Cambodia's troubled national airline Royal Air Cambodge is facing a multi-million

dollar breach of contract lawsuit filed by the French aircraft manufacturer ATR.

The Post has obtained copies of court documents submitted to Queen's Bench Commercial

Division Court in England initiating civil liability proceedings against RAC for

breach of contract for three ATR planes leased by RAC between September 1996 and

February 1999. ATR is a division of Airbus manufacturer Aerospatiale.

The documents list damage claims against RAC by ATR's Protea Leasing Limited in excess

of 25 million dollars for failure to honor contractual lease payments and physical

neglect of the leased aircraft.

Court documents say RAC began to renege on its contractual lease payment obligations

in the wake of the July 1997 coup.

Successive attempts by ATR to negotiate receipt of the outstanding lease payments

over the course of more than three years proved unsuccessful, leading the company

to file the civil suit in December 2000.

"As recently as October and November ATR was still trying to negotiate with

RAC, but they finally gave up," an industry observer said of the motivation

behind the lawsuit.

An RAC spokesman confirmed that the suit had been filed, but deferred all comment

to Acting RAC Chairman Sok An. Sok An's RAC advisor Chea Aun declined to comment.

ATR is also seeking damages from Malaysian Airline System (MAS) and its parent company

Malaysian Helicopter Services (MHS), which has provided key management personnel

to RAC since its creation in 1994.

ATR points the finger of blame for RAC's failure to honor its contractual obligations

on MAS personnel, accusing them of seeking to undermine RAC's relations with ATR

in order to financially benefit MAS. MAS is named as being liable for the same damages

as RAC.

MAS's management agreement with RAC allowed the appointment of MAS personnel in the

positions of Chief Operations Officer, Commercial Director and Vice President of

Finance. ATR alleges those personnel concerned themselves solely with the interests

of MAS to the extreme detriment of RAC and ATR.

"MAS and/or MHS...have caused RAC not to pay sums which were legally due [ATR],"

the court documents state. "As to the intention and motive of MHS and/or MAS...RAC

presented an opportunity for MAS to earn hard currency...at the price of RAC performing

its obligations to [ATR]."

According to ATR, RAC's MAS personnel blocked negotiations by ATR to recover lease

payments owed it and actively lobbied RAC to break its ATR contract and introduce

MAS planes to replace the three ATRs.

"...it was in MHS's interest to promote MAS in a way which would interfere with

[ATR's] Lease Agreements by seeking to introduce replacement aircraft in place of

[ATR] aircraft so as to increase MAS's US dollar revenue," the report states.

More disturbing is ATR's allegation that MAS-appointed RAC management personnel physically

threatened ATR representatives sent to Cambodia to try to negotiate a solution to

the lease payment stoppage.

The court documents include an affidavit written by Christophe Clarenc, Sales Director

for ATR's Marketing Department, in which he alleges MAS personnel implied that his

efforts to recoup ATR's losses in Cambodia would result in personal physical harm.

"[MAS personnel] insisted on returning one ATR aircraft without paying any cost

or reducing RAC's debt. They showed me an article in a newspaper of a European businessman

who had been murdered in Phnom Penh. I was told to be careful. The purpose of showing

me the article was to threaten me to comply with their demands. I was concerned and

angered by this threat. I moved hotel and made a complaint to the French Embassy."

Malaysian Airlines personnel in Phnom Penh denied knowledge of the lawsuit. Malaysian

Embassy Commercial Officer Nekmet Ismail declined to comment on the matter.

The lawsuit could prove the death blow for RAC, which has been in a crisis mode since

Aug 1, 2000.

On that day Hun Sen sacked RAC Chairman Pan Chantra following an incident in which

an RAC plane waiting to take King Norodom Sihanouk to Beijing began inexplicably

gushing jet fuel out onto the tarmac at the feet of the government delegation on

hand for the King's departure. Acting RAC Chairman Sok An is said to be too busy

to give the ailing airline the attention it requires.