/www.bailii.org/ew/cases/EWHC/Comm/2025/1430.txt