The passing of control of the Development Fund for Iraq (DFI) to the Iraqi government may make the assets vulnerable to seizure.
A lawyer for Kuwait Airways told Bloomberg in an interview that “the class of assets against which we can seek enforcement has expanded.”
Christopher Gooding (pictured), a partner at London-based Fasken Martineau, said:
“Despite pleas to the contrary, Iraq is an extremely rich country … Its trading assets are available worldwide, and it remains our intention to seize Iraqi assets whenever and wherever they are available.”
Iraq amassed about $130 billion in debt under Hussein; it owes Kuwait about $21 billion and carries a significant debt to Qatar and Saudi Arabia. It continues to pay into the UN compensation fund.
“For anyone with unpaid debts with Iraq, this is a very significant development,” Stephen Fietta, a solicitor at Volterra Fietta in London, said in an interview.
Most legal jurisdictions recognize the ability of creditors to seize debtors’ assets as a means of debt enforcement. A sophisticated creditor may be able to track Iraqi cargo and try to seize it as it enters a port, or upon its discharge, he said.
“The risk might be minimized if the legal title was transferred by the Iraqi government before the oil was shipped,” Fietta said. “So there are ways around this, but the constant risk of seizure and enforcement can become a real headache for sovereign debtors, just as for private ones.”
(Sources: Bloomberg, UPI)