Kuwait Airways legal dispute enters new phase

Nine aircraft ordered by Baghdad are impounded in Canada as Kuwaitis question ownership. And the Iraqi government has been accused of breaching the terms of a $380m contract to buy new aircraft, according to an adviser to Kuwait Airways, marking a fresh phase in the long-running legal dispute between Kuwait and Baghdad, reported Meed.
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Baghdad placed an order for 10 shorthaul CRJ900 aircraft from Canadian manufacturer Bombardier in March 2008, but has only taken delivery of a single plane.
 
The Canadian courts impounded the remaining nine aircraft after Kuwait Airways launched a $1.2bn compensation claim for aircraft and equipment that it says was stolen by Iraq during the 1990 invasion.
 
The Kuwait source said that Bombardier has declared Iraq to be in breach of its contract because of the ongoing difficulties in delivering the aircraft or receiving payment. 
 
The 10 planes are the first tranche of a $5.5bn agreement the Iraqi government made with Bombardier and the US' Boeing for a total of 50 planes.
 
Unable to take delivery of the remaining planes, Iraq is believed to be seeking to defer the order.
 
With the issue still before the courts, Baghdad and Bombardier declined to comment on the status of their contract.
 
"Our policy is not to reveal any elements of our deals with clients, and that includes the delivery timetable, but we uphold our end of the deal," says a spokesman for Bombardier.
 
The spokesman declined to say whether Baghdad has also upheld its end of the deal.
 
Bombardier and the Iraqi government are co-defendants in a new trial due to start at the Quebec Superior Court in October. Kuwait Airways is suing both parties over the status of their contract.
 
Kuwait Airways alleges that the Iraqi government, rather than Iraqi Airways, struck the deal in an effort to prevent Kuwait from seizing the aircraft.
 
Under a judgement from the UK Commercial Court in 1994, Kuwait Airways is entitled to seize Iraqi Airways' assets, such as its airplanes, as it seeks to reclaim $1.2bn from the Iraqi carrier.
 
"We say the contract between Iraq and Bombardier is a sham," says the source on the Kuwaiti side. "The real contract is between Iraqi Airways and Bombardier. We have documents that say the specific reason for the ownership agreement is to avoid liability for Iraqi Airways."
 
Bombardier and the Iraqis reject this. "Our agreement is between Bombardier and the government of Iraq," says the Bombardier spokesman. "We are not party to any agreements with Iraqi Airways. In our view, that is indisputable."
Meanwhile, the contract has also come under scrutiny in Baghdad itself, with parliament and the Public Integrity Commission uncovering a series of irregularities in the paperwork surrounding the deal.
 
"There are some doubts about the deal," says one senior Iraqi government source. "Some elements [government officials] have been accused of corruption. Some of the approvals documentation was not done correctly, but no outright corruption has been uncovered."
 

 

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