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Our cross-practice sector experts have summarised a selection of these key developments in this short update:


Below we cover two key developments in the litigation space and their relevance to the aviation sector – (1) litigation following Russia's invasion of Ukraine, and (2) the rise of class action litigation.

Litigation following Russia's invasion of Ukraine

Amongst the litigation that has followed Russia's invasion of Ukraine in February 2022 is a large number of claims brought by aircraft and engine lessors against insurers both in London and elsewhere such as in Ireland and the United States. At around the time of the invasion, many aircraft and engine lessors sought to recover their assets from Russian airlines. These attempts were largely unsuccessful, leaving the lessors with very substantial losses. The High Court is due to hear several such claims together in October 2024, and it is possible that there are further such claims on the horizon. Lessors have also brought claims to enforce security arrangements such as letters of credit and guarantees.

Rise of class action litigation

Class action litigation has become increasingly prominent in England in recent years. The upward trend has been driven by the growth and globalisation of claimant firms and the litigation funding market, as class actions represent a potentially lucrative opportunity for those looking to invest in litigation as an asset class. In recent years, claims have been brought against a broad range of corporates, including airlines, and this trend looks set to continue.

The growth is particularly pronounced in the context of competition claims under the collective redress regime for competition claims in the CAT under which, uniquely in England, claims can be brought on either an opt-in or an opt-out basis. Other types of class actions that are increasingly prominent include claims by shareholders, employment claims, ESG claims and claims in respect of data breaches. 

Herbert Smith Freehills recently launched a new edition of its class actions text, "Class Actions in England and Wales". For further information, see our post here.


There have been a number of recent regulatory/competition law developments relevant to aviation.  One example relates to the Competition and Markets Authority (the "CMA")'s final determination of various appeals brought in relation to an airport licensing decision made by the Civil Aviation Authority (the "CAA") in respect of Heathrow Airport.  This is the first time that an appeal against an airport economic licensing decision has been brought under the regime introduced by the Civil Aviation Act 2012 and was therefore somewhat of a litmus test as to how the CMA might approach issues in appeals in this sector.  Subject to any judicial review proceedings brought in relation to the final determination, and a small number of points which have been remitted to the CAA, the CMA's decision draws to a close the lengthy debate over Heathrow's maximum recoverable airport charges for the period 2022 – 2026.

What did the appeals relate to?

The Civil Aviation Act 2012 introduced a new regime for the economic licensing of airports in the UK which have been designated as holding substantial market power ("SMP").  At present, only Heathrow and Gatwick Airports have been found to hold SMP and are economically regulated by licence by the CMA.  Akin to appeals in respect to regulatory decisions in the energy sector, appeals of the CAA's airport economic licensing decisions are heard by the CMA on limited statutory grounds only (i.e. the CMA does not have the power to re-determine the price control as it does in relation to Ofwat price control decisions in the water sector).

The appeals stem from the CAA's decision in March 2023 in respect of the price control relating to Heathrow Airport for 2022 – 2026 (known as H7), which sets total maximum amount in charges that HAL can recover from airlines using the airport over this period pursuant to its economic licence.  Appeals were brought against the CAA's decision by both Heathrow Airport Limited ("HAL"), the owner/operator of Heathrow Airport and by three airlines operating from Heathrow (British Airways, Delta Airlines and Virgin Atlantic) across 5 separate appeal grounds, namely: (i) adjustments to HAL's regulated asset base; (ii) the appropriate level of the WACC; (iii) passenger forecasts for the H7 period; (iv) the application of a "K factor" mechanism to recover certain charges by HAL which the CAA considered were in excess of what was permitted under the previous price control; and (v) the capex incentive scheme for H7.  In substance, HAL argued that a higher maximum allowance should have been set, whereas the airline appellants argued that it should have been lower.  At the heart of a number of the appeal grounds was the extent to which HAL was entitled to recover losses sustained during the Covid-19 pandemic.

What did the CMA decide?

The CMA's final determination largely endorsed the approach and conclusions of the CAA, save in respect of three discrete issues which have been remitted back to the CAA for further consideration.  In its final determination the CMA recognises that the CAA had conducted its price control review against a challenging backdrop of the impact of the Covid-19 pandemic and that it had to weigh up very differing stakeholder views. 

Future implications?

Insofar as the CMA has largely upheld the decision of the CAA, this may give a steer as to how the CMA may choose to look at similar issues in respect of future airport price controls, in particular in relation to the setting of the appropriate weighted average cost of capital.  Whether the CMA's final determination will deter appeals of any future CAA price control decisions – or whether this is just the first of many appeals to come (as seen in other regulated sectors) - remains one to watch.


Sustainable finance continues to be of interest to many corporates, including those in the aviation sector, as part of their transition plan to move to net zero. 

Use-of-proceeds products

Use-of-proceeds products, which can be used to finance particular "green" or "sustainable" projects or assets, are relatively straightforward in that they rely mainly on disclosure, due diligence and on-going reporting in sufficient detail to give lenders and investors comfort that stated aims are being appropriately pursued.

Sustainability-linked loans and bonds

Sustainability-linked loans (SLLs) and bonds (SLBs) are forward-looking performance-based products where a margin adjustment may arise where particular sustainability targets are not met (or are met).  These can be useful tools as part of a corporate's overall sustainability strategy but are often more complex from a documentary perspective. 

The ICMA SLB Principles and the loan market Sustainability-Linked Loan Principles both focus on the critical requirements for ambitious, stretching sustainability performance targets (SPTs), as well as regular reporting with external verification.  These were developed to aid the development of a robust sustainable finance market and ensure that labels attached to finance products have integrity. 

Much of the work in ensuring the robustness and ambition of the initial SPTs comes during the structuring phase for both SLBs and SLLs.  SLBs then rely on a stringent regime of disclosures, reporting, and verification. 

Typically there would be 3 or 4 sustainability targets, though in the airline and holiday travel sector there may just be a single target.  This is often around reducing GHG emissions intensity, whereas 18 months ago it was often based on fleet renewal.

Key contractual issues for discussion in SLLs

There are several issues which are still negotiated quite heavily in SLLs, following the publication of draft wording by the Loan Market Association.  For example:

  • Verification – Borrowers are typically required to deliver a sustainability compliance certificate at regular intervals confirming achievement of the sustainability targets. However, lenders may further request that the achievement of sustainability targets are separately assured by an independent body and any verification report is disclosed to them. Whether this is agreed on a particular transaction will depend upon the ability to share that verification under the verifier's terms of business and the consequences of not doing so.
  • Rendezvous clause – Lenders are increasingly pushing for including a "Rendezvous" clause in SLLs which provide that, upon the trigger of certain events (eg, a change in law or a change in business that would impact the sustainability targets or a material change in the calculation methodology of the targets), the parties must negotiate amendments to the KPIs and/or sustainability terms for a certain period (typically 30 to 75 days). The list of such trigger events is often heavily negotiated.
  • Declassification provisions – It used to be the case that only if the borrower determines that the sustainability targets are no longer appropriate and is not able to agree on revised targets with the lenders, the sustainability features of the loan are disapplied and the facility is no longer sustainability-linked. However, with the introduction of the rendezvous clause, it is now the case that, following the negotiation mentioned above triggered by a rendezvous event, if the parties are not able to agree to on amendments within the relevant time period, the facility will be "declassified". The facility may also be "declassified" if the Borrower fails to deliver a sustainability compliance certificate when due.
  • Restrictions on publicising it as a SLL – The consequence of "declassification" of an SLL is, amongst other things, that the parties agree not to publicise it as such to deal with concerns around greenwashing. Sometimes the parties will have the right to make a public statement if another party to the financing (on either the borrower or lender side) continues to describe the facility as an SLL post declassification in order to address concerns around greenwashing. This can be a sensitive point for all parties.

Sustainability Derivatives

Sustainability-linked derivatives (SLDs) may be included in interest rate swaps, which are often connected to a sustainability-linked financing, which use some of the same sustainability metrics and margin adjustment techniques outlined above. Alternatively, they may be included in other types of derivatives such as FX and commodities swaps.

Public Law

Below is an update on two key public law developments which are relevant to the aviation sector – (1) climate change litigation and (2) the scope of judicial review (which is the form of litigation used to hold public bodies to account).

Public law climate change litigation

Climate litigation – where cases often rely on public law principles – continues to generate heightened levels of activity. Arguments arising in these cases are relevant to all of those engaged in or affected by large scale projects – whether that is exploring possible challenges to a decision, seeking to protect commercial interests in a challenge as an interested party, or defending a challenge.

In the aviation sector, two recent cases have focussed on the interplay between public policy on aviation carbon emissions and the granting of planning consent in and around airports:

  1. Manston Airport:

In September 2023, the High Court dismissed a challenge to the granting of development consent for the reopening of Manston Airport in Kent for air freight services.

This case was based in part on the Government's reliance on its Decarbonising Transport Plan and the Jet Zero Strategy, with the claimant arguing that the Government was not entitled to rely on those policies to conclude that the development would have a neutral impact on climate change. The arguments put forward included that the modelling for Jet Zero did not take into account material considerations and the policy was not robust, being based on "aspirational and untested" proposals. Ultimately the Court rejected those arguments, finding that the Government was entitled to rely on these policies to deliver the outcome for which they were designed.  We understand that the claimant has asked the Court of Appeal for permission to appeal, so this may be one to watch in 2024.

For more information on this case please see our blog here.

  1. Bristol Airport:

Another recent challenge in the aviation context concerned the expansion of Bristol Airport. The key question was whether emissions from the proposal would materially affect the ability of the UK to meet its target of net zero by 2050.

The High Court concluded that aviation emissions are primarily to be considered at a national, rather than local, level. Although there would be an admitted increase in CO2 emissions, this was a matter for the relevant Secretary of State to manage as part of the duties under the Climate Change Act 2008 and was not a material consideration pointing against airport expansion.

For more information on this case please see our blog here.

Together these cases (and other similar cases in other sectors – which we cover in our climate change disputes series here) show some of the challenges faced by those seeking to bring public law climate litigation, including the deference shown to public bodies balancing competing policy considerations. However, overall, the direction of travel appears clear: despite various obstacles and having had limited formal success so far, claimants are not discouraged and we should expect the trend of increasing climate litigation to continue, including in the aviation context.

The scope of judicial review

Judicial review can only be used to challenge decisions of those exercising public functions and there can be debate as to whether a particular function is public or private. In the aviation context, that question arose in a challenge brought against Doncaster Sheffield Airport Ltd's decision to close the airport. Despite being a privately owned organisation, the High Court found that it was "arguable with a realistic prospect of success” that the airport operator's decision could be challenged by way of judicial review. This case shows the possible breadth of public law principles in the aviation context – potentially extending beyond Government and regulators to commercial organisations such as airport operators – and it is an important topic for all those involved in the aviation sector to keep in mind.

For more information on this case please see our blog here. Moreover, please get in touch with your regular HSF contact or our contributors listed below to discuss any of the topics included in this update.

Key contacts

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Kim Dietzel

Partner, London/Brussels

Kim Dietzel
Robert Moore photo

Robert Moore

Partner, London

Robert Moore
Gregg Rowan photo

Gregg Rowan

Partner, London

Gregg Rowan
Kristen Roberts photo

Kristen Roberts

Managing Partner – Finance West, London

Kristen Roberts
Amy Geddes photo

Amy Geddes

Partner, Global Head of Debt Capital Markets, London

Amy Geddes
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Nusrat Zar

Partner, London

Nusrat Zar
Suzy Campbell photo

Suzy Campbell

Of Counsel, London

Suzy Campbell
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James Wood

Senior Associate, London

James Wood

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