Kuwait signals end to Iraqi Airways asset seizures

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The governments of Kuwait and Iraq have given the strongest indication yet that they stand by a war reparation settlement brokered earlier this year, paving the way for Iraqi Airways to revive its long-delayed aircraft orders and resume direct flights to Europe.

On 23 October, Decree 23 by Kuwait’s Emir gave legal sanction to the contentious agreement, state-run KUNA news agency reports, with the Iraqi foreign ministry in turn issuing a reciprocal statement upholding the deal.

The neighbouring countries had appeared to end their 22-year-old dispute in March, when the Iraqi government said it was committed to paying $500 million compensation to Kuwait for the theft of 10 aircraft by Saddam Hussein.

However, over the summer Kuwait Airways lawyer Christopher Gooding reported that the no payments had been made and the two sides were still wrangling over the terms of the deal. The situation was further complicated by the dissolution of Kuwait's parliament in June, which stopped its National Assembly from endorsing the agreement.

With Britain’s High Court previously holding Iraqi Airways liable for $1.2 billion over the dispute, Kuwait has in recent years pursued asset seizure across the globe. Its enforcement action culminated in the 2010 detention of Iraqi Airways director general Kifah Hassan Jabbar in London and the cessation of Iraq's newly restored flights to Europe.

Announcing the signing of Decree 23 by Emir Sheikh Sabah Al Ahmad Al Jaber Al Sabah, KUNA says the move "is in the best interests of Kuwait in the current delicate [political] state".

"The Emiri Decree...approves the pact reached by the two sides on 18 July 2012 [the most recent draft agreement] to settle the financial dispute between Kuwait Airways Corporation and Iraq Airways and stop litigations in this regard."

Iraqi foreign minister Hoshyar Zebari also confirmed the agreement in a statement published on his ministry's website, saying that it "cancels all restrictions and complications in rebuilding Iraqi Airways, and it is now free to buy new planes and build a fleet".

The Republic of Iraq signed for 10 Boeing 787-8s in December 2009 and 30 737-800s in April 2008 - with Iraqi Airways widely believed to be the intended recipient - but the status of the order was thrown into doubt by Kuwait's asset seizure enforcement. Iraq's order for 10 Bombardier CRJ900s was also interrupted by Kuwait after just six deliveries.

"The two airlines have to inform their respective international lawyers to stop the litigation process, pending the completion of the final settlement," KUNA states.

Iraq's government will pay $300 million towards the settlement in the 2012 financial year, while $200 million has been set aside for the 2013 financial year, the state-run news agency adds. It makes no reference to a joint Iraqi-Kuwaiti airline previously linked to the second tranche.

Gooding declined to comment on the latest developments, though he said his legal firm, Fasken Martineau, will likely issue a statement within 48 hours.

Decree 23 was preceded by Kuwait's latest privatisation decree, in which the Emir pledged ongoing financial support for Kuwait Airways and said that the flag carrier would henceforth operate as a share-holding company. A strategic investor has yet to be found, but Decree 22 will pave the way for immediate restructuring of the fleet and workforce.