The former Iraqi government had been paying Hyundai E&C for the projects it carried out since 1977. But payment was interrupted by the Iraqi invasion of Kuwait in 1990.

When the war ended, the government offered a rescheduling of the outstanding amount and also issued financial supplementaries. Part of the outstanding amount was to be offset through the Korean firm being granted rights to lift Iraqi crude. The remaining amount was covered by CBI promissory notes, with a two-three-year maturity, issued by the housing ministry. Hyundai circulated the notes in international markets, but they defaulted.

The Korean contractor filed lawsuits in 1997 in the London and New York high courts against the then Iraqi government. 'We won a default judgement in New York. The London case could not proceed as there were difficulties in serving the claim forms to Iraqi defendants. But we expect that to move,' the Hyundai E&C official says.

Earlier this year, Hyundai E&C along with other South Korean private creditors with exposure to Iraq set up the Korean Creditors Co-ordinating Committee (KCCC) to facilitate debt recoveries. 'We have also strengthened co-operation with the London Club - a group of banking creditors. The Iraqi government has been pursuing comparability with the Paris Club terms despite the fact that private debt should not be treated the same way as government debt,' says the Hyundai E&C official. Citibankand JP Morgan are advising the government on the issue.