Iraq to Wind Up Airline in Kuwait Dispute

30 May 2010 - Financial Times

The Iraqi government on Wednesday said it would dissolve the national airline amid a legal dispute with Kuwait over reparations dating from Iraq’s invasion of its neighbour in 1990.

The $1.2bn (£837m, €979m) reparations relate to aircraft and parts taken by Iraq during its occupation of Kuwait. The decision to wind up Iraqi Airways is an attempt to avoid the claims filed by Kuwait Airways.

The quarrel highlights the lingering tensions between the two countries and the long shadow cast by Saddam Hussein’s rule. Despite the dictator’s downfall in 2003, Kuwait insists Iraq’s government must pay a total of $24bn in outstanding reparations. Iraq still transfers 5 per cent of its quarterly oil and gas revenues to Kuwait to meet this obligation.

The airline dispute came to a head last month after Iraqi Airways made its first flight to London in 20 years, only for its aircraft to be met by a lawyer representing Kuwait Airways.

The Kuwaiti airline had obtained a High Court order in London providing for the freezing of Iraqi Airways’ assets. Its director-general was forced to hand over his passport. However, the aircraft that landed was chartered from a Swedish company, so it could not be seized. The Iraqi Airways executive was also eventually allowed to return to Baghdad.

“They didn’t leave any chance for Iraqi Airways to operate,” Ali al-Dabbagh, a government spokesman, told the Financial Times. “We feel this needs to be closed ... needs to solved in a friendly way, not in the court.”

Mr Dabbagh said the government had yet to decide whether to sell the Iraqi Airways aircraft or establish another company to bypass the legal claims.

“We have to find out the legal way – is there a legal way to avoid the Kuwait claim on the Iraqi Airways property or on the new airline?” Mr Dabbagh said. “If that is still there, then we will not form [an alternative airline].”

Kuwait Airways filed its first claim in Britain in 1991, alleging that Iraq stole 10 civilian aircraft.

Christopher Gooding, a lawyer at Fasken Martineau, which represents Kuwait Airways, said any move to dissolve Iraqi Airways and declare it bankrupt would not lead to the claims being dropped.

“First, it appears to me to be a sorry reflection of Iraq’s attitude to its international commitments that liquidating its own national airline is seen as preferable to addressing those commitments,” said Mr Gooding in a statement.

“Threatening to start a new airline merely demonstrates what a cynical tactic this is.”