Indemnity In A Holding Pattern: Capacity, Causation And Actual Cost After FW Aviation V VIETJET, And What It Means For Aircraft Leasing Into India
Sanat Nandkishore, National Law Institute University, Bhopal
ABSTRACT
The litigation between FW Aviation and VietJet has become one of the leading modern authorities on how English law treats the collapse of a Japanese Operating Lease with Call Option structure after an airline defaults on its rent. The earlier judgments upheld the termination of the leases, refused relief from forfeiture and held that termination sums and liquidated damages of over US$180 million were recoverable without offending the rule against penalties. Those judgments left open the question of what else a lessor may recover once the aircraft are back on the ground, and the third trial, decided by Birt J in July 2026, answers that question with considerable care. This paper examines the four propositions on which the answer rests, the first being that remedies are cumulative save where a liquidated sum fixes the recovery for a particular head of loss. The second is that a broadly worded indemnity reaches first-party losses on a loose causal test, whereas the third is that an assignee recovers only in the capacity in which it holds the rights assigned to it. The fourth is that a promise to indemnify is a promise to make good costs actually incurred, rather than a promise to pay a notional sum for work that the lessor never chose to carry out. The paper argues that these propositions, read together, yield a structure-sensitive theory of the aircraft lease indemnity, under which the gate to recovery is wide but the purse on the other side of it is narrow. It then sets out what practitioners have made of the judgment, before testing its reasoning against the Indian Contract Act 1872, the Go First insolvency and the Protection of Interests in Aircraft Objects Act 2025. It concludes with drafting and structuring lessons for lessors, lessees and distressed-debt investors operating in the Indian aviation market, where the export risks that drove so much of the loss in this case have recently been reduced by legislation.
Keywords: aircraft leasing, JOLCO, contractual indemnity, Cape Town Convention, export delay, Indian Contract Act, Aircraft Objects Act 2025.
