In Kuwait Airways Corporation v Iraq Airways Co1 the Court of Appeal ventured into uncharted territory. It allowed a ‘without notice’ appeal by Kuwait Airways Corporation and permitted the implementation of ancillary restraining orders against a non-resident nonparty in order to ensure the effi cacy of a worldwide freezing order and associated disclosure orders against Iraq Airways Co and its director general.
The issues before the court were the result of 15 years of litigation between the parties, arising out of Iraq Airways’ seizure and theft of Kuwait Airways’ civil aviation fl eet following Iraq’s invasion of Kuwait in 1991. Kuwait Airways had succeeded in obtaining judgments against Iraq Airways that it had never been able to enforce fully; the balance outstanding at the time of the appeal was around $1.2bn (plus interest).
In April 2010 it was announced that scheduled commercial fl ights between London and Baghdad would be resumed. Kuwait Airways hoped that this would allow it to enforce the judgment debts against (i) the security likely to have been deposited at Gatwick Airport or elsewhere, and (ii) the probable fresh revenue stream generated by the service. It was believed that the aircraft were leased. Kuwait Airways made a ‘without notice’ application to the Commercial Court, seeking a worldwide freezing order over Iraq Airways’ assets and ancillary disclosure orders against Iraq Airways and its director general, Captain Kifah. Kuwait Airways also sought:
- a restraint order against Kifah to prevent him from leaving the jurisdiction until he had sworn an affi davit of disclosure of assets
- a passport order requiring him to hand over his passport in order to police the restraint order
- a tipstaff order (conferring powers of entry, seizure and arrest) requiring the tipstaff to attend on Kifah to obtain his passport in order to police the restraint and passport order.
The first instance judge was satisfi ed that he could make the disclosure orders against Kifah. In addition, he initially exercised his discretion in favour of Kuwait Airways in granting the restraint, passport and tipstaff orders, without which he acknowledged that the disclosure order might be in vain. In so doing, the judge recognised that he was making orders of an unprecedented nature and that he had to be “cautious and proportionate and do no more than necessary to protect the legitimate interests of the claimant”. Nonetheless, he was satisfi ed that the breadth of the court’s jurisdiction under Section 37 of the Senior Courts Act 1981 allowed such orders against a non-resident non-party, although they were unprecedented in the commercial context.
However, before the orders were sealed, the judge decided to withhold his approval for the restraint, passport and tipstaff orders because he considered that Kifah’s rights would be unacceptably jeopardised. Kuwait Airways appealed the decision.
Court of Appeal decision
Lord Justice Rix made clear that this was a diffi cult case, commenting that the liberty of the subject is not to be interfered with lightly. However, in giving the leading judgment, he allowed the appeal against the refusal to grant the restraint, passport and tipstaff orders on the basis that the risk to Kifah’s liberty was offset by the court’s obligation to do whatever was necessary to support its orders and ensure that they were not futile.
Rix LJ recognised that the risk to Kifah’s liberty was mitigated by the fact that there would be an inter partes hearing within a few days, at which Kifah would be entitled to raise submissions as to why the orders should never have been made.
The judgments of Lords Justice Wilson and Keene suggest that they were less reluctant than Rix LJ to grant the orders. Wilson commented that he had no reason to doubt that the court’s jurisdiction to make a restraint order fortifi ed by a passport order extended in the case of a corporate party to a director thereof, and that if the orders were not granted with the attendant tipstaff order, the disclosure order against Kifah would be left “hanging limply”. Acknowledging that the orders sought were without precedent in the commercial context, Keene LJ commented that this was not a bar to making such orders, stating that “if the court were not prepared to do something for the fi rst time, the law would never develop”. With reference to the potential infringements on Kifah’s liberty, Keene LJ commented that the court should exercise its powers of arrest and detention where this was necessary to implement an order of the court.
Rix LJ emphasised that he was allowing the appeal largely because of the exceptional nature of the Iraq Airways litigation. Nevertheless, the court has acknowledged the diffi culty faced by judgment creditors seeking to enforce against non-resident debtors. The judgment acknowledges that without the court’s further assistance in exercising its powers of arrest and detention, a potentially powerful worldwide freezing order may be toothless.