Loss of Use Claims Assessed

Author:Mr Simon Phippard
Profession:Barlow Lyde & Gilbert
 
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Kuwait Airways Corporation - v - Iraqi Airways Co (No.4)

Commercial Court, 31 July 2002

The long running litigation arising out of Iraq's invasion of Kuwait and seizure of aircraft at Kuwait International Airport in 1990 has produced two further decisions of the English Commercial Court.

Aircraft loss of use claims are notoriously difficult to quantify. The ongoing Kuwait Airways claim against Iraqi Airways illustrates an extreme case.

Following the House of Lords' decision that Iraqi Airways (IAC) was liable in conversion for the loss of six Kuwait Airways' (KAC) aircraft seized by Iraq and transferred to IAC following the invasion of Kuwait in 1990, the Commercial Court has delivered a partial ruling on the quantification of loss.

The test applied was the difference between the owner's position in possession of the goods and that without them. This was the settled law in a case of successive conversion. In this instance it was to be assumed that KAC did not have access to Kuwait airport, but that it had possession of the aircraft, so could secure rental income.

Accordingly the court had to determine:

Whether KAC could have leased out the subject aircraft during the period before it resumed its own operations, and

The cost of leasing in capacity to substitute for the six aircraft detained in Iran ("the Iran Six"), for which IAC were responsible after it resumed operations.

The factual background to the claims for lost revenue and the costs of leasing alternative capacity was complicated. KAC started running some services from Cairo in September 1990 and by January 1991 the liberation of Kuwait was imminent, so it would have been hopeful of restarting its services on regaining access to Kuwait. In the event Kuwait airport became available in about April or May and by July KAC was running a full service. In August and September 1991 it took out a series of short term dry leases for replacement capacity pending the delivery of eleven new replacement aircraft from Airbus; there were in addition a number of wet leases. The Iran Six were recovered in July and August of the following year and after repairs were reaccepted into KAC's fleet between December 1992 and June 1993.

The claims on which the Court adjudicated were:

Direct costs associated with recovering the Iran Six. This was largely allowed subject to some discounts for want of proper proof, and was in addition to a figure of US$20m paid to the Government of Iran for their recovery.

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