The United Nations is trying to force the Iraqis to give 30 per cent of future oil revenues to a compensation fund. They have yet to agree, but the process of gathering information to assess who should receive money has started. Forms have already been sent out; they will be processed by the Foreign Office and sent to the UN Compensation Commission in Geneva, which will decide how much money each country should receive.
But Touche Ross, the accountants, and Turner Kenneth Brown, the law firm with which it is working on claims, say the system is virtually unworkable. 'The procedure is a clear invitation for everyone to overstate the claim by as much as possible,' said Antony Tracey, principal in Touche Ross's corporate finance department.
'In its haste to be seen to be doing things, the UN has rushed things through, leaving a lot of uncertainties unresolved. The commission is reluctant to give out details needed by claimants, even on principles of law.'
The claims form is also confusing. 'Instructions for claimants' take up one page, and no details of the supporting documents needed are given. The form says losses caused by the Iraqi invasion will be considered, but those triggered by the West's trade embargo will not. 'It is easy to see a situation where a loss began because of the invasion and increased because of the embargo,' Mr Tracey said. 'It is a nonsense if you have to say at a particular point the cause was the embargo.'
He adds that the Government is providing insufficient help. 'People in industry are unaware of what they should do, because the British government has not told them. The Department of Trade and Industry is not giving out any information. All support is coming from the Foreign Office. That seems an odd choice, given the commercial nature of these claims. There is a perception that the US government is doing more by putting very high quality staff at the service of companies.'
Meanwhile, British contractors who were working in Iraq say they are being squeezed by the refusal of banks to release them from bonding commitments taken on before the invasion. To ensure they complete their assignments, contractors are often required to lodge performance bonds before starting work. Dissatisfied clients can 'call' these bonds, which are guaranteed by Western banks. Because British companies left so much work uncompleted, the Iraqis could theoretically call hundreds of millions of pounds' worth of bonds. Two British companies each have potential liabilities of more than pounds 20m.
Under the current legislation, it would be illegal for bonds to be paid. However, the Iraqis may be able to get at assets in the guaranteeing banks of friendly countries such as Yemen, and they could call the bonds once the embargo is lifted.
The EC has ruled that the banks should carry the responsibility for this risk, a decision supported by every country except Britain and the Netherlands, which are insisting that it should lie with contractors. The companies affected say this is tying up their overdraft facilities and, in the case of at least one small business, that it has forced the directors to mortgage their houses.Reuse content