By Gulnur Bekmukhanbetova (U.C. Berkeley, graduate) and Ainur Merziyasheva (Vice President, Legal Counsel, Citibank Kazakhstan)
The Russia-Ukraine conflict has global significance in the aviation sector because it exposed a huge problem in leasing operations involving high-risk jurisdictions from the aircraft lessors’ standpoint. The Government of Russia has refused to honor the rights of lessors (and financiers) to exercise remedies under the leases which have breaches and are covered under the Cape Town Convention to which Russia is a party. To put a finer point on it, there is not really an enforcement mechanism available to the individual lessors as enforcement of international treaties (such as the CTC) ultimately depends on the government choosing to comply. This has significant implications in practice affecting approximately US$10 billion worth of foreign-owned aircraft stranded in Russia following Russia’s invasion of Ukraine, exposing the global aviation community to an unprecedented level of political and sovereign risk.
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