Zephyrus Capital Aviation Partners 1d Limited & Ors v Fidelis Underwriting Limited & Ors

An exclusive jurisdiction clause should ordinarily be enforced, but it is not absolute. Strong reasons may exist where the agreed forum is unlikely to provide a fair trial. The court assesses the weight and cogency of the evidence prospectively, rather than applying a bare real-risk threshold or making a formal balance-of-probabilities finding. Foreseeable convenience factors carry little weight. Foreseeability of unfairness is only a factor and must relate to the dispute likely to arise. State interference, lack of judicial independence, application of the wrong governing law, serious witness-safety concerns and, in an exceptional market-wide dispute, risks of inconsistent findings may together justify retaining English jurisdiction.

The judgment determined jurisdiction challenges in numerous operator-policy claims brought by aircraft owners, lessors and related entities against reinsurers. The aircraft had remained in Russia after the February 2022 invasion of Ukraine. The claims concerned all-risks and war-risks insurance and reinsurance, with Russian exclusive jurisdiction clauses relied on by the defendants. The leases were governed variously by English, Californian or New York law.

The defendants sought stays to enforce the Russian jurisdiction clauses. The claimants relied principally on the likelihood of an unfair trial in Russia, together with public policy, multiplicity of proceedings, inconsistent findings and witness-safety concerns. The central issue was whether the claimants had shown strong reasons not to enforce the agreed jurisdiction.

1. The applications were refused. The court declined to stay the proceedings. Under Donohue v Armco Inc [2001] UKHL 64, the court retained a discretion, but would ordinarily enforce an exclusive jurisdiction clause unless the claimant showed strong reasons. The burden was on the claimants, and the assessment required consideration of all the circumstances.
2. The court rejected a hard-edged foreseeability rule. Foreseeable matters of mere convenience generally carried little weight, but foreseeability of an unfair trial did not preclude reliance on that matter. Its relevance depended on whether the parties could have foreseen an unfair trial in the type of dispute which actually arose.
3. It was generally insufficient merely to show a plausible real risk of unfairness. The evidence had to indicate, by its weight and cogency, that it was likely that the agreed forum would not provide a fair trial. The court was not required to make a formal finding on the balance of probabilities. It had to assess the relative plausibility of the competing evidence and resort to the burden of proof only if unable properly to form a view. Positive and cogent evidence was required, applying the approach in The Abidin Daver [1984] AC 398 and Cherney v Deripaska [2009] EWCA Civ 849.
4. The claimants were unlikely to receive a fair trial in Russia. The likely issues included the effect of Russian counter-measures, the validity of termination and repossession, causation, and whether the losses resulted from war, invasion, restraint, detention, seizure or other insured perils. The Russian state had a substantial interest through RNRC, the strategic importance of civil aviation, possible subrogated claims, and the involvement of Russian insurers and reinsurers. The evidence also supported a real likelihood of judicial interference or self-censorship.
5. The Russian courts were likely to apply Russian mandatory rules to issues governed by the leases’ English, Californian or New York law. That could deprive the claimants of a fair determination of termination and repossession rights. The court also treated the risk of fragmented proceedings and inconsistent factual findings, together with serious witness-safety concerns, as additional supporting factors.
6. The public-policy issue did not need to be decided. The court also made no final determination on the collateral-contract jurisdiction issue, although it considered that the defendants had a good arguable case that the exclusive jurisdiction clauses applied.