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Legal flaws in the compensation regime

1. The UN Security Council has neither power nor legal competence, in accordance with the UN Charter, particularly chapter VII to settle compensation issues arising from state liability, although it has, in principle, the competence to determine state liability as contained in resolution 674 (1990). This view is supported by the precedents practiced by the Security Council itself.

2. Compensation settlement is a purely technical legal question. The Security Council had better urge the concerned parties to refer this issue to the International Court of Justice (Article 36/3 of the Charter) or resort to any judicial settlement acceptable to the concerned parties.

Legal flaws in the UNCC procedures

1. Accepting individual claims instead of the established principle in dealing with compensation issues, which is based on the payment of Lump Sum, will result in a very large number of claimants, and in the consequent complication of the UNCC procedures in respect of claims consideration, arbitrary compensation, and the delay in claims settlement.

2. The consideration, by the UNCC, of individual A, B and C claims, under flimsy pretexts and on the basis of samples, means that the UNCC neither study the claims nor document the established international rules in relation to legal substantiation.

The UN Secretary-General mentioned in his report (S/22559) of 1991 that the commissioner panels would provide the consideration of legal rules. However, the commissioners have been deprived of this role when the UNCC secretariat trespassed its administrative task, making the decisions adopted by the commissioner just non-mandatory recommendations which are subject to amendment or cancellation by the Governing Council which is a political organ.

4. As a result of the complexity of the UNCC procedures that are based on the acceptance of individual claims, Iraq has been burdened with the UNCC costs which amounted to more than US$ 50 million annually.

5. Although the deduction rate from the sales of Iraqi oil to the Compensation Fund should not exceed, as determined, 30%, the Security Council resolutions 705 (199 1) and 778 (1992) adopted the maximum rate. The reduction, by the Security Council, of that rate to 25% at present is not attributed to the understanding, by the Security Council, of Iraq's essential needs, but rather to dubious political compromises in the Security Council with a view to letting pass the package of compensation for the Kuwaiti Oil Company.

6. The adoption, by the LJNCC, of secrecy in its procedures has deprived Iraq of a fundamental right which is established in the procedural rules of compensation settlement prevailing in international law, namely the right to see all the claims filed against it and to prepare its pleads thereof, especially that Iraq is not represented in the mechanism of the UNCC work.

7. Since the consideration of the claims filed against Iraq is not exclusively limited to the LJNCC, a large number of claimants and companies have filed parallel cases before their national courts. This has also initiated a serious situation in which the states of those courts can attach the sales and exports of Iraq other than oil, as a result of issuing such judgements, a matter that restricts Iraq's foreign trade indefinitely.

Legal flaws in the UNCC decisions

First: Decision No. 1 (S/AC.26/1991/1) adopted by the UNCC Governing Council, concerning the establishment of criteria for submitting A, B, and C claims which the Governing Council has considered as a priority according to speedy and simplified measures. In this respect, we have the following observations:

A. The Governing Council has imposed the payment of fixed amounts of money without asking for evidence to prove the volume of the loss and the actual author, under the pretext that these sums are (urgent compensation and a provisional help), in violation of the relevant rules of international law which stipulate that every case should be discussed according to its conditions and to make sure of the cause of the losses, if any, and their real volume.

B. The LJNCC Governing Council has initially supposed Iraq's liability by stating a number of reasons, considering the mere general relationship, which is unspecified legally, between the alleged and undocumented loss and one of those reasons, as an evidence of the causative relationship between Iraq's entry into Kuwait and any claimed loss. This is a flagrant violation of the rules of state liability substantiation, which are emphasized by paragraph -16 of resolution 687 (199 1). This paragraph emphasizes that the claimed damage or loss should be a direct result of Iraq's entry into Kuwait, including all the conditions necessary for proving the causative relationship between the action and the damage in accordance with international law.

C. In this decision the Governing Council used absolute general expressions, which were not determined pursuant to legal regulations. For example, the decision did not determine the reason for granting those who left Iraq or Kuwait or who were unable to leave them, a fixed amount as compensation without stipulating the occurrence of financial loss, or without indicating the legal reason, by which this departure was considered as inarguable criterion.

Second: Decision No.7 of the Governing Council (S/AC. 26/1991/7), concerning the establishment of criteria for D, E and F claims submission. It is possible to state the following remarks:

A. In contradiction to all established international legal rules regarding the issues of state liability, the Governing Council has permitted all companies and private legal bodies to submit their claims directly to the UNCC regardless the approval or disapproval of their governments.

B. The Governing Council has adopted criteria that might lead to duplicated claims and to the impediment of the procedures, when it permitted public sector companies, i.e. governmental companies, to submit their claims within category (E), besides the possibility of submitting their claims within category (E), i.e. within the claims of their governments.

C. In the context of what has been stated in decision No. (1), the Governing Council resorted to the assumption of Iraq's responsibility for the damages through stating a set of reasons (Military operations of both sides, threat and collapse of public order ... etc.). instead of investigating the reasons of every case separately with regard to the actual occurrence of loss, its amount and relation with the Iraqi action

Third: Decision No. 15 (S/AC. 26/1992/15), it is possible to state the following remarks:

A- The inclusion by the Governing Council of the damages resulted from the trade embargo and measures related thereby within the framework of damages for which Iraq is responsible in the decision, is considered a violation to what had been adopted by the council in paragraph (16) of its decision No. (1) and in paragraphs (9,24,38) of its decision No.. (7), which stipulated that compensation would not cover losses resulted from the trade embargo or the relevant measures.

B-The Council justified this inclusion by depending on the principle of (parallel interference or parallel reasons). It is worth mentioning that this principle does not correspond with the status quo, as the application of this principle assumes " the exclusion of the responsibility of state as long as the loss will occur even in the absence of the action of the responsible state due to the existence of another reason to which the harmful result attributed. This necessitates the exclusion of Iraq's responsibility for all these damages, depending on the principle of the paralleled reasons itself.

Fourth: The Governing Council Decision NO. (16) concerning the imposition of interests on the compensation amount. It is possible to state the following:

A- Paragraph (16) of the Security Council resolution 687, which is considered the basis for the system of compensation and the main guide of the UNCC organ's work, did not provide for the issue of interests, so it is incorrect to expand in the explanation in away to add, on Iraq's shoulders a new responsibility that was not contained in relevant Security Council resolutions.

B-In addition to what has been mentioned in paragraph (A) above, the responsibility of Iraq for payment of compensation is limited restrictedly to the payment of compensation for direct damages. The imposition of interests by the Governing Council on the original amount of compensation means expanding this already limited responsibility.

C-The imposition of interest contradicts what has been stated in paragraph (19) of resolution 687, which called the Secretary- General, in the process of defining the appropriate level of Iraq's contribution to the Compensation's Funds, " to take into consideration the needs of the Iraqi people and Iraq's ability for paying ... along with servicing foreign debts and the needs of Iraq's economy". A In' atter which the S e cretary- General had adopted in his report in this regard, as he had called upon the Governing Council "to consider the possible levels of Iraq's revenues from its future oil exports, along with the necessity of taking into account the needs of construction and development in the country, document (S/AC. 26/22559). It is clear from what has been stated in this paragraph that the basis for limited compensation with regard to Iraq's responsibility contradicts the imposition of interest. which will make the amount of compensation double several times in the light of paying the amounts of compensation by the Commission in the form of installments in separate time intervals.

D- Further, interest is usually imposed when there is a delay in the payment of the compensation amount. The delay must be attributed to the indebted state, a matter that does not apply to the status quo in Iraq, on which strange mechanism and measures were imposed. Iraq has nothing, whatsoever, to do with the delay of payments originally related to the nature of the Commission's work, that nature which distanced itself from what has been adopted and common in the process of compensations which are based on the imposition of Lump Sum.

E- Rules of International law confirm the non-imposition of interests on compensation, as the interest per se is compensation, so it is legally incorrect to impose compensation on compensation.

F- The delay in the payment of the amounts of compensation for the claimants is not attributed to Iraq, but rather to the Commission's complicated measures and it's adoption of the principle of receiving single claims. Thus, it is legally incorrect to impose interest on the delay of payments, which was due to the Commission's work, which Iraq has repeatedly voiced its reservation about it.

General Remarks:

1. Iraq has no option whatsoever but to accept unjust conditions, because the Security Council allowed, in its resolution 678 (1990), Kuwait and its allies to use force.

2. Iraq has accepted in principle and under forcible conditions the responsibility as contained in the two Security Council resolutions 674 (1990) and 686 (199 1), but Iraq has not accepted that the Council imposes a certain mechanism to settle compensations outside the mode adopted in International exercise related to the solution of compensations problems.

3. If it is said that Iraq's acceptance constitutes a basis for the UNCC mechanism, then this matter imposes restrictions on the freedom of measures of the Security Council and the UNCC, since the implementation and explanation of the provisions of this process must be contingent upon this acceptance.

4. The need for providing Iraq with correct legal defense with regard to the categories of big compensations in general.

5. The Government of Iraq has not been given enough time to respond to the claims.

6. The Commission's adoption of the secretariat's plan regarding the review of all claims for the period (1998-2003) reflects tendentious purposes to overload Iraq with very huge amounts through the settlement of big and complicated claims in a very short period not only with regard to the period given to Iraq to respond to these claims, but also with regard to the period given to the teams of commissioners, who review the claims.

7. The necessity of calculating the costs o ' f studying incorrect claims on the states that present them in their name or on behalf of their companies or nationals within their unified claims. As it is unfair that Iraq bears high expenses and administrative costs for studying futile claims presented in contradiction to the Security Council resolutions and in the absence of the Commission's treatment of the issue.

8. The Governing Council has extended the period for the submission of claims for the categories A, B, and C, as from January 1, 1992 to January 1, 1994. It accepted anew the delayed claims until January 1, 1995. Then, the Council exempted certain cases accepting the application thereof until January 1, 1996. In other words, the Council extended the period for the submission of claims, in one way or another, for two full years. There is no doubt that these extensions on the part of the Governing Council have proved Iraq's valid viewpoint that this sort of conduct has led to the enlargement of the bulk of claims and consequently inflicted an immense damage on it.

9. In the light of the Security Council Resolution 687 (1991) and within the mandate of the UN Compensation Commission, it is admitted that the Commission is not authorized to conduct a legal work related to Iraq's debts and commitments which originated before August 2, 1990 because paragraph (16) of the said resolution had exempted these debts and commitments. On this basis, there is no legal justification to conclude agreements with a state, state enterprise, or any other quarter concerning these debts. The Memorandum of Understanding signed between the Government of Arab Egypt and the UNCC Secretariat, and the agreement signed between the Executive Secretary and the Governor of the Egyptian Central Bank as regards the due transfers for Egyptians who were working in Iraq before August 2, 1990, are considered a transgression of the authority of the Secretary and the Executive Secretary, and a serious precedent in this regard.

10. The Security Council resolution 705 (1991) was adopted to approve the UN Secretary General's proposal, contained in his note (DOC. S/2266 1), dated May 13, 199 1, in which he counted the needs of Iraq's economy for imports at (8) billion dollars to betaken from the whole oil revenues which he estimated at about (2 1) billion dollars annually, according to which he assessed the rate of debt service at 22%, and another 30% for contribution to the Compensation Funds. However,, there are certain companies and individuals who submit claims against Iraq to their national courts demanding compensation for the damages which were allegedly inflicted on them. By so doing, they target Iraq's funds and assets abroad instead of resorting to the UN Compensation Commission. The implementation of these claims against Iraq's funds abroad instead of the resources of the Compensation Funds, means that the deduction rate out of the exports of Iraqi oil will practically transcend the maximum level defined by the Security Council for compensation, and will consequently be adversely reflected on Iraqs capabilities for providing the essential needs of the Iraqi people and economy, a matter which will make it impossible for Iraq to meet its commitments towards the Compensation Fund itself.

11. As regards state claim, ( 41) NO. (500169) concerning (the National Committee for Prisoners of war and Missing Affairs), contained in the report and recommendations of commissioners, the first batch of category (3/F) the Government of Kuwait has demanded an amount of 58.452.768 million dollars whereas the amount recommended by the Commissioners team was 153.452.000 million dollars, i.e. more than double the amount demanded. This is in contrast to the statements made to Al-Jazeerah Satellite Channel by the UN Secretary Executive Assistant Michael Raboween that: (No claimant has received more than what he demanded). This state of affairs contradicts the legal prconcerning' compensation, which provide that it is inadmissible to decide to compensate by more than the demanded amount. The injured person, if there is any, is the one who assesses his own loss and the one involved in this matter. Therefore, the duty of the panels of commissioners is limited only to look into the claims which are submitted by persons according to their procedures and the kind of clues required. Furthermore, Iraq had called in the 34th session of the UNCC Governing Council for postponing the discussion of this subject until the end of work on this subject which is of special nature implying that investigation may not bring about any result as is the case with many files of international armed conflicts which previously took place. It is legally inadmissible to pay compensation for persons whose legal statuses have not been known yet. In addition, it is legally impermissible to submit claims on behalf of any person with the exception of the dead, a matter that has not been settled in this case.

12. The unavailability of a legal status and appropriate defense for Iraq before the UN Compensation Commission. While claimants are allowed full access to, the most famous lawyers in the World to prepare their claims, Iraq is unable to get the help of foreign experts and lawyers in preparing its responses because of the narrow time it is granted to respond to claims, on the one hand, and because of the lack of the money necessary to secure the best legal defense due to the economic embargo and blocking of the Iraqi assets on the other hand. Thus, Iraq is deprived on purpose of exercising its legitimate right to defend its rights. Iraq has on many occasions emphasized its demands that all requirements of defense of its legitimate rights be financed from its funds which are deposited with the UN Fund for Compensations, or be allowed to export an extra amount of oil to be allotted to this end. Moreover, the Governing Council's approval of the Norwegian paper concerning arrangements for technical assistance to Iraq in the field of environmental claims which grants Iraq not more than (5) million dollars to be aided by the offices of legal and scientific expertise in formulating its responses to environment related claims, is not enough to satisfy Iraq's need for preparing its technical and legal defenses in this very important matter. Iraq affirms the necessity for allocating not less than (20) million dollars to finance the requirements of its defenses to these claims because the amount referred to in the Norwegian paper does not commensurate with the big numbers of claims nor does it satisfy Iraq's need to prepare its responses there to.

13. The lack of provisional rules for making claims of general conditions required by the procedural rules of justice and also of the minimum simplest criteria required by international law such as securing justice among the parties concerned, transparency as regards acquaintance with the development of the Commission, the movement of supportive documents of claims, enabling Iraq to have adequate defense, and to ensure the criteria of procedural and objective justice.

14. Paragraph (16) of the Security Council resolution 687 provided that Iraq's debts and commitments which had originated before August 2, 1990 be excluded from the mandate of the Commission on condition that they are settled in accordance with the normal mechanisms. However, the teams of Commissioners have violated the text of this paragraph which is considered the basis of the Commissioners' work as a whole, and so a law which should be applied in the work of Commissioners (Article 31 of the Provisional rules on making claims). They did so when they decided to make these debts and commitments subject to the Commissioners' mandate so long as the submission of claims against Iraq had been accomplished in a period of three months before the second of August 1990(see the report and recommendations of the team of commissioners as regards the first installment of claims of category E2 on July 3, 1998).

15. Despite Iraq's withdrawal from Kuwait and the end of military operations on March 2, 1991, the teams of Commissioners had extended the period during which Iraq is liable to make compensation, to (5) months as from the end of the military operations, those operations which were considered the basis for Iraq's responsibility for compensations pursuant to the relevant Security Council resolutions as well as the Commission's Governing Council's resolutions See DOC. (s/AC26/ 2000/7).

16. The Commission's failure in general and the Secretariat in particular in checking claims submitted to them, as a number of states (Sri Lanka, India, Yugoslavia and Bosnia) noticed that the Commission had compensated (575) claims twice . The UN Executive Assistance Secretary Michael Raboine in his recent statements has admitted this state of affairs to Al Jazeera Satellite TV where he confirmed the repetition of compensation for claims of individuals and those of companies. And here, a legitimate question could be raised,, namely what is the number of claims that have been compensated more than once? And who will be responsible for those claims which have not been known yet? And what is the legal punishment to be imposed on those claimants who have received more than one compensation for the same damage? The reason for this as a whole is attributed to the absence of Iraq's representation in the Commission, and the latter's adoption of secrecy in discharging its duties as well as its complicated procedures. See DOC: (S/AC.26/200/14).

17. In a statement dated 3 March 1999, the UNCC Governing Council called upon states which had received funds from the Compensation Fund but had not distributed them among those who deserved them, to return the money to the Fund one year after the receipt of those funds, a matter which affirms the imaginary nature of those claims, and the inability of states to find their alleged quarters, individuals or companies.