Impact of the EU’s Latest Sanctions against Russia on Aircraft Owners

On December 18, 2023, the European Union (EU) published its 12th package of sanctions targeting Russia via Regulation (EU) 2023/2878 and Regulation (EU) 2023/2875, which amend Regulation (EU) 833/2014 and Regulation (EU) 269/2014, respectively (collectively, the “12th Sanctions Package”).

The 12th Sanctions Package includes, amongst other things, a “No Russia” contractual clause requirement which places an obligation on certain aircraft lessors who are either based in any of the EU member states or who do business in whole or in part within EU territory to contractually prohibit the re-export of certain categories of sensitive items to or for use in Russia. Among the list of items concerned are aircraft, along with other aviation and space items as listed in Annex XI of Regulation 833/2014. In addition, not only must the clause contain an adequate remedy in the event of a breach of this contractual obligation, but the aircraft lessors are also required to report any such breach to the relevant national competent authority.

The “No Russia” clause must be inserted in all contracts entered into by EU-based aircraft owner/lessors relating to the sale, supply, transfer or export (which would include the operation into and out of Russia on a routinely scheduled flight) of aircraft (including aircraft parts) to non-EU member states other than partner countries as listed in Annex XVIII of Regulation 833/2014, which currently include the United States of America, Japan, the United Kingdom, South Korea, Australia, Canada, New Zealand and Norway.

This clause will have to be inserted by March 20, 2024, in all applicable contracts concluded after December 19, 2023, and by December 20, 2024, in all applicable contracts concluded before December 19, 2023 (unless the contract expires before that date).

Next Steps

In a well-drafted lease, there is typically a restriction prohibiting the lessee from operating the aircraft in a manner which would cause the owner or lessor to be in breach of any applicable sanctions, but for completeness in the coming months, any lessor based in the EU should:

• identify any aircraft leases to lessees not located in another EU member state or a partner country;
• identify any of those aircraft leases which are expiring after December 2024;
• review those aircraft leases to ensure that they include a contractual prohibition on the re-export of the aircraft into Russia along with adequate remedies for non-compliance; and
• (if needed) amend the lease before December 2024.

Please reach out to Kim Dalrymple or Elena Guillet for more details on the above topic or if you have any other queries.

This information is provided by Vinson & Elkins LLP for educational and informational purposes only and is not intended, nor should it be construed, as legal advice.