UniCredit Bank AG, London Branch (Respondent) v Constitution Aircraft Leasing (Ireland) 3 Limited and another (Appellants)

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Case summary
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Case summary

Case ID

UKSC/2024/0102

Parties

Appellant(s)

Constitution Aircraft Leasing (Ireland) 3 Limited

Constitution Aircraft Leasing (Ireland) 5 Limited

Respondent(s)

UniCredit Bank AG, London Branch

Issue

Facts

Does Regulation 28(3) of the Russia (Sanctions) (EU Exit) Regulations 2019/855 (the “Regulations”) prohibit a German bank from discharging payment obligations owed to Irish companies under letters of credit issued as security for agreements to lease aircraft to Russian airlines, where those lease agreements were lawful when entered into and terminated before the payment obligations fell due? Appeal 1 and Appeal 2 raise materially identical facts. Constitution Aircraft Leasing (Ireland) 3 Limited and Constitution Aircraft Leasing (Ireland) 5 Limited (together, “Constitution”) and Celestial Aviation Services Limited (“Celestial”) are Irish companies that entered, either directly or through other companies in the same group, into civilian aircraft leasing agreements with Russian airlines between 2005 and 2014. As security for performance of the lessees’ obligations under the leases, a Russian bank issued a total of 12 letters of credit between 2017 and 2020, of which Constitution and Celestial were between them the beneficiaries. UniCredit Bank GmbH (“UniCredit”), a German bank acting through its London branch, acted as the confirming bank for each letter of credit. Following the Russian invasion of Ukraine in February 2022, the United Kingdom amended the Regulations to expand the scope of the sanctions it imposed on Russia. The leases all terminated for default in March 2022 and Constitution and Celestial made demands to UniCredit for payment under the letters of credit. UniCredit considered that the amended Regulations, in particular Regulation 28(3), prohibited it from making the payments until it obtained a licence from the UK authorities, which it applied for the same month. Constitution and Celestial each brought claims against UniCredit. After the first instance hearing but before judgment, UniCredit obtained a licence and paid the principal amounts due under the letters of credit. The dispute was thereafter confined to interest and costs. The High Court found in favour of Constitution and Celestial. The Court of Appeal allowed UniCredit’s appeal. Constitution and Celestial now appeal to the Supreme Court.