UK: High Court decides that timing of coronavirus restrictions was not a relevant force majeure event entitling termination of aircraft lease
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UK
I am a partner and co-head of our International Dispute Resolution Group, as well as the London team. I specialise in complex disputes, often of a cross border nature, and have particular expertise in the aviation & defence sector, commercial life science, and in matters involving fraud.
Dispute Resolution Knowledge & Development Lawyer
UK
As the knowledge and development lawyer in our International Dispute Resolution team in London, I play a key role keeping my colleagues at the forefront of legal developments, trends and case law – covering litigation and international arbitration – for the benefit of our clients.
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A number of disputes which stem from the coronavirus pandemic are starting to reach the English courts. It is apparent that in some of these cases the pandemic has provided an excuse for one party to try and terminate current agreements. One such example, which is very relevant to the aviation industry, is the recent High Court decision in Fibula Air Travel Srl v Just-Us Air Srl [2020] 10 WLUK 415.
In this case, an aircraft charterer, Fibula, purported to terminate a wet lease claiming an incident of force majeure under the lease the day before the first instalment of the payment in respect of the lease was due and before any flights had taken place. Under the lease, it had given the lessor a security deposit which it then sought to recover and which the lessor refused to return. Fibula argued this evidenced a real risk of dissipation and applied to the court for a notification injunction, which would have required Just-Us to notify it before dealing with or disposing of the deposit. The court refused this application.
In deciding to terminate on 17 March 2020, Fibula relied on a clause of the lease which it claimed allowed it to terminate for force majeure as a result of the suspension of flights between Romania and Turkey due to the coronavirus pandemic. However, no flight restrictions were enforced on the intended route until 28 March. In addition, the lease did not require flights to begin until at least 1 April and the obligation to fly was conditional on the claimant having made the payments under the lease. In light of this, the court determined that there was no force majeure event on which the claimant could rely as of 17 March.
Absent a legitimate force majeure event on 17 March, the claimant should have paid the first instalment on 18 March and a second on 1 April. Importantly, this would have been the case even if the restrictions which were later imposed (by Turkey on 28 March and by Romania on 5 April) did amount to a force majeure event, since the clause required the situation to continue for ten days before a party was free to terminate. The court therefore found that Just-Us was able to retain the security deposit in relation to the two unpaid instalments, and would have been able to even if the lease was correctly terminated by a force majeure event or frustration when restrictions were later imposed.
This judgment emphasises that the court will consider all the circumstances when analysing whether there is a relevant force majeure event entitling a party to terminate an agreement. In this case, not only were coronavirus restrictions not yet in force but under the lease itself there was no obligation to fly until the second instalment had been paid on 2 April 2020 and even then the clause required the situation to continue for ten days before a party was free to terminate. Parties should pay close attention to the sequence of events surrounding potential force majeure events and termination. Force Majeure clauses can only be relied upon as a reason to terminate a contract where the factual matrix supports the assertion of this right.
