Aviation Case Review 2026, Part 1

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Following our Aviation Case Review published in January of this year (available here), which covered developments in 2025, the first six months of 2026 have seen a number of case law decisions of interest to the aviation industry.

In Australia, we look at a decision of the NSW Court of Appeal which has raised important questions about the IATA Standard Ground Handling Agreement.

Elsewhere, in Dubai, whilst not aviation-specific, we discuss two DIFC court decisions which will be of interest to the aviation industry, given the common use of international arbitration to resolve disputes and the need for cross-border asset enforcement and interim relief measures. The decisions provide useful guidance on the DIFC courts’ approach to jurisdiction, enforcement and procedural fairness.

Finally, in England and Wales, we look at the Supreme Court’s decision in the UniCredit v Celestial Aviation litigation concerning the impact of the UK Russian sanctions regime on payment obligations under letters of credit. We also highlight a decision of the Court of Appeal on the impact of fraudulent behaviour on the chain of causation, as well as a string of cases involving applications for summary judgment and security for costs.

Australia

Dubai

England and Wales

 

AUSTRALIA

Dnata Airport Services Pty Ltd v Polar Air Cargo Worldwide, Inc [2026] NSWCA 105

In a case arising from a workplace injury sustained by a Dnata employee while unloading cargo from a Polar Air-owned Boeing 747 freighter aircraft in Sydney, the NSW Court of Appeal found that the dispute resolution clause in the IATA Standard Ground Handling Agreement (“SGHA”) does not automatically require disputes to be resolved through arbitration, but instead provides only for optional arbitration by mutual consent, with litigation operating as the default mechanism.

Our article on this decision examines its implications for airlines, ground handlers and cargo operators globally. The case serves as a reminder that parties should not assume that arbitration agreements contained in industry-standard agreements, such as the SGHA, will be applied uniformly, with courts in different jurisdictions potentially reaching different conclusions as to whether and how an arbitration agreement operates.

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"The first six months of 2026 have seen a number of case law decisions of interest to the aviation industry."

Dubai

Orabelle v Orzenia [ARB 007/2026]

Against the backdrop of the 2025 decisions in Trafigura and Techteryx (as reported here), the DIFC Court of First Instance considered the jurisdictional requirements for obtaining urgent interim relief in support of foreign arbitral proceedings as opposed to foreign court proceedings. The claimant relied on Article 15(4) of the DIFC Courts Law 2025 to seek a worldwide freezing order and asset disclosure order, in anticipation of a Paris-seated arbitration that had not yet been commenced.

The court dismissed the ex parte application and held that it lacked a sufficient jurisdictional basis to grant the requested relief where no assets had been identified within the DIFC. The decision suggests a more restrictive approach than that adopted in Trafigura and Techteryx, where the DIFC courts confirmed their ability to grant interim measures in support of foreign court proceedings which can result in an enforceable judgment in the DIFC.

The decision is relevant to airlines, lessors and financiers seeking urgent asset preservation measures in support of foreign arbitrations and cross-border recovery actions. The case is a warning, however, that parties cannot necessarily assume the availability of DIFC interim relief merely because a judgment may later be enforceable in the DIFC. Careful consideration must be given to establishing the required jurisdictional nexus with the DIFC courts at the outset of any application. As this remains a developing area of case law, parties should continue to monitor the courts’ evolving approach to the exercise of jurisdiction to assist parallel foreign proceedings.

Oheo Bank v Parker [2025] DIFC CA 006

On 24 April 2026, the DIFC Court of Appeal delivered a landmark judgment by setting aside an arbitral award for the first time in its history. The court set aside a DIAC arbitration award because the tribunal had determined liability on the basis of an unpleaded case, which had deprived the other party of a reasonable opportunity to present its case under Article 41(2)(a)(ii) of the DIFC Arbitration Law.

The decision is significant for the aviation industry, in which parties commonly agree to DIFC-seated arbitration clauses in their aircraft leasing and financing arrangements. While demonstrating the DIFC courts’ willingness to intervene in cases of serious procedural unfairness, the judgment also reinforces the courts’ broader pro-arbitration approach of “maximum support and minimum interference” in respect of judicial intervention.

For aviation stakeholders, the case underlines the importance of raising procedural objections promptly in arbitration proceedings and ensuring that any material changes in a party’s case are introduced in sufficient time for the opposing party to have the opportunity to respond. The reasoning in the case also provides reassurance that the DIFC remains an arbitration-friendly jurisdiction, while maintaining robust due process protections.

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"Against the backdrop of the 2025 decisions in Trafigura and Techteryx, the DIFC Court of First Instance considered the jurisdictional requirements for obtaining urgent interim relief in support of foreign arbitral proceedings as opposed to foreign court proceedings."

ENGLAND AND WALES

UniCredit Bank GmbH, London Branch v Constitution Aircraft Leasing (Ireland) 3 Ltd and another; UniCredit Bank GmbH, London Branch v Celestial Aviation Services Ltd [2026] UKSC 10

The Supreme Court’s ruling in UniCredit Bank GmbH v Celestial Aviation Services Ltd and UniCredit Bank GmbH v Constitution Aircraft Leasing (Ireland) 3 Ltd and another [2026] UKSC 10 (“Celestial Aviation”) sets out the English courts’ approach to the interpretation and treatment of the suspension of payment obligations where one party acts under a reasonable belief that sanctions regulations will be breached and adds to the developing body of judicial thinking relating to the UK’s Russian sanctions regime.

The case concerned 12 standby letters of credit issued by the London branch of UniCredit, as security for civilian aircraft leases to Russian airlines by Celestial Aviation and other lessor entities. Following termination of the leases and the introduction of Russian sanctions in March 2022, UniCredit – the confirming bank – refused to process payments, on the basis that performance was prohibited because the underlying transactions involved “restricted goods”. Although UK and EU authorities later granted licences covering the principal sums, outstanding issues remained as to liability for interest and costs.

The Supreme Court addressed three principal questions:

  • whether payment under the letters of credit was prohibited by Regulation 28(3)(c) of the UK Russian Sanctions Regulations;
  • whether the leases constituted “relevant arrangements” for the purposes of Regulation 28(3)(c), despite being lawful when entered into; and
  • whether section 44 of the Sanctions and Anti-Money Laundering Act 2018 (“SAMLA”) protected the bank from civil liability for non-payment.

In a departure from the High Court’s initial narrow interpretation of Regulation 28(3)(c), the Supreme Court upheld the decision of the Court of Appeal and adopted a broad and purposive interpretation of the UK Russian sanctions regime. The Supreme Court dismissed the lessors’ appeal and allowed UniCredit’s cross-appeal, unanimously deciding that payment was prohibited absent a licence, as the obligation was “in connection with” a prohibited arrangement – namely, the supply of aircraft for use in Russia.

Crucially, the court held that this statutory language requires only a factual nexus, not a causal link, thereby broadening the scope of the prohibition which the Supreme Court found must have been the intention of the UK legislature. The Supreme Court considered the overarching purpose of Regulation 28(3)(c) and emphasised that the objective of the Regulations is to advance public policy aims, including exerting economic pressure in response to geopolitical events. Regulation 28(3) should be interpreted broadly and extends to a wide category of financial services connected with Russia.

As a result, UniCredit’s payment obligations were suspended during the period in which performance would have breached sanctions. The court also confirmed that section 44 of SAMLA would have protected UniCredit from liability for an action to recover a debt, interest during the non-payment period and an award of associated costs, where UniCredit acted in the reasonable belief that payment was prohibited by Regulation 28(3)(c).

The decision in Celestial Aviation highlights a clear judicial trend towards a broad, policy-driven construction of UK sanctions legislation, with English judges interpreting the phrase “in connection with” an arrangement as capturing any factual link between a financial payment and a prohibited arrangement, regardless of causation. Significantly, Celestial Aviation demonstrates that even obligations ordinarily regarded as absolute in their independence – such as letters of credit – may lawfully be suspended.

We have considered this case in the broader context of sanctions developments in another article available here. 

Logix Aero Ireland Ltd v Siam Aero Repair Company Ltd [2026] EWCA Civ 510

Logix Aero agreed to purchase two aircraft engines from Siam Aero pursuant to a letter of understanding, which included a confidentiality clause. By unknown means, fraudsters inserted themselves into email correspondence between the parties relating to the engine purchase. The result was that the purchase price was paid to the fraudsters’ bank account rather than Siam Aero’s account.

Logix Aero brought proceedings to recover the purchase price from Siam Aero on the basis that it had breached the confidentiality agreement by sharing draft Purchase Agreements, the list of Line Replaceable Units, invoices and details of the previous owners of the engines via email correspondence with the fraudsters. At first instance, the High Court struck out the claim on the basis that the fraudsters’ intervention broke the chain of causation. Logix Aero appealed against this decision, but the Court of Appeal agreed with the court below. The fraudsters’ intervention had occurred before any breach by Siam Aero, whose email correspondence with the fraudsters had created part (and only part) of the opportunity for the fraud, rather than the cause of the fraud.

In this case, the court applied the standard principle of causation – that the voluntary intervention of a third party breaks the chain of causation – to conclude that Logix Aero’s loss was not caused by the assumed breach of contract by Siam Aero but by a third-party intervention, namely that of the fraudsters.

The Court of Appeal followed the High Court in distinguishing London Joint Stock Bank Ltd v Macmillan [1918] A.C. 777, which decision was based firmly on the inclusion of a special duty in the contract to prevent the very fraud that was in the event carried out. Parties wishing to benefit from such protection need to state this expressly. By contrast, in Logix, the primary purpose of the confidentiality provisions was to prevent commercially sensitive information from falling into the hands of competitors.

Summary judgment

In the context of English litigation, summary judgment is a process where the court may decide a claim or issue in the proceedings without a full trial of the issues and hearing of evidence. It may do this if (i) a party’s case has no reasonable prospect of succeeding and (ii) there is no other compelling reason why the case or issue should be disposed of at a trial. Summary judgment has been granted in a number of reported aviation cases this year, reinforcing that cases (or claims or issues in them) will not be permitted to go to trial where the claim or defence is too weak, far-fetched or speculative. For each of the cases we discuss we set out, where the information is available, the time it took from the date of commencement to the date when the hearing took place and summary judgment was granted. This demonstrates the significant time saving compared to the length of time for resolution of claims which proceed to a full trial. In the English Commercial Court, where many commercial disputes involving aviation are litigated, it can be upwards of 18 months from issue of a claim to trial and judgment, depending on the complexity of the case.

Rostrum Leasing 1 DAC v MAE Aircraft Management WLL [2026] EWHC 57 (Comm)

Claim filed: 17 December 2024
Hearing date: 27 October 2025
Judgment date: 15 January 2026

A lessor was granted summary judgment for rent plus interest and costs following termination of a lease for non-payment of rent. The court held that the lessee was estopped from arguing that the aircraft was not “airworthy” when it was delivered to the lessee on the basis that both parties had behaved in a manner consistent with the lease being operative and rent being due, as evidenced by payment of rent and use of the aircraft. The lessee also attempted to argue that it redelivered the aircraft in accordance with the terms of the Letter of Intent that was entered into prior to the lease, contending that the lease was only binding so far as consistent with the Letter of Intent. The court held that the Letter of Intent was only binding in respect of its confidentiality and the initial deposit.

Airline GEO Sky LLC v Air Albania shpk [2026] EWHC 395 (Comm)

Claim filed: 26 March 2025
Hearing date: 30 January 2026
Judgment date: 30 January 2026

The court granted summary judgment to a lessor on an undefended application in respect of outstanding lease payments (which the lessee had admitted were due). Additionally, the court confirmed that the lessor could enforce an indemnity provision in the lease to recover its own legal costs incurred in respect of the breach of the lease. Such indemnity was not subject to the same “reasonable and proportionate” threshold that applies to the recovery of costs in English court proceedings, and so the lessor’s legal costs of the action were fully recoverable from the lessee. 

Sunbird France 02 SAS v SpiceJet Ltd [2026] EWHC 831 (Comm)

Claim filed: 8 October 2025
Hearing date: 13 March 2026
Judgment date: 15 April 2026

The case involved three CFM56 engines leased to SpiceJet, with the airline falling behind on rent and maintenance reserve payments. SpiceJet chose not to participate in the proceedings, despite having notice of them. In those circumstances, Sunbird could have obtained a default judgment. But instead, they applied for and obtained summary judgment, which, unlike the default judgment process (except in some circumstances), involved consideration of the substantive merits of the claim, even if the party against whom summary judgment is sought chooses not to appear at the hearing of the application. The reason for proceeding in this way was to facilitate the enforcement process in India and the prospects of making a recovery against SpiceJet. Obtaining a default judgment is quicker than obtaining summary judgment, but it may not be enforceable outside England and Wales.

The court granted summary judgment in excess of US$7.9m in favour of the lessor, finding that SpiceJet had no realistic prospect of defending the claims. The amounts being claimed constituted debt claims and had been proven by evidence which was considered by the court.

The clear message in this decision, which is consistent with other similar decisions, is that where rent and maintenance reserves are clearly due under a lease, the court will regard them as straightforward contractual debts and is generally unwilling to entertain weak or tactical defences.

CIT Group Finance (Ireland) Unlimited Company (a company incorporated under the laws of Ireland v SpiceJet Ltd (a company incorporated under the laws of India) [2026] EWHC 1277 (Comm)

Claim filed: 22 November 2024
Hearing date: 19 May 2026
Judgment date: 3 June 2026

The lessor (CIT) and lessee (SpiceJet) entered into two early termination agreements (“ETAs”) for the return of leased aircraft for which SpiceJet was in arrears on rental payments. The agreements required SpiceJet to pay all outstanding rent and supplemental rent due under the ETAs. SpiceJet defaulted on its payment obligations under the ETAs, allowing CIT to exercise ‘snap back’ rights to void the agreements and apply for summary judgment. Summary judgment was granted for rent and supplemental rent, with the court rejecting the various defences advanced by SpiceJet, holding that:

  • no trial was required to determine whether the sums were owed under the lease or the ETAs; they were due either way;
  • the presence of the words: “at the Lessor’s discretion” in the ‘snap back’ clause did not impose a Braganza duty (explained further below); and
  • the lessor was not estopped, as a result of anything in the ETA redelivery certificates, from claiming sums due under the lease. SpiceJet had contended that the fact that the ETA redelivery certificates had been issued by CIT prevented it from claiming losses on the basis that the aircraft were in a worse state of repair than what was required under both the redelivery conditions set out in the ETA (the “ETA Redelivery Condition”) and the redelivery conditions in the original lease agreements. However, the court concluded that the ‘snap back’ provision rendered the ETAs and consequently the ETA redelivery certificates, “null and void”. The court dismissed SpiceJet’s argument that the estoppel or waiver still operated, notwithstanding that the ETAs and the ETA redelivery certificates had been voided. The court also found that the parties had not agreed that CIT was prevented from contending, post-redelivery, that the aircraft fell short of the ETA Redelivery Condition. The ETAs, moreover, had a narrow scope, simply determining that the parties would proceed for the purpose of the ETAs on the basis that the ETA Redelivery Condition had been met. There was therefore nothing to stop CIT from exercising its ‘snap back’ rights, as it did, and reimposing the rights and obligations set out in the lease agreements.

One of the key issues to be determined by the court was SpiceJet’s argument that a ‘Braganza duty’ was implied into the ‘snap back’ provision of the ETAs. A Braganza duty arises where one party has a contractual discretion and is required to exercise it rationally and in good faith. For example, a lessee might argue that the lessor must exercise certain rights, for example around calculations, determinations or enforcement step ins, in accordance with that standard. In this case, the court disagreed with SpiceJet and found that no Braganza duty was implied. The court treated the relevant obligations, particularly payment obligations, as clear, absolute and not subject to discretionary adjustment. Therefore, there was no scope for the lessee to argue that the lessor had exercised its rights unreasonably in a way that could limit or delay enforcement.

These types of ‘snap back’ provisions in settlement agreements are becoming increasingly common, particularly in these turbulent times coming out of the COVID pandemic and into the oil price crisis.  This decision gives strong support for these clauses, assuming that they are well drafted.  The commentary on the Braganza duty is helpful for lessors as it means that they do not have to justify themselves in relying on the ‘snap back’ provision under an ETA and going back to the original lease terms.

Casamance Owner SARL v Air Senegal SA [2025] EWHC 3196 (Comm)

Claim filed: 10 July 2025
Hearing date: 28 November 2025
Judgment date: 28 November 2025

A lessor applied for summary judgment against a lessee that had repeatedly fallen into arrears on rent (and admitted as much) and defaulted on the redelivery of the aircraft. Summary judgment was granted as the lessee had not exercised its only possible defence, which was an application for relief from forfeiture.

"The decision in Celestial Aviation highlights a clear judicial trend towards a broad, policy-driven construction of UK sanctions legislation, with English judges interpreting the phrase “in connection with” an arrangement as capturing any factual link between a financial payment and a prohibited arrangement, regardless of causation."

Security for costs

An English court may order a party which is “a defendant to any claim” (which includes a claimant that is faced with defending a counterclaim) to pay money into court, or provide some other form of security such as a bank guarantee, as security for their opponent’s costs of proceedings. Defendants commonly seek security for costs where there is concern that they would not be able to enforce a costs order which is made against the claimant, either within the jurisdiction or abroad (for example, because of the claimant’s financial position). The court has discretion to grant the order if specified grounds are met and it is just to do so. We set out below recent aviation cases where security for costs has been applied for.

Chady Aero Developments Ltd v Aero Engine Finance LLP (“AEF”) [2026] EWHC 1271 (Ch)

AEF applied for security for costs on the basis of an insolvency practitioner’s report that claimed, among other things, that Chady Aero was ‘balance sheet’ insolvent and was reliant on director support. The court granted security for costs on the basis that Chady Aero did not have sufficient assets to pay AEF’s costs. The court found that undertakings provided by Chady Aero’s directors not to require repayment of their loan accounts until the end of the court proceedings were not adequate to prevent the impecuniosity test (which is one of the grounds upon which an application for security for costs can be made) from being satisfied. This conclusion followed from concerns surrounding the ability to enforce the undertakings in the event that a costs order was made against Chady Aero, including that the directors were based outside of England and Wales in a jurisdiction where there was no adequate civil remedy for breach of undertaking.

Limited Liability Company Air Company Air Manas (“Air Manas”) v GTLK Middle East SPV Three Ltd (“GTLK”) [2026] EWHC 177 (Comm)

GTLK had obtained an arbitral award against Air Manas for around £11m, which the latter attempted to challenge before the English courts. GTLK applied for security for costs in the region of £270,000. Air Manas asserted that meeting the security for costs application would leave it with insufficient funds to pursue the claim, offering £100,000 instead as security. Having been provided with only limited evidence as to Air Manas’ finances, the court required Air Manas to provide security in the sum of £125,000.

Freestream Aircraft Limited (“Freestream”) v Seven Hundred Limited (“SHL”) & Ors. [2026] EWHC 1540 (Ch) / [2026] EWHC 1596 (Ch)

SHL applied for security for costs, relying on the ground set out in CPR 25.27(b)(ii) that “the claimant is a company or other body (whether incorporated inside or outside England and Wales) and there is reason to believe that it will be unable to pay the defendant’s costs if ordered to do so”. The court declined to consider Freestream’s overseas conduct in coming to its decision, but ultimately did grant security for costs on the basis that it had not been transparent about its financial position and its accounts appeared to suggest that its total assets were insufficient to meet the applicant’s budgeted costs.

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"An English court may order a party which is 'a defendant to any claim' (which includes a claimant that is faced with defending a counterclaim) to pay money into court, or provide some other form of security such as a bank guarantee, as security for their opponent's costs of proceedings."

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