UK ruling highlights strength of exclusive jurisdiction clauses

In the case between aircraft leasing company AerCap Ireland Capital Designated Activity Company and PJSC Insurance Company Universalna & Others, the High Court stayed the proceedings in favour of the overseas court – in this case the Ukrainian court - finding that, since it was still possible for a trial to be held in a Ukrainian court, the war in Ukraine was not a strong enough reason to bring proceedings in England rather than Ukraine.

The case involved aircraft leased to Ukrainian airlines that has been grounded in Ukraine since the Russian Federation’s invasion in 2022, with the owners and lessors unable to repossess the aircraft.

The world’s biggest aircraft lessor, AerCap, brought claims against PJSC Insurance Company Universalna and other reinsurers, domiciled in England and Ireland and operating in the UK. The aircraft had been insured under policies that were underwritten by Ukrainian insurers and then reinsured with PJSC Insurance Company Universalna under contracts governed by English and Irish law. 

PJSC Insurance Company Universalna challenged the jurisdiction of the English court, relying on exclusive jurisdiction clauses in favour of Ukraine in the reinsurance contracts.

AerCap argued that the exclusive jurisdiction clauses were not binding and did not apply to its claims, as they had not been parties to the reinsurance contracts. It also argued that, even if the clauses were binding and enforceable, the war in Ukraine provided strong reasons for their claims being heard in England.

The court, however, considered that, even though Ukraine was under martial law, its courts had not ceased to function and proceedings could still be held there. The court found that the exclusion clauses were binding and enforceable and that there were no strong reasons for allowing the claims to proceed in England. Among other arguments, the court assessed the service options available in Ukraine,  available timetable and the previous experience, including proceedings with a foreign law element of the commercial courts in Ukraine, as well as the undisputable link of this case with Ukraine. Most of the witnesses were Ukrainian nationals based in Ukraine and would likely give evidence in Ukrainian, and a large proportion of the documents was likely to be in Ukrainian. As a result, the claims were stayed.

Litigation expert Slava Tretyak of Pinsent Masons said that the English court had rightly come to a conclusion that Ukraine is the proper jurisdiction for the hearing of these claims.

Michael Fenn, also a litigation expert at Pinsent Masons, said: “Whilst the court recognised the practical difficulties caused by the war it found that this was unlikely to result in substantial delay or unacceptable difficulties. This recognition by the English court that the legal system in Ukraine is functioning adequately will be a boost for the Ukrainian legal system and Ukrainian lawyers. It will also be a boost for the rebuilding of Ukraine.”