[2025] EWHC 1430 (Comm)

The issue is whether the Aircraft were lost by reason of a permanent deprivation of possession. I have set out above what I have concluded is the correct ‘test’ to be applied in deciding this: namely to say whether, as of any given date, deprivation of possession was, on the balance of probabilities, permanent; that in carrying out this assessment the court will look at the true facts at that time; but that the court may have regard to what happened after that date in the two ways I have previously identified.

This exercise is in principle distinct from an identification of whether any particular peril may have caused the loss. It is inevitable, however, that a consideration of whether and if so when any loss occurred will be related to what perils were operating and how, as at any given date.

In making the assessment which follows as to whether there was a loss, and when, I have had regard to all the various circumstances and developments which applied and took place from 24 February 2022 onwards, and which I have referred to above. In particular I have taken into account the general political situation in Russia, the governmental reaction and measures taken in response to Western sanctions, the positions of the various lessee airlines, and the geopolitical situation.

The last of these is significant in two particular respects. First, in the early days after the invasion of Ukraine, there appeared the possibility that the ‘special military operation’ launched by President Putin might be brought to a swift conclusion by the seizure of Kyiv and the capture or forced exile of the Ukrainian government. This has been called the attempted coup de main. What might have been the effect of this succeeding on the potential for return of the Aircraft is difficult to say, given that Western sanctions would probably have remained in place. Nevertheless the uncertainty, during the period in which it remained a possibility, seems to me to weigh against a conclusion that, during that period, it was more likely than not that the lessors had been permanently deprived of the Aircraft. As I have set out above, however, the evidence before me was to the effect that, by 8 March 2022, the prospect of a swift end to the war was over, and Western sanctions were in place for the foreseeable future. Second, although peace talks were still proceeding in March 2022, the positions of the two sides were existential and inconsistent. Those talks were, in my judgment, never remotely likely to result in any peace agreement which would have led to the lifting of sanctions, as proved to be the case. There was no realistic prospect of those talks ending the lessors’ deprivation of the Aircraft.

In relation to the position of the government, this was characterised by a resolve not to see Western sanctions be successful, and to maintain transport connectivity within Russia. How the government sought to meet these objectives developed over time. Initially it relied on measures which were, in various ways, informal. But the position of the government, to the effect that Western Leased Aircraft should not be returned to lessors, became progressively clearer and more emphatic. It came to be expected by Russian airlines that there would be formal legislative steps taken in relation to the matter. Those steps were taken by the introduction of GR 311 and GR 312 on 10 March 2022.

In relation to the airlines, their positions were not identical, as I have set out. I do not consider that the evidence establishes, in the case of any airline, that, prior to 10 March 2022 such a fixed decision permanently to keep the Aircraft had been taken that that decision itself made it likely that the lessor’s deprivation of the Aircraft would be permanent. Meanwhile, those airlines which were most committed to returning Western Leased Aircraft to lessors clearly came under increased constraints, and pressure not to do so, especially from 5 March 2022 when the FATA Message was published and President Putin made his appearance at the Aeroflot training centre. Some room for manoeuvre remained, at least for some airlines, as demonstrated by the return of aircraft leased to Russo-Turkish airlines in the period 6-9 March 2022. After 10 March 2022 the room for manoeuvre disappeared. The only flights abroad of the Aircraft in this action which occurred after that date until May 2022 were to Kazakhstan, Kyrgystan, Tajikistan, Uzbekistan and Belarus. The only returns of aircraft to lessors which have taken place have been the very exceptional cases to which I have referred. The restriction on flights may have been achieved by the restrictions on the approval of flight plans, but it appears to me clear that this was in keeping with the formal export ban introduced by GR 311.

Before 10 March 2022, on my assessment, it could, and I think would, have been properly said that recovery of the Aircraft at some point was uncertain. I am not persuaded that it would have been said to be, on the balance of probability, unlikely. On and after 10 March 2022 I consider that it could and would properly have been said to be unlikely. By that stage, there was a formal ban on exports, and effective practical restraints on flying to locations where there might be return to lessors. Western sanctions were in place for the foreseeable future. While GR 311 was, as enacted, time-limited, it was likely that it would be continued as long as necessary to counter Western sanctions (and it has indeed been extended). 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.

I do not consider that there is the need to invoke an ‘evidential wait and see’ period to make this assessment as of 10 March 2022. But insofar as regard is had to such a period, it confirms the conclusion that the aircraft were lost on 10 March 2022. A reasonable ‘wait and see’ period cannot last indefinitely without emasculating the commercial product which the insurances represent. Any ‘wait and see’ period must have ended long before now. Equally, the conclusion that there was a loss on 10 March 2022 is not contradicted, but if anything supported, if regard is had, as a ‘cross-check’ in the manner described above, to what has happened since that date up to the present. The Aircraft have not been returned. The fact that in some cases the lessors have entered into settlements which transfer title to aircraft does not show that there has been no loss. I have already given my reasons for rejecting WR Insurers’ case that there is only a deprivation of possession if the insured is unable to exercise any of the benefits of ownership. That the lessors agreed to part with title in circumstances where they were deprived of possession does not indicate that they had not lost the Aircraft.

My above conclusions are I consider consistent with the evidence of Mr Houlihan of DAE. His evidence was that, by 9 March 2022, the situation (from his point of view) was deteriorating, it was known that a formal decree was imminent, and he ‘was aware at this stage that I wasn’t going to get any aircraft back’; and further that what GR 311 and GR 312 did was to convert a covert into a ‘very overt way to retain the aircraft.’ To my mind that supports my conclusion that it was with the implementation of GR 311 that the Aircraft could be regarded as lost.

For the purposes of completeness, I should make it clear that I regard the position as at 10 March 2022 as being not only that, on the balance of probability, the deprivation of the aircraft was permanent; but also that there was only a ‘mere chance’ of their recovery; and that recovery was uncertain, the insured having taken reasonable steps to seek to recover them by that stage. I have explained my preferred analysis of these various formulations of the test, but, in case there is said to be any difference between them, my view is that each is satisfied.

I have set out above what, as a matter of law and the proper construction of the policies may count as AR or relevant WR Perils.

As I have said, I did not understand it to be in dispute that, assuming that the Contingent or Possessed Cover was engaged, if there was a loss of the Aircraft within the policy periods involved, and if it was not caused by the operation of a WR Peril, then it was caused by the operation of an AR Peril. Specifically, it was not in dispute that decisions on the part of airlines, or deliberate conduct on their part not to return aircraft, constituted AR Perils.

As to the WR Perils, I consider that the direction which I have found was given by the Russian Government to the Aeroflot group, either shortly before, or at, the Meeting of 26 February 2022 was a ‘restraint’ or ‘detention’ on the aircraft of the Aeroflot Group by or under the order of the government.

I am also satisfied that the FATA information message of 5 March 2022 was a restraint or detention by or under the order of the Russian Government. This message was expressed in unusually emphatic, and political, terms and was communicated by particularly numerous and direct methods. As Mr Kozhanov said, it would have been understood as a ban on flights abroad for any purposes; and it was largely complied with. It has the three features of a ‘restraint’ or ‘detention’ which I have identified above.

I have found more difficult whether there was any other ‘restraint’ or ‘detention’ in the period prior to 10 March 2022. There are arguments to the effect that what was said at the meeting on 28 February 2022, and/or the ‘informal direction’ which the representatives of Ural spoke of to Dr van Antwerpen on 2 March 2022, and/or the FATA telegrams of 2-4 March 2022 were ‘restraints’ or ‘detentions’. They all had a role in communicating to airlines that the Russian state wished aircraft not to be returned to lessors for the present and pending further official action.

I have been left unpersuaded that any of these matters should be characterised as a ‘restraint’ or ‘detention’. Even allowing for the role of informality in the communication of the wishes of the Russian state, the fact that these communications took the forms they did, coupled with the lack of an unequivocal prohibition on the return of aircraft to lessors or flights abroad indicates to me that they are not, themselves, properly described as ‘restraints’ or ‘detentions’.

In relation to GR 311, as I have already said, subject only to arguments about it that I have rejected, there was no dispute that GR 311 constituted a restraint or detention within the Government Perils in the war risks.

The issue which has to be resolved here is as to what must be regarded as the cause of the loss of the Aircraft. Specifically, the question is whether the proximate, or efficient cause, of their loss was, or was not, the operation of a WR Peril. What that involves considering, in the present case, is what was the proximate cause of the lessors’ deprivation of the Aircraft becoming, on the balance of probabilities, permanent. The burden rests on the AR Camp of establishing that it was the operation of a WR Peril.

As I have already indicated, the answer to this question cannot be easily divorced from the question of when the loss occurred. My finding is that the loss occurred on 10 March 2022, and that was in part based on the fact that it was on 10 March 2022 that GR 311 was published. That does not itself dictate that it is GR 311 that is to be regarded as the proximate cause of the loss of the Aircraft, but it is consistent with such a conclusion.

In my judgment GR 311 should indeed be regarded as the proximate cause of the loss of the Aircraft. I say this for the following reasons:

I do not regard the airlines’ wishes or decisions to retain the Aircraft in their own interests to have been a cause of the loss of the aircraft of equal efficiency with the government measures culminating in GR 311. Again, this is for a number of reasons.

My conclusion as to the proximate cause of the loss is, to my mind, consistent with what was said contemporaneously by two men who were very well placed to know what was the real cause of Western Leased Aircraft remaining in Russia, and how decisions are taken in Russia: President Putin and Minister Savelyev. In his remarks at the Novgorod Technical School on 21 September 2022, and at the meeting with the aviation industry on 9 February 2023, President Putin was clear that it was governmental action which had ensured that the planes remained in Russia, and were not returned to lessors or able to be ‘seized’ by them. Minister Savelyev’s comments on 15 March 2023 to the Duma’s Committee on Transport were to the effect that GR 311 was what put an end to the ‘bewilderment’ of some airlines, leading them to understand that aircraft could not be taken out of the country without approval, which approval would not be forthcoming.

I do not regard this case as one in which it is necessary, in order to reach the conclusion that the proximate cause of the loss was a restraint or detention by or under the order of the government, to have regard to the principle established in The Ann Stathatos. If the approach suggested in that case is adopted, however, and regard is had to the ‘power of the war risks clause to attract the result into its own field’, it would strengthen my conclusion.

Equally, I do not consider that the present is a case of there being two concurrent causes of equal efficacy or efficiency. If I were wrong in this conclusion, and it could be said that the WR Peril and an AR Peril were of equal efficacy, I would still regard the exception for War Risks in the AR Covers as being applicable. This is because, in the first place, I do not consider that the two causes can sensibly be said to be ‘independent’. Any decisions, or desires, or interests on the part of airlines to retain the Aircraft were at least influenced by the measures taken by the government. But even if that is wrong, and the two causes can properly be said to be independent, my conclusion would still be, for the reasons I have given above, that the exception in the AR Covers would apply to the loss.