Iraqi Airways Considers Bankruptcy To Beat Kuwait Reparations

 - May 27, 2010, 7:54 AM
Iraqi Airways aircraft were destroyed during the second Gulf War in 2003, but the carrier now faces the prospect of being wound up by its own government to avoid facing a 20-year-old lawsuit brought by Kuwait Airways, which alleges that Iraq stole 10 of its aircraft during the 1990 invasion of Kuwait by Saddam Hussein.

The prospect of involuntarily bankruptcy is all too real for many airlines around the world. But the government of Iraq is poised to voluntarily take Iraqi Airways out of business as a way to avoid a 20-year-old legal dispute with Kuwait Airways. Iraq argues that its flag carrier can no longer continue trading while Kuwait Airways continues to pursue damages of up to $1.2 billion in reparation for the destruction and theft of its aircraft and other assets during the 1990 invasion of Kuwait by then Iraqi President Saddam Hussein.

In late April, lawyers acting for Kuwait Airways sought to impound an airliner operated by Iraqi Airways when it landed in London after the resumption of services from Baghdad. The seizure was not permitted because the aircraft in question was leased from a Swedish company. Iraqi Airways’s chief executive was briefly detained in the UK as part of the legal action.

According to Christopher Gooding, an attorney with London law firm Fasken Martineau, which is representing Kuwait Airways, there is concern that the Iraqi government plans to dissolve Iraqi Airways and then immediately form a new company in the belief that the new entity would be rendered immune to the long-running legal action. Gooding said Iraqi officials are mistaken if they think this tactic will work because Kuwait Airways will simply sue the state of Iraq instead. 

The lawsuit covers the alleged theft by Iraq of 10 Kuwait Airways airliners and the theft of millions of dollars worth of spare parts. In fact, the Iraqi invasion led to the almost complete destruction of all of the carrier’s assets. Kuwait Airways alleges that this was an orchestrated attempt to forcibly merge Iraqi Airways with the Kuwait carrier as part of Saddam Hussein’s plan to annex Kuwait.