Runway Wrangling Thailand Pledges to Settle Dispute Over Prince's Jet

Thailand has signaled it may settle a dispute over outstanding debts in a case that prompted a German court to impound the personal jet of the Thai crown prince. A German insolvency lawyer showed resourcefulness and cunning in his curious fight with the Thai government -- and may end up getting his way.

The Boeing 737 jet belonging to the Thai Crown Prince remains impounded at the Munich airport for the time being, but there are signs of movement in the bizarre dispute  between a German insolvency administrator and the Thai government over an outstanding debt.

The Thai government said this week it was considering issuing a guarantee to pay the entire sum of €36 million ($51 million) demanded by the administrator of insolvent German construction firm Walter Bau, which made losses on a highway project in Thailand as a result of a breach of contract by the Thai government.

The administrator, Werner Schneider, obtained a court order last month to sequester the jet while Thai Prince Maha Vajiralongkorn was vacationing in Germany.

The case has led to intense diplomatic wrangling and could upset relations between Thailand and Germany. The Thai government initially argued that the jet should be released because it was the personal property of the prince and didn't belong to the Thai state.

A German court is due to rule in September whether the impounding was lawful. If it decides that the prince's jet is indeed his private property, the plane will be released. In the meantime, he would have to offer a €20 million guarantee for its release.

Bangkok initially refused to make such a payment. In a fresh twist, the prince had declared on Monday he would pay the €20 million himself. Then, on Tuesday, the government said the prince should not be burdened with the problem and that it would settle the dispute.

According to Thai newspaper reports on Monday, outgoing Prime Minister Abhisit Vejjajiva said the affair should not be allowed to hurt bilateral ties.

Outstanding Debt

Walter Bau filed for insolvency in 2005. When Schneider went through its books, he found a contract with the Thai government. The firm had acquired a stake in a Thai company building a toll road between Bangkok's old airport and the city center. But the project was a commercial failure because the Thai government had, in breach of its contractual obligations, built a second, toll-free road, which meant that fewer people than expected used the toll road.

Schneider calculated that the company had lost €100 million as a result of the deal. An international arbitration court ruled in 2009 that Thailand should pay Walter Bau €30 million. But the government hasn't paid up.

Schneider flew to Bangkok a number of times over the last two years to try to get the money. He met officials in dark suits and officers in gold-braided uniforms who were always friendly, but non-committal. He sent more than a dozen reminder letters. By early 2011, Schneider had had enough. He did what any insolvency administrator does when a debtor won't pay up -- he prepared a seizure of assets and began to scrutinize Thailand's valuable fleet of state-owned passenger jets.

In early May, an anonymous source in Bangkok sent him a fax containing the flight plan for a VIP jet complete with registration, flight number and name of the pilot. The aircraft was due to arrive in Munich on May 21 from Bangkok and be stationed there until August 8. The Boeing 737 was due to go on various flights from Munich, to the airport of Memmingen just 100 kilometers away, to St. Petersburg and to London. But the destinations were irrelevant. The crown prince, a trained pilot and marshal in the royal Thai air force, wanted to fly around a bit in European airspace to stay in practice.

Verifying the Tip-Off

Accompanied by a sizeable entourage, the prince arrived in Munich on May 23 as a first class passenger on board a Thai Airways jet, two days after his personal jet had touched down.

He took up residence in a wing of the luxury Kempinski Hotel at Munich airport. Whenever the prince desired to fly, a black Mercedes S class limousine would draw up in front of the separate hotel entrance and would chauffeur him directly to the taxiing area in the southwest part of the airport where his Boeing 737 was waiting.

Schneider had hired a student to sit on a hill near the airport and make a note of the prince's flight movements. The future monarch adhered precisely to the flight plan that Schneider had received from his Bangkok source.

All Schneider needed now was a court order.

The first attempt failed. The Munich senior district court decided that it had no jurisdiction in the case. The prince, the court said, wore a uniform and was immune from prosecution. Schneider then took the case to a court in Berlin, and was successful.

Prince Had Second Jet Flown Out

Three weeks ago, court bailiff Günther Dersch visited the Munich airport authority, presented a court order and said he needed to impound a plane. Escorted by two police officers, he summoned a mobile gangway and stuck a sequestration notice on all the plane's doors. He also stuck an A4-sized notice with an official stamp next to the front exit. "It's attached," he yelled into his mobile phone. Schneider, waiting on the other end of the line, was satisfied.

But Crown Prince Maha wasn't grounded for long. A week after his jet was impounded he had a second personal jet flown out from Bangkok. On July 25 he took off from Munich, probably with that jet. The impounded Boeing has been hauled into a hangar.

While the prince went strawberry-picking in Bavaria, German and Thai diplomats got in a stew over the case. The Thai foreign minister even visited Berlin at one point to demand that the jet be released. He was told that the German government was powerless to interfere in court matters.

But the German government may end up having to get involved, and may even have to pay compensation itself to Walter Bau. A recent report by an expert in insolvency law, Professor Christoph Paulus of Berlin's Humboldt University, concluded that the German government should be doing everything in its power to make Thailand pay its debt to the insolvent construction firm. That includes "curtailing trade relations" or the "freezing of foreign assets."

If the government takes no action, "a compensation claim is feasible," wrote Professor Paulus.

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