France to Pay Taiwan Penalty Over Warship Deal

By on Monday, June 13th, 2011

The French government and defense giant Thales said Thursday they will pay Taiwan a court-ordered fine of 630 million euros (US$913 million) after losing an appeal in a case involving bribes to clinch a Lafayette-class frigate deal with Taiwan in the 1990s.

The ruling brings to an end to a nearly two-decade dispute between France and Taiwan over commissions paid on the US$2.8 billion deal.

The French government said it had agreed with a request by Thales, the French contractor that sold six Lafayette frigates to Taiwan in 1991 when it was still known as Thomson-CSF, not to appeal the ruling by the Paris Court of Appeals.

Thales was concerned that continuing the long-running legal battle would not be good for the defense contractor’s image and hurt future business prospects, according to wire service reports.

An international court of arbitration ruled in April 2010 that the French contractor had to pay Taiwan 630 million euros, including a fine of roughly 433 million euros plus interest costs, litigation fees and other related expenses, for paying commissions in violation of the contract.

Because the French government guaranteed the contract, known as “Bravo,” it was to pay 72.5 percent of the penalty, or 460 million euros, with Thales to pay the other 170 million euros.

The French government said Thursday that an emergency amendment to its operating budget would have to be sent to the parliament in order to pay the fine and settle the issue.

Thales said in a statement that it had already set aside provisions for its 27.46 percent share of the fine and did not expect that the ruling would hurt the company’s financial results.

The French government also promised on Thursday to help Taiwan reclaim illegal commissions paid to intermediaries, but it remains to be seen what kind of assistance it can provide.

French authorities previously classified related documents as national secrets, making it impossible for judicial authorities to track down the destinations of the illegal payments and forcing the presiding judge to close the case in 2008.

Millions of dollars of commissions are believed to be in Swiss bank accounts held by Thomson-CSF’s agent at the time, Andrew Wang, and have become the priority target of Taiwan’s drive to get back illicit commissions paid in the deal.

The funds in Wang’s account have remained frozen, however, pending ongoing litigation.

Wang fled Taiwan following the death of Navy Captain Yin Ching-feng under suspicious circumstances in late 1993. Yin is believed to have been poised to blow the whistle on colleagues who had allegedly received kickbacks from the Lafayette deal. Wang has been wanted by Taiwanese authorities on a murder charge since September 2000.

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