Kuwait Airways Corporation v Iraqi Airways Co [2002] 1 AC 883 (UKHL)

Facts: In 1990, Iraq made an armed attack on Kuwait. When Iraqi forces reached Kuwait city, there were 10 commercial aircraft that comprised the fleet of Kuwait Airways. The Iraqi government instructed its Airways to seize these aircraft. The Iraqi government gave a decree (Resolution 369) that purported to dissolve the Kuwait airline and transfer the 10 aircraft to Iraq. Pl commenced proceedings in England to recover damages for the tort of conversion. D had a place of business in England, and therefore was subject to the jurisdiction of England. There was no application for a stay of proceedings on FNC grounds. The rule in Phillips v Eyre was applicable at this time, and so there was a requirement for civil liability (for civil wrong of usurpation i.e. wrongful seizure) under Iraqi law as the lex loci delicti. The only defence available to D was Resolution 369. 

Held: It would be contrary to public policy to recognise the law of Iraq. It was enacted in a fundamental violation of public international law, using force against another state. As this provided the context and background to the enactment of the law, this made it contrary to forum public policy to recognise the law. Therefore, the two parts of the rule in Phillips v Eyre were satisfied, and judgment was given in favour of the Pl.

Principle: A foreign law/governmental act which purports to transfer title to tangible movable property (e.g. aircraft, situated within the foreign country) will not be recognised if this would be contrary to forum public policy. e.g. where the transfer of title involves flagrant breach of rule of public international law of fundamental importance. 

Held (Lord Nicholls): “When deciding an issue by reference to foreign law, the courts of this country must have a residual power, to be exercised exceptionally and with the greatest circumspection, to disregard a provision in the foreign law when to do otherwise would affront basic principles of justice and fairness which the courts seek to apply in the administration of justice in this country.”