When Russia invaded Ukraine in early 2022, hundreds of aircraft remained stranded in Russia due to sanctions and countermeasures. The legal questions over who bears the risks and costs sparked one of the largest aviation insurance disputes ever brought before the London Commercial Court, with a combined insured value of over US$4.5 billion: Russian Aircraft Lessor Policy Claims [2025] EWHC 1430 (Comm).

Summary of background facts

The claimants (aircraft lessors) originally leased their aircraft and engines to Russian operators. Following sanctions against Russia and Russia’s subsequent countermeasures in March 2022 prohibiting the export or return of foreign-owned aircraft, these assets became stranded in Russia. Unable to repossess them, the lessors sought payment under their “Lessor Policies” (LPs). Meanwhile, the Russian lessees had their own “Operator Policies” (OPs) which were meant to cover all risk (AR) and war risk (WR) events. 

As the Russian insurers were largely unable or unwilling to indemnify the lessors, the lessors relied on the LPs’ “Contingent Cover” (triggered when OPs fail) and argued that if “Possessed Cover” (which requires a lessor to have actual custody) did not apply, then "Contingent Cover" should apply.

The dispute turned on whether the cause of loss was:

• a commercial decision by Russian airlines (which would engage the AR insurers); or

• a government act triggering WR insurers.

Both AR and WR insurers were joined in the litigation, each asserting or disputing liability under their respective policies. In parallel, claims under the Russian operators’ OPs continue in separate proceedings set for 2026, following an earlier jurisdictional ruling in Zephyrus Capital Aviation Partners 1D Ltd v Fidelis Underwriting Ltd and Others [2024] EWHC 734 (Comm).

Key findings by the Court 

In summary, the Court ruled that the aircraft were deemed lost on 10 March 2022 due to the implementation of Government Resolution No. 311 banning the export of aircraft without governmental permission (GR 311) by the Russian Government, which qualified as "restraint" or "detention" under the "Government Perils" clause in the WR cover of each claimant. The loss was not covered by AR cover. The Court also found that claimants may recover under "contingent cover" but not under "possessed cover". 

We discuss five key findings by the Court below. 

Issue one: what constitutes “permanent loss”?

The Court found that once Russian legislation effectively barred the exit of leased aircraft, the lessors were permanently deprived of them. “Loss” in this context did not require physical destruction; rather, it meant the lessors were highly unlikely to recover the aircraft during their usable life.

Notably, the Court rejected the assertion that the lessors were "in the course of repossession" and held that the possibility of return during the aircraft's lifetime does not exclude that the insured may be able to show, on the balance of probabilities, that the deprivation is permanent: "the probability that, upon any hypothesised end to sanctions, which might be years down the line, and having been flown or kept unused in Russia in the meantime, the aircraft would be returned to lessors would in my view have been considered to be low" (see para 911 of the judgment).

Issue two: is the 'grip of the peril' doctrine applicable and were the aircraft in the grip of the peril within the relevant policy period?

The Court confirmed that if an insured peril takes hold before a policy expires, coverage will remain effective even if the loss only becomes permanent afterwards. As long as the peril arose during the policy period and the final loss flowed naturally from it, an indemnity is payable. In this case, the Court concluded that WR measures were already in place from 5 March 2022, when the Russian aviation authority advised airlines not to return the leased aircraft, and the Russian Government later formalised those restrictions in GR 311.

Issue three: what was the proximate cause of the loss?

The Court determined that the events giving rise to the permanent deprivation of the aircraft constituted “restraint” or “detention” by or under the order of a government, squarely a WR peril. In particular, Butcher J pinpointed 10 March 2022, the date GR 311 came into force, banning the export of the aircraft, as the operative date of loss. This conclusion placed liability on WR insurers, rather than AR insurers. 

Issue four: should "Contingent Cover" or "Possessed Cover" apply?

The lessors argued that their “possessed” insurance applied because the aircraft were effectively under their control. The Court disagreed, concluding that the lessors never physically repossessed the aircraft in Russia. Instead, the “contingent” element of their policies responded because the airlines’ OPs in Russia would not pay.

Issue five: what was the impact of sanctions?

Insurers cited various sanctions regimes to argue that they could not indemnify the lessors. The Court clarified that neither EU nor US sanctions prevented payments to non-Russian entities based outside Russia:

• US sanctions: insurers cited General Prohibition 10 of the Export Administration Regulations, claiming it barred coverage due to US-origin components in the aircraft. The Court refuted this, stating the regulations focus on physical export or transfer, not insurance provision to lessors with detained aircraft. Thus, there was no breach by honouring policies for non-Russian companies. 

• EU sanctions: insurers referenced EU Regulation No.833/2014, which prohibits insurance "to any person, entity or body in Russia or for use in Russia." They argued this included aircraft within Russian territory. The Court also disagreed, asserting that Western-based lessors could insure their own losses despite their aircraft being stuck in Russia. 

Practical insights  

Counsel for one of the claimants, AerCap, has since confirmed that this ruling will allow AerCap, to recover over US$1 billion in addition to prior settlements. Nevertheless, AerCap could have recovered more under its AR cover since its coverage under "war risks" was significantly lower than under "all risks". Compensation for other claimants is yet to be determined.

Overall, the insurance market is already experiencing ripple effects from these proceedings and no doubt from this recent judgment. We would expect policyholders to pay extra attention to their coverage portfolios and to refine contract clauses against heightened war risk exposure. It has become increasingly important for businesses operating in multiple jurisdictions to co-ordinate their policy language and dispute resolution provisions, reducing the risk of contradictory interpretations or fragmented liability findings. 

Aircraft lessors should re-examine their war risk insurance policies to ensure coverage limits and terms adequately reflect the heightened exposures that can arise when assets become stranded under government orders. In addition, it would be prudent to revisit contingent coverage triggers and thresholds, confirming they effectively address scenarios where the primary operator policies do not respond. The 2026 litigation concerning Operator Policies merits ongoing attention, as it may ultimately influence recoveries and prompt further re-evaluation of lessors’ insurance strategies.

Insurers and reinsurers, meanwhile, should consider revisiting their “follow the fortunes” clauses, as these provisions could potentially bind certain reinsurers to the Court’s determination of coverage responsibility. Clarity in policy language addressing sanctions remains essential, especially in contexts where assets subject to claims lie in sanctioned territories. 

Airlines and other stakeholders should remain vigilant about how swiftly commercial arrangements can transition into complex war risk situations once government actions become the decisive factor. It is vital to scrutinise key contractual terms, particularly those relating to force majeure or war risk, and to ensure that appropriate protections are in place before unforeseen developments escalate. As a final observation, the Court’s approach to “loss” may hold broader relevance beyond the aviation sector, potentially extending to industries such as shipping and energy. In these industries, government directives or prohibitions could similarly deprive owners of practical use and control over their assets, potentially activating war risk or political risk coverage.

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Our Disputes and Investigations team is on hand to guide you through the evolving insurance landscape, whether you’re a lessor, insurer, reinsurer, or operational stakeholder. If you have questions about this landmark decision or need legal assistance, please contact a member of our team.