Court Clarifies Disclosure of Insurance Documents Not Breach of Sanctions

Citation: [2024] EWHC 144 (Comm)
Judgment on

Introduction

In the case of AerCap Ireland Limited v AIG Europe SA & Ors, the High Court of Justice was concerned with an application for third-party disclosure under CPR PD57AD para. 31.17 within the context of the current sanctions regime against Russia. The judgment provides insight into the interpretation of the Russian (Sanctions) (EU Exit) Regulations 2019 in relation to the provision of insurance documents and the implications for the global aviation insurance industry.

Key Facts

AerCap Ireland Limited (“AerCap”) sought documents from the Respondents which relate to insurance and reinsurance contracts (termed the ‘Operator Policies’) concerning aircraft and engines not returned by Russian airline lessees following the invasion of Ukraine. Some Respondents opposed the application, fearing contravention of the Russia (Sanctions) (EU Exit) Regulations 2019. The key question was whether the disclosure of these documents constituted the provision of a service and thus a possible breach of sanctions.

The court applied several legal principles to determine whether sanctions would be breached by the disclosure of documents.

Third-party Disclosure

Under CPR PD 57AD para. 31.17, the court can order disclosure from third parties if documents are likely to support the applicant’s case, adversely affect another party’s case, and if such disclosure is necessary to dispose of the proceedings fairly or to save costs.

Sanctions Regulations Interpretation

The court used principles of statutory interpretation considering the context and purpose of the regulation to determine its scope. The purpose behind the sanctions regulations is to apply economic pressure on Russia to cease actions destabilizing Ukraine, not to bar legal proceedings that seek to establish insurance coverage.

Scope of Financial, Brokering and Insurance Services

The court determined that compliance with a court disclosure order does not equate to providing “financial services” or “brokering services” under Regulations 28 and 29, or “insurance or reinsurance services” under Regulation 29A. The provision of documents under court order lies outside the services contemplated by these regulations.

Defence under the Regulations

The court also noted that even if a party was within the Regulations’ provisions, a possible defence exists. A person can argue that they did not know, nor could reasonably suspect, that their actions were connected to the provision of services to a person in Russia.

Collateral Use

The court addressed collateral use of disclosed documents, emphasizing that permitted use should be confined to purposes of the proceedings for which the disclosure was sought, plus related proceedings already commenced in the court.

Outcomes

Mr. Justice Butcher granted AerCap’s application for third-party disclosure and clarified that the disclosure of the documents itself will not breach the sanctions regulations. The Respondents could not successfully argue that providing the documents would be contrary to their obligations under the sanctions because the documents were made available pursuant to a court order for legitimate litigation purposes, rather than as a service. The court provided regulatory guidance on the issue of collateral use of the documents, linking them to the ‘Operator Policy Documents’ as defined by a previous order.

Conclusion

The judgment in AerCap Ireland Limited v AIG Europe SA & Ors presents a clear precedent for future cases concerning the crossroads of third-party disclosures and compliance with international sanctions. It highlights the court’s role in ensuring fair litigation, balancing the prohibition of providing services under sanctions with the necessity of disclosing documents for legal proceedings. Notably, compliance with a court order is distinguished from the act of providing services that sanctions are designed to restrict. This decision will likely be of strategic value for parties in similar contexts, particularly within areas affected significantly by international sanctions such as the aviation industry.

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