Russian Aircraft Operator Policy Claims (Jurisdiction Applications): Key Points for Practice in Jurisdictional Challenges

Introduction

This article distils key points on jurisdiction for practitioners from the lengthy decision in Re Russian Aircraft Operator Claims [2024] EWHC 734 (Comm). In this case Henshaw J rejected challenges to the English court’s jurisdiction over the case advanced by the Defendant reinsurers on the basis of Russian exclusive jurisdiction clauses.

Adam Riley and Tabitha Hutchison consider the points concerning jurisdiction that practitioners can take-away from this decision.

Christopher Loxton was instructed by Fieldfisher LLP for the Deep Sky Leasing claimants.

The Court summarised its conclusions at paragraph 557:

“[…] I consider that the Claimants have shown strong reasons why the court should decline to stay these proceedings. I consider that in all the circumstances – including having regard to comity, to the importance of giving effect to exclusive jurisdiction clauses in general, and to the extent to which such problems might be said to have been foreseeable – the court should decline to stay the proceedings. The main reason is that the Claimants are very unlikely to obtain a fair trial in Russia, which in itself is a strong reason to decline a stay. In addition, the inevitability of increased multiplicity of proceedings and far greater risk of inconsistent findings on fundamental issues were these claims to proceed in Russia, as well as an element of risk of personal attacks on individuals who in the ordinary course would attend trial, add further support to the view that strong reasons exist to refuse a stay.”

The judgment is essential reading for practitioners who regularly undertake or defend jurisdictional challenges, especially in the context of exclusive jurisdiction clauses. It considers in-depth (inter alia):

• principles relevant to the “strong reasons” test for granting a stay of proceedings commenced in England;
• the assessment and weight of un-/foreseeable factors relevant to matters of convenience and substantive justice;
• the degree of likelihood or risk of an unfair trial (and the standard required to be met in establishing the unfairness of a trial in a foreign jurisdiction); and
• the proper approach to evidence in such jurisdictional challenges.

Basic background

The Claimants in the case are owners and lessors of aircraft and aircraft engines, which were leased to Russian airlines under leases governed by English, Californian or New York law. Following the February 2022 invasion of Ukraine, the Claimants issued default and termination notices under the leases. The Russian airlines failed to return the aircraft to the Claimants, which still remain in Russia. These facts precipitated the instant litigation, relating, as at the date of the decision, to 208 aircraft and 31 engines. The sums claimed were in the region of US$9.7 billion, following settlement of some of the claims. The Claimants accepted that the underlying insurance policies and reinsurance policies in relation to which they had brought their claims contained Russian law and jurisdiction agreements, which were valid at Russian law and, further, that the Claimants’ claims fell within the scope of those Russian law and jurisdiction clauses.

It was common ground that the Russian jurisdiction agreements were required to be enforced, unless the Claimants could satisfy that there were strong reasons not to do so. The Claimants argued there were strong reasons not to enforce the exclusive jurisdiction clauses because:

• they would not receive / there was a real risk they would not receive a fair hearing of their claims in Russia;
• requiring the Claimants to pursue their claims in Russia would be contrary to public policy, because it would undermine the sanctions imposed on Russia following the invasion of Ukraine; and
• requiring the pursuit of the claims in Russia would give rise to an undesirable multiplicity of proceedings and the risk of inconsistent judgments.

 Key practitioner points

As to the principles relevant to the grant of a stay, the Court confirmed the following:

• The court is not bound to grant a stay but has discretion to do so;
• There can be no absolute or inflexible rule governing the exercise of the discretion;
• An English court will ordinarily exercise its discretion by granting a stay of proceedings unless the claimant can show strong reasons for suing in England;
• What constitutes a strong reason will depend on all the facts and circumstances of the particular case;
• The burden of showing strong reasons is on the claimant; and
• Strong reasons are not shown merely by establishing factors that would make England the appropriate forum on a forum non conveniens

As to the foreseeability or otherwise of certain factors, and how these impinge on the analysis to be undertaken by the Court:

• Foreseeable factors of (mere) convenience should not be regarded as strong reasons to decline a stay;
• Regard can properly be had to whether the claimant would be prejudiced by having to sue in the foreign court because they would, for political, racial, religious or other reasons, be unlikely to get a fair trial;
• There are some judicial statements which suggest that a matter pertaining to the interests of justice might not amount to a “strong reason” if it was foreseeable and could be regarded as encompassed within the parties’ bargain in agreeing to the exclusive jurisdiction clause;
• A situation where a party would be unlikely to receive a fair trial due to state interference or lack of judicial independence/impartiality would be an “exceptional circumstance” involving the interests of justice;
• Whether or not an exclusive jurisdiction clause (“EJC”) was specifically or individually negotiated has no freestanding significance, provided it was freely adopted in the sense that a party had a choice whether or not to contract on terms which included such a clause; and
• What is relevant, when considering whether it was foreseeable that the agreed forum would provide an unfair trial, is to have regard to the fact (if a fact) that a claimant did not have actual knowledge that the relevant contract would contain an Exclusive Jurisdiction Clause in favour of the jurisdiction in question.

The Court additionally commented on the applicable standard to be met where there is an EJC, so far as the proposition that a trial in the relevant forum would be unfair:

• A more stringent test than “real risk” is appropriate when relied on as a ground to give effect to a contractual agreement as to forum, in order to respect party autonomy and give proper weight to the principle of English law that parties should be held to their bargains;
• In the specific context of jurisdiction agreements, a higher standard than “real risk” is appropriate in order to reflect the “strong reasons” criterion, and the courts’ acceptance that an EJC is the most stringent form of jurisdiction clause;
• The enquiry is fundamentally different from the balancing exercise called for by the second stage of the Spiliada test, where no question of contractual entitlement arises;
• An EJC involves the same policy considerations as lie behind the mandatory stay imposed by section 9 of the Arbitration Act 1996 and the very high bar in Article 6(c) of the Hague Convention 2005 on Choice of Court Agreements;
• The courts use a higher standard than “real risk” when assessing, in other interlocutory contexts involving departure from a party’s prima facie entitlements, whether a future event will occur (e.g. in security for costs applications; an order restraining freedom of expression; an application for an anti-suit injunction);
• It will generally be unlikely, given the factors outlined above, to be sufficient for the counterparty merely to show a “real risk” of an unfair trial, if real risk is taken to connote a plausible or arguable case;
• It will generally be necessary to show that the preponderance of the evidence indicates that it is likely that the agreed forum will not provide a fair trial; and
• Proof on balance of probabilities is not the necessary or appropriate standard, because such a finding implies findings of fact (which is unlikely to be possible on the materials available in applications challenging jurisdiction); the decision to be taken is instead concerned with the strength of the relative arguments in play.

In outline, the Court took the following view of the correct approach to evidence:

• To establish a real risk of injustice, the claimant must adduce positive and cogent evidence; broad and conclusory allegations concerning the judicial system in the contractual forum will not suffice;
• The court should resort to the burden of proof only if it finds itself unable properly to form a view on the evidence before it; and
• The court is concerned with the relative plausibility of the rival contentions and evidence.
  

The conclusion set out at the outset of this article was reached following the application of the above principles to the voluminous expert evidence in the case. Although the Court reached the conclusion that a fair trial was unlikely to be obtained in Russia, Henshaw J ruled that this did not amount to a decision “that the Russian courts will necessarily decide the issue in a particular way, contrary to English public policy” (emphasis added). As such, he noted the Court would “have been hesitant about refusing the Defendants’ stay applications on public policy grounds”. In addition, Henshaw J considered that the prospect of a multiplicity of proceedings, and the resulting risks of inconsistent findings on key issues, were factors that could also be taken into account. However, these latter factors were not themselves decisive.