Wednesday, July 20, 2011

Coming to Closure on Taiwan's Lafayette Frigate Case

After 10 years, French courts have ruled in Taiwan's favor on a case linked with the 1991 sale of six LAFAYETTE frigates to the Republic of China (ROC) Navy. The contract explicitly restricted payment of commissions, which French parties seemingly ignored.

The damage caused by this case transcended the tragic death of ROC Navy (ROCN) Captain Yin Chin-feng, loss to Taiwanese taxpayers due to inflated pricing, and wrongful charges against a number of senior ROCN officers. The most lasting effect is what is now known as the "Lafayette Syndrome," a deep-seated aversion within the Ministry of National Defense (MND), and especially the Navy, to assume risk in procurement of modern weapon systems.

Regardless, hats off to the ROCN and MND for clearing the decks on the this issue. Too bad those funds couldn't be applied as seed funding to jump start the submarine program! To make that happen, the Obama administration would need the melt the frozen Congressional notification for the submarine design study, which has been held back at the State Department since late 2007/early 2008

More to come on these issues...

Thales Pays Up In Taiwan Frigate Battle

TAIPEI, Taiwan, July 15 (UPI) -- French defense company Thales ended a decade-long legal battle when it wired a court-ordered fine of $875 million into a Taiwan government bank account, the country's Central News Agency reported.

Earlier this month a Paris Court of Appeals ruling confirmed the May 2010 decision of the International Chamber of Commerce's International Court of Arbitration, which ruled in Taiwan's favor over a major frigate contract.

The case involves a 1991 $2.5 billion agreement that Thales made with Taiwan for providing six Lafayette-class frigates.

Taiwan's Ministry of National Defense took the case to the ICC in 2001 for resolution.

The Paris Court of Appeals confirmed the 2010 Court of Arbitration ruling that Thales had violated Article 18 of the Lafayette contract that prohibited payments of commissions to intermediaries.

Immediately after the ruling, a Ministry of Defense official, speaking on condition of anonymity, said Thales must pay arbitration and litigation expenses, a CNA report said.

"We will continue resorting to legal procedures and require the firm to fulfill its obligation," said the official.

Thales, also after the ruling, said in a statement that it had made provisions to pay its 27.46 percent share of the penalty of about $247 million, with the French government responsible for the remainder.

Thales now has paid up, Ministry of National Defense spokesman Lo Shao-ho said. The money, which is in an account owned by the MND, soon will be transferred to the state treasury.

Also, the "commercial dispute" won't affect military cooperation between France and Taiwan, he said.

In the deal, in which the French government played a crucial role, Taiwan's navy bought six Lafayette-class frigates from Thomson-CSF, which became Thales, and the state-owned shipbuilder DCN for $460 million each, nearly double the original budget.

Concern over the deal began in December 1993 when the body of the leader of procurement for the Taiwanese navy, Capt. Yin Ching-feng, was found floating in the sea off the coast of Taiwan. A corruption investigation was started and eventually six former naval officers, including a vice admiral, were indicted in connection with the affair.

In 2001, the Taiwanese authorities filed a complaint alleging that the anti-corruption clauses in the contract had been breached.

French prosecutors investigated claims that bribes were paid in the deal but they were unable to say who might have benefited.

Millions of dollars in illegal kickbacks are believed to be in frozen Swiss bank accounts held by Thomson-CSF's agent at the time, Andrew Wang, who fled Taiwan after the discovery of Yin's body.

Yin is believed to have been ready to blow the whistle on colleagues who allegedly received kickbacks from the Lafayette deal, the CNA report said.

Wang also remains wanted in Taiwan on a charge of killing Yin.

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