No retrospective relief: Sanctions are no bar to making payments due under pre-existing letters of credit in aircraft leasing dispute

In Celestial Aviation Services Limited and Constitution Aircraft Leasing (Ireland) 3 Limited and another v UniCredit Bank AG (London Branch) [2023] EWHC 663 (Comm), the English High Court considered two concurrent claims in relation to payment under standby letters of credit which were provided before the Russian sanctions. The judgment is clear that sanctions will not ‘bite’ where the leases and agreements associated with the letters of credit were put in place prior to the relevant sanctions regime coming into effect.

Background

The claims were brought by Celestial (regarding numerous aircraft leases between various subsidiaries of its parent company (AerCap Holdings N.V.) and two Russian lessees) and Constitution, (relating to an aircraft leasing agreement with the Russian cargo airline AAL) and whose letters of credit were confirmed by UniCredit between 2017 and 2021, it in turn confirming the letters of credit issued by the Russian bank, Sberbank, in respect of the aircraft leases entered into between…