Jurisdiction(s):
United Kingdom

High Court of England and Wales upholds US$180m JOLCO termination sums in FW Aviation v VietJet, applying Makdessi penalty test

Published on: 23 April 2025

Published by a Law360 reporter

Legal News

Article summary

Judge James Picken, sitting in the High Court, determined that VietJet Aviation Joint Stock Company had entered into a leasing arrangement with FW Aviation (Holdings) 1 Ltd, a FitzWalter Capital unit, for four Airbus aircraft worth US$111m, and did so 'with full knowledge of the nature and terms' of the transaction. He stated that for the structure, a Japanese operating lease with call option, to be workable, the carrier had to make rental payments on time. The airline is 'a sophisticated commercial actor with significant experience in aircraft financing', and it appreciates the rationale for these types of structures, Picken said. He went on to explain that early termination is 'very damaging' to the economic benefits expected by Japanese investors, therefore the termination clause provides for 'a sum compensating those investors for the reduced tax benefit and also a sum to reflect the expected return on the equity investment for the investors'. Judge Picken added that he had applied the legal test from the landmark UK Supreme Court decision in Cavendish Square Holding BV v Makdessi here...

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