[2025] EWHC 1430 (Comm)

There were only limited issues of law in dispute in relation to the ambit of the perils insured under the insurances.

In relation to the AR Policies, in the ordinary way, there is no specification of the insured perils, and the cover is expressed in unlimited terms, subject to specified exclusions, including WR Perils.

The breadth of AR Cover is well established as a matter of authority.

Given this breadth of cover, there was, as I understood it, no dispute that, assuming the Contingent or Possessed Cover was engaged (considered above), if there was a loss of the aircraft within the policy periods involved, then it was covered under the Claimants’ AR insurances, unless it fell within the exception of war risks.

Certain issues did arise as to the ambit of the WR Perils relied on in these cases by the Claimants and the AR Insurers.

I have already quoted the full terms of the WR Perils set out in each Claimant’s insurance. They are materially the same for each.

No party contended that any loss of the aircraft was caused by the war peril itself (i.e. the peril commencing with the words ‘War, invasion, acts of foreign enemies …’). There were, however, two groups of perils said to be relevant. The first is what has been called, and which I will term the ‘Political Peril’, as follows:

Any act of one or more persons, whether or not agents of a sovereign power, for political or terrorist purposes and whether the loss or damage resulting therefrom is accidental or intentional.

The issue in relation to the construction of the Political Peril related to what is meant by an ‘act … for political … purposes.’ Those in the AR Camp (i.e. those contending that the operative peril was a WR Peril) argued that these words should be given an ordinary wide meaning, which can encompass any act carried out to implement or further a government policy. Those in the WR Camp argued, in summary, that the phrase encompasses only acts of individuals which are directed at changing either a government or government policy.

The argument for those in the AR Camp is straightforward. It is that the words ‘for political purposes’ is very broad language, and should be given its natural meaning. It is further said that the argument to the contrary is based, essentially, on the premise that the Political and Government Perils clauses should be construed in a way so that they are mutually exclusive, i.e. that since government acts are explicitly provided for as Government Perils, the Political Perils clause does not cover them. That, the AR Camp say, is incorrect. The ‘no overlap’ approach has been rejected in a number of authorities. The fact that under the clause the qualifying act may be carried out by ‘agents of a sovereign power’ itself indicates that they can be carried out by agents of the government. The AR Camp further rely on what is said in Arnould at 24-37, albeit in relation to slightly different words, as follows:

… the broader exception “any person acting from a political motive” … has yet to be judicially construed in the context of the Institute Clauses. We consider that it should be given a broad commonsense meaning. It cannot be given an exclusive meaning such that it will not overlap with other perils. Most of the war and strike perils do in fact seem to be duplicated by “any person acting from a political motive” as they relate either to actions taken by or on behalf of governmental authorities or to internal disturbances aimed at supplanting those in government or taking place for general purposes. It has been stated that “in its ordinary sense … the word ‘political’ means ‘pertaining to policy or government’”. There appears to be no reason to construe the word more narrowly, in the present context.’

The AR Camp further contends that, even on a narrower construction, the peril would be made out in the present case because, on any view, the Political Peril is broad enough to encompass acts of governments directed externally, i.e. including against other foreign governments. Here, the acts of the Russian Government, or its agents, qualify as acts done for political purposes.

For their part, the WR Camp argue that ‘political’ needs to be read and understood in its context, alongside ‘terrorist’. They contend further that the meaning for which they contend is consistent with the only English judicial consideration of the Political Peril, namely in KAC v KIC, whereas the AR Camp’s is not. And they say that their preferred meaning avoids giving to the Political Peril an extraordinary breadth which would consume numerous other WR Perils.

The ambit of the words ‘any act of one or more persons … for political … purposes’ is not a straightforward issue, and given that it does not, on my findings below, make a difference to the result of the case, I will express my views on it as briefly as I can.

I do not consider that the words ‘political purposes’ can be given the narrow meaning contended for by the WR Camp, namely of purposes aimed at changing a government or its policy. The words themselves are broad. It is not difficult to think of cases in which people can be said to be acting for ‘political purposes’ on both sides of a debate. By way of example, if there were a demonstration and a counter-demonstration on a topical political issue, both sides might be acting for ‘political purposes’, even though one might be supporting the stance of the government.

I consider, however, that the words ‘any act of one or more persons … for political or terrorist purposes’ do contain certain implicit or inherent restrictions. Thus, in my view, it is apparent that it is not concerned with acts of the government itself. That appears to me clear partly from the different terminology between the Political Peril and Government Perils clause. In the former the phrase used to identify the relevant actor(s) is ‘one or more persons’, in the latter it is ‘any government’. I think it is also apparent from the remainder of the wording of the Political Peril clause, and its context within the war risks as a whole. In this regard it is significant that ‘political’ is juxtaposed with ‘terrorist’, as to the purposes involved. That seems to me to indicate that what is contemplated as covered by the clause as a whole is acts which are in some sense adverse to the government of the place where they happen. Consistently with what I have already said I do not think that this adversity needs to be confined to where the ultimate aim pursued is the change of the government or its policy, but can embrace a case in which support for a government or government policy is pursued by unauthorised (for example violent) means.

I also consider that the WR Camp is correct to say that it is not the natural reading of the WR Perils as a whole, and is unlikely to have been intended, that the Political Peril, by the use of the words ‘for political … purposes’ rendered effectively if not entirely redundant the carefully expressed Government Perils, and was indeed much wider than the Government Perils. Yet that would be the effect of the AR Camp’s construction, whereby acts of the government in pursuit of its own policies can be acts for political purposes within the Political Peril, for there would be no limitation under that clause to government acts of the particular types specified in the Government Perils clause (viz confiscation, nationalization etc.). While I accept that there is overlap both within the various paragraphs of the WR Perils, and between them, I do not accept that the perils should be read as to render a whole paragraph (with a group of perils) redundant and without obvious purpose.

For similar reasons, I do not think that it is intended that the Political Peril should embrace acts which are simply those of agents of the government itself, if what one is considering is a situation in which only one government is relevant. If it did, then that would, in effect, mean that the Political Peril clause potentially extended to all or most government acts capable of causing loss or damage, accidentally or intentionally, which, as I have said, I do not regard as the case.

The significance of the reference to ‘whether or not agents of a sovereign state’ is, in my view, that it shows that there may be an ‘act … for political or terrorist purposes’ even if it is done at the behest or on the instigation of a different state. State-sponsored terrorism of the Lockerbie type, or interference by one state in the politics of another are well known phenomena. Had what was intended been to refer to the agents of the government of the place where the loss or damage takes place, the terms used would surely not have been ‘a sovereign state’, but have been or have included a reference to ‘the government’ or to a public or local authority, similar to the language of the Government Perils.

But that does not fully answer the issues which arise in relation to situations where two states are involved. A particular question arises here because the AR Camp contends that, even if the Political Peril clause is given a restricted meaning, there were here acts of persons, in Russia, whether or not agents of the Russian State, which were ‘for political purposes’, namely for the purpose of nullifying, or rendering ineffective the Western sanctions, which would be adverse to the Western governments and/or states which had imposed them. In my view, although I recognise that the boundaries of the distinction are not easy to define, the Political Peril is not intended to cover the avowed acts of the government, or agents of the government, of the place where the act is done which causes the loss or damage. I say ‘avowed’ to cover a case such as Lockerbie, where one state may engage in secretive acts aimed at another state or its citizens. I do not think it extends to a case such as the present where the acts of those in Russia which are said to have caused the loss of the Aircraft were either the avowed acts of the Russian Government or its agents or acts of others supporting the known policy of their government and not in any sense adverse to that government.

In relation to the ambit of the Government Perils there remained at the end of the case, as I understood it, four points of controversy. Given my findings, below, as to the nature of the operative peril, these issues are not of great significance to my final decisions, but they were fully argued, and I should express my conclusions on them.

The first was as to the words ‘by or under the order of any government’. The AR Camp contended, in summary, that these words are to be read in the sense which would be made clear by the addition of two commas, thus: ‘by, or under the order of, any government’. The WR Camp contended that the words are to be construed such that both ‘by’ and ‘under’ apply to ‘the order of any government’. The difference therefore is that the WR Camp contends that there must be an order of the government for there to be a Government Peril within the clause.

The WR Camp’s argument was, in essence, that the syntax favours their construction. Further, numerous statutes use the phrase ‘by or under’ an order. Insofar as the use of the two words resulted in surplusage, that was not surprising, especially in a clause which contained other overlapping provisions (as with ‘restraint’ and ‘detention’).

In my judgment the AR Camp’s construction is to be preferred. The words in question have to be construed in the context of the Government Perils clause, which I think it is fair to say is a broad provision concerned with deprivation of rights of property and/or possession, and is not concerned with technicalities; hence the different ways in which there may be deprivation of such rights are widely drawn. Furthermore, some of those ways are likely to involve a form of order by the government, but others may not. By way of example, ‘seizure’ and ‘detention’ are concerned with the practicalities of what has happened, not with formalities as to whether the dispossession was under an order. The words ‘by or under the order of any government’ fall to be construed in light of this.

Moreover, under the WR Camp’s interpretation, the word ‘by’ would be effectively redundant, because a peril having occurred under the order of a government is not meaningfully different from a peril having occurred by the order of a government. I consider that the better interpretation is that ‘by’ serves the purpose of capturing cases in which the government brings about deprivation of property, in one of the ways specified in the clause, by direct agency; while ‘under the order of’ the government refers to what may or may not be a longer chain of causation in which the efficient cause is an order of the government.

I do not consider that a reasonable person would understand the meaning of the words used to be such that a deprivation of possession by the government, without something which qualifies as an order, would not be covered as a war risk (and would thus fall to all risks), while a deprivation of possession by the same government pursuant to an order would be covered as a war risk. The interpretation which I favour is not precluded by the punctuation, or rather the lack of further punctuation, of the clause, though the addition of commas might have made it clearer. Even without commas, I consider that that interpretation is an entirely natural one to put on the words used.

The second issue is as to whether any ‘order’ of any government, as referred to by the clause, needs to be a constitutionally or legally valid order. In my judgment it clearly does not. This I consider to be apparent from the fact that the clause specifies that the government may be ‘civil, military or de facto’. It is characteristic of military and de facto governments that they exercise power other than through formal legal or constitutional mechanisms.

The third issue is as to the meaning of a ‘restraint’ or ‘detention’, and in particular as to the role of a governmental order backed by the force of law in the existence of a restraint, and as to whether there are any circumstances in which there can be a restraint without such an order. This arises because the AR Camp contend that the most relevant perils, which they say were operatively causative, were those of ‘restraint’ and ‘detention’.

The words ‘restraint’ and ‘detainment’ have a wide commercial meaning. This was confirmed by Hobhouse J in The Wondrous [1991] 1 Lloyd’s Rep 400, at 417, whose reasoning was endorsed in the Court of Appeal.

The editors of Arnould say ([24-28]) that ‘the most obvious cases of restraint are those where the assured is deprived by superior authority of possession of his property or where, although he retains possession the property is forcibly detained, for example by an embargo’.

There is little or no difference between the perils of ‘restraint’ and ‘detention’. In Johnston & Co v Hogg (1883) 10 QBD 432, Cave J referred to the ‘impossibility’ of giving ‘distinct and different meanings’ to these perils. The editors of Arnould say ([24-25]) that there does not appear to be any authority that supports drawing a distinction between them. The discussion which now follows in relation to ‘restraint’ also applies in relation to the ‘detention’ peril.

What is in issue is whether it is inherent in the concept of a restraint that there has to be an order. AerCap’s initial position appeared to be that an order is always a prerequisite of a restraint, and reliance was placed on Lord Wright’s speech in Rickards v Forestal [1941] AC 51. WR Insurers’ position was that there could be a restraint in two, but only two, circumstances. One is where the action of the restrained party is checked or restrained by the direct compulsion of physical force or the threat of immediate physical force. The other is where the compulsion is by the force of the state standing behind laws. In both cases the peril must arise from an executive act, i.e. an act of the state or government in its capacity as such and not, for example, by reason of an ordinary judicial process.

WR Insurers rely in support of their case in this regard on Miller v Law Accident Insurance Co [1902] KB 694, British and Foreign Marine Insurance Co v Samuel Sanday & Co [1916] AC 650, Russian Bank for Foreign Trade v Excess Insurance Co [1918] 2 KB 123, Rickards v Forestal [1941] AC 51, and The Bamburi [1982] 1 Lloyd’s Rep 312.

The AR Camp contends that though the two circumstances in which there can be a restraint identified by WR Insurers are examples of where there can be a restraint, they are not exhaustive of the circumstances in which there can be a restraint and that the authorities relied upon by WR Insurers do not make good the case that the two circumstances are exhaustive. The AR Camp further submits that it is sufficient for there to be a restraint if the matter relied upon constitutes an ‘effective’ restraint. Geipel v Smith (1871-2) LR 7 QB 404 was cited in support of that proposition.

In Miller v Law Accident Insurance Co, a vessel was stopped before berthing in Buenos Aires. Discharge of the cattle on board was prohibited by the Argentine authorities on the grounds that the cattle were suffering from disease. The master was directed to leave Buenos Aires, but he was at liberty if he wished, to tranship the cattle and land them at some other port. He did so, without the vessel having been subject to any actual physical force. The Court of Appeal considered the presence or absence of actual physical force or the immediate threat thereof to be irrelevant in judging whether there had been a ‘restraint’. Thus, Stirling LJ said in his judgment, at 720:

It seems to me that there was an active intervention of the Government of the Argentine Republic, which was none the less an exercise of superior force because no officer of the army or of the police force intervened. The natural inference to be arrived at upon these facts is that, if the captain had not acted as he did, possession would have been taken of the ship by persons acting directly under the authority of the Government, and the cattle would have been slaughtered under art. 5 of the regulations to which I have referred. The captain, therefore, was justified in taking the ship outside the port and transferring the cattle to another ship in order to minimise the loss, and in so doing he acted under compulsion of superior force. It was not the less the act of the Argentine Government because it was done under the laws in force in that country.

In British and Foreign Marine Insurance Co v Sanday, the claimant (British merchants) shipped linseed on two British ships to Hamburg. They insured the goods with the defendant under policies which included cover for ‘restraint of princes’. While the goods were at sea, war between Britain and Germany broke out, which made trading with the enemy and the further prosecution of the voyage illegal, and the ships diverted to British ports and discharged their cargoes there. The courts at all levels held that there had been a restraint under the terms of the policy. This was so, even though the vessels were not subject to a general ‘restraint’ but were simply prevented from prosecuting their voyages to Germany by reason of the common law.

In the House of Lords, Earl Loreburn said (at 659) that he was not swayed by the ‘circumstances that force was neither exerted nor present, for force is in reserve behind every state command’; and he added ‘it would be a strange law which deprived the assured, if otherwise entitled to his indemnity, upon the ground that he had not resisted, till the hand of power was laid upon him.’ Lord Parmoor (at 669) said:

If the restraint in the present case has been imposed by political or executive acts, it was not the less a restraint, within the terms of the policy, because the master submits without opposition and without the presence of either actual or threatened force.

The House of Lords further decided that the case was not one of ‘anticipated restraint’. Instead it was a case in which the operation of the law, which had been called into action by the declaration of war, was ‘present and immediate’ (see at 665).

In Russian Bank for Foreign Trade v Excess Insurance Co [1918] 2 KB 123, a British vessel in Russia was subject to an order of the British Admiralty requisitioning it for the use of the Russian Government, which was found by Bailhache J to be ultra vires, on the grounds that the Admiralty had power to do so only in respect of ships within British waters. During the course of his judgment Bailhache J said:

Where restraint takes the form of an order and nothing more, that order must, in my opinion, be one that has behind it the forces of the State, which can, if necessary, be lawfully employed to compel obedience if obedience is refused. Now, an order ultra vires the Admiralty could not lawfully be enforced by seizure, detention or confiscation of the ship….

It seems to me to follow that as disobedience to an ultra vires order is not illegal, obedience to such an order, unless compelled by force, or threats of force, is a voluntary act and not a restraint of princes…

The Court of Appeal ([1919] 1 KB 39) affirmed Bailhache J’s decision on different grounds. The report records, however (at 40), that in relation to the question of whether an ultra vires requisition by the Admiralty might constitute a restraint of princes, Scrutton LJ ‘without expressing a final opinion, inclined to the view that it well might.’

In Rickards v Forestal Land the German government, in anticipation of the outbreak of the Second World War, had instructed the masters of German merchant vessels to take refuge in neutral ports, to return to Germany with their cargoes if possible, or as a last resort, to scuttle their vessels. A claim was brought in respect of the cargoes of two vessels that were scuttled and of one that returned to Germany. The House of Lords held that each of the cargoes had been lost by ‘restraint’. Lord Wright said:

The restraint which was operating on the master was the compelling force of the German State to which he was subject. In one sense it was a moral compulsion, but in another sense it was more because it may be assumed that he was aware that, if he disobeyed the order, his government had means of vindicating its authority if not at the moment, at least subsequently …

… there may be a restraint, though the physical force of the state concerned is not immediately present. It is enough, I think, that there is an order of the state, addressed to a subject of that state, acting with compelling force on him, decisively exacting his obedience and requiring him to do the act which effectively restrains the goods.

Insofar as the last sentence quoted from Lord Wright’s speech was relied on by AerCap to suggest that there must always be ‘an order of the state’ for there to be a restraint, I do not accept that it supports that proposition. Lord Wright was not saying that there need always be a legally binding order; but rather that, in that case, it was sufficient to constitute a restraint that the German government had given an order to masters of German vessels, which had compelling force on them even in the absence of an immediate physical threat.

In The Bamburi [1982] 1 Lloyd’s Rep 312, Staughton J said at 315:

So far as concerns restraint of princes, it is clear and was not disputed that if there is an order of an executive government, backed by the power of the state, it is unnecessary that actual force be used.

As regards the case of Geipel v Smith, relied on by the AR Camp, that was not an insurance case. It was concerned instead with whether a charterparty had been frustrated. The defendant shipowners had chartered a vessel to the plaintiffs to load a cargo of coal and proceed to Hamburg. The charterparty provided ‘restraints of princes and rulers … during the voyage always excepted.’ Before the voyage began, the Franco-Prussian war broke out. The defendant shipowners renounced the charterparty. The plaintiffs sued for breach of the charterparty and various defences were asserted by the defendant. One of those was a plea that: a state of war had arisen between France and Germany and that the port of Hamburg had been blockaded by the French; the Queen had published a proclamation enjoining all British subjects to maintain strict neutrality between the belligerents; the owners could and did refuse to allow a ship to receive a cargo for the purpose of running the blockade; and the charterparty had therefore been frustrated. On demurrer, the blockade was taken to have been established and effectual. The Court of Queen’s Bench considered that the contract was frustrated.

During the course of his judgment, Cockburn CJ said (at 410):

First, is a blockade a restraint of princes? I think it is. It is an act of a sovereign state or prince; and it is a restraint, provided the blockade is effective; and in the eye of the law a blockade is effective if the enemies’ ships are in such numbers and position as to render the running of the blockade a matter of danger, although some vessels may succeed in getting through. In such a case the obstacle arises from an act of state of one of the belligerent sovereigns, and consequently constitutes a restraint of princes.

WR Insurers contend that Cockburn CJ was alone in saying this; that it was obiter; and that the result in Geipel could not be applied to a policy of insurance, because the decision not to proceed would, in the insurance context, be regarded as anticipation of restraint rather than the peril of restraint itself.

My conclusions, having regard to these authorities, are as follows:

The fourth issue is likewise as to the meaning of ‘restraint’ and ‘detention’, and is as to whether there can be a restraint or detention if the person allegedly subject to the restraint did not wish to act in the manner prohibited. In the context of the present case, the argument, raised by WR Insurers, is that there can have been no restraint unless the lessee wished to return the aircraft and was actually checked from completing a course of action which they were seeking to undertake. This argument is distinct from, though related to, the question of whether the restraint is to be regarded as the operative cause of a deprivation of possession on the part of the lessor if the lessee wanted not to return the aircraft anyway.

The argument, insofar as put as a matter of construction as to the meaning of ‘restraint’ and ‘detention’ is, in my judgment, incorrect. The relevant insurance has property as its subject matter. The important question is whether the aircraft and engines insured have been the subject of a restraint, and that question ought to be assessed by what happens to the aircraft, and not by reference to the wishes of the person who is using the aircraft at the time. Furthermore, ‘restraint’ and ‘detention’ within the government perils are, in my view, to be understood as descriptions of forms of governmental conduct. What is necessary for there to be a ‘restraint’ or ‘detention’ is whether something describable as that type of conduct has taken place; if it has, the conclusion that there has been a ‘restraint’ or ‘detention’ cannot be gainsaid by reference to the mental state of the custodian of the property. The same would apply, for example, to whether there has been a ‘confiscation’.