When Saddam Hussein invaded Kuwait in 1990, the rampaging Iraqi forces stole money, art and even the country’s airline before they were eventually stopped by an American-led coalition.

For the past 19 years Kuwait Airways has been seeking restitution for the loss of half its fleet and it took a step closer to recovering some of that money yesterday, when it emerged that JP Morgan, the investment bank, has written a letter of security that guarantees payment of hundreds of millions of dollars to Kuwait if a Canadian court rules that restitution should be given.

The battle for redress began after Iraq invaded its neighbour and seized ten passenger aircraft belonging to Kuwait Airways. Among the fleet were new Airbus 300s and 310s and Boeing 757s. These aircraft were flown to Iraq, repainted and reregistered as Iraq Airways planes.

Before the outbreak of the Gulf War, six of the aircraft were sent to Iran in the hope that they would not be attacked. The remaining four were bombed by the Americans in an attack on Mosul airport. The aircraft stored in Iran were eventually returned to Kuwait but were never flown again.

The case against Iraq Airways was initiated by insurance underwriters in London, which brought the action before the English courts because the carrier’s Heathrow operations were registered as a UK company. The case has become the longest-running piece of commercial litigation in the English courts.

During the legal battle, Iraq Airways was found to have committed perjury and Kuwait Airways was eventually awarded compensation of £1.2 billion. The airline and Fasken Martineau, its law firm, have since been trying to recover that money. Last year, Fasken Martineau sought the seizure of ten aircraft worth about $280 million (£175 million) that were being built by Bombardier, the Canadian industrial conglomerate, for Iraq Airways. A legal case is being heard in Canada over whether the aircraft should be given to Kuwait as restitution.

While that case has dragged on, the value of the Bombardier aircraft, three of which are parked at Montreal airport, has fallen.

A compromise was reached yesterday that will allow the aircraft to be given to Iraq Airways in return for a letter of security. If the Canadian case goes in favour of Kuwait, JP Morgan will pay the value of the aircraft to Kuwait Airways.

Christopher Gooding, the lawyer who has represented Kuwait Airways since 1990, said: “The company has, over many years, made its position clear. Iraq Airways assets will be seized in any and all jurisdictions where enforcement of its judgments is possible.”

The opportunity to seize more of Iraq Airways’ assets could grow as the airline has said it wants to expand its network.

The United Nations Compensation Commission, which was set up after the Gulf War, has so far paid $28.2 billion to the victims of the Iraqi invasion of Kuwait. The money has come from the proceeds of Iraq’s oil and gas sales.

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