Sitting in a nondescript building near the high court in Dublin, about 40 cloaked barristers have gathered almost daily since June last year. At stake is €2.5bn (£2.1bn) worth of aircraft stranded in Russia after the invasion of Ukraine.
Behind multiple screens and a mountain of warehouse boxes they are fighting to determine who should pay for the losses – the aircraft lessors or the several insurance companies, including Lloyd’s, AIG and Chubb.
The case is due to go on for months, with legal fees for the 180 lawyers in the court and behind the scenes potentially running into hundreds of millions of euros.
Along with a parallel case being heard in London’s high court, it is one of the biggest and most complex commercial cases ever heard.
The megatrials centre on claims made by the world’s largest aircraft lessors against insurers relating to losses caused by the stranding of about 400 planes in Russia.
Western sanctions forced aircraft leasing companies to cancel their contracts with Russian carriers by 28 March 2022, initially leaving an estimated $10bn (£8.2bn) worth of assets out of reach.
Initially, Russia faced demands to return the “stolen” planes, but Moscow refused, prompting the lessors’ legal claims.
Many of the planes have been re-registered by Russia without the owners’ consent and sold to Russian airlines, with lessors invoking war risk insurance clauses for their claims.
The world’s second- and third-largest lessors, SMBC and Avolon, as well as BOC Aviation, CDB Aviation, Nordic Aviation Capital and Hermes Aircraft, are among those pursuing their claims in Ireland, where more than 60% of the world’s leased aircraft are owned or managed.
The witnesses before the Dublin commercial court last month included the seasoned technical manager from BOC Aviation, which leased aircraft to Pobeda Airlines, a subsidiary of Aeroflot. In 2022, it filed insurance claims to recover the losses after writing down the value of the planes, saying it was unlikely to recover the jets “in the foreseeable future, if ever”.
During cross-examination, barristers representing insurance firms pored over a slew of emails from March 2022 showing BOC Aviation scrambling to get its aircraft out of Russia. Email exchanges in the first week of that month showed it seeking parking space for 14 aircraft, including eight 737s, at a Lufthansa facility in the Philippines.
Another exchange suggested their contacts in Russia should emphasise BOC Aviation’s Chinese investors to see if the Kremlin would allow it to repatriate aircraft to a “Russia-friendly” country, such as Turkey.
BOC Aviation said it would not comment on the dispute but confirmed it had had 17 aircraft stranded in Russia; two had been retrieved and there were settlements from Russian insurers for a further seven.
The world’s largest aircraft lessor Aercap, based in Dublin, can trace its roots back to Ryanair founder Tony Ryan’s Guinness Peat Aviation, one of the leasing pioneers who made Ireland the centre of the global industry.
It is central in the London case over the loss of 116 aircraft and 23 engines. The legal action was launched against 16 insurance companies, including Lloyd’s of London, Chubb European Group, AIG Europe and Swiss Re, in November 2022.
Aercap, which initially estimated its losses at $3.5bn (£2.9bn), has since reached settlements out of court of more than $1.3bn with insurers, but is continuing to pursue the remaining claims.
Settlements continue to be made between lessors and insurance companies in the Dublin case. Just before Christmas barristers for SMBC told the judge they had reached an undisclosed settlement with Swiss Re.
However, there are signs the trials will go all the way.
Last month, the Irish commercial court heard that the case would take at least another 12 weeks, making it unlikely to finish before April.
Where does this leave the Russian aviation industry?
In June 2022, the Kremlin announced a programme to manufacture 1,036 planes by 2030. The Russian aviation historian Steven Harris, speaking to the Wilson Centre thinktank, called it an ambitious project that recalled the Soviet Union’s determination not to be dependent on the west.
By November last year, passenger numbers were up as Russians defied western sanctions and took holidays in “Russia-friendly” countries.
The number of passengers flying to Europe have dropped from almost 10 million in 2019 to a few hundred thousand, data from Russia’s civil aviation watchdog, Rosaviatsia, shows.
With most of Europe’s airspace closed to Russian carriers, international travel has pivoted to countries that have not imposed sanctions on Moscow, such as Turkey, ex-Soviet countries and the United Arab Emirates, according to data from the FSB security service, which tracks border crossings, Reuters reported in November. Egypt, Thailand and China have also grown in popularity.
But the sanctions mean fewer new planes are being added to Russia’s fleet to meet rising demand, forcing Moscow to ask neighbouring countries to help run some domestic routes.
Sanctions have also starved the Kremlin of critical western-made parts for engine production, limiting Russia’s ability to produce more than 1,000 new aircraft in the next six years.
In August, the Russian newspaper Kommersant reported that the target was likely to be lowered amid claims from government-commissioned consultants that such demand did not actually exist.
