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19 October 20203 minute read

English High Court agrees to consider allegation of bias by Russian court when deciding whether to recognise and enforce decision against non-Russian reinsurers arising out of 2012 Sukhoi Superjet crash

The High Court of England and Wales has ordered a Russian insurer to disclose its communications with its insured aircraft manufacturer, after a previous letter from the manufacturer to a Moscow Court assisted in diverting responsibility for a USD22 million fatal accident to the manufacturer’s reinsurers.

The case arose out of a fatal crash of a Sukhoi Superjet SSJ-100 in Indonesia during a flight in 2012. Sukhoi Civil Aircraft Co.s’ Russian insurer Kapital, a subsidiary of PJSC Insurance Company “Rosgosstrakh”, ultimately made payment to Sukhoi and sought an indemnity from its reinsurers.

The reinsurance policy, however, only covered aircraft legal liability “arising from the test flights”. Given the nature of the flight as a “demonstration” flight, a categorisation which was corroborated by the Indonesian investigation report, the consortium of reinsurers, which includes QBE, Swiss Re, Catlin Insurance, and Munich Re, successfully brought a claim in the Moscow Arbitrazh Court to recoup advances paid under its policy. Rosgosstrakh was initially unsuccessful in its appeals.

Subsequently, however, the insurer made a separate claim in the Khanty-Mansi Arbitrazh Court, located in Western Siberia, where Kapital has a registered office. The Khanty-Mansi Arbitrazh Court found in favour of the insurer, namely that the reinsurance policy covered all hull loss, including demonstration flights. Consequently, the Russian Supreme Court Collegium intervened, ordering the Moscow Arbitrazh Court to reconsider the case.

After the Collegium’s intervention, the Moscow Arbitrazh Court requested a further explanation from Sukhoi regarding the nature of the flight. In a October 2016 letter, Sukhoi described the flight as a “test-demonstration flight” and the Moscow Arbitrazh Court subsequently found in favour of Rosgosstrakh.

The reinsurers have resisted making payment on the basis that the Russian judgments were made as a result of political pressure and are therefore invalid. The reinsurers’ position is that Rosgosstrakh brought a claim in Khanty-Mansi because of the “cosy relationships between its chosen local lawyers and the local judiciary”. Furthermore, the reinsurers assert that the intervention by the Russian Supreme Court Collegium was highly irregular and was due to the Russian state’s ownership stake in Sukhoi and the strategic importance of the Superjet programme. Such allegations have been dismissed by the insurer as “incoherent, vague” and “unsupported by evidence”.

The insurer has sought recognition and enforcement of their Russian decision against the reinsurers in England and Wales. Whilst it is possible for the court in England and Wales to simply recognise such a foreign judgment as a “contractual debt” by way of summary judgment, the court has notably rejected doing so in this case, such that a full trial on the merits of the matter is now required to be heard.

By requiring a full hearing, the court is opening up for consideration the question of the alleged bias of the Russian courts against the reinsurers. As outlined in Judge Moulder’s 17 June 2020 Judgment, rejecting the insurer’s application for summary judgment, to succeed on this point, the reinsurers will need to establish that the Russian courts were “deliberately wrong and not merely incompetent” which is unsurprisingly “a high threshold”.

Pursuant to this backdrop, on 9 October 2020, High Court Judge Christopher Butcher approved the request by the reinsurers that insurer disclose all its communications with Sukhoi in the leadup to the October letter. The extent to which the High Court of England and Wales will be willing to criticise the conduct of a foreign court in their approach to the non-local reinsurers is, however, yet to be seen.

The trial of the matter is scheduled for November 2021.