On 17 April 2025, Mr Justice Picken gave a further judgment in the proceedings brought by FW Aviation (FWA) against VietJet, following a two-week trial in January. This judgment follows that given in FWA’s favour in July 2024 in respect of liability (which was summarised here).

The trial was principally concerned with the issue of whether certain sums falling due upon the termination of the leasing of four Airbus A320 aircraft leased to VietJet under a Japanese Operating Lease with Call Option (JOLCO) structure constituted a penalty. In particular, under the leasing agreements, following termination, VietJet became prima facie liable to pay a sum referrable to the total amounts outstanding under loan agreements that had part-financed the acquisition of the Aircraft by the lessors and a sum payable to Japanese equity investors, who stood behind the lessors and whose capital had funded the remaining purchase price. Whilst payment of those sums, in addition to certain other amounts, within 30 days would have permitted VietJet to exercise an option to purchase the Aircraft, in the event, the option expired without payment being made. The result was that VietJet remain liable to pay the sums and was obliged to return the Aircraft.

The judge held that the obligation to pay the sums in question did not constitute a penalty. In particular, the judge considered that the sums payable represented the balancing of the interests of the financing parties and VietJet in light of a wide range of uncertain and unpredictable scenarios. In doing so, the judge provided further guidance on the application of the principles established by the Supreme Court in Makdessi v Cavendish Square Holdings [2015] UKSC 67 and, in particular, the relevance of case law pre-dating that decision.

However, the judge held that, if the obligation to pay the sums had constituted a penalty, he would not have been willing to sever the obligation to pay the sum payable to the Japanese equity investors from the obligation to pay the sum referrable to the total amounts outstanding under the loan agreements.

In relation to a separate issue, it may be of particular interest to aviation practitioners that the judge also held that, under the Cape Town Convention regime, an international interest, and the ability to enforce the entitlements and remedies of a creditor arising in respect of such an interest (including, in the case of a lessor, to take possession), is not discharged where the holder or original assignor of the interest divests itself of any title that it might have held in relation to the relevant aircraft object.

Akhil Shah KC, Richard Lissack KC, Niamh Cleary, Jacob Turner and Orestis Sherman acted for FWA, instructed by Quinn Emanuel Urquhart & Sullivan LLP, and Alexander Milner KC, Giles Robertson and Kit Holliday acted for VietJet, together with Steven Thompson KC and Erin Hitchens of XXIV Old Buildings and Sebastian Isaac KC of One Essex Court, instructed by King & Spalding.

A further, third trial has been listed for March 2026 to determine outstanding issues of quantum. The judgment can be found here.