[2025] EWHC 1430 (Comm)

I will address the key facts relevant to the issues of loss, peril and causation in six sections. In the first place, I will consider the evidence as to what lessors and lessees thought the future held in the run up to the Russian invasion of Ukraine. Secondly, I will consider the actions of the Russian Government up to 9 March 2022. I will divide this into a consideration of (1) the meeting of 26 February 2022; (2) the meeting of 28 February 2022; (3) FATA telegrams and meetings 1-4 March 2022; (5) the events of 5 March 2022; (6) the period 6-9 March 2022. Thirdly I will consider PD 100, GR 311 and GR 312, particularly GR 311. This will involve a consideration of the issues of Russian law relating to GR 311. Fourth, I will consider government acts after 9/10 March 2022. Fifth, I will look at the position of the various airlines in more detail. Sixth, I will look at recovery attempts made by lessors. This treatment of the facts will involve my reaching and giving conclusions on some of the very many issues and sub-issues of fact which arose between the parties.

By January 2022 at the latest, Western governments were giving active consideration to the possibility of imposing sanctions on civil aviation, and in particular aircraft leasing, if Russia were to invade Ukraine. AerCap came to know of this, and lobbied the Irish government and the EU Commission. On 26 January 2022, Mr Kelly sent a message to the Irish Foreign Minister, Simon Coveney, saying that sanctions would be ‘disastrous’, because ‘Russia would never give the aircraft back and won’t pay’. On 2 February 2022, Risteard Sheridan of AerCap supplied lobbyists with a message to be given to the European Commission, which stated, in part, ‘in a scenario where sanctions affected aircraft leased to Russian airlines, particularly state-owned airlines, the Russian state would never allow those aircraft to depart its control’. On 3 February 2022 Mr Kelly sent a further message to Mr Coveney, having had a team in Moscow that week. He said that he could ‘say with certainty that the Russian state controlled carriers will not return aircraft to us if aircraft leasing is sanctioned.’

What these communications indicate is that, in anticipation of the invasion, AerCap expected that, if sanctions were imposed, at least the aircraft leased to state-owned airlines would not be returned. It seems clear that AerCap anticipated that this would be procured by the state. Insofar as the likelihood of non-return had been indicated to AerCap by the state-owned airlines themselves, AerCap considered that this would be in conformity with the attitude of the state.

Prior to the invasion, at least some of the other airlines operating in Russia were not concerned about the prospects of war or sanctions, and were not planning for them. Ramazan Akpinar said this to Damhan Finegan of AerCap on a visit the latter paid to Moscow on 2 February 2022. Mr Klyucharev of Red Wings said much the same to Mr Finegan during the same trip.

On 24 February 2022 Russia invaded Ukraine. President Putin gave a public address to announce the start of what he called a special military operation. He said, amongst other things, that this was, for Russia, ‘a matter of life and death, a matter of our historical future as a nation…’. Many Russian airlines were taken by surprise by the invasion. S7 said that to Mr Leahy of AerCap on 24 February 2022. Ural on the same day told AerCap it was ‘shocked by the developments’. Other airlines, including Red Wings and Smartavia did not expect that if sanctions were imposed they would have a major impact on their businesses.

Wide-ranging Western sanctions, including EU sanctions, were in fact imposed swiftly, as set out in the chronology of main events, above. Word as to the EU sanctions was leaking out on 25 February 2022, and they were formally announced and published at one minute to midnight on that day. By the afternoon of 25 February 2022 word was already circulating that MinTrans had called a meeting of Russian airlines to take place the next morning, which was a Saturday. Ms Mashkova told Mr Leahy of AerCap at 16.50 Dublin time (according to his call report) that ‘the Minister of Transportation has demanded that all Russian airlines attend a meeting tomorrow’.

A considerable amount of time was spent at the trial on what had occurred at this meeting. I tend to think that more time was spent on it than its significance deserved. But it was important in some respects. It was unusual, in itself, for MinTrans, as opposed to FATA, to be dealing directly with airlines on operational matters; and it was unusual for its timing (a Saturday). It was attended by the Minister of Transport, Mr Savelyev, and by the head of FATA, Alexander Neradko, and thus indicated high level attention to its subject matter.

On the airlines’ side, many attended. I have already mentioned that Ms Mashkova had told Mr Leahy that the Minister had demanded the attendance of ‘all airlines’. Ms Fileva’s recollection in the Forbes magazine article interview which I have quoted above was that ‘representatives of all the airlines’ were present. That goes too far: Nordwind and Smartavia were not there. But it indicates that many were, and there is sufficient evidence that at least Aeroflot, S7, Ural, Red Wings, and Yakutia were present.

There are various sources as to what transpired at the meeting. They are not all entirely consistent, and the original sources of many of these accounts is not clear. I considered it likely that a part of what was said was accurately summarised in a pro-Kremlin social media post, namely a Politjoystic telegram channel post of 26 February 2022, which stated:

Aeroflot will not give the planes to European leasing companies and will raise the issue of their buyback. All other Russian airlines will decide at their discretion, but the Government will help them if they decide to keep the planes.

…

The decision was made at the very top.

If, as I consider probable, this was an accurate account of at least part of what had occurred, a number of points arise. In the first place, ‘the very top’ was probably President Putin. No one else was ‘the very top’. But if it was not, it must have been Mr Savelyev. Secondly, it demonstrates, in my view, that Aeroflot was being told that it was not to give back its planes to European leasing companies, and that this was one of the things coming from ‘the very top’. In this regard, what Aeroflot was to do (‘will not give the planes…’) and what the other airlines were to do (‘will decide at their discretion…’) are expressed in the same way. In other words, both are what the various airlines were told to do. ‘The decision’ made at the very top is most naturally read as being both parts of what appears in the previous paragraph.

I also consider that, while the Politjoystic post refers to Aeroflot being instructed not to give the planes back, the other state-owned airlines were also given to understand that they should not hand back any planes at present. This is supported by statements deriving from Mr Yanbukhtin, a Moscow-based lawyer, who had previously worked in AerCap’s legal leasing department, and who had relations with Ural, Red Wings and Alrosa. The information deriving from Mr Yanbukhtin was that while private carriers were fine to do whatever they decide ‘Government owned airlines – an absolutely different story’.

What also appears to me clear is that, even though the Politjoystic post may represent part of what was said, it does not convey all that was discussed, and, if taken on its own, tends to suggest that the meeting produced a more concluded position than was the case. In this regard, I considered that Mr Kozhanov’s evidence was of significance. His account was based on his recollection of a contemporaneous report that he had received from an attendee of the meeting. His evidence was that during that meeting ‘everyone, including MinTrans, was shocked and nobody knew exactly what was to be done. This meeting was just a preliminary discussion. MinTrans explained that they needed time to think. They tried to explain the situation, telling the airlines not to worry, not to do anything, and to wait for decisions.’

Similarly, Ms Fileva said in her Forbes interview: ‘At that time, no specific decisions had been taken at the first meeting on 26 February. At first, everyone was just confused, to be honest. The decisions followed later.’ Izvestia, in an article published on 27 February 2022 said: ‘As Izvestia’s sources at a number of airlines reported, no decisions were made at the [26 February] meeting.’

Mr Finegan recorded Mr Kozhanov as having conveyed, on 26 February 2022, ‘Per Red Wings, the meeting was light and there is likely more to come.’

Kommersant reported, based on what it had been told by ‘one of the participants of the meeting’, that ‘the state would only save Aeroflot’; and that ‘the others were asked, if possible, not to give up the planes preventively, to wait for clarity and try to find a compromise with the lessors.’

In the immediate aftermath of the meeting it was already known that there would be another meeting with MinTrans on Monday (as is apparent from Mr McCray Smith’s ‘Russia Update’ of 11.02 on 26 February 2022). It seems likely that this had been announced at the meeting itself.

My findings of what had occurred at the meeting can be summarised as follows. In the first place, the Aeroflot group was told not to hand over any aircraft, and other state-owned airlines were given to understand that they should await the government’s decisions about leased aircraft. Secondly, private airlines were not given any express instruction as to what to do, and were told to deal with the situation in their own way. Thirdly, it was made apparent that there would be further communications from and decisions of MinTrans, and that it would be prudent for airlines to await those communications/decisions before giving up planes. Fourth, it was made known that there would be another meeting with MinTrans on Monday 28 February 2022. And fifth, there was some talk as to the state helping private airlines, by which most likely it was being mooted that there might be assistance with purchasing aircraft, and possibly subsidies, but this was at a high level of generality, and it was unclear what might be on offer, as reflected in Kommersant’s source’s understanding that the state would only save Aeroflot.

A further meeting at MinTrans occurred on 28 February 2022. It was not attended by Minister Savelyev but was attended by the Deputy Minister of Transport, Igor Chalik, who has been described as having been Minister Savelyev’s right hand man when he was CEO of Aeroflot, before they had moved together to MinTrans.

It is not entirely clear which airlines were at the meeting. The RBC article, to which I will come, said that ‘the largest Russian airlines’ participated, and mentioned the presence of Aeroflot, S7, Ural and UTair. Ural’s presence is open to doubt. Three Ural representatives told AerCap on 28 February 2022 that Ural was not at the meeting and could not provide an update. Whether Ural was at the meeting or not, I consider it likely that it was told about what was discussed at the meeting very shortly after it had happened. Other airlines than those mentioned by RBC were also present at the meeting.

There are two main sources for what happened at the meeting. In the first place, there is an RBC article of 2 March 2022. RBC is a business news outlet increasingly subject to control by the Kremlin. This was based on what had been told to RBC journalists by ‘two sources familiar with the meeting’. The article says, in part:

… the option of nationalization of such [viz leased] aircraft was raised as one of the options for solving the problem.

The Ministry of Transport is inclined to this idea (about the nationalization of aircraft), added a source in a large leasing company. But the authorities have not yet made a final decision on what to do with Airbus and Boeing aircraft … They expect that a specific scenario may appear before the end of the week.

“The question is at the evaluation stage”, a representative of [FATA] told RBC, answering questions about options for maintaining foreign aircraft in Russia and the possibility of their nationalisation.

…

“The nationalisation of the fleet is the most realistic scenario, there are no other options {for maintaining operability} [in parentheses in original] right now”, says one of the sources of RBC. According to him, this should be a decision of the state, because the companies themselves do not have legal grounds to detain aircraft, if there is a requirement of leasing companies to return them. If a decision is made to buy the aircraft, the state will have to discuss this possibility with the United States and the EU…

The state will primarily help the Aeroflot group…

The other principal source is the evidence of Mr Kozhanov. He was not at the meeting, but was told at the time what had happened by two people who were there. Mr Kozhanov’s evidence was that he was told that this meeting was ‘stronger’ than that on 26 February 2022, and that:

It was explained that the issue of repossession of aircraft was in the final stage of being resolved and a decision would be made very soon. It was not a final decision, but the airlines were told to be ready for the final decision of the government. Airlines were told not to return aircraft until a final decision was made as Russia could not be in a situation where it had airlines without aircraft. The expectation was clear that the aircraft should be retained pending a formal legal solution.

Mr Kozhanov supplemented this evidence, in a correction to his first report, by adding that what he had meant was that ‘while there was no final decision at that stage as to what the legal mechanism would be, there was nonetheless a decision that the government policy would be to retain the aircraft in Russia.’

Some further light is shed on what happened by a Telegram message from Aviatorshina of 2 March 2022, which stated:

At meetings with Russian airlines at the Ministry of Transport and [FATA] at the beginning of the week, it was decided that the leased aircraft would not be handed over, says a source acquainted with the details.

My conclusions in relation to this meeting are that it was attended by a significant number of the major Russian airlines. I consider that it was indeed made apparent at the meeting that the government’s expectation was that the aircraft should be retained pending the formulation of a legal solution. I do not regard this as having been an order. Nor do I find that it was couched in terms of a decision having been made by the government that the aircraft should be retained. Rather, the message was that the government was working on a legal solution, and its expectation was that the aircraft should not be returned before that was devised. It was further conveyed that one possible legal solution was nationalisation, but that this was still under review.

I accept that Mr Kozhanov, especially in the correction which he added to his report, probably went too far in characterising the meeting as having conveyed a decision that the government policy would be to retain the aircraft in Russia. I think that the position was somewhat more indefinite than that, and the government was indicating that it was still reaching its decisions, did not want the aircraft to be handed over in the meantime, and was looking at legal solutions which would keep the aircraft permanently in Russia.

I have referred above to the nature of the FATA telegrams. In summary: (1) on 2 March 2022, FATA asked to be given details of airlines’ leased fleets and any requests for the return of leased aircraft; (2) on 3 March 2022, FATA stated that even if certificates of airworthiness were suspended, airlines should not suspend flights without confirmation from FATA; (3) on 4 March 2022 certain regional administrations within FATA proposed that airlines react to lease terminations by re-registering aircraft in Russia and obtaining Russian certificates of airworthiness, and the Tyumen Administration directed airlines to re-register aircraft; and (4) also on 4 March 2022 FATA placed special control measures on the preservation of technical records for leased aircraft.

It is not in dispute that these telegrams from FATA were not legally binding. MinTrans’ legal department indeed sent a letter on 5 March 2022, reported by Aviatorshina, stating that it was not permitted for regulatory legal acts to be issued in the form of letters and telegrams. Some of these messages were also expressed as recommendations, which doubtless provides additional support for their not being binding; though, as I have said above, I accept Mr Kozhanov’s evidence that FATA’s recommendations are generally observed without question.

These FATA telegrams were also, as it seems to me, clearly and of their nature, only temporary messages, inviting an immediate response to a situation on which there would be a more definitive position established in due course.

The significance of the telegrams appears to me to be that the Russian authorities had a clear, and urgent, concern about what was happening to the leased aircraft, wanted to know how many were the subject of termination of leases or requests for return, and wanted to keep them flying in Russia.

As to other meetings which were being held at MinTrans during this period, there was evidence that Dr van Antwerpen spoke to a representative of Rossiya on 1 March 2022, and was told that there had been a meeting at MinTrans on that day. The call report states: ‘The feed-back from the meeting … is that the government is trying to understand how it can keep its aviation infrastructure in place across the Russian Federation given the sanctions imposed’; and further that the Rossiya CEO had returned from the meeting with a ‘tracker’ put together by the Ministry, which required Rossiya to specify how many foreign lessors had demanded the return of their aircraft, and information as to how long aircraft could fly before anticipated maintenance was required.

The call report also records that Dr van Antwerpen asked his contact whether he anticipated that leased aircraft would be held in Russia and whether this would apply to both government-owned and private airlines. His contact said he was speculating and could not provide a firm answer: ‘there is no instruction or messaging at this moment that suggests that leased aircraft should be held in Russia. But there is no instruction for the aircraft to depart outside Russia either.’

This report indicates that MinTrans was, by 1 March 2022 actively collecting information in relation to leased aircraft. The answer given to the question as to whether aircraft would be kept in Russia reflected some uncertainty on the part of the contact which itself, as I understood Dr van Antwerpen’s evidence, was probably due to the contact, Mr Ostrovsky, being in St Petersburg, that is to say not in Moscow at the centre of decision-making.

On 2 March 2022 representatives of Ural said to Dr van Antwerpen that there was no formal guidance from the government, and ‘airlines are left to deal with their lessors’; but that there had been an informal direction given by the government that aircraft should not be returned at present, and no confirmation permitting their return; and that clarity was expected to be provided by MinTrans in the middle of the following week. The words which I have quoted within inverted commas were in inverted commas in the original. I regard it as clear from the note that this was to indicate that this was a reiteration of a formal position, and it was to be taken in conjunction with the informal direction, and the fact that there was no government confirmation that aircraft might depart.

On 3 March 2022 there was a further meeting at MinTrans. When Mr Leahy of AerCap spoke to Ms Mashkova of S7 on 3 March 2022, she referred to daily meetings at MinTrans, and reported that they were largely centred around operations and how to keep passengers moving; and that she thought MinTrans would provide more clarity as to its position early in the following week.

An email was sent by Mr Turtsev of Clifford Chance, a lawyer who worked with lessors, to CDB Aviation on 4 March 2022, which contained an account of the meeting on 3 March 2022. Mr Turtsev did not work for airlines, and it is unlikely that he was at the meeting himself, and so it is unclear what his source of information was. Two of the points he noted were that the Russian Federation would not assist lessors in repossessions; and that ‘there is no guidance or rules for privately owned airlines. They are free to make their own decisions’. As to the latter point, it seems to me very likely that this was a reflection of the same message from MinTrans as Ural had reported on to Dr van Antwerpen on 2 March 2022, and which he had put in inverted commas (and which I have quoted above), namely that formally airlines were left to deal with their lessors. But that does not mean that there was not an informal direction that aircraft should not be returned, as Ural had said there was.

I have quoted above part of what President Putin said in his appearance at the Aeroflot training centre on this day. It was a high profile appearance, occurring at an early stage after the start of the full scale invasion of Ukraine and the imposition of Western sanctions. What he said can be over-interpreted. What is apparent, however, is that President Putin publicly associated himself with the continued operation of civil aircraft in Russia; and that he indicated that he regarded Western sanctions as like a war on Russia. It is also significant that President Putin revealed that he was talking to Minister Savelyev on a very regular basis, and, given the context of the remarks, it is plain that these discussions were, wholly or largely, about aviation. President Putin’s remark that Minister Savelyev should be given the opportunity to negotiate with his ‘partners’ is not clear as to who the ‘partners’ were that he was referring to. Minister Savelyev would not be conducting negotiations with Western lessors himself, and these do not appear the obvious group President Putin had in mind. I tend to think that President Putin was referring to negotiations with all interested parties, including airlines, and possibly other ministries. Whatever the position in relation to that, the reference to the Minister having the opportunity to negotiate further but President Putin being certain that ‘we will fly’ is a clear indication that, while there had been no final decisions as to the way in which it was to be achieved, there would continue to be a functioning civil aviation system in Russia.

Also on 5 March 2022 FATA issued the message of that date which I have quoted above. I consider that this was an instruction, albeit a temporary one, to airlines to keep leased aircraft in Russia, subject to the identified exceptions. I do not regard it as plausible that this message was intended, or understood by airlines, merely to be advice that if flown abroad planes might be arrested. That is a matter of which airlines would have already been aware. In any event, and as I have already said, ‘recommendations’ of FATA were generally expected to be complied with; and that must have been particularly the case with this one, which was expressed in emphatic terms, and employed marked and unusual political language. FATA also took care to communicate this message to airlines, publishing it on its website, emailing it to airlines, and, as Mr Kozhanov and Mr Rybak agreed, telephoning the CEOs of airlines to ensure that it had been received.

I also consider that this message was not intended, and would not have been understood to prohibit only laden flights carrying passengers and cargo, while saying nothing about empty ferry flights. As the message said, FATA was concerned about the possibility of aircraft being arrested. It would not have been concerned only about the arrest of laden aircraft, and not about ferry flights to return aircraft to lessors. The message would have been understood, as Mr Kozhanov says it was understood, as a ban on any flights abroad for any purpose.

During this period, most airlines did not fly abroad. There were returns to lessors of 22 planes by Russian-Turkish airlines, i.e. Azur, Pegasfly/Nordwind and Royal Flight. Of those, 12 flew to Turkey, 6 to Egypt, and 2 each to Mexico and UAE. In several of these cases, the airlines used subterfuge to return the aircraft. By way of example, AerCap’s MSN 32729, which had been leased to Azur, was flown to Egypt and grounded, and Azur made sure that the aircraft could not depart by immobilizing it. In most if not all these cases the airline acquiesced or cooperated in the repossession. It seems that these airlines were able to obtain permission to fly the aircraft to Turkey, Egypt and Mexico because they were carrying out repatriation flights or because they were able to fly under the guise of carrying out maintenance at an operational base outside Russia.

These returns were not viewed with equanimity by FATA. A telegram post by Aviatorshina of 11 March 2022, referring to a ‘recent’ meeting at FATA, included the following:

The meeting also discussed a “small demarche” by charter airlines with Turkish origins (Pegas Fly, Nordwind, Royal Flight, Azur Air). The source said that “by a fortuitous coincidence, most of their fleet landed in Turkey at the same time where they were conveniently detained.” According to Flightradar data, more than 20 aircraft of the listed airlines have already been in Turkish airports for several days.

In response, Maxim Kostylev [FATA’s head of flight operations] threatened the carriers that “the appropriate conclusions will be drawn” regarding this sabotage.

Mr Kozhanov’s evidence was that SATMC was instructed, on 10 March 2022, not to issue permits for flights abroad by Russo-Turkish airlines. It seems likely that this instruction was given at much the same time as the meeting at FATA described above.

A draft Government resolution, ‘On Guaranteeing the Uninterrupted Operation of Civil Aircraft Flights Against the Backdrop of Sanctions Against the Russian Federation’ was reported to have been prepared by 2 March 2022. Its text was published unofficially on the Russian website Frequent Flyers on 3 March 2022. It did not include any prohibition on leased aircraft being moved out of Russia. Instead it provided for the extension of the validity of airworthiness certificates, reducing the period for the issue of Russian airworthiness certificates, extending the validity of documents confirming the passage of inspections, and the like. On 5 March 2022 an expanded version of this draft resolution was officially published for public consultation, due to be completed by 21 March 2022.

On 9 March 2022 a draft regulation in relation to the performance of aircraft leases, including the terms and conditions and procedure for the return of foreign aircraft was published by MinTrans. It provided that sums due under such leases should be paid in accordance with procedures established by the Central Bank of the Russian Federation, and provided that the lessee should ensure insurance and reinsurance of the aircraft with Russian insurers and reinsurers. It further provided that in the event of the termination of a lease by the lessor and a demand by the lessor for the early return of the aircraft, the lessee ‘shall return the foreign aircraft … on the basis of a decision of the Government Commission for Import Substitution, indicating the procedure and the terms and conditions of such a return’; and that in the absence of such a decision, the lessee should continue to use the aircraft during the term of the lease.

This draft resolution was published on the same day as GR 311, which I will come to consider in detail below, was passed. The draft resolution was aircraft-specific, whereas GR 311 covered a wide range of goods. They dealt with restricting the export of aircraft in rather different ways, with the draft resolution envisaging a permission procedure involving the Government Commission for Import Substitution, and not referring to GR 311. It seems to me likely that the difference was due to the governmental left hand (MinTrans) not knowing exactly what the right hand (the Russian Government acting by the Prime Minister’s Office) was doing, in circumstances of emergency and crisis. The draft resolution came to be amended and turned into GR 412, which was enacted on 19 March 2022. In its enacted form, instead of referring to the Government Commission for Import Substitution, it provided that the export of foreign leased aircraft was to be ‘carried out in accordance with the bans and restrictions established on the basis of [PD 100]’, that is to say GR 311.

These measures are central to the AR Camp’s case that any loss of the Aircraft was caused by a WR Peril. They contend that, if there had been no prior loss of the Aircraft, these measures, and in particular GR 311, were a restraint or detention which was the proximate cause of the loss of the Aircraft. The WR Camp accepted that GR 311 was capable of amounting to a restraint, subject to three issues, which are in whole or in part issues of Russian law, that determine its scope and effect. Russian law expert evidence was adduced in relation to those issues.

In what follows, I will consider the terms of the measures, and then the three issues. In the course of my review of those issues, I will resolve the issues of Russian law, insofar as it is necessary to do so.

President Putin’s decree PD 100, issued on 8 March 2022, was issued pursuant to pre-existing counter-sanctions legislation. It provided, in part, that there should, until 31 December 2022, be a ban on the export from Russia of certain goods pursuant to lists to be determined by the government. PD 100 was implemented by means of the Prime Minister signing GR 311 and GR 312 on behalf of the government on 9 March 2022. They came into force from 10 March 2022, the date of their official publication.

GR 311 banned the export from Russia of certain goods, which were listed in an Annex to the resolution. This Annex contained a large number of items, including aircraft and aircraft engines. GR 311 provided that the FCS should ensure control over the performance of the ban; and that the Ministry of the Interior, the Border Service of the FSB, and the Federal Service of the Troops of the National Guard should assist the FCS. There was an exception for exports to other countries in the EEU. There was an exception for TVIC.

GR 312 introduced a permit-based procedure for the export of certain goods from Russia to the EEU member states. Those goods were listed in annexes to the resolution. Annex 2 included aircraft and engines. MinTrans was given responsibility for issuing export permits for these goods. TVIC were exempt from the permit-based procedure.

Both GR 311 and GR 312 were stated to impose their restrictions until 31 December 2022. In the event they were first extended by GR 1959 of 2 November 2022 until 31 December 2023, and then re-extended by GR 2285 of 23 December 2023 until 31 December 2025.

On 17 March 2022 GR 311 was amended to introduce a new paragraph 2(1) which provided that temporary export permits could be granted ‘by decision of the Government of the Russian Federation, on the basis of proposals of federal executive bodies agreed with the Ministry of Industry and Trade … and the Ministry of Economic Development’.

GR 311 was amended by GR 850, which came into force on 12 May 2022. Following the amendment, the exception for TVIC was not to apply to aircraft exported for the purpose of return to lessors of states unfriendly to Russia.

The three issues raised by the WR Camp as to whether GR 311 had a relevant restraining effect, and if so as to whether any restraint was effective, are as follows. First, the WR Camp contended that the aircraft could have been moved outside Russia pursuant to the TVIC exception. Second, it was said that the aircraft could have been returned by exporting them as ‘goods’ if the Government granted permission. There is a significant issue as to the reality of this possibility. Third, it was argued that if an aircraft was refused permission to leave Russia on the grounds that it was to be returned to a lessor, that refusal could have been challenged on the basis that GR 311 conflicted with Russia’s obligations under the Cape Town Convention and Protocol.

GR 311 as initially enacted provided that the ban on exporting the goods listed in the Annex to the Resolution ‘shall not apply to: … transport vehicles of international carriage’.

The WR Camp contends that, up to 12 May 2022, aircraft could have been moved outside Russia pursuant to this exception, by the airline undertaking a journey of international carriage (i.e. a journey involving a flight carrying passengers, baggage and/or cargo to another state) and, once outside Russia, returning the aircraft to the lessors. This was supported by expert evidence from Dr Gerbutov and Mr Kozienko.

The AR Camp contends that the TVIC exception did not allow aircraft to be exported permanently from Russia to be returned to lessors. Further, even if leased aircraft could have left Russia as TVICs for the purpose of the permanent return to lessors, it would still have been necessary to submit them for export or re-export processing in order to effect their export on a lawful basis, and that would have been prohibited by the ban on ‘export’ in GR 311. The AR Camp relied on the expert evidence of Mr Saveliev and Dr Khodykin.

In more detail, the issues are these. First, would an aircraft which left Russia to start or complete a journey of international carriage but also with the purpose of being permanently returned to a lessor outside Russia have qualified as a TVIC within the meaning of the TVIC exception? Second, once an aircraft had been flown out of Russia in such circumstances, would the FCS have been bound to agree to the airline’s application permanently to export it?

The legal background to these arguments, aside from GR 311 itself, includes that TVIC is a concept drawn from EEU Customs law, and has the same meaning as it does there. Article 2.1(51) of the EEU Customs Code defines a TVIC as:

transport vehicles used for the international carriage of goods, passengers and/or luggage.

A number of matters were common ground between the experts as to the TVIC concept. It covers vehicles making journeys for the purpose of international carriage of goods, passengers and/or luggage; and the relevant purpose is that of the particular journey. The TVIC concept does not apply to vehicles which are being exported as goods themselves. Its rationale is to simplify and facilitate international carriage, travel and trade, as it would be inconvenient for full customs procedures and the payment of duty to be required for a vehicle which is being used for regular flights to and from Russia each time the vehicle crossed the border. I also understood it not to be in dispute between the experts that a movement out of the EEU as a TVIC is a temporary export, and does not change the vehicle’s customs status.

The first main matter at issue was whether the movement of an aircraft out of Russia would fall within the TVIC exception if, at the point of departure, the airline had had the intention of completing a carriage of goods, passengers and/or luggage, but had also intended that, at the end of that carriage, the aircraft would be returned to the lessors outside Russia.

The WR Camp contends that the only relevant purpose is as to the use of the aircraft for the particular journey, not its subsequent use. This produces a simple test, while any assessment of whether a movement falls within the TVIC exception which depends on the relative weight of the purposes of the airline would be uncertain, and illogical.

The AR Camp contends that the WR Camp’s case is inconsistent with the intention and purpose of GR 311, which was to ban the export of aircraft; and that a Russian court would consider the purpose and objective of GR 311 when considering its meaning and effect. Further, if there was an intention that the aircraft should be delivered to lessors at the end of the flight, that would be a current intention at the outset of the flight, and one which could not be dissociated from the purpose of the journey. If there were an intention at the outset of the flight that the aircraft should be returned to a lessor at the end, then the export would not be temporary, and that would be inconsistent with the aircraft being a TVIC. Moreover, an airline could not have properly and honestly filled in the TDTS form (the short form declaration that has to be filled in when a TVIC leaves the EEU), if the intention was to return an aircraft to the lessor at the end of the flight.

I have concluded that the AR Camp is clearly right about this. My reasons are essentially six-fold.

In the first place, I considered that, where they differed, the evidence of Mr Saveliev and Dr Khodykin was generally more cogent than that of Mr Kozienko and Dr Gerbutov. The evidence of Mr Saveliev was, I found, generally persuasive and realistic, as was that of Dr Khodykin. Mr Kozienko’s evidence, though informed by considerable knowledge of Russian and EEU customs law, on occasions lacked realism; and Dr Gerbutov on occasions failed to make realistic concessions and came close to arguing the case for the WR Camp.

Second, it is apparent that the objective of GR 311 was to be an effective ban on the export of aircraft and engines. GR 311 (and GR 312) was passed pursuant to PD 100, which was a decree, as its title stated, for the purpose of furthering the security of the Russian Federation. PD 100 was issued pursuant to Federal Laws 281-FZ of 30 December 2006 on Special Economic Measures, 390-FZ of 28 December 2010 on Security and 127-FZ of 4 June 2018, on Counter-Sanctions. As Mr Saveliev put it, the purpose of GR 311 can be seen to be to further the objectives of (i) ensuring the uninterrupted functioning of key areas of the Russian economy, (ii) protecting Russia’s security and sovereignty and (iii) protecting the rights and interests of Russian citizens against the actions of unfriendly states; and was intended to protect (inter alia) the aviation sector against economic sanctions. These objectives would be defeated if any number of aircraft could be returned to lessors provided only that there was any amount of cargo/passengers on board.

Third, the meaning and purpose of GR 311 are illuminated by the facts, which were agreed between the experts, that: (1) the TVIC exception does not apply to a case where the aircraft was exported outside the EEU for the sole purpose of return to the lessor; and (2) the TVIC exception does not apply to the export of engines outside Russia separately from aircraft. To say that these cases were not within the TVIC exception, but the export of an aircraft where there was an outward flight which did carry some passengers or cargo was, appeared to me to produce an absurd result.

Fourth, the points about the purpose of GR 311 and the relevance of the absurdity of one interpretation of it, are matters which could be taken into consideration by a Russian court in interpreting GR 311. I accepted the evidence of Dr Khodykin and of Mr Saveliev that a teleological interpretation was a mode of construction available to a Russian court in construing GR 311. This seemed to me to be borne out by the decision of the Appeal Chamber of the Russian Supreme Court in LLC Vita-Ora, where the court did have regard to the objective of GR 311 itself.

Fifth, the interpretation which WR Insurers put on GR 311, and the way in which it is contended that aircraft could have been exported, would fall foul of the Russian law doctrine against circumvention of law. This principle was explained by Mr Saveliev as applicable where a person seeks, using formally permissible and lawful actions, to circumvent a result that the law is intended to prohibit. That this principle is applicable in public law cases is the evidence of Mr Saveliev, and this is supported by part of the reasoning in the Russian Supreme Court decision in Moloko v Chelyabinsk Customs, and also by part of the reasoning in the decision of the Arbitrazh Court of the North West Circuit in Barrus Project Logistics v Murmansk Customs. I recognise, especially in relation to the latter authority, which is not a decision of the Russian Supreme Court, that it is necessary not to treat Russian authorities as precedents in the way in which a common law system would; nevertheless those cases do appear to contradict the idea that the principle is only applicable in private law cases.

Sixth, I accepted the evidence of Dr Khodykin and Mr Saveliev that an intention to return the aircraft after the flight was inconsistent with a temporary export, which is an integral part of the TVIC regime; and their further evidence that if that was the intention, then to fill out the TDTS form indicating one of the four standard purposes of export would involve a misrepresentation which would have exposed the airline to sanctions.

The second main issue is whether, if an aircraft had been flown out of Russia as a TVIC, the lessee would have been entitled to make a declaration for export or re-export which the FCS would be bound to approve.

It was, as I understood it, common ground between the experts that, in order for an aircraft to be permanently exported, it was not enough that the aircraft should have physically left Russia, but there needed to be the performance of a customs procedure, namely to submit a declaration for export or re-export, and the customs authorities needed to agree to place the aircraft under the relevant procedure. What was in issue was that the WR Camp contended that, the aircraft having been flown out as a TVIC, the authorities would have had no option but to agree; but even if that was wrong, non-compliance with the relevant procedure would have no significant implications, and a refusal of the authorities to agree to the placing of the aircraft under the relevant procedure would not be a restraint of the aircraft.

This point does not matter given my conclusions in relation to the first main point as to the TVIC exception. I will nevertheless briefly express my conclusions in relation to it.

The situation which is being considered is where an aircraft has been flown out of Russia as a TVIC, and on the assumption that it was not inconsistent with the aircraft’s TVIC status that there should have been an intention to return it to the lessors at the end of the flight. I accept AR Insurers’ case that, in such circumstances, the aircraft would still be subject to the ban on export in GR 311. GR 311 bans the permanent export of goods (including aircraft). That ban does not cease to apply to a TVIC once it has left Russia, because, as provided for in Article 7 of the EEU Customs Code, the aircraft crossed the EEU customs border and/or have been placed under customs procedures ‘subject to prohibitions and restrictions’. I accept Dr Khodykin’s evidence that if an aircraft left the EEU as a TVIC, namely a temporary export, permanent export would still be prohibited.

I consider as entirely unrealistic the suggestion that, if an aircraft had left the EEU as a TVIC, but was still subject to the ban on export, the Russian authorities would have given permission for its permanent export by return to lessors.

More generally, if one assumes, contrary to the facts, that what had happened was that airlines had moved aircraft out of Russia as TVICs and had then applied to export or re-export aircraft in order to return them to lessors, the purpose would have become known to the Russian authorities, even if it had not been known before. I do not consider that the Russian authorities would have accepted such applications, and they would have been made aware that the TVIC route was being used as a means of returning aircraft to lessors. I regard it as clear that the authorities would have reacted by not permitting any further aircraft to fly out as TVICs. There were numerous ways in which unauthorised flights could have been prevented: including refusal of an airspace permit, and refusal of dispatch permission. In other words, after the first few planes, this route to returning aircraft would have been stopped, even if it had succeeded in the first few cases.

WR Insurers make the point that, if aircraft were outside Russia, and if there was then a refusal by the Russian customs authorities to grant a permit for permanent export, this would not be a restraint for the purposes of the policies. Even if a customs duty could, in such circumstances, be levied, the aircraft would not be restrained, or prevented from being returned. I am prepared to accept that is so. But it does not seem to me to be the relevant question, as that situation never occurred. The relevant question is whether GR 311 was a restraint, and the degree of realism of the suggested ways of getting around it is relevant to whether it was. The way suggested by WR Insurers as to how the ban could have been avoided, or was potentially inapplicable, is, in my view, unrealistic and would not have worked, and that is of relevance to whether GR 311 was a restraint.

For completeness, I should refer to the position under GR 312, which had introduced a permit procedure for exports of enumerated goods to EEU countries. Mr Kozienko’s evidence was that it would have been possible for aircraft to be returned to lessors pursuant to GR 312 by a series of steps involving first that the aircraft should be admitted for domestic consumption in Russia; second that it should be flown to another EEU country as a TVIC; third, that the aircraft be returned to the lessor in that other EEU country; and fourth that the lessor then apply to the local customs authority in the other EEU country in order to export the aircraft.

As the TVIC exception in GR 312 is in the same terms as that in GR 311, and for the same reasons as in relation to GR 311, I do not consider that an aircraft could have been flown out of Russia to another EEU country as a TVIC, if it was intended to return the aircraft to the lessor; and an attempt to do so would have fallen foul of the doctrine as to circumvention of the law.

It is also apparent that there would have been further difficulties with this proposed route of return. Dr Khodykin explained that it would be necessary, as a first step, for the lessee to change the customs status of the aircraft, while in Russia, from temporarily admitted to released for domestic consumption, because it would not be possible to transfer possession of the aircraft to another in an EEU country while under the temporary admission regime. That change of status would, however, attract VAT at 20% and customs duties of up to 12.5%. I did not consider persuasive the suggestion, put to Dr Khodykin in cross examination, that no VAT would have been payable, because the relevant exception relates, as I understood it, to goods conditionally released for domestic consumption, but goods in that category would retain the status of foreign goods and could not have been transferred to a lessor. In addition, I concluded that, at stage 4, the foreign lessor would not have been able successfully to apply for export from the EEU country, because it would not have met the relevant criteria. In particular it could not have used any of the available codes, for the reasons Dr Khodykin gave.

One final issue in relation to the TVIC exception should be referred to. This is as to what inferences can and should be drawn from the passage of GR 850 which came into force on 11 May 2022. As set out above, this provided expressly that the export restriction should not apply to TVICs except for aircraft being exported for the purpose of return to lessors in unfriendly countries. This was relied on by the WR Camp as support for their case that, prior to this, there had been no ban on the export of aircraft for the purpose of their return to lessors. On the other hand, the AR Camp, and Messrs Khodykin and Saveliev, contended that it was merely clarificatory.

I found the evidence of Mr Saveliev and Dr Khodykin on this point persuasive. On their evidence, GR 850 did not alter the position that the TVIC exception had never allowed permanent return to any lessor, but emphasised it in relation to Western lessors. I considered the contrary position, and Mr Kozienko and Dr Gerbutov’s evidence on it, to be unconvincing. It would suggest that, when GR 311 was introduced in March 2022, the government was content that aircraft should be returned to lessors from unfriendly countries, but that that changed in May 2022. There was no evidence of, or apparent reason for, such a change. The WR Camp’s interpretation also involves that there would have been a difference between the government’s approach to aircraft and detached engines. Detached engines could never have been a TVIC. It is difficult to see why the government should have been intending to permit the return of aircraft in March 2022, but not of detached aircraft engines, or why that policy changed in May 2022. Further, if the intention had actually been to effect a substantive change to the TVIC exception, it is difficult to see why the TVIC exception in GR 312 was not similarly altered, notwithstanding that other amendments to GR 312 were made by GR 850.

Clarificatory amendments were made to GR 311 by GR 1775. This confirmed, in essence, that the ban did not apply in relation to goods exported from the Russian Federation prior to GR 311 coming into force. I conclude that GR 850 was likewise introduced for the avoidance of any doubt, probably because some airlines were asking about the position.

I therefore find that the TVIC exception was not available as a route by which airlines could return aircraft to lessees. The fact that no airline in fact tried to use it to return aircraft to lessors appears to me to support the conclusion that it was not, and was not thought to be.

There is no dispute that, in its original form, GR 311 did not contain any procedure for seeking permission to export goods subject to the ban; or that, on 17 March 2022, GR 390 amended GR 311 to introduce a new provision dealing with permission. That provision was, in the event, further altered on 6 October 2022 by GR 1775 which introduced a more involved procedure.

There was no specific format stipulated for an application for permission under GR 311; nor were any criteria or conditions set out for the grant of permission. A procedure for applications under GR 312 was established by Order 99 passed on 24 March 2022, and might have been applied by analogy. The procedure under Order 99 required the submission of an application to MinTrans, including the grounds for export of the relevant product and details of the applicable contract; and if the application conformed to relevant requirements, MinTrans would provide it to the FSB and the Ministry of Defence for them to evaluate whether the export posed a threat to the defence and security of the country. Grounds for refusal of the application expressly included a threat to national defence or security.

The main focus of argument between the AR and WR Insurers on the issue of permits was as to whether there was any realistic prospect of the grant of permissions to return aircraft to lessors. I will return to the applications which were made in the context of the position of the airlines below. But my conclusions on this issue are as follows:

Accordingly, I accept that the position is accurately stated in AerCap’s Opening Submissions, namely that the ability to obtain export permits for return of aircraft to Western lessors was at all material times illusory. The only exception appears to have been in relation to the special case of Boeing 737 MAX 8 aircraft. There would not have been the grant of permits for any significant number of aircraft because it would have undermined the government’s anti-sanctions strategy.

The third main issue in relation to GR 311 is as to whether GR 311 could have been challenged on the basis that it was inconsistent with Russia’s obligations under the Cape Town Convention. WR Insurers contend that GR 311 did not constitute a restraint or detention because any refusal of permission of an aircraft to leave pursuant to GR 311 could have been challenged in court on this ground. The AR Camp disagrees, and contends that the point is hopeless.

WR Insurers’ argument is that, under the Cape Town Convention, Article 10 entitles a lessor to terminate the leasing agreement, take possession or control of the aircraft and apply for a court order authorising or directing these acts. The Protocol confers additional rights to ‘procure the export and physical transfer of the aircraft object from the territory in which it is situated.’ Accordingly, upon a default, the lessor had a right to remove the aircraft from Russia and to export it. Insofar as GR 311 restricted that right, it was incompatible with the Cape Town Convention, and could have been challenged accordingly, because Russia’s international obligations take precedence over Government Resolutions pursuant to the Russian Constitution.

This argument is another which strikes me as unrealistic. This is because I find that this is not a point which would or could have been advanced successfully in a Russian court. It is a point which it is unlikely that any airline would take to court, and none has; and if it was taken, it would not be successful. Russian courts would either have ‘self-censored’, to use the expression which has been used during the trial, or there would, if it had been necessary, have been direct political interference.

On these points, I found the evidence of Professor Greene to be of the greatest assistance. He gave evidence that: ‘The barriers to judicial independence in Russia are multiple’. He quoted from a Freedom House 2023 Report to the effect that the Russian judiciary ‘lacks independence from the executive branch’; and from the World Justice Project which in 2023 ranked Russia 113^th out of 142 countries on rule of law, 130^th out of 142 on the degree of government interference in the conduct of civil justice, and 137^th out of 142 on the degree of government interference in the conduct of criminal justice.

Professor Greene gave the following evidence which I considered persuasive:

… it is my opinion that a challenge to Resolution 311 – whether that be a challenge to the law as such, or to aspects or instances of its implementation and enforcement (including in particular whether the purported exception for … TVIC might be used to return aircraft to lessors) – would have implicated a clear political interest. In such circumstances, Russian airlines would likely have concluded that it would be reckless to bring suit, given the government’s apparent interest in the policy and the national-security context in which the policy was framed. This is in part because they would likely have perceived no chance of success, and in part because they would likely have perceived at least some chance of adverse reaction, including reprisal, by the authorities.

There was largely agreement by the other experts who dealt with the area that, at least in areas of political importance, the Russian courts are weak and pliable and likely to be swayed by state interests. There was some disagreement as to whether the issue in the present case fell within the category of a case of political importance where the interests of the state were substantially engaged; or at least as to whether that would have been the case if the matter had arisen in a dispute between airlines and customs authorities, rather than as a head on challenge to the validity of GR 311. Dr Gerbutov gave evidence in his first report (paragraph 230) that ‘in case of a direct dispute between a Russian lessee or a foreign lessor with the President or the Government seeking to invalidate Decree No. 100 or Resolution No 311, the likelihood that the risk [of unlawful influence over the judges] could materialize seems to be very high’; but considered that a reliance by a lessee on incompatibility of GR 311 with the Cape Town Convention in the context of a dispute between the lessee and Russian customs authorities was less likely.

Given that, as I consider clear, the validity of GR 311, including in relation to aircraft, engaged an important state interest, I find that the fact that the challenge to its validity might have arisen in the context of a dispute with Russian customs authorities would not have made any material difference to the (un)likelihood of the point being taken, or of its being successful. If the putative challenge, namely that GR 311 was incompatible with the Cape Town Convention, was identical, then there seemed no good reason to think that the result (both as to whether the point would be taken and its fate if taken) would be different.

As Mr Saveliev and Dr Khodykin gave evidence, a Russian court would have been able to decide, had the point been taken, that the termination of the leasings was contrary to public policy, as having been caused by Western sanctions. This would have been consistent with an approach which was applied in GPM RTV LLC v Google, which was based on reasoning in Ruling No. 8-P. That would mean that the issue of inconsistency between GR 311 and the Cape Town Convention did not arise, because the lessor’s rights which would be protected by the Cape Town Convention would not have come into existence. There were other possible arguments to the effect that there was no inconsistency between GR 311 and the Cape Town Convention, in particular because GR 311 provides for the possibility of an authorisation procedure to export aircraft, and that GR 311 is expressed to be temporary in nature. I accepted the evidence of Mr Saveliev that it was likely that a Russian court would, had the point been taken, have concluded, by one of these routes, that the issue of non-compatibility of GR 311 and the Cape Town Convention should be resolved in a way which avoided any conclusion that there was incompatibility.

The above conclusions are consistent with Henshaw J’s finding in Zephyrus v Fidelis that a fair trial in Russia on the Cape Town Convention point would be unlikely. He considered that the validity of the Russian Counter-Measures, including GR 311, was ‘bound to be a topic of the most obvious and acute interest to the Russian state’, and that it is ‘clear that a Russian court would be unlikely to be able to adjudicate fairly on this issue.’ ([347], [353]). He further found it unlikely that a Russian court would recognise a termination ground which was based on Western sanctions ([368]). Those findings were based on the evidence before Henshaw J, but, as appears above, I have reached similar conclusions based on the evidence before me.

From 10-29 March 2022, the only international flights which took place for the aircraft which are the subject of this dispute were to Kazakhstan, Kyrgyzstan, Tajikistan and Uzbekistan. On 30 March 2022 flights involving such aircraft recommenced to Belarus. Thereafter flights recommenced on 14 May 2022 to Sri Lanka, 5 August 2022 to Venezuela, 3 September 2022 to Iran, 4 September 2022 to Armenia, 4 October 2022 to Cuba, 24 October 2022 to Turkmenistan, 24 January 2023 to Turkey and 20 March 2023 to Azerbaijan. AerCap was able to effect an arrest of MSN 1301 in Sri Lanka on 2 June 2022, but after intense diplomatic pressure from the Russian state, and despite diplomatic efforts procured by AerCap from the EU and USA, the aircraft was allowed to depart back to Russia on 6 June 2022.

Since 9 March 2022 the only returns of aircraft have been of two pairs of aircraft, which were authorised by the Russian Government. The first pair was the pair of Boeing 737 MAX 8 aircraft, which, as I have already mentioned, S7 obtained permission to return. The second was two aircraft which ABC was permitted to return in March 2024 to lessors within the Bank of China Aviation group. It seems likely that this permission was based on the fact that the return was to lessors within a group based in a ‘friendly’ country.

Both WR and AR Insurers made very detailed submissions about the position of the various airlines. The WR Insurers’ case was that the AR Camp had failed to establish that airlines wished to return Western Leased Aircraft and were prevented from doing so by an operative WR Peril. Further that it was the airlines’ decisions not to return the Aircraft which was the proximate cause of any loss which may have occurred. The AR Camp, by contrast, contended that an analysis of the position of the airlines showed that the proximate cause of the loss of the Aircraft was a WR Peril, and in particular a restraint or detention.

Before considering the position of the airlines in turn, it is helpful at this point to summarise a number of general points arising from the evidence. In the first place, the relations between the airlines on one side and the federal, and local, government on the other differed from case to case. Secondly, the extent to which airlines had commercial interests was, equally, not uniform. And thirdly, the nature and relative importance of the commercial considerations applicable to the airlines again differed. It is clearly the case that most of the airlines had interests in retaining some or all of the aircraft leased to them. Without those aircraft, their businesses would be disrupted, severely harmed or even destroyed. Furthermore, the immediate return of all the Aircraft would have created a scheduling crisis. Different airlines would, however, have been affected by the return of leased aircraft to differing extents. Those airlines whose fleets consisted largely or entirely of leased aircraft faced the prospect of bankruptcy and failure if all their leased aircraft were immediately returned.

There were, however, clearly also factors which, to greater or lesser extents, motivated airlines to return the Aircraft. The principal such factor was that a failure to do so would be a breach of contract with the lessors which would be likely to destroy or undermine relationships with lessors. This would have meant the real prospect that, even if relations between Russia and the West were restored, lessors would not wish to contract with Russian airlines. Airlines would also have an incentive to return Western Leased Aircraft if they could not be profitably utilised if retained, and whether they could be profitably utilised depended, in part, on what would be the regulatory and subsidy framework in which they might be operating.

It is also necessary at this juncture to reiterate and emphasise certain features of the evidence. In the very voluminous submissions on the position of the airlines, there is much examination of documents which were not produced by the airlines themselves. Even where the documents, or statements, come from the airlines, they were generally produced for purposes very different from that of illuminating whether any operative peril was a WR or an AR Peril: a distinction which was in none, or almost none, of the participants’ minds at the time of the communications. Further, the nature of many of the communications – the relaying of the latest news as to what was happening, often informally – made them inappropriate subjects for much of the detailed parsing to which they were subjected in this trial.

In what follows, I will endeavour to express my findings in relation to the various airlines as succinctly as possible, concentrating on the main material which indicates the position of each airline insofar as it may be relevant to the questions of loss, peril and causation.

In advance of the invasion of Ukraine, in early February 2022, in meetings with AerCap, Aeroflot representatives had indicated that, if sanctions were imposed on Russia, this would lead to Aeroflot retaining its AerCap Aircraft, and probably to its stripping parts off some aircraft to service others. It is not possible to know whether these comments were prompted or approved by MinTrans. What is clear is that they were only a forecast as to what would happen: they were not a response to a concrete situation or the sanctions which were, in the event, imposed.

Immediately after the invasion, on 25 February 2022 at a point before the EU sanctions had been announced, Dr van Antwerpen had a discussion with Mr Minaev and Ms Balakina of Aeroflot. At that stage AerCap was exploring many different ideas with Aeroflot, including the possibility of novating AerCap’s leases to GTLK, the Russian State Transport Leasing Company, or selling the relevant AerCap Aircraft to Aeroflot. Ms Balakina said that, based on its cash position, she did not see Aeroflot buying the relevant AerCap Aircraft itself, but said that this might change depending on developments. Aeroflot was ‘holding its breath for the upcoming European sanctions’.

I find that at some point soon after the announcement of Western sanctions, Aeroflot was directed by MinTrans that its Western Leased Aircraft should not be returned. I have already set out my findings as to the basic facts. There is no evidence of any board meeting of Aeroflot before the meeting with MinTrans on 26 February 2022. Instead, what I consider happened is that by the time of, and/or at, that meeting, MinTrans directed the Aeroflot Group to retain its Western Leased Aircraft. This directive came ‘from the very top’, which as I have said, was probably President Putin, and if that is not right, Mr Savelyev. Whether or not that message had been communicated to Aeroflot before the meeting, I regard it as clear that it was said at the meeting. I also regard it as clear that this was not said at the meeting by MinTrans as a representative of the majority shareholder of Aeroflot, but as the government acting in an executive capacity. The meeting of 26 February 2022 had been called by Minister Savelyev; it involved other airlines; and there is no reason to believe that it involved the other shareholders of Aeroflot. Minister Savelyev was clearly acting towards Aeroflot as he was towards the other airlines present, namely as Minister and part of the executive government, not as the Chairman of Aeroflot’s Board of Directors.

It is inherently plausible that the government should have given an early direction to the Aeroflot group to keep its leased aircraft in Russia, as the Aeroflot Group fleet was essential to maintaining connectivity within Russia; and also because the return of the Aeroflot fleet would have amounted to an important symbolic victory for Western sanctions. There is no evidence that the government’s stance towards the return of the Aeroflot Group’s fleet changed over the weeks after 26 February 2022, and ultimately the government passed GR 311, which applied to Aeroflot’s aircraft as to others.

It is difficult to distinguish the state’s political interests from Aeroflot’s commercial interests. To the extent that it is possible to distinguish between them, it may well be that the retention of the aircraft served Aeroflot’s commercial interests. Nevertheless, in the case of this airline, that does not appear to me to be of any great significance. As Individual 1 said, and I accept, ‘at the end of the day there is no such thing as Aeroflot making decisions outside the state.’ As from 26 February 2022, the issue of whether the Aeroflot Group’s fleet should be returned was off the table: the matter had been decided by the government. There is no evidence to suggest that, at some point after 26 February 2022, the Board of Aeroflot made a decision that Aeroflot should retain its Western Leased Aircraft for commercial reasons independent of the directive of the government, and it is hard to imagine how there could have been. What did happen is that within an overall approach that the Western Leased Aircraft should be kept, Aeroflot worked towards a buyout of at least some of those aircraft, backed by government money.

One specific issue which should be addressed is the return by Rossiya of MSN 1630 (an Airbus A319) on 5 March 2022. That is, as I think, clearly to be explained by the fact that the lease for MSN 1630 had expired and the aircraft had been approved for return to AerCap before the invasion of Ukraine. The plane was, moreover, over 20 years old and was due to be ‘parted out’ by AerCap on its return. This appears therefore to be a return in the ordinary course, and does not, in my view, provide any cogent reason to consider that there had been no order that the Aeroflot Group airlines should retain its Western Leased Aircraft.

The position of S7 was the subject of particularly intense and lengthy debate. My findings follow.

After the invasion of Ukraine and the imposition of sanctions, as Ms Fileva said in her Forbes interview, S7, in common with other airlines was faced with an unexpected situation and was ‘confused’. Although, after the invasion, S7’s immediate reaction to requests from AerCap to relocate the AerCap Aircraft had been a willingness to help, on 25 February 2022 Mr Leahy was told that it would not be possible to relocate the AerCap Aircraft before the MinTrans meeting of the following day. By the time of the MinTrans meeting on 26 February 2022, the Filevs had made no firm decision as to how to respond to the unexpected crisis.

There is no basis for thinking that at the ‘family council’ meeting after the MinTrans meeting of 26 February 2022, there were any decisions made as to whether the Western Leased Aircraft should be returned or retained. The exchange between Mr Filev and Ms Fileva which she describes in her Forbes interview, amounted to no more than the father asking whether his daughter had the courage to battle through the crisis, and the daughter responding that she was determined to do so. Doubtless neither envisaged that the whole S7 fleet would be parted with, and still less immediately, but there is no evidence that they were making any firm decisions about what should be done. Instead, it appears that one matter which must have been discussed was the need to obtain legal clarity as to the effect of the sanctions, including by getting advice from outside counsel. S7 did proceed to take legal advice from Norton Rose Fulbright.

By 1 March 2022 S7 had still made no firm decisions. It expected legal advice the following day, and ‘had not yet discussed a proposal for lessors at a senior level’. It proposed to one lessor to provide its thoughts and proposals for next steps over the following 7 days.

It appears that Ms Berezina of S7 had a call with Mr Hogan of SMBC on 2 March 2022. She said that ‘discussions continue at the highest level in S7 and with authorities’; that S7 believed it was not in breach of any terms of its lease and wanted to continue to operate until the end of the ‘wind down’ period in the sanctions regime; that a return of the SMBC-owned aircraft in the next few days was ‘far too early’; and that S7 had a meeting with the Minister of Transport on the following day. This stance appears to be a reflection of the facts that S7 wished to find a way of retaining the SMBC-owned aircraft at present, that it had or was waiting for legal advice saying that it was entitled to do so, and that S7 was being influenced by the government as to what it should do.

In the days which followed, S7 was nevertheless indicating to lessors that it was seeking to cooperate in relation to the return of at least some Western Leased Aircraft, but that it was constrained as to what it could do by the government. I am not able to conclude that this was simply pretence or dissimulation on S7’s part. I consider that Mr Leahy’s contemporary understanding that S7 was trying to return at least some aircraft, which was based on his frequent interactions with S7 representatives, is likely to be accurate. A note of particular importance is his call report sent by email at 7.35 pm on 3 March 2022. This stated, in part:

I had a long and frank conversation with Olesia [Mashkova of S7]. They have been actively trying to relocate some aircraft for us since Saturday. All requests so far have been denied.

Daily meetings with the MoT that Olesia and Vlad [Filev] have both been going to personally have yielded little result. …

S7 have been strongly requesting to at least move the neos first as these are of little use since they cannot continue to operate them without PW [Pratt & Whitney] support. S7 seem to sincerely want to try to help the lessors as these are important relationships that they have cultivated over a long period.

… She also was of the opinion that terminating leases when aircraft are outside the country would likely have negative repercussions, though this is basically a moot point now as they are no longer allowed to fly internationally (including to Uzbekistan).

… Olesia is of the opinion that early next week (perhaps Tuesday) the MoT will provide more clarity on their position. In the meantime, there is another of the daily meetings tomorrow. She promises to keep us informed of any developments and will keep pushing to get the neos out asap.

I regard it as significant that Mr Leahy saw this conversation, at the time, as having been ‘frank’, and that his assessment was that S7 ‘sincerely’ wanted to help. It is of course possible that Ms Mashkova was being disingenuous but with a convincing appearance of candour which took Mr Leahy in, but that is not the most obvious nor, in my view, a necessary conclusion. What Ms Mashkova was indicating was that S7 was seeking permission to relocate at least the ‘NEO’ aircraft amongst the AerCap Aircraft, but was not being permitted to do so. I see no adequate reason for doubting the substance of what she was telling Mr Leahy. Specifically, I see no reason to doubt that S7’s view, as of 3 March 2022, was that NEOs would be difficult to maintain; or that it was seeking to return some of them; or that requests to do so had been refused; or that more definitive guidance was expected from MinTrans the following week.

With effect from 5 March 2022 S7 stopped flying its aircraft internationally. A spokeswoman for S7 was reported as saying that the decision to stop flying internationally was ‘forced’. Mr Houlihan’s evidence was that this decision was unlikely to have been to protect S7’s aircraft from arrest, given that S7’s international presence was very limited; and that it was more likely to have been done in compliance with the regulator’s expectations. I considered this to be probably the case.

An SMBC aircraft leased to S7, MSN 10160, had been grounded by SMBC on 3 March 2022 while it was in Armenia. By 8 March 2022 it was apparent that efforts to recover the aircraft in Armenia were being pursued at the highest political levels in Russia, who had contacted their counterparts in Armenia. Ms Mashkova told Mr Hogan of SMBC that S7 was under pressure to get the aircraft returned. Mr Filev was later to tell representatives of SMBC that this pressure from the Russian Government had ‘included direct physical threats to his personal safety’.

On 9 March 2022 Ms Mashkova told Mr Leahy by WhatsApp that she did not have good news from her latest meeting at MinTrans. She wrote:

Not good news, all our requests were rejected, even for the aircraft which should be redelivered….

Mr Houlihan met S7 in Moscow on 9 March 2022. He sent colleagues a summary of the meeting later that afternoon. That note included the following matters of significance.

S7 have been listed as a strategic entity by the Ministry of Transport along with Aeroflot.

They expect government decrees in the next couple of days regarding confiscation of aircraft.

The SMBC aircraft is stuck in Armenia. The Russian Ministry of Transport is demanding its return via Armenian authorities.

… Even if aircraft are confiscated they intend proposing to the Ministry that they do not require all 116 of their leased aircraft due to reduced demand and that they will propose to the Ministry handing back some aircraft, something along the lines of 1 aircraft per lessor. They said they are being transparent with all lessors but the situation is out of their hands. All ferry permit applications they have submitted to date have been rejected by the Russian authorities.

They also would like to see if they can swap out the existing aircraft for other aircraft with Chinese and other lessors or via other structures.

They want to hand back NEOs and take in CEOs…

Again, I see no sufficient reason to doubt that what Mr Houlihan was told was true. That S7 had been listed as a strategic entity had, as Mr Houlihan recognised in his oral evidence, both positive and negative aspects for the airline. On the positive side it meant that S7 would be eligible for state funding as regards the purchase of aircraft. On the negative side, it might mean state interference in S7’s affairs; and for that reason S7 were somewhat nervous about it, and of being ‘taken over by the state’.

The reference to the expectation of government decrees in the next couple of days was explained by Mr Houlihan in his oral evidence. He said that on 9 March 2022 everyone in Moscow ‘knew that something was coming that would turn what was a somewhat covert attempt to retain aircraft into a very overt way to retain the aircraft.’ That eventuated in that GR 311 and GR 312 were published on the following day. The paragraph as to what Western Leased Aircraft S7 might seek permission to return, indicates that the requested return might be modest, but also that the situation was, as S7 saw it, ‘out of their hands.’

The reference to the SMBC-owned aircraft stuck in Armenia is also of significance. What that incident does demonstrate is that MinTrans was interested in the Western Leased Aircraft being retained in Russia, to the extent that the Russian Government intervened with the Armenian government to seek to procure the return of this S7 aircraft.

On 14 March 2022 S7 wrote to AerCap referring to the terms of GR 311 and GR 312, as a prohibition on the export of aircraft and of all their parts and components in the absence of approval from MinTrans.

S7 met AerCap in Dubai on 30 March 2022. The possibility of pursuing an insurance settlement structured buy-out was first identified as a possible option at this meeting. S7 said that they had been instructed by the government not to return any aircraft to lessors. S7 met DAE in Dubai on the following day. S7 repeated to DAE that they had been instructed by the government not to return any aircraft, and told that they must not cooperate with unfriendly lessors. S7 also met Merx on 31 March 2022, and again S7 raised the possibility of an insurance settlement buy-out.

S7 continued flying Western Leased Aircraft within Russia and re-registered them on the Russian registry. S7 made a request to MinTrans before the end of June 2022 for clarification as to whether it could redeliver aircraft to lessors, but were told not to expect an immediate reply. S7 did, however, obtain permission to return the two Boeing 737 MAX 8 aircraft, to which reference has been made above.

In relation to several of the airlines, but particularly in the case of S7, WR Insurers placed weight on a May 2022 email sent by David Houlihan to Firoz Tarapore, the CEO of DAE, in which David Houlihan placed each lessee into one of three categories. These were ‘Category 1 – airlines that have no requirement for the aircraft and want to hand back the aircraft and records’, ‘Category 2 – airlines that want to hand back some aircraft due to lack of international passenger demand’, and ‘Category 3 – airlines that do not want to hand back the aircraft and are operating in domestic Russia and Eurasian Economic Union’. He considered that ABC, UTair and Red Wings fell into ‘Category 1’, Nordwind into ‘Category 2’, and Aeroflot, S7, Smartavia and I-Fly into ‘Category 3’.

The question of whether an airline wanted to hand back its Western Leased Aircraft is not the same as the question of whether it retained them due to a government restraint or business need. An airline’s very proximity to the government, or the pressure it experienced from the government, might well account for why it did not want to return its leased aircraft. Moreover, while David Houlihan was a valuable witness, a record of his opinion as to the intentions of the airlines in May 2022, which he himself described in his oral evidence as written ‘in a hurry’, is of limited use in determining why those airlines retained their Western Leased Aircraft in the relevant period.

The findings I make in relation to S7, in summary, are these. Initially after the invasion and imposition of sanctions, S7 was in a state of uncertainty as to what to do, and was doubtless awaiting developments. It did not, in the first days following the imposition of sanctions, make any firm decisions as to whether to retain or return most of its Western Leased Aircraft. However, in the period from about 1 March to about 8 March 2022 S7 was seeking permission from the Russian authorities to return at least some leased aircraft, but permission was refused. From 10 March 2022 the export ban was in place. S7 thereafter raised with lessors the possibility of an insurance based buy-out.

Representatives of Ural indicated to lessors, on a number of occasions, in the immediate aftermath of the invasion, that Ural would cooperate. On 28 February 2022 Ms Nortseva of Ural told Mr Carr of Merx that Ural planned to redeliver its Merx Aircraft; and Mr Carr’s assessment was that Ural were ‘effectively willing to terminate ops today in the hopes of future business with Lessors and Ural 2.0’. I consider that there was a degree of temporising in these and other communications from Ural representatives, as the airline was seeking to understand the position and what it should and could do.

As I have set out above, on 2 March 2022 representatives of Ural told Dr van Antwerpen that, though there was no formal guidance from the Russian Government, there had been an informal direction to Ural not to return its Western Leased Aircraft at that juncture. In addition, Mr Skuratov, the decision-maker at Ural, had said that aircraft were not to depart until clarity was provided by MinTrans. It thus appears that Ural were, by this stage, subject to informal directions by MinTrans, and would not act to return aircraft without permission.

Nevertheless it also appears that Ural were seeking permission from the authorities to return at least some Western Leased Aircraft. Thus on 3 March 2022 Dr van Antwerpen reported that ‘Ural is making a plea to the MoT to get at least all their NEOs out (all Leap) and returned to Lessors outside Russia.’ On 5 March 2022, Mr Melnikov of Ural told BOCA that the decision on redelivering aircraft was ‘with the Russian state authorities…’; and that ‘Ural is advocating in front of the government to return Airbus NEO planes to lessors as Ural will not be able to service these planes for more than 2 months.’ Mr Melnikov also said that he thought ‘the chances to get the Russian government to agree to return NEOs to lessors are quite slim.’ There is no adequate basis for concluding that these statements were not true.

On 9 March 2022 Mr Melnikov told SMBC that Ural was ‘fighting’ to be able to return aircraft ‘but the ball is on government side now’. He said much the same to Goshawk on the same day, referring to Ural being ‘prepared to create a plan for extraction of the aircraft but they are awaiting the Government to approve anything’.

On 21 March 2022 Mr Skuratov wrote to various lessors saying that Ural was temporarily prevented from returning aircraft to lessors by GR 311, and that Ural intended to apply for permission to export aircraft once the procedure for doing so was established. It is not apparent that Ural did make such an application; and Ural did re-register its Western Leased Aircraft on the Russian register.

My conclusions in relation to Ural are that it was, in the period up to 10 March 2022 open to returning at least some Western Leased Aircraft, but considered that it was under an informal direction from the government not to do so; and although it had sought to argue that it ought to be permitted to return at least the NEOs, no such permission had been forthcoming. After 10 March 2022 Ural took the position that it was not permitted to return aircraft by reason of GR 311.

WR Insurers accept that, after the invasion, UTair took concrete steps towards returning its DAE Aircraft; and further that, after GR 311 and 312 were introduced, UTair sought proactively to export the DAE Aircraft under GR 312. That application has not been successful.

In relation to the concrete steps which UTair took towards returning the DAE Aircraft, on 5 March 2022, UTair was envisaging a ferry flight to Joramco in Jordan. UTair was, however, clearly concerned about whether this would be permitted. By 8 March 2022 it was suggesting Kazakhstan as the place where the aircraft might be returned; and it sought approval for a ferry flight plan. This was refused.

UTair summarised the position as of 11 March 2022 in a letter which it wrote to DAE of that date:

The operation of the aircraft has been stopped and they are ready to take off since March 10, 2022. As it stands today, we have not been able to obtain permission from FATA to fly to Kazakhstan, although we have all needed permissions from Kazakhstan. Also our request for a flight to Jordan for March 13, 2022 is still pending and we did not yet received (sic) neither approvals nor rejections from FATA. Moreover, we became known today that the export of aircraft outside the Russian Federation is now prohibited as per the government order #311. We continue to seek solutions…

On 22 March 2022, the Governor of the Khanty-Mansiysk Autonomous Okrug-Yugra, the region in which UTair had its head office, issued Order No. 69-rg enacting various measures to ensure social and economic development of the region. Paragraph 7 of the order required UTair to ‘ensure uninterrupted operation of its aircraft, regardless of any requests from third parties for suspension of operations and return of aircraft.’ Notwithstanding this, during the remainder of 2022, UTair sought permission to return its DAE Aircraft. This appears to have involved a number of approaches. On 5 May 2022 UTair confirmed to DAE that it had submitted an application for export permission under GR 312. No approval was forthcoming. On 13 March 2023 UTair proposed a buy-out of the aircraft ‘since we see no other options due to restrictions on both sides.’

The instance of UTair is thus a relatively straightforward one in which UTair undoubtedly wished, and tried, to return its Western Leased Aircraft, but was prevented from doing so by the Russian authorities refusing permission for a ferry flight prior to 10 March 2022; and then by the prohibition on export contained in GR 311, from which UTair was unable to obtain an exception.

Aurora’s basic function is to provide accessible transportation between the isolated communities of Russia’s Far Eastern Federal District. Its activities are, as Ms Dagaeva put it, dominated by a ‘predominantly social function’. Its purpose is not to make money for shareholders. Instead, even before the invasion of Ukraine, it required subsidies to continue operating. It is not possible, in the case of Aurora, sensibly to distinguish its commercial from its public and social interests.

In the aftermath of the meeting at MinTrans on 26 February 2022 Aurora was not certain as to what was the position as to the return of the Western Leased Aircraft of the relevant authorities, including of its main owners, the regional governments. On 27 February 2022 Mr Tyschchuk of Aurora told Dr van Antwerpen that ‘we do not understand the position of our government and aviation authorities on this issue at the moment’. On 2 March 2022 Mr Emets of Aurora, in an email which expressed a hope that a ‘workaround’ could be found to the current problem, asked in relation to the possibility of return of the aircraft how this was based on the lease agreement, and also stated that ‘we have still not received an official decision from our government’.

WR Insurers’ case is that ‘our government’ in these communications meant the local government, as Aurora’s shareholder. It seems to me most likely that it was either a reference to the federal government or a reference to the government of the Sakhalin Region. But, and to the extent it matters, I do not consider that it was intended to be referring to a government only in its capacity as a shareholder. There were eleven regional governments (and the federal government) which were shareholders, and the reference does not seem to have been to them all. I therefore think that it was not intended to be a reference to the owners of the company qua owners. Be that as it may, the local government(s) would have been guided by the federal government, as was Ms Dagaeva’s evidence. It may well have been the case that the local government(s) would have been the, or a, vehicle for communication from the central government. There is evidence that this happened in the case of Yakutia which told KDAC on 7 March 2022 that the ‘federal government, via local government, instructed not to stop operations…’.

As of 10 March 2022 Mr Voronin of Aurora informed AerCap that ‘the main issue is the permission for the ferry-flight from Russian aviation authorities.’

The position is accordingly that until 10 March 2022 Aurora was saying that it did not have clear instructions as to what it would do, and would only be able to return aircraft in the event of permission from the Russian aviation authorities.

On 11 March 2022 Ms Eliseeva of Aurora wrote to AerCap saying that no airline was allowed to make a ferry flight from Russia without a special permit. She referred to GR 311 and GR 312, and said that Aurora was trying to understand the process of obtaining approvals. On 25 March 2022 Ms Eliseeva wrote again to AerCap, referring to GR 311, as a temporary prohibition on the export of aircraft from Russia, and to GR 411 as requiring Aurora to re-register its Western Leased Aircraft on the Russian register and to operate the aircraft. She said: ‘Being incorporated in Russia Aurora Airlines must comply with all regulations issued by the RF Government.’

Yakutia, like Aurora, operates subsidised socially valuable routes in the far east of Russia. It is not a profit-making commercial enterprise, and it is difficult to separate its ‘commercial’ from its social and political interests.

Immediately after the MinTrans meeting of 26 February 2022, Yakutia did not understand there to have been any direct instructions given to operators as to what they should do as to returning or retaining Western Leased Aircraft. By 1 March 2022, Mr Shtenko of Deucalion understood that the ‘word is’ that ‘any airline with any gov connections (i.e. like the Yaks) have been ordered not to respond…’. On the other hand, in a conversation between Mr Skirrow of Deucalion and Mr Ermolaev of Yakutia, Mr Ermolaev did not mention that Yakutia was precluded from returning the aircraft by anyone. On 6 March 2022 in a WhatsApp message to Mr O’Reilly of AerCap Mr Ermolaev said that Yakutia were ‘getting contradictory instructions from the Russian authorities’.

On 7 March 2022 Mr Batenburg of Deucalion spoke to Mr Ermolaev. His internal email report included:

Sergei [Ermolaev] explained that Federal Government, via local government, instructed not to stop operations as this would create “social unrest”. Creating social unrest is a criminal offence (prosecution risk).

Sergei/Yak want to apologize but can’t apologize for something they can’t control.

The situation is changing on a daily basis and they would like to cooperate as soon as possible, but currently “hands are cuffed”. It is all driven by the Federal Government.

I see no good reason to doubt the substantial truth of this. Had Yakutia been simply making up an excuse, it is not obvious why it should have blamed the Federal Government as opposed to the local government which owned it. Mr Batenburg’s oral evidence was to the effect that he had believed what he had been told by Mr Ermolaev. I accept that what the Federal Government was telling Yakutia to do was in accordance with what Yakutia, and the government of the Republic of Sakha, would have wished, namely to continue flying and fulfilling its social functions. That does not, however, mean that the Federal Government was not directing it to do so. Mr Ermolaev’s statements are evidence that it was.

Yamal shares characteristics with Aurora and Yakutia. As Mr Rybak said, one of its main goals is not to make a profit but to perform a social function by providing residents of YaNAO with flights to other parts of Russia and, to a more limited extent, abroad.

On 28 February 2022 Damhan Finegan of AerCap reported that ‘Yamal informed Castlelake that they will cooperate but will take instruction from the Govt and won’t move aircraft until they get a green light there.’ That meant either the federal government or the Sakha government. I do not consider it matters greatly which was being referred to, because the regional government would have deferred to the federal government. What I do not consider plausible is that what was being referred to was ‘the owner’ and that the type of instruction which would be taken were only corporate decisions made by the shareholder.

After GR 311, on 16 March 2022 Yamal wrote to AerCap stating that the transfer of aircraft to other countries was now prohibited, but that it might be possible for there to be a transfer to EEU countries subject to a special permission from MinTrans, which it would investigate. On 8 April 2022 however, Yamal wrote to say that, due to the unfriendly actions of the Bermuda authorities in cancelling airworthiness certificates, it had decided to re-register its AerCap Aircraft on the Russian register, and would continue to fly in order to fulfil its social and contractual obligations.

Thus in Yamal’s case, the airline did not consider that it could return its Western Leased Aircraft, even had it wanted to, without a green light from the government. There can be no doubt that that green light never came. I accept that the net effect of that was that Yamal did what it and the government of Sakha might in any event have wished to do, which was to keep the aircraft and to continue flying. But Yamal regarded the position of the government as an essential matter to be given effect to.

Since before the invasion of Ukraine, Red Wings had a business strategy to cease operating its Western Leased Airbus aircraft and return them to Western lessors, replacing them with Russian-built SSJ-100s.

Consistently with this, Red Wings was willing to return its leased aircraft. On 26 February 2022 Red Wings told Mr Finegan of AerCap that it would facilitate AerCap’s ferry requests. In a WhatsApp message on 27 February 2022 Ms Palevska of Aviator Capital told Mr Ranta-Aho of AerCap that, at the MinTrans meeting on the previous day, Red Wings had been told that they should keep their Western Leased Aircraft, but had said to her that they would cooperate. In a further WhatsApp message on 28 February 2022 she said that Red Wings had told her that they were not allowed to cooperate, and so would not try to get aircraft out of Russia.

By 7 March 2022 all of Red Wings’ AerCap and DAE Aircraft had been grounded. All those aircraft have remained registered in Bermuda and none has been registered in Russia. Only in June 2024 did Red Wings indicate that it might bring two of its Western Leased Aircraft back into service.

On 9 March 2022 Mr Houlihan of DAE met Mr Klyucharev of Red Wings in Moscow. Mr Houlihan’s note of the meeting records that Red Wings intended to comply with the Grounding Notice in relation to the A321 leased from DAE, and had grounded it since 3 March 2022; that Red Wings wanted to cooperate and return the DAE Aircraft and requested a draft redelivery agreement; that Red Wings said that it was restricted by MinTrans and ‘Russian aviation authorities’, but intended to make an application for a ferry flight. There is, in my view, no good reason to doubt the truth of these statements made by Red Wings.

On 10 March 2022, Mr Klyucharev confirmed to AerCap, via Mr Finegan, that he was now seeking shareholder (i.e. Rostec/UAC) support to fly out. On 28 March 2022 Mr Tikhonov emailed AerCap to confirm that Red Wings could not ferry MSNs 2793 and 2730 out of Russia because it still had not received permission for returning aircraft to the lessor. It thus appears that an application had been made by this stage. This is also implied by an email from Mr Adanov of DAE to Laura Ivaskaite at the Latvian airline Smartlynx on 30 March 2022, which said that ‘apparently the Governmental commission does no[t] give them [Red Wings] a ferry flight permit.’

Whether that is correct or not, there was clearly an application by Red Wings to return aircraft in November 2022, but it was rejected. I do not accept that this rejection is likely to have been because General Chemezov did not put his weight behind the application. That is, in my view, implausible speculation. General Chemezov would be very unlikely to be dealing with this matter; and Mr Kozhanov’s evidence was that Rostec had told Red Wings on 5 or 6 March 2022 that he would not be dealing with the issue and that Red Wings ‘should strictly follow the government policy’.

I accept Mr Houlihan’s evidence, as follows, at least as it applies to Red Wings:

… [Red Wings] wanted to hand back the aircraft ever since and again, bearing in mind who their shareholder are, they haven’t put this aircraft on the Russian registration, and it’s been parked up since 3 March 2022, and despite their best efforts, they still can’t get it out. So it doesn’t really matter whether airlines do or do not want to hand back aircraft; the state does not want to hand back aircraft, hence the decision is taken out of everybody’s hands, including Red Wings.

Alrosa is wholly owned by the Alrosa diamond-mining company, which is majority owned by a combination of federal, regional and local government. The diamond company accounts, apparently, for 95% of all diamonds mined in Russia, and a third of all diamonds mined in the world. It is a ‘backbone’ company, that is to say it is on the list of enterprises whose products or services are vital for the functioning of a particular territory or the socio-economic system of a region. The airline’s main business is to shuttle miners working at the mines between Mirny in Eastern Siberia and Moscow. The airline has a social function, in addition to, and which it is not easy to separate from, the commercial interests of the mining company.

After the invasion, on 26/27 February 2022 Mr Carr of Merx spoke to Messrs Gulov and Khoroshikh of Alrosa. His note indicates that Alrosa’s representatives raised options of purchasing aircraft or leasing through an alternative jurisdiction, but ‘would not elaborate (likely hasn’t yet formed) shareholder/airline’s plan assuming neither of these options is a possibility’. Merx was told that Alrosa’s management was travelling to Moscow for the FATA meeting on 28 February 2022, ‘followed by another shareholder meeting with the diamond co.’

On 3 March 2022, Mr Gulov sent Dr van Antwerpen a letter raising an argument that there was an exception to Western sanctions for lease agreements concluded before 26 February 2022 and saying ‘Currently, we are in communication with the aviation authority of the Russian Federation about the situation, waiting for its position. We will inform you immediately about the clarifications received.’ On the same day, Mr Gladkikh of Alrosa emailed Merx saying ‘We are currently awaiting a decision of the Government, the aviation authorities and the shareholder.’

A consultant to Alrosa, Mr Koltovich, who was contacted by AerCap, considered that the stance put forward in Alrosa’s letter of 3 March 2022 must have been as a result of ‘some kind of order/position from the Russian Ministry of Transportation/Government’ and that ‘it is definitely not simply Alrosa Air Company position’, but was ‘coming either from the Shareholder or from the Ministry of Transportation’, as he told Dr van Antwerpen by WhatsApp on 3 March 2022.

After GR 311, on 22 March 2022 Alrosa sent a letter to AerCap denying that any Events of Default under its leases had occurred. It referred to GR 311 saying that this ‘prohibits return of aircraft according to the Lessor’s instructions’, and said ‘the Lessee at present does not have any opportunity to take aircraft abroad for objective reasons due to the effect of the Decree of the Government of the Russian Federation.’

It is not clear as to whether Alrosa made an application for special permission to export aircraft after the permission possibility was introduced on 17 March 2022. From the exiguous evidence, it appears that it probably did. This is suggested by a letter from AerCap to Alrosa dated 27 September 2022 which refers to a letter from Alrosa dated 21 July 2022 which refers to such an application. That it had done so would be consistent with what Mr Koltovich had told Dr van Antwerpen on 7 April 2022, namely that Alrosa was looking to return one of the AerCap Aircraft. If an application was made, there is no evidence that it was successful.

The case of Alrosa appears to me to be one where, in the period before 10 March 2022, the airline was awaiting direction from the government, aviation authorities and shareholder. There is no indication that it was anticipated that those three would contradict each other, and it was to be expected that they would align with the government’s position. After GR 311 Alrosa took the point that it was not obliged to return aircraft under the leases, but also clearly took the point that export was not permitted by reason of GR 311.

Nordwind is essentially the same entity as IKAR, and they are both owned by Ramazan Akpinar. Mr Akpinar is a Turkish businessman who owns hotels around the world, in particular in Turkey. Nordwind enabled him to sell package holidays to tourists. The majority of Nordwind’s and roughly half of IKAR’s business was international.

The evidence indicates that, after the invasion and the imposition of sanctions, Mr Akpinar was seeking to establish Air Operator Certificates (‘AOC’s) in Turkey and Armenia with the aim of setting up a Turkish airline, and in the interim had in mind transferring Nordwind’s aircraft to an existing AOC in Turkey. On 28 February 2022 he told Mr Finegan of AerCap that he would ferry his fleet to Turkey by 20 March 2022. On 2 March 2022 Mr Akpinar was telling CDB that he was in the process of re-evaluating his business model so that the aircraft he leased from CDB might operate in Turkey, and was negotiating with CDB to enter into new lease agreements with the relevant Turkish company on the same terms and conditions as the terminated leases.

Nordwind in fact made significant efforts to return Western Leased Aircraft to Western lessors from Russia. 21 aircraft were returned to lessors, including nine to AerCap and one to DAE. Nordwind cooperated with CDB with the result that all aircraft it had leased to Nordwind, except MSN 1370, were secured.

There is, in my view, insufficient evidence to conclude that Mr Akpinar’s statements, namely that he wanted to return his entire fleet, were untrue or insincere. He had a business case for wanting to do so. Mr Akpinar indeed established a new airline in mid-2022, Southwind, which is based in Turkey. As AR Insurers put it, ‘instead of operating a Russian airline flying between Russia and Turkey, Mr Akpinar now operates a Turkish airline flying between Turkey and Russia’. I also find unconvincing WR Insurers’ case that what he had wished to do was to return some of his Western Leased Aircraft while keeping some in Russia. Deliberately to retain aircraft in Russia and not hand them back to lessors would not be conducive to the good relations with the lessors which were necessary for his ongoing, Turkey-based, operations. Furthermore, if aircraft were retained in Russia, it was, at least in the early period and before it was known what the Russian state would do by way of subsidies, doubtful that they could be profitably employed. Mr Akpinar said to NAC on 22 March 2022 that the operation of the aircraft leased from NAC ‘domestically in Russia only generates “negative results” financially’.

Accordingly, I conclude that the reason why Nordwind did not return more of its Western Leased Aircraft than it did was the one which Mr Houlihan believed it to be at the time and since, namely that it became impossible for Mr Akpinar to do so, given the constraints imposed by the Russian authorities. In this regard, it appears from a note of Mr Houlihan’s that Nordwind considered from 5 March 2022 that there was a direction from FATA to ensure that their aircraft were not arrested anywhere in the world. Nordwind did make a return of two aircraft to AerCap and DAE respectively on 5 March 2022 and 8 March 2022, each of which involved an element of subterfuge.

As Mr Akpinar told Mr Houlihan on 7 March 2022, and which appears entirely plausible, he was under enormous pressure because of the seizures which had been made of aircraft, while he was also under enormous pressure from the authorities to repatriate Russian tourists.

When Mr Houlihan met Mr Akpinar in Moscow on 7 March 2022, they discussed the return of all five of the DAE Aircraft. Mr Akpinar showed Mr Houlihan the flight schedule for the next few days on his phone. I refer to the evidence in paragraph 4 of the Confidential DPSI Schedule. In the event the flight schedule which Mr Akpinar had shown to Mr Houlihan was not adhered to. MSN 32639 flew to Hong Kong and MSN 37136 flew to Mexico later than in the schedule. MSN 32640 did not fly to China, or thereafter to Turkey, as had been scheduled. I accepted Mr Houlihan’s assessment that this was not because Mr Akpinar was giving him the run around. In circumstances where on the one hand the Russian aviation authorities were applying strong pressure to avoid repossession of Western Leased Aircraft by lessors while completing repatriation flights, and on the other hand the lessors themselves were demanding the return of their Western Leased Aircraft, it is of course plausible that Mr Akpinar may at points have been economical with the truth. However Mr Houlihan, who communicated closely with Mr Akpinar at the time, evidently believed that he was truthful, and there is no evidence before the court which demonstrates that Mr Akpinar had lied.

Instead, it appeared to me that Mr Akpinar’s good faith towards DAE was shown by the fact that he told Mr Houlihan on 9 March 2022 that MSN 37136 was in Mexico and suggested that DAE should detain it there, as was in fact done. It was also demonstrated by Nordwind’s continued cooperation in getting records for MSN 37136 to DAE, as indicated in an email from Mr Lopes of 12 March 2022. I also accepted Mr Houlihan’s view that the fact that MSN 32639 had departed Hong Kong before DAE could arrest it there was not on Mr Akpinar’s instruction.

After GR 311 was introduced, Nordwind appears to have sought to persuade the Russian authorities that some Western Leased Aircraft should be permitted to be returned. On 22 March 2022 Mr Akpinar told NAC that he was trying to set up a meeting with MinTrans to try to explain that IKAR did not need its NAC aircraft and to seek approval to redeliver them. On 22 May 2022, Mr Akpinar told Mr Houlihan that he had had a meeting with MinTrans and that the Minister was refusing even to talk about re-export. On 16 June 2022, Mr Hayrettin Yagiz, a third-party consultant, told Mr Finegan of AerCap that Mr Akpinar had asked for an appointment with MinTrans for the week of 20 June 2022 ‘to discuss the application for export of aircraft’. It appears that Nordwind made no formal application because it did not see the point of doing so. I consider that that was because of what Nordwind had learned as to the likely attitude of MinTrans to any application.

Nordwind held certain settlement discussions with AerCap in May 2022. One matter of significance is what Mr Morozov, Nordwind’s Chief Legal Officer, wrote on 18 May 2022, as follows:

If AerCap do not agree, why then 113 AerCap’s aircraft are still in Russia. It is widely acknowledged that the only reason why the aircraft of foreign lessors are still in Russia and cannot be removed from Russia is the actions of the Russian Government and not lessees’ unwillingness or reluctance to return the aircraft. AerCap’s approach towards treatments of the recent enactments of the Russian Government as not preventing the exportation of the aircraft outside Russian (sic) seems to be unreasonable and unjustified. If AerCap knows how to return the aircraft from Russia when there is a statutory ban for exportation of the aircraft and engines outside Russia please show us a good example…

This communication indicates that Nordwind regarded itself as constrained by GR 311 and considered that there were no available routes round the ‘statutory ban’.

There is no dispute that Royal Flight cooperated with lessors to return most of its Western Leased Aircraft. Of the 15 aircraft leased to Royal Flight by Western lessors, 13 were recovered. Eight of the ten AerCap Aircraft were recovered. There is evidence that this was in the face of menaces from at least some Russian authorities. A contractor who assisted in the extraction of Royal Flight aircraft later said: ‘the managers of Royal Flight were threatened by Russian FSB, that they will have jail punishment in Russia if these aircrafts go back to Lessors.’

As to the two which were not returned, one had been the subject of a repossession attempt by AerCap in Egypt on 6 March 2022, which Royal Flight had evaded. It appears, nevertheless, that Royal Flight planned to ferry the two remaining aircraft out of Russia on 11 March 2022, but were declined a flight permit. Mr Kozhanov gives evidence that, with effect from 10 March 2022, SATMC ordered that international flights were not to be permitted by aircraft with foreign registrations operated by, amongst others, Royal Flight. Since then, they have not been used for commercial operations. MSN 38820 had a technical event which meant that it could not operate between 27 February 2022 and 27 June 2022. Thereafter it performed non-commercial flights on 27 June and 18 August 2022, but has otherwise been grounded. MSN 28171 has been grounded since returning to Russia on 7 March 2022. Royal Flight’s AOC was suspended by FATA on 1 April 2023 at the carrier’s request. It has not been reinstated.

In my judgment the reason why the two Royal Flight aircraft remained in Russia was because they were not permitted to leave by the Russian authorities. I do not accept that it was because Royal Flight decided to keep these two aircraft in order to retain the possibility of restarting operations. I also do not accept Mr Kelly’s evidence that at a meeting with Coskun Yurt of OTI on 16 March 2022 Mr Yurt told him that OTI would not be returning more of the AerCap Aircraft for ‘commercial reasons’ on the basis that an airline with western aircraft would be in a strong position. That would have been inconsistent with the fact that Royal Flight had returned so many of its Western Leased Aircraft, and the fact that the two which remained in Russia were not flown. The best evidence of what was said at the meeting is in the note kept by Alexander Wilson, an AerCap leasing executive who also attended the meeting. In that note Mr Wilson recorded that Mr Yurt ‘can’t say when a/c can leave Russia [...] private airlines being forced to fly [...] Russian govt wants to keep Russian aviation alive’. I do not accept Mr Kelly’s evidence on the subject save insofar as it accords with the note kept by Mr Wilson.

Royal Flight set out its position to AerCap in a letter of 15 April 2022. It referred to GR 311 and 312 as a prohibition on taking aircraft out of Russia; it said that it was seeking legal ways to return its AerCap Aircraft, ‘however as of today there is no way that is applicable for our Company’; and that ‘we do not have intention for commercial use of the Aircraft grounded.’ I see no good reason not to credit those statements.

On 28 February 2022 I-Fly had a call with DAE. An internal DAE message records the gist of what was said. One point recorded, under ‘Traffic’, was that ‘China/Asia/ME/South America traffic remain open’ and that ‘iFly plan to continue to operate in these markets and will avoid EU.’ In this and other parts of the message, what is indicated is that, at this early stage, I-Fly was considering ways in which it could continue to retain its Western Leased Aircraft, but operate legally, perhaps by changing the location of the lessor company.

In the first few days of March 2022 I-Fly indicated a willingness to cooperate with DAE in relation to the return of the ESN 733666 engine. On 4 March 2022 DAE recorded that I-Fly was ‘cooperating’, and also that MSN 283 was grounded in Moscow. The aircraft and engine were not returned, however.

On 8 March 2022 Mr Houlihan met Mr Ivan Burtin, CEO of I-Fly, and Evgeny Filatov, its General Director, in Moscow. Mr Houlihan’s evidence was that they had met at the Ritz hotel, as I-Fly did not want him to visit them at their offices. This, as I understood Mr Houlihan’s evidence, was because I-Fly had a fear of punishment for being seen to cooperate with a foreign lessor. At the meeting, Mr Burtin said that I-Fly was unable to return the aircraft since its employees might face jail time. Mr Filatov had had real world Moscow prison experience, and was thus particularly anxious. Mr Houlihan’s evidence was that I-Fly were ‘very nervous of … upsetting the authorities in advance of what they believed were to be resolutions coming down, being issued, in the next day or two.’

After GR 311, I-Fly referred to it as making the airline ‘unable’ to return the engine or aircraft, by communications to DAE of 14 and 22 March 2022 respectively. As far as is known, I-Fly has not made an application for permission to export the aircraft or engine. This is probably because I-Fly considered that an application would not be successful, as indeed it suggested in a communication of 27 June 2022. MSN 283 remains parked up in Moscow, with I-Fly unable to carry out appropriate maintenance. As Mr Houlihan put it, ‘It’s a paperweight sitting in Vnukovo airport.’

On 28 February 2022, NordStar conveyed to Genesis that its ‘legal team [was] still seeking any alternatives to retain aircraft in operation including aircraft purchase’. Genesis had raised the possibility of ferrying the Genesis Aircraft outside Russia in advance of a resolution on lease termination or otherwise; and NordStar had said that ‘they will cooperate, but nothing can happen in advance of discussion with Russian Transport Ministry’, the timeline for which was by the following day.

On 1 March 2022, NordStar told another lessor, Avolon, that it would not decide on next steps until all options had been considered. By 3 March 2022 Genesis regarded NordStar as ‘deflecting on aircraft return, ferry and records on shareholder and Russian Minister of Transport approval’. I understand this, in line with Mr Croucher’s evidence, to mean that NordStar had stopped providing clear answers. Mr Croucher also said that NordStar was putting the blame on the shareholder or MinTrans for not progressing the discussion of return.

In the period between 3 and 10 March 2022 NordStar gave at least one indication that it was still contemplating cooperating with Genesis to return the Genesis Aircraft, namely that on 9 March 2022 it returned a marked-up draft of a proposed termination agreement which had been sent by Genesis on 3 March 2022.

By 12 March 2022 the Genesis Aircraft had been re-registered on the Russian registry, along with 8 other foreign-owned NordStar Boeing aircraft.

On 15 March 2022 Ms Kochetkova of NordStar emailed Genesis, informing them of ‘some new piece of legislation’ which had been adopted in Russia, and said that ‘our discussion on redelivery conditions seems to be futile now’. This attached a formal letter which referred to PD 100, and to GR 311. The letter stated that: ‘As a result of the Regulations, the Lessee is currently prohibited to export the Aircraft from the territory of the Russian Federation. As such, if the Lessee were required to redeliver the Aircraft while these restrictions remain in place, it would be unable to do so. We suggest that we hold a meeting to discuss the impact of these developments…’.

In NordStar’s case, the position is, in my judgment, that after the invasion and advent of sanctions, it was looking for ways in which it could continue to operate its leased aircraft legally. There is no good evidence that it had come to any clear decision as to what to do if that was not possible by the time that GR 311 was introduced. Once GR 311 had been introduced NordStar referred to it as prohibiting redelivery.

Smartavia’s ultimate owner and decision maker is Sergei Kuznetsov. He is a close friend of Denis Manturov, the Minister of Industry and Trade of the Russian Federation, and an important political figure in Russia. Mr Kuznetsov is also a friend of General Chemezov, the director general of Rostec. The CEO of Smartavia at the relevant time was Sergey Savostin. Mr Kozhanov was Smartavia’s, as well as Red Wings’, Fleet Development Director. He stopped working for Smartavia on about 14 March 2022.

As he clarified in his oral evidence, on the evening of 26 February 2022, Mr Kozhanov had a conversation with Mr Savostin, in which Mr Kozhanov expressed the view that Smartavia should return its planes. Mr Savostin ‘categorically refused [the] suggestion; in his words, if the planes were returned, it would “kill his business”, deprive the company of its income and put more than a thousand people out of work. Nevertheless, he told me he would wait for a decision from the government.’ Mr Kozhanov also gave evidence that Mr Savostin told him to tell AerCap that Smartavia would facilitate their ferry requests. Mr Kozhanov described all this as a ‘very strong emotional reaction on the part of Mr Savostin.’

Mr Kozhanov’s evidence, which I accept, is that after the 28 February 2022 MinTrans meeting, it was obvious that returning the planes to lessors would have been problematic. Nevertheless, Mr Kozhanov still encouraged Mr Savostin to find a way of returning Smartavia’s Western Leased Aircraft, up until 8 March 2022. Mr Savostin, Mr Kozhanov said, was not in a position to make important decisions in the company; ‘the important decisions were always made only by Mr Kuznetsov, the owner of the company.’ Mr Kozhanov added:

So after the 28 February meeting I know that Savostin and Kuznetsov had a long discussion where Mr Kuznetsov spoke with members of the government and representatives of the government in order to understand what was going on and to get direct instructions directly from the government, and those instructions were received on 3, maybe 4 March. I received a clear-cut instruction that we had to act in full compliance with the instructions that we were receiving from the government.

Smartavia’s representatives appear to have been seeking to buy time, by temporising answers to lessors’ questions on 1 and 2 March 2022 from Mr Kozhanov and Mr Loksts. This correspondence certainly did not reveal the level of animosity which Mr Savostin felt to the idea of returning the planes. On the other hand, I consider that Mr Kozhanov’s evidence that management were awaiting the clarification of MinTrans’ position is borne out by a voice note sent by Mr Kozhanov to Mr Finegan on 2 March 2022 in relation to the termination of the leasing of an A320 NEO which was in Turkey. Mr Kozhanov said that he had just got a message from top management ‘that tomorrow Minister of Transport will send a kind of instructions or whatever. So before that, before that information or email from Minister of Transport, let’s say, my guys, don’t know, will do nothing. So they will wait for that, ok?’.

While Mr Kozhanov’s message was in the specific context of the two aircraft which were not in Russia, I consider that it reflected what would have been Smartavia’s position in relation to aircraft within Russia: namely that they were awaiting direction from MinTrans. If Smartavia would not make a decision on aircraft outside Russia without knowing the position of MinTrans, it would have been most unlikely to make decisions on aircraft within Russia without doing so. Further, Mr Kozhanov’s evidence was that Smartavia received ‘an answer’ from MinTrans on 8 March 2022 in the form of PD 100 and 9 March 2022 in the form of GR 311, which clearly were not directed solely, or principally, to aircraft outside Russia.

On 9 March 2022 Mr Houlihan had a meeting with Mr Savostin and Ms Lavitskaya of Smartavia in Moscow. Mr Houlihan’s record of the meeting contains the following:

… They will not hand back aircraft as they say they will lose the airline. They also will not stop flying as they need the revenue. All of their operations are domestic.

They discussed various solutions, buying the aircraft via Chinese banks, setting up an AOC in Kazakhstan, etc.

It appears they haven’t fully read the sanctions or correctly interpreted them.

They expect a Ministry decision on aircraft soon and are waiting for that.

I spend a while discussing with them, the meeting was cordial, but we should consider them non-cooperative in even negotiating to hand back aircraft.

In his oral evidence Mr Houlihan confirmed that the Smartavia representatives’ conduct at the meeting was consistent with a commercial decision by the shareholder or management to keep its Western Leased Aircraft. As to the reference to awaiting a MinTrans decision, he said that, although there was no legislation yet ‘on 9 March, 2022 everybody knew this was coming, and not to do anything until the government’s position on this was in law, not just were aware of what the government wants to do, it’s in law…’. He further described the meeting as follows:

Their conduct at the meeting was they had a number of presentations and a number of pieces of paper, they were quite nervous, they went through them in great detail, they took great care to explain how they could set up AOCs, how they could try to set up bank accounts, how it could try to move title. … They were nervous, they were coming up with ways that they felt maybe they could continue leasing through these structures, but they were nervous, and it was not a normal meeting.

On 15 March 2022, a representative of Smartavia told Mr Korn of Carlyle that they ‘have clear instructions from the aviation authority and the Ministry of Transport not to return any aircraft. They are being instructed to move the fleet to the Russian registry and keep operating domestically. They mentioned there have been indications that any airline that redelivers aircraft would be shut down.’ While what was said may have been convenient to Smartavia as justifying its retention of aircraft, it was true that there were by then clear directions not to return aircraft, and I consider it likely to have been true to say that there were indications that any airline that redelivered aircraft would be shut down; and that Smartavia had been encouraged to continue operating domestically.

On 18 May 2022 Mr Adanov of DAE recorded a conversation with a representative of Smartavia, who had told him that the airline had no intention to apply for permission to export its Western Leased Aircraft as it needed them.

Smartavia is undoubtedly an instance with some unusual features. Its attitude was noted as unusual by Mr Finegan in an exchange of WhatsApp messages with Mr Kozhanov on 25 March 2022, when Mr Finegan wrote: ‘please tell Sergey [Savostin] that Smartavia is the airline in all of Russia to provide the least amount of dialogue and cooperation to AerCap.’

WR Insurers contend that Smartavia is a clear case in which the airline made the decision to retain its Western Leased Aircraft for commercial reasons, independently of the attitude of the Russian Government. It is the case that the airline saw no commercial reason to, and strong reasons not to, hand back its aircraft. Its stance cannot, however, be considered in isolation from the government’s position. There is no basis for considering that the ultimate decision-maker, Mr Kuznetsov, had taken any decision before the MinTrans meeting on 28 February 2022. The evidence is that after that meeting Mr Kuznetsov took the line that the airline should act on the instructions of the government. I have had regard to the material which appears in paragraph 5 of the Confidential DPSI Schedule.

WR Insurers suggest that this line really amounted to no more than that Smartavia had decided to retain its Western Leased Aircraft, save in the unlikely event that the government took the view that they should be returned, and so was, in effect, window dressing. I do not consider that that is an accurate characterisation of the position. I consider that the decision to await the government’s direction was, formally as well as politically, significant. It meant that the airline was accepting the government’s position as governing. And the details of that position might not be clear or might change. Thus, while it was doubtless inconceivable that the government would order the return of aircraft to Western lessors, whether there was a ban on doing so would likely be related to the support which the government was contemplating providing if aircraft were retained in Russia, including in relation to subsidies.

ABC specialised in transcontinental cargo transportation between the USA and South-East Asia and the Northern EU and South-East Asia. Atran specialised in intra-Asian cargo transportation between Russia and China, and sometimes between Russia and the EU, and supplementary pure domestic distribution of cargo delivered from China. It was not practical for these airlines to refocus away from international to domestic routes post invasion, as Mr Pyne said.

Very shortly after the imposition of sanctions, on 26 February 2022, AerCap sent a letter to VDG requesting that the two Boeing 747s leased by it to ABC, which were then in Amsterdam, should be relocated to locations in Spain, France or Ireland. It is somewhat unclear as to whether that letter will have been received by ABC before the aircraft were flown back to Russia, but if it was, ABC did not comply with it. One aircraft flew back to Russia at about midday, and the second departed about an hour later.

On 1 March 2022, two of the Boeing 737s leased to Atran were in Kagoshima, Japan, and Hangzhou, China respectively. Mr Trottier of AerCap spoke with Mr Nikitin of VDG, requesting that VDG should ground the aircraft in Japan and China. Mr Trottier understood Mr Nikitin to have agreed to do so, which may in fact have been the case. The aircraft were, however, flown back to Russia.

Two BOCA-owned 747-800s were flown back to Russia on about 5/6 March 2022. Evidence in the Irish proceedings indicates that ABC said that this was because they had been expressly required by the Russian Government to return the aircraft to Moscow.

The last flight undertaken by either of ABC’s AerCap Aircraft was on 3 March 2022. Save for some non-commercial repositioning flights within Russia on about 12 March 2022, the Atran aircraft have been grounded since 5 March 2022. The last ABC-operated flight by a DAE Aircraft was on 1 March 2022. The aircraft remain in Russia up to the present. They have not been re-registered in Russia.

With those aircraft are three more aircraft which were leased to ABC by Irish leasing companies ultimately owned by Mr Isaykin himself, and which have remained in Russia since March 2022.

On 8 March 2022 AerCap received a letter from ABC dated 6 March 2022, and a materially similar letter from Atran. The letters stated that the aircraft must comply with customs formalities before they could depart Russia; and further that ‘Russian Aviation Authorities issued the document requiring prior authorization for any movement of any aircraft operated by any Russian carrier outside Russia’. I also have regard to the evidence referred to at paragraph 6 of the Confidential DPSI Schedule.

On 10 March 2022 Mr Houlihan met Mr Isaykin and his deputy in Moscow. Mr Houlihan’s evidence was that at that meeting he had been told that ABC ‘wanted to hand back MSN 66625 but would be unable to do so because of government action’. In oral evidence he added that they had discussed ‘both aircraft’. That is a reference to both MSN 66625 and to MSN 35613. In relation to the former, ABC had paid a commitment fee by the time that the aircraft had been delivered to it under the lease. The other was an aircraft which DAE had leased to Emirates, which was being returned to DAE, and which DAE was intending to sell to Avers Avia, an Irish company controlled by Mr Isaykin, to be subleased to ABC. ABC had paid a deposit in respect of that aircraft. That aircraft was not in Russia. Mr Houlihan said that at the meeting:

At this stage, the game was up. The draft resolution was in circulation. Everyone knew about it. Everyone knew it was a temporary ban…. at this stage I knew I wasn’t going to get 66625 out, and nor was I going to get any money…we both knew we couldn’t do anything.

After GR 311 and GR 312 were enacted, on 18 March 2022 ABC wrote to AerCap stating that they were willing to comply with AerCap’s Termination Notice, but that ‘we are required to have a permission from the Russian governmental authorities to actually fly the Aircraft outside of Russia as requested in the Termination Notice.’ On 30 March 2022 in the context of negotiations between AerCap and ABC of an early termination agreement, Mr Nikitin referred to the fact that because of GR 312, ‘any aircraft operated by Russian airline could not be redelivered to lessor without a permission from the Russian authorities for such redelivery.’

From late March 2022 until at least early 2023, VDG were seeking to find a non-Russian partner, which would allow them to operate their business outside Russia, while, if possible, continuing to use at least some of their Western Leased Aircraft. From sometime in April 2022 a potential joint venture with Etihad became a serious option. Any deal negotiated would have been for both ABC and Atran.

In parallel with the exploration of such options, ABC and Atran made efforts to obtain permission to export their aircraft from Russia. An application to export the 737-800s leased from AerCap was submitted on or about 27 April 2022. This, Individual 3 said, was an application to permit return of these aircraft to the lessor. ABC submitted a formal application to MinTrans on 17 May 2022 in respect of its entire fleet of 18 aircraft, including the three that were leased to ABC by leasing companies ultimately owned by Mr Isaykin. The basis was said in the letter of application to be that ‘the sanctions regime means that there is no prospect of ensuring the continued airworthiness of these types of aircraft, so the Airline is planning to return them to the lessor.’

Although ABC had been optimistic that the necessary permissions would be obtained, they were not. On 13 September 2022 Mr Nikitin informed DAE that ‘the Russian government want something in return for allowing aircraft to leave.’ I take into account the evidence referred to at paragraph 7 of the Confidential DPSI Schedule.

ABC obtained permission to return two Boeing 747 aircraft to BOCA in March 2024. I am unable to conclude that, because ABC was successful in that application, it shows that it could have been successful in relation to its AerCap/DAE Aircraft had it been ‘sufficiently motivated’. As Ms Dagaeva said in her evidence, it is reasonable to consider that the return to BOCA proved possible in part because of the fact that the ultimate origin of the leasing company was a ‘friendly country’, China.

The position in relation to VDG in overview can, in my judgment, be summarised as follows. In the immediate aftermath of the invasion and imposition of sanctions, ABC and Atran did not comply with requests to ground or reposition certain aircraft, which flew back to Russia. I do not consider that this was as a result of any settled or strategic decision that VDG’s Western Leased Aircraft should be kept in Russia or not returned to lessors. Instead, I consider it likely that it was a result of a desire to fulfil existing commitments, and not to have the aircraft arrested or detained in a way which would have interfered with them. However, from about 5 March 2022 it appears to me clear that the reason why the ABC/Atran aircraft remained in Russia was because they were not permitted to depart by the Russian authorities. I do not consider that VDG wanted to retain them in Russia. For one thing, keeping them unused in Russia entailed considerable storage costs. For another, to keep them would have jeopardised good will with lessors, which would have been necessary in the long term, as Individual 3 said. There is no plausible explanation as to why VDG should have wished to keep the aircraft owned by leasing companies controlled by Mr Isaykin himself in Russia and idle. Further a desire on the part of VDG to keep its Western Leased Aircraft in Russia appears to me to be negatived by ABC/Atran’s applications to export aircraft.

Many of the steps taken by lessors to seek to recover aircraft, in the wake of the Ukraine invasion, have already been referred to. I will summarise them briefly at this juncture.

All lessors in this action took steps to attempt to recover the Aircraft. At a minimum, those steps included the issuing of grounding notices and notices of termination of the leases to the Russian airlines and communicating with lessees to persuade the lessees to return the Aircraft. All the lessors reasonably concluded that recovery within Russia itself of their assets was impossible.

There have been no opportunities to take further steps towards repossession in the case of the Merx Aircraft, which have not left the CIS subsequent to the Russian invasion.

Russian airlines did continue to use AerCap and DAE Aircraft for international flights, generally for repatriation purposes, subsequent to the imposition of the EU Sanctions. Both lessors made efforts to repossess their aircraft whilst they were outside Russia. Some of those efforts were successful, and others not.

AerCap’s initial recovery efforts were diplomatic and aimed at a consensual return. Its leasing executives frequently contacted their lessees both to clarify what their intentions were and to urge them to return the AerCap Aircraft. On occasion there was contact between very senior figures, as on 7 March 2022 when Mr Kelly emailed Mr Filev of S7. On 8 March 2022, AerCap wrote to its lessees to reiterate that they were in breach of the aircraft leases and to repeat its request for flight plans for the return of the AerCap Aircraft. By 10 March 2022 the leases of all AerCap Aircraft had been terminated.

Where possible AerCap also undertook further active steps to repossess the AerCap Aircraft as follows. It identified where an aircraft was flying, whether by tracking or by the co-operation of the airline. Once the aircraft had exited Russian airspace, or once it had landed at its destination, AerCap issued a termination notice in respect of that aircraft if it had not already done so and as a result obtained an official letter from the registering authority which confirmed that the aircraft’s certificate of airworthiness was suspended. AerCap sent the termination notice and the registering authority’s letter to the aviation authority of the country in which the aircraft was situated or to which it was flying, requesting that the authority ground the aircraft.

AerCap’s successful repossessions were all of aircraft leased to the ‘Russian Turk’ airlines. AerCap recovered its sole aircraft on lease to Azur Air, 8 out of 10 aircraft from Royal Flight/Blue Connect, and 9 out of 17 aircraft from Nordwind. The majority of aircraft recovered from the Russian Turk airlines were already outside Russia at the time of the invasion. However there were some exceptions. The Azur Air aircraft was flown to Egypt, two Royal Flight/Blue Connect aircraft to Egypt and four to Turkey, and three Nordwind aircraft to Turkey subsequent to the invasion. AerCap made all of these recoveries consensually, with the exception of the Nordwind aircraft MSN 28247, which was prevented from leaving Turkey on 2 March 2022 without Nordwind’s co-operation.

The difficulties involved in the recovery of aircraft may be illustrated by the case of the Azur Air aircraft. On 6 March 2022, after failing to obtain a flight permit for Turkey due to the large number of leased aircraft which had been repossessed there, Azur obtained a flight permit for Egypt, and informed AerCap that once the aircraft had landed it would ‘pull some of the circuit plugs’ and declare a technical problem. AerCap could then apply to arrest the aircraft. The scheme was successful, but even after the aircraft was grounded AerCap could not obtain its return. The Irish ambassador to Egypt reported that Egypt was under pressure from Russia not to permit the return of Western Leased Aircraft to lessors. Following a meeting between AerCap representatives and the Egyptian Minister of Aviation in October 2022, the aircraft was returned to AerCap.

AerCap also successfully recovered several assets which were outside Russia for maintenance purposes, or to be redelivered, at the time of the invasion. These included the aircraft MSN 2243 leased to Aurora, which was undergoing maintenance in Taiwan, MSN 30038 leased to Smartavia, which was undergoing maintenance in Sharjah, and MSN 28825 leased to Yakutia, which was in the US for redelivery, in addition to a variety of engines.

However, with the exception of the single Nordwind aircraft MSN 28247, AerCap did not recover any aircraft where the lessee did not co-operate. The Dominican Republic’s aviation authority allowed the Royal Flight/Blue Connect aircraft MSN 32714 to depart on 2 March 2022. The same was true of the Azur Air aircraft MSN 32729 on 3 March, later repossessed in Egypt. The Egyptian civil aviation authority allowed the Ural aircraft MSN 9073 to depart on 5 March 2022, and likewise the Royal Flight/Blue Connect aircraft MSN 27617 (later recovered). It allowed the Royal Flight/Blue Connect aircraft MSN 28171, which was never recovered, to depart on 6 March 2022. All these departures were in spite of AerCap’s requests to the aviation authorities to ground the aircraft.

The most recent attempt made by AerCap to ground an aircraft leased by a Russian airline was in respect of the Aeroflot aircraft MSN 1301. The aircraft landed in Sri Lanka on 2 June 2022, and AerCap obtained an interim order for its arrest on the same day. However, due to intense diplomatic pressure, including a threat by Russia that it would revoke a facility for the export of oil and gas to Sri Lanka, and an announcement by Aeroflot that it would cease all flights to Sri Lanka, the aircraft was released by the Sri Lankan authorities on 6 June 2022.

DAE, like AerCap, sought consensual returns and to that end communicated frequently with its lessees both by WhatsApp messages and calls. Its discussions with UTair, for instance, focussed on a possible plan for repossession in Kazakhstan, which was ultimately unsuccessful. Most strikingly, Mr Houlihan also travelled to Moscow and met with each lessee between 6 March and 11 March 2022, in an act of significant personal courage. Mr Houlihan repeated DAE’s requests for the return of the DAE Aircraft, requested information on aircraft movements, and clarified the airlines’ positions in respect of the return of their Western Leased Aircraft. Some of that information was of material assistance in recovering aircraft.

Where possible, DAE also took further steps to repossess certain individual aircraft. As in AerCap’s case, its only successful repossessions were either where the lessee co-operated or where the aircraft was already outside Russia at the time of the invasion.

DAE recovered one aircraft from the ‘Russian-Turk’ airlines. As set out above, on 9 March 2022 Ramazan Akpinar (Nordwind) called Mr Houlihan, pursuant to their meeting in Moscow on 7 March 2022, and informed him that Nordwind could not obtain flight permits for Turkey, and therefore DAE should attempt to repossess the aircraft MSNs 37136 and 32639 in Mexico City, to which they were flying. DAE successfully repossessed MSN 37136 there on the same day.

DAE also recovered two I-Fly aircraft, MSNs 293 and 946, which were undergoing maintenance outside Russia at the time of the invasion.

Genesis successfully arrested an aircraft on lease to Ural on 4 March 2022 in Dubai and flew it back to the UK by 25 July 2022. As a result of its successful repossession, it is not the subject of a claim in this action. There has been no opportunity to take further steps to repossess the Genesis Aircraft leased to NordStar.

By the end of the trial, all Defendants either conceded that the Claimants had taken reasonable steps to recover the Aircraft, or advanced no case that they had not. I find that they had.