Judgment reinforces financial obligations in aviation dispute

On 17 April 2025, the High Court of Justice in England and Wales, specifically the Commercial Court, issued an important judgment in the case of FW Aviation (Holdings) 1 Limited v VietJet Aviation Joint Stock Company. The ruling primarily revolved around financial disputes regarding termination values for aircraft leases and the consequent rights to possession.

The background of the case is rooted in a legal dispute between FW Aviation (FWA) and VietJet concerning leasing agreements for four aircraft. The case has an extensive history, with a prior judgment delivered on 31 July 2024, where the court ruled that FWA had succeeded in its claim against VietJet. This earlier judgment established liability, but significant quantum issues remained for this latest consideration, leading to this judgment primarily dealing with what VietJet must pay FWA under the sub-leases’ terms.

The court identified four key issues during the judgment. Firstly, it addressed termination values, determining whether VietJet is liable to pay FWA specific termination values under Clause 19.3 regarding the aircraft, raising amounts approximately valued at US$108 million for NEO (New Engine Option) aircraft and about US$57.1 million for CEO (Current Engine Option) aircraft. Secondly, the basic termination amount was examined; should the A Line Termination Value not be payable, the court assessed whether VietJet would owe FWA the Basic Termination Amount. The third issue focused on possession rights, where the court reviewed FWA’s entitlement to immediate possession and control over the aircraft, in light of legal title now being with FWA. Lastly, liability for rental was considered, looking into what extent VietJet is liable to pay FWA pursuant to Clause 20.4(c) of the sub-leases concerning rental payments, especially after the sale of the aircraft to Trustee Owners.

Mr Justice Picken, delivering the judgment, reaffirmed the conclusions previously drawn regarding the termination fee obligations. He concluded that VietJet is indeed liable to pay the specified amounts under Clause 19.3, confirming FWA’s claims about the significant termination values. Importantly, he also stated that VietJet's arguments regarding penalties did not hold, reinforcing that the obligations outlined are not disproportionate to the interests that they protect, particularly for the financing parties involved in the leasing arrangements.

On the issue of possession, the court ruled that FWA, having acquired legal title to all four aircraft, is entitled to immediate possession. The historical context was important here, particularly given VietJet’s recent conduct regarding the aircraft. Furthermore, on the potential liability for rental payments as prescribed in Clause 20.4(c), the court stated that VietJet is liable for rental payments not only until the aircraft were sold but also for the ongoing period until the aircraft are redelivered. This decision implies that VietJet is liable for additional rental sums attributed during the interim, amounting to significant operational costs.

This judgment is pivotal in determining the financial liabilities associated with the aircraft leasing agreements initiated between FWA and VietJet. It highlights key considerations in the aviation finance sector, particularly around the legality of contractual obligations and the importance of prompt compliance to avoid complications in ownership and control over valuable assets like aircraft. The decision serves as both a precedent and a clarion call for clarity in contractual agreements within the aviation industry, emphasising the need for a comprehensive understanding of obligations arising from leasing arrangements.

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