KING'S BENCH DIVISION
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
COMMERCIAL COURT
Fetter Lane, London, EC4A 1NL |
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B e f o r e :
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AERCAP IRELAND LIMITED (on its own behalf and on behalf of all those insured under insurance policy UMR B1752GE2100325000) |
Claimant |
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(1) AIG EUROPE S.A. (on its own behalf and on behalf of all underwriters subscribing to Section One of insurance policy UMR B1752GE2100325000 other than the Third to Fifth Defendants) (2) LLOYD'S INSURANCE COMPANY S.A. (on its own behalf and on behalf of all underwriters subscribing to Section Three of insurance policy UMR B1752GE2100325000 other than the Third to Fifth Defendants) (3) FIDELIS INSURANCE IRELAND DAC (4) SWISS RE INTERNATIONAL SE (5) CHUBB EUROPEAN GROUP SE |
Defendants |
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-and- |
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(1) McGILL AND PARTNERS LIMITED (2) ARTHUR J. GALLAGHER (UK) LIMITED (3) UNITED INSURANCE BROKERS LIMITED (4) WILLIS LIMITED |
Respondents |
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Alex Potts KC (instructed by Eversheds Sutherland (International) LLP) for the First Respondent
Hearing date: 19 January 2024
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Crown Copyright ©
Mr Justice Butcher :
Introduction
McGill's role
Background to the application
The Requirements of CPR PD 57AD
'31.17 (1) This rule applies where an application is made to the court under any Act for disclosure by a person who is not a party to the proceedings.
(2) The application must be supported by evidence.
(3) The court may make an order under this rule only where-
(a) the documents of which disclosure is sought are likely to support the case of the applicant or adversely affect the case of one of the other parties to the proceedings; and
(b) disclosure is necessary in order to dispose fairly of the proceedings or to save costs.
(4) An order under this rule must –
(a) specify the documents or the classes of documents which the respondent must disclose; and
(b) require the respondent, when making disclosure, to specify any of those documents –
(i) which are no longer in his control; or
(ii) in respect of which he claims a right or duty to withhold inspection.
…'
(1) That the Defendants in the action allege that the contingent coverage in both Section One and Section Three of its Contingent and Possessed Policy only responds in respect of losses which would fall within the scope of the policies taken out by lessees, and that there has been no such loss in this case. AerCap denies that construction, but if it is correct it will be necessary to investigate the scope of those lessee policies.
(2) Secondly, the Defendants allege that they are only liable under the possessed coverage in both Section One and Section Three of the Contingent and Possessed Policy insofar as there are no claims payable under the policies taken out by lessees. The documents are relevant to whether there are claims payable under those policies.
(3) Disclosure of the documents is necessary in order to dispose fairly of the proceedings or to save costs, as they will ensure that any arguments as to the scope of cover available to AerCap will proceed on a correct basis.
Confidentiality
Sanctions
The Regulations
'Financial services and funds relating to restricted goods and restricted technology
28 (1) A person must not directly or indirectly provide, to a person connected with Russia, financial services in pursuance of or in connection with an arrangement whose object or effect is—
(a) the export of restricted goods,
(b) the direct or indirect supply or delivery of restricted goods,
(c) directly or indirectly making restricted goods or restricted technology available to a person,
(d) the transfer of restricted technology, or
(e) the direct or indirect provision of technical assistance relating to restricted goods or restricted technology.
(2) A person must not directly or indirectly make funds available to a person connected with Russia in pursuance of or in connection with an arrangement mentioned in paragraph (1).
(3) A person must not directly or indirectly provide financial services or funds in pursuance of or in connection with an arrangement whose object or effect is—
(a) the export of restricted goods to, or for use in, Russia;
(b) the direct or indirect supply or delivery of restricted goods to a place in Russia;
(c) directly or indirectly making restricted goods or restricted technology available—
(i) to a person connected with Russia, or
(ii) for use in Russia;
(d) the transfer of restricted technology—
(i) to a person connected with Russia, or
(ii) to a place in Russia; or
(e) the direct or indirect provision of technical assistance relating to restricted goods or restricted technology—
(i) to a person connected with Russia, or
(ii) for use in Russia.
(4) . . .
(5) . . .
(6) Paragraphs (1) to (3) are subject to Part 7 (Exceptions and licences).
(7) A person who contravenes a prohibition in any of paragraphs (1) to (3) commits an offence, but—
(a) it is a defence for a person charged with an offence of contravening paragraph (1) or (2) ("P") to show that P did not know and had no reasonable cause to suspect that the person was connected with Russia;
(b) it is a defence for a person charged with the offence of contravening paragraph (3) to show that the person did not know and had no reasonable cause to suspect that the financial services or funds (as the case may be) were provided in pursuance of or in connection with an arrangement mentioned in that paragraph.
(c). . .
Brokering services: non-UK activity relating to restricted goods and restricted technology
29.—(1) A person must not directly or indirectly provide brokering services in relation to an arrangement ("arrangement A") whose object or effect is—
(a) the direct or indirect supply or delivery of restricted goods from a third country to a place in Russia;
(b) directly or indirectly making restricted goods available in a third country for direct or indirect supply or delivery—
(i) to a person connected with Russia, or
(ii) to a place in Russia;
(c) directly or indirectly making restricted technology available in a third country for transfer—
(i) to a person connected with Russia, or
(ii) to a place in Russia;
(d) the transfer of restricted technology from a place in a third country—
(i) to a person connected with Russia, or
(ii) to a place in Russia;
(e) the direct or indirect provision, in a non-UK country, of technical assistance relating to restricted goods or restricted technology—
(i) to a person connected with Russia, or
(ii) for use in Russia;
(f) the direct or indirect provision, in a non-UK country, of financial services—
(i) to a person connected with Russia, where arrangement A, or any other arrangement in connection with which arrangement A is entered into, is an arrangement mentioned in regulation 28(1), or
(ii) where arrangement A, or any other arrangement in connection with which arrangement A is entered into, is an arrangement mentioned in regulation 28(3);
(g) directly or indirectly making funds available, in a non-UK country, to a person connected with Russia, where arrangement A, or any other arrangement in connection with which arrangement A is entered into, is an arrangement mentioned in regulation 28(1); or
(h) the direct or indirect provision of funds from a non-UK country, where arrangement A, or any other arrangement in connection with which arrangement A is entered into, is an arrangement mentioned in regulation 28(3).
(2) Paragraph (1) is subject to Part 7 (Exceptions and licences).
(3) A person who contravenes a prohibition in paragraph (1) commits an offence, but it is a defence for a person charged with that offence to show that the person did not know and had no reasonable cause to suspect that the brokering services were provided in relation to an arrangement mentioned in that paragraph.
(4) In this regulation—
"non-UK country" means a country that is not the United Kingdom;
"third country" means—
(a)for the purposes of paragraph (1)(a) and (b), a country that is not the United Kingdom, the Isle of Man or Russia,
(b)for the purposes of any other provision of paragraph (1), a country that is not the United Kingdom or Russia.
Insurance and reinsurance services relating to aviation and space goods and aviation and space technology
29A.—(1) A person must not directly or indirectly provide insurance or reinsurance services relating to aviation and space goods or aviation and space technology—
(a) to a person connected with Russia, or
(b) for use in Russia.
(2) Paragraph (1) is subject to Part 7 (Exceptions and licences).
(3) A person who contravenes a prohibition in paragraph (1) commits an offence, but—
(a) it is a defence for a person charged with an offence of contravening paragraph (1)(a) ("P") to show that P did not know and had no reasonable cause to suspect that the person was connected with Russia;
(b) it is a defence for a person charged with an offence of contravening paragraph (1)(b) to show that the person did not know and had no reasonable cause to suspect that the goods or technology were for use in Russia.'
Analysis
(1) The correct approach to interpretation of the Regulations is to ascertain the meaning of the words in the light of their context and the purpose of the provision. It is thus important to consider the purpose of the Regulations. In this I agree with Christopher Hancock KC, sitting as a judge of this court, in Celestial Aviation Services Ltd v Unicredit Bank AG (London Branch) [2023] EWHC 663 (Comm) at [79]-[85].
(2) The purpose of the Regulations as a whole is stated in Regulation 4, insofar as relevant, as being to 'encourag[e] Russia to cease actions destabilising Ukraine or undermining or threatening the territorial integrity, sovereignty or independence of Ukraine'. At its most basic, they are intended to have an adverse impact on the Russian state, Russian industry or Russian persons; and a key purpose of the trade sanctions in Chapter 2 of Part 5 of the Regulations (which includes each of Regulations 28, 29 and 29A) is to stop the supply of restricted goods to Russia, in order to exert pressure on Russia.
(3) Viewed in the light of those purposes, Regulation 28 is not contravened by a broker supplying documents in the situation I have hypothesised in the preceding paragraph. Regulation 28(1) is not engaged because, even if the provision of the documents could be regarded as a 'financial service' it would not be to a person connected with Russia, but rather to AerCap or other non-Russian lessor. Equally, Regulation 28(3) would not be contravened because the provision of the documents cannot be regarded as being 'in pursuance of or in connection with an arrangement whose object or effect is [one of the matters in (3)(a)-(c)]'. The relevant 'arrangement' in pursuance of or in connection with which the documents are being provided is, in my view, the making of a claim by the lessor under the insurance, or, perhaps, the insurance itself. Neither has as its object or effect any of the matters in (3)(a)-(c). The only 'arrangement' which might be said to have had as its object or effect one of those matters would have been the original aircraft lease, but the link between the provision of the relevant documents and that lease, which was entered into before the sanctions were imposed and which has been terminated, is too tenuous to qualify as a relevant 'connection', when that protean word is considered in context and in light of the purpose of the Regulations.
(4) In relation to Regulation 29, the position is closely similar, notwithstanding the width of the definition of 'brokering services'. In my view, the provision of documents in the situation hypothesised would not be 'in relation to an arrangement' whose object or effect was any of the matters in 29(1)(a)-(h). Instead, the 'arrangement' 'in relation to' which they were being provided would be the claim by the lessor under the insurance, or, perhaps, the insurance itself. Any 'brokering services' involved cannot be regarded as being 'in relation to' the original lease: the link is too tenuous. This is especially so as the lease was entered into before sanctions were imposed and has been terminated. The Regulations are not aimed at preventing a non-Russian party from seeking (or being assisted in seeking) compensation or an indemnity in respect of the consequences of non-performance or termination of such a lease.
(5) As to Regulation 29A, if any 'insurance or reinsurance service' was involved in the provision of the documents, it would not be provided 'to a person connected with Russia' but to AerCap or other non-Russian lessor. Nor would any such service properly be regarded as 'relating to aviation … goods … for use in Russia', because the insurance does not cover (or facilitate) the use of the Aircraft and Engines in Russia, but is rather, at least on one of AerCap's cases, to provide cover in circumstances where the items remain in Russia as a result of the termination of a lease and against the lessor's will.
(1) Even if the provision of documents could be regarded as a 'financial service' provided to 'a person connected with Russia', viz the Russian insurers, for the purposes of Regulation 28(1), it would not be 'in pursuance of or in connection with an arrangement whose object or effect' was one of the matters in 28(1)(a)-(e), but rather with the lessor's claim under the insurance, or perhaps with the insurance under which the lessor was covered. That is also the reason why Regulation 28(3) would not be contravened.
(2) Similarly with Regulation 29. Even if the provision of the documents is regarded as the provision of a 'brokering service' to the broker's insurer client, it was 'in relation to' the lessor's claim on the insurance, or possibly the insurance insofar as the lessor had a claim under it, and not to any arrangement which had any of 29(1)(a) to (h) as its object or effect.
(3) In relation to Regulation 29A, the provision of the documents to a non-Russian lessor would not, in my view, constitute the provision, directly or indirectly, of an insurance or reinsurance service to a person connected with Russia. The documents would not be being provided in fulfilment of any obligation owed by the Russian insurers to provide documents to lessors in order to make, or establish whether they can make, a claim against those insurers or their reinsurers. They would be being provided, instead, because they are potentially relevant to an action which has been brought in this court, and the reinsurance broker, though not a party, holds those documents. In those circumstances, I do not consider that a broker situated as McGill is can be regarded as providing an 'insurance or reinsurance service' to the insurer in making such documents available to the lessor. Insofar as there is an 'insurance or reinsurance service' provided to anyone, it is to the lessor, as putative additional insured under the insurance and as allegedly having a claim under the reinsurance pursuant to a 'cut-through' clause. The lessor, however, is not a 'person connected with Russia' within 29A(1)(a). Any 'insurance or reinsurance service' involved would not relate to aviation goods 'for use in Russia', within 29A(1)(b) for the reason I have already given in paragraph 25(5) above: the (re)insurance does not cover (and facilitate) the use of the Aircraft and Engines in Russia, but is rather, at least on one of AerCap's cases, to provide an indemnity in circumstances where the items remain in Russia as a result of the termination of a lease and against the lessor's will.
Collateral Use
Conclusion