Kogalymavia demands from Egypt $ 200 million for negligence

Kogalymavia Airlines, which is in the stage of bankruptcy after the attack, and the Turkish tour operator Prince Group filed lawsuits against Egypt, demanding compensation of almost $ 200 million.
Origin source
Kogalymavia Airlines (operating under the Metrojet brand), which has been in bankruptcy since February 2018, and the Turkish tourist group Prince Group have filed lawsuits against the Egyptian authorities in the Permanent Court of Arbitration (PCA) under the UN Commission on International Trade Law in the hague. Companies are demanding compensation for both direct damage resulting from the terrorist attack aboard the Airbus A321 in October 2015 and the loss of their investment in the Egyptian economy.

This was reported to RBC by the representative of both companies Oksana Golovina. The litigation is also said in the prospectus of the Egyptian government to issue Eurobonds for $ 4 billion.

The lawsuits were filed back in November 2017, but only at the beginning of 2020 the first hearings on the case took place - it took the parties several years to prove the correct choice of jurisdiction and the exchange of documents and memorandums of the case.

RBC sent a request to the State Office for Legal Claims of Egypt.

What Kogalymavia requires from the Egyptian authorities

On October 31, 2015, an A321 Kogalymavia plane flying out of Sharm el-Sheikh airport exploded in the air over the Sinai Peninsula. The victims of the disaster were 217 passengers and seven crew members (a total of 224 people). The incident was recognized as a terrorist attack. During the investigation, it turned out that an employee of the airport service department helped the terrorists to lay the explosive device on the plane.

“At the first stage, we had to prove what exactly was the investment and whether these investments were in the economy of Egypt,” Golovina explains. The initial confirmed amount of direct damage claimed in the claims is $ 201 million. “The amount of compensation for lost investments is determined by the principle of Ongoing concern - the assumption of the continuity of activities of [companies] - and takes into account what the cost of both companies would be today if they were tragic no events have occurred. According to the auditors, as of October 31, 2015, the estimated value of Metrojet and the Prince Group was $ 575 million, ”says a company representative.

Among the main claims:

Kogalymavia and the Prince Group claim that Egypt was aware that the security system at its airports did not comply with international standards and requirements of the International Civil Aviation Organization (ICAO) for security “long before the attack”;

as of February 2020, 4.5 years after the attack, Egypt had not issued an official opinion on the cause of the crash of the Kogalymavia aircraft;

Egyptian authorities did not accept responsibility “for criminal negligence that led to the death of 224 people, did not pay any compensation either to the affected companies, or to the families of the victims,” said the representative of the plaintiffs;
the terrorist attack, in addition to the tragic loss of life, led to the impossibility for companies to “fully continue their activities” and their lost profit. By investment in the economy of the republic, companies mean many years of activity in organizing trips of Russian tourists to Egypt. From 2011 to 2015, Kogalymavia transported 2.1 million passengers across the Egyptian route, while the Prince Group sent over 500 thousand Russian tourists to Egypt for the same period.

Companies are planning to complete litigation by the end of 2020. In the event of a positive outcome, they are ready to pay part of the compensation received to the families of the deceased passengers.

What happened to Kogalymavia

The Russian airline Kogalymavia was founded in 1993. In May 2012, after a change of ownership, she rebranded and renamed Metrojet. She and the international Prince Group (established in 2002 for the accommodation and ground handling of tourists mainly from Russia at the resorts of Turkey and Egypt) have one beneficiary - Ismail Lepiev.

Almost immediately after the Sinai disaster, in December 2015, Kogalymavia stopped flights, explaining this decision by the closure of two of the most popular tourist destinations - Egypt and Turkey. The latter was closed after the Turkish military shot down a Russian Su-24 bomber near the Syrian-Turkish border: Russia suspended charter flights of Russian companies to Turkey on December 1, 2015 (flights were resumed only in July 2016 after normalization of relations between Moscow and Ankara). In March 2016, the Federal Air Transport Agency limited the Kogalymavia operator certificate for domestic and international flights, and in February 2018 the Moscow Arbitration Court declared it bankrupt.

The disputes under consideration stem from bilateral investment agreements between Russia and Egypt (in the case of Kogalymavia) and Turkey and Egypt (Prince Group), explained O2 Consulting consultant Yuri Ustinov. Such agreements are designed to protect the investments of investors of one country in the territory of another, giving the opportunity to apply to international arbitration. “Similar disputes are now being considered in claims of Ukrainian investors against Russia for lost assets in the Crimea, for example, a lawsuit of Privatbank, and in claims of Russian companies, for example, a lawsuit of Gazprom against Ukraine (the company withdrew this lawsuit after a settlement was concluded at the end of 2019. - RBC ), ”Explains Ustinov. According to the lawyer, such claims are most often considered for more than one year. The dispute on the claim of Privatbank has been going on for more than five years.

How did the relatives of the victims sue

Relatives of the victims of the tragedy have repeatedly tried to obtain compensation through the court. Most of them filed civil suits with the Zamoskvoretsky court in Moscow in November 2017 demanding compensation from Kogalymavia and Ingosstrakh for a total amount of 54 billion rubles. But in September 2018, the court limited payments to 32 million rubles: the amount of compensation varied from 50 thousand to 1 million rubles. per person.

After the decision of the Russian court, the victims appealed to the court of North Cairo against Kogalymavia, Ingosstrakh and the Egyptian authorities with a lawsuit for $ 90 million, but they were also refused there. On March 4, 2020, the Kommersant newspaper reported that the Cairo Court of Appeal also dismissed the claim. According to the newspaper, the court did not consider specific claims, considering that the identities of the victims have not yet been established.

The direct losses from the suspension of flights with Egypt, the nine largest Russian tour operators estimated at 1.5 billion rubles, demanding compensation from the Russian government due to the suspension of flights to the country. And these requirements were not satisfied.

On November 8, 2015, President Vladimir Putin signed a decree on the suspension of all flights of Russian airlines to Egypt “pending the establishment of an adequate level of security of aviation communications”. Until 2015, it was considered the most popular winter holiday destination. In April 2018, Russia and Egypt resumed regular flights between Moscow and Cairo, but resort charters are still banned.