Kuwait Airways Corporation v Iraqi Airways Company (Nos 4 & 5)

JurisdictionEngland & Wales
CourtHouse of Lords
JudgeLORD HOFFMANN,LORD NICHOLLS OF BIRKENHEAD
Judgment Date16 May 2002
Neutral Citation[2002] UKHL 19

[2002] UKHL 19

HOUSE OF LORDS

Lord Nicholls of Birkenhead

Lord Steyn

Lord Hoffmann

Lord Hope of Craighead

Lord Scott of Foscote

Kuwait Airways Corporation
(Respondents)
and
Iraqi Airways Company
(Appellants)

And Others

Kuwait Airways Corporation
(Appellants)
and
Iraqi Airways Company
(Respondents)

And Others

(Consolidated Appeals)
LORD NICHOLLS OF BIRKENHEAD

My Lords,

1

On 2 August 1990 military forces of Iraq forcibly invaded and occupied Kuwait. They completed the occupation in the space of two or three days. The Revolutionary Command Council of Iraq then adopted resolutions proclaiming the sovereignty of Iraq over Kuwait and its annexation to Iraq. Kuwait was designated a 'governate' within Iraq.

2

When the Iraqi forces took over the airport at Kuwait they seized ten commercial aircraft belonging to Kuwait Airways Corporation (KAC): two Boeing 767s, three A300 Airbuses, and five A310 Airbuses. They lost no time in removing these aircraft to Iraq. By 9 August nine of the aircraft had been flown back to Basra, in Iraq. The tenth aircraft, undergoing repair at the time of the invasion, was flown direct to Baghdad a fortnight later. On 9 September the Revolutionary Command Council of Iraq adopted a resolution dissolving KAC and transferring all its property worldwide, including the ten aircraft, to the state-owned Iraqi Airways Co (IAC). This resolution, resolution 369, came into force upon publication in the official gazette on 17 September. On the same day IAC's board passed resolutions implementing RCC resolution 369.

3

On 11 January 1991 KAC commenced these proceedings against the Republic of Iraq and IAC, claiming the return of its ten aircraft or payment of their value, and damages. The aircraft were valued by KAC at US$630 million. The damages claimed at the trial exceeded $800 million.

4

The UN Security Council's deadline for Iraq's withdrawal from Kuwait expired at midnight on 15 January 1991. Military action by coalition air forces began twentyfour hours later. The airfield at Mosul, in the north of Iraq, suffered several attacks from the air. In late January and early February 1991 four of the ten aircraft seized from KAC, moved to Mosul for safety reasons, were destroyed by coalition bombing. The aircraft destroyed were the two Boeing 767s and two A300 Airbuses. In these proceedings these four aircraft have become known as 'the Mosul four'. The other six aircraft, known as 'the Iran six', were evacuated by IAC to Iran at much the same time. Following negotiations with the government of Iran these six aircraft were flown back eventually to Kuwait in July and August 1992. KAC later paid Iran a substantial amount, US$20 million, for the cost of keeping, sheltering and maintaining them.

The proceedings

5

The proceedings have had a lengthy procedural history, including an earlier appeal to your Lordships' House: see [1995] 1 WLR 1147. On that occasion the House was concerned with challenges to the jurisdiction of the English court. The House decided, on 24 July 1995, that the writ had been effectively served on IAC but not on the state of Iraq. The House also decided that IAC could not claim state immunity regarding the acts of which KAC was complaining, in so far as they were done after RCC resolution 369 came into force. IAC's retention and use of the aircraft as its own did not constitute acts done in the exercise of sovereign immunity. KAC then continued the proceedings against IAC alone.

6

The trial of the action was split between issues relating to liability and those relating to damages. Certain issues relating to liability were tried by Mance J. On these issues KAC achieved a large measure of success. Mance J held that IAC had wrongfully interfered with KAC's ten aircraft: see [1999] CLC 31. Issues relating to causation, remoteness and amount of damages were tried by Aikens J. He held that KAC had failed to establish it had suffered any recoverable damage in respect of any of the aircraft. KAC would have suffered the losses claimed even if IAC had not wrongfully interfered with the aircraft. He dismissed the action: see [2000] 2 All ER (Comm) 360.

7

Both parties appealed. IAC appealed against the rulings of Mance J on liability, and KAC appealed against the conclusions of Aikens J on damages and his dismissal of the action. The judgment of the Court of Appeal, comprising Henry, Brooke and Rix LJJ, was given in November 2000: see [2001] 3 WLR 1117. KAC was partly successful. Its claims in respect of the Mosul four still failed but, save in one respect, its claims regarding the Iran six succeeded.

8

IAC then appealed against this decision to your Lordships' House. IAC submits that the action should be dismissed in its entirety. Aikens J's decision was correct, and should be restored. KAC cross-appealed. KAC contends that its claims regarding the Mosul four were wrongly dismissed by both courts below. KAC also contends it should succeed on the head of damages on which it failed in the Court of Appeal.

9

A further procedural matter should be noted. In May 2000 KAC petitioned the House to vary its order of 24 July 1995. The variation sought was that IAC should not benefit from sovereign immunity for the period 9 August 1990 to 16 September 1990. The ground of the petition was that, in respect of its activities in this period, IAC had obtained the judgment of the House by fraud. Evidence of IAC witnesses was perjured. On 27 July 2000 the House dismissed the petition [2001] 1 WLR 429. The appropriate procedure was for KAC to commence a fresh action. On 16 October 2000 KAC started new proceedings. This new action ('the perjury action') is due to be tried shortly.

10

A notable feature of the present proceedings is that this is a claim in tort for damages in respect of events having no connection with this country. The acts of which complaint is made took place in Iraq. Nor do the parties themselves have any connection with England. Both IAC and KAC had places of business in London, but that is of no real significance. As international airlines, no doubt they had branch offices in several countries.

11

At an early stage in the proceedings IAC raised an 'inconvenient forum' objection to the jurisdiction of the English court. The basis of the objection was that the United Nations Organisation had established a compensation commission for the purpose of considering claims against Iraq for damage and loss caused by its invasion of Kuwait. Evans J rejected this objection, and his decision was not the subject of an appeal. At a later stage IAC raised a further forum non conveniens objection but subsequently abandoned this. Thus it came about that the English court accepted jurisdiction to decide the issues raised in the proceedings.

12

Given that the alleged wrongs were committed in Iraq, and given also the absence of any particular connection with any other country, it is to be expected that when adjudicating upon KAC's claims an English court would apply the law of Iraq. As English law now stands, that would be so. The general rule is that the law to be used for determining issues relating to tort is the law of the country in which the events constituting the tort occurred: see sections 9(1) and 11(1) of the Private International Law (Miscellaneous Provisions) Act 1995. But the events of which complaint is made by KAC occurred long before this statute was enacted. Accordingly, as was common ground between the parties, in the present proceedings the court has to apply the so-called double actionability rule, as generally understood since the decision of the House in Boys v Chaplin [1971] AC 356. The rule is that, in order to be actionable here, the acts done abroad must satisfy both limbs of a dual test. The acts must be such that, if done in England, they would be tortious. Additionally, the acts must be civilly actionable under the law of the country where they occurred.

13

KAC immediately comes up against an obvious difficulty. In order to satisfy the double actionability test KAC must show it was the owner of the aircraft when IAC did the acts of which KAC is complaining. But, on the face of things, that was not so. By September 1990 the aircraft had been seized by the government of Iraq and moved from Kuwait to Iraq. Under Iraqi law, RCC resolution 369 was effective to divest KAC of its ownership of the aircraft and vest title in IAC. Under Iraqi law the subsequent repeal of this decree did not retrospectively give KAC a title it did not otherwise have during the relevant period. Under English conflict of laws principles the transfer of title to tangible movable property normally depends on the lex situs: the law of the country where the movable was situated at the time of the transfer. Likewise, governmental acts affecting proprietary rights will be recognised by an English court as valid if they would be recognised as valid by the law of the country where the property was situated when the law takes effect. Here, that was Iraq.

14

KAC does not dispute these propositions. Nor does KAC contend that the lex situs of the aircraft was the law of Kuwait as the place where, presumably, the aircraft were registered. KAC's response is that in the present case, as a matter of overriding public policy, an English court will altogether disregard RCC resolution 369. An English court will not regard this decree of Iraqi law as effective to divest KAC of its title to the ten aircraft.

RCC resolution 369 and English public policy

15

Conflict of laws jurisprudence is concerned essentially with the just disposal of proceedings having a foreign element. The jurisprudence is founded on the recognition that in proceedings having connections with more than one country an issue brought before a court in one country may be more appropriately decided by reference to...

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