August, 2025 - Impact of sanctions on insurance cover - Aercap Ireland Ltd & Others v AIG Europe SA & Others

The commercial court judgment in Aercap Ireland Ltd & Others v AIG Europe SA & Others [2025] EWHC 1430 (Comm) sheds light on the English law interpretation of EU sanctions regulations. It concerned claims by aircraft lessors against their all-risks and war-risks insurers for loss of aircraft and engines following the Russian invasion of Ukraine in February, 2022. The claimant lessors issued default and termination notices but the aircraft and engines were not returned, and therefore, they sought recoveries under their various insurance policies.

A relatively small part of the lengthy judgment by Mr Justice Baker dated 11th June, 2025, dealt with the sanctions–related arguments raised by the insurers. The insurers argued that they could rely on sanctions-related defences under their policies which stated:

“If … providing coverage to the Insured is or would be unlawful because it breaches an embargo or sanction, that Insurer shall provide no coverage and have no liability whatsoever nor provide any defence to the Insured or make any payment of defence costs ....  to the extent that it would be in breach of such law or regulation.”

The insurers relied on US and EU sanctions regulations; there was no reliance on UK sanctions regulations. The court found that the insurers could not rely on the relevant US Export Administration Regulations, as its prohibitions did not specifically forbid insurance coverages and were concerned with the export of items subject to those regulations, rather than leasing arrangements.

One of the insurers argued that EU sanctions regulations prevented it from providing cover (i.e. Article 3c(2) of EU Regulation 833/2014 (as amended)) which stated:

“(2) It shall be prohibited to provide insurance and reinsurance, directly or indirectly, in relation to goods and technology listed in Annex XI to any person, entity or body in Russia or for use in Russia.”

The list of goods under Annex XI include aircraft and aircraft parts.

The court held that it should give effect to the words used in the Regulation, having regard to the recitals in the EU Regulation and the European Commission FAQs. The lessors were not Russian entities and did not operate in Russia.

Therefore, the court found that, for the purposes of the EU Regulations, the lessor all-risks and war-risks insurances were provided to non-Russian lessors, and were not insurances provided “… to any person, entity or body in Russia or for use in Russia”. Consequently, the court found that the EU Regulations did not exclude the claims, and that the lessors were entitled to maintain their claims under their insurance policies, subject to the relevant insured values.

Commentary

EU Regulations

The court adopted a commonsense approach to the proper interpretation of EU Regulation 833/2014 (as amended). That Regulation contains lengthy prohibitions in relation to the carriage, and the provision of insurance, of an extensive list of goods intended for export to or for use in Russia. The various lists of prohibited goods are set out within the relevant Annexes to the Regulation.

UK Regulations

UK Regulations are similar but not identical to the EU Regulations. For example, under the UK Regulations the export of listed goods to, or for use in Russia, or for their direct or indirect supply or delivery from a third country to a place in Russia is prohibited. The lists of prohibited goods include “G7 dependency and further goods” (such as certain chemicals, electronics, semiconductors and machinery) “Russian vulnerable goods” (such as wood, tools, locomotives and ships) and revenue generating goods (such as tobacco, cars and aircraft). All such items are listed in the Schedules to the UK Regulations

The UK Regulations also prohibit insurances responding “to a person connected with Russia” in relation to an arrangement for the export, supply or delivery of any of the listed goods. 

They also prohibit the provision of insurance in connection with an arrangement whose object or effect is to export, for example, “G7 dependency and other goods” or “Russian vulnerable goods” to, or for use in Russia, or to directly or indirectly supply or deliver such goods to a place in Russia.

Separate detailed provisions relate to the carriage of Russian crude and refined petroleum products under US, UK and EU law.

Conclusion

If sanctions regulations apply in relation to a Member’s trade they may impact the ability of insurers to provide cover. For example, if the EU Regulation applies the Club may be unable to provide advice and assistance in relation to any disputes which arise out of or are consequent upon the carriage of prohibited goods set out in the relevant Annexes to the EU Regulation. Similarly, if the UK Regulations apply the Club may not be able to assist in relation to goods within the Schedules to the UK Regulations.

There does not need to be a causal connection between the type of prohibited cargos and the nature of a dispute. If the relevant EU or UK Regulations apply then Members’ insurances may not be able to respond. This is the case even if the type of cargo carried is factually unconnected to the type of dispute, for example, bunker quality/quantity disputes, performance issues, and unpaid freight or hire.

If Members are requested to carry any goods listed under, for example, US, UK, or EU sanctions regulations, they are advised to consider the impact thereof on all of their insurance policies.

Members which have any questions in relation to the above issues are invited to contact the Club for further information.