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. Last Updated: 07/27/2016

EDITORIAL: Plane Seizure Shows Failure Of Courts




If those were cheers you heard in Moscow on Wednesday, they may very well have been from foreign partners of joint ventures gone sour applauding the temporary impounding of an Aeroflot passenger jet this week in Montreal.


It seems Canadian company IMP ran out of patience trying to get Aeroflot Russian International Airlines to pay up the $5.8 million the International arbitration court ruled it owed after the nasty divorce of their partnership in the Moscow luxury hotel Aerostar.


So IMP successfully lobbied Canadian government officials to seize an Airbus 310 passenger jet leased by Aeroflot while it was on the ground in Montreal on Monday. Aeroflot was forced to spend about $3,000 a hour in leasing fees to get its 50 passengers to Moscow while Royal Canadian Mounted Police grabbed the jet's fuel, emergency gear and duty-free items as collateral against the debt. They released the airplane Tuesday.


The seizure has threatened to turn into a huge international incident. Official protests were lodged by Russian diplomats in Canada and the Canadian ambassador to Moscow, Anne Leahy, was summoned by Russian government officials for a dressing-down over the move.


The Airbus seizure should come as no surprise to Russian authorities. Canadian Prime Minister Jean Chretien raised the issue with President Boris Yeltsin during his visit to Moscow in October. Canadian officials say they warned Aeroflot ahead of the plane's impounding that they were ready to do so if Aeroflot still refused to pay.


The Canadian case illustrates a growing frustration by foreign investors who are unable to obtain enforcement of international and sometimes even Russian court decisions in Russia. Other cases, notably that of U.S. sandwich restaurant chain Subway against its Russian ex-partner, have dragged on much longer than the Aerostar case with no hope of resolution in sight.


It was only a matter of time before something like this happened. As Russian companies involved in disputes become more integrated into the global economy, it will become easier for aggrieved parties to take action against them just like IMP has done, right or wrong. If Russian firms hope to be able to compete internationally, it's in their best interest to see effective court enforcement.


Hopefully, this case will spur the Russian government to move quickly to reform its court system, giving it the teeth it needs to make sure its decisions are enforced. The creation of an effective court marshals system to ensure defendants abide by court decision or risk imprisonment would be a good start.