France faces huge fine over scandalous Lafayette deal with Taiwan

Central News Agency

2009/05/07 22:55:40

By Tsai Hsiao-ying and Sofia Wu

Paris, May 7 (CNA) The French government might have to pay Taiwan up to 1 billion euros (US$1.33 billion) in fines over the scandalous Lafayette frigate deal struck in the early 1990s, the French daily Le Parisien reported Thursday.

In addition, Thales -- the French company that sold six Lafayette-class frigates to Taiwan in 1991 under its previous name of Thomson-CSF -- might also be required to pay Taiwan US$536.5 million in damages over the US$2.5 billion deal, according to the paper.

The report said that international commercial closed-door arbitration over the case has been concluded, with attorneys from both sides attending the last hearing in March, and that the three arbitration judges handling the case are expected to come up with a final report and arbitration within three to four months.

It added that France will probably be slapped with record-setting fines and that the French government is bracing for a worst-case scenario. A former official at the French prime minister's office was quoted as saying that the French government has done its best to procrastinate over the arbitration process while trying to have Thales pay the full amount of the fines.

The main reason that France might lose the arbitration lies in Article 18 of the Lafayette contract, which prohibited payment of commission.

However, it turned out that Andrew Wang, a Taiwanese arms broker, received US$495 million in unlawful kickbacks on the deal, money that has been frozen in a Swiss bank account.

According to the Le Parisien report, the office of the French prime minister held a closed-door cross-agency meeting every two months that brought together officials from finance, judicial and defense departments to discuss strategies to cope with the case.

The paper said that France tried to lobby Taiwan to negotiate a deal and in 2006, tried but failed to hold government-to-government negotiations to sort out a settlement that could reduce the amount it would have to pay.

According to the paper, Taiwan refused to agree to the negotiations because it regards the case as related to the country's national honor.

Taiwan demanded the repayment of US$520 million of kickbacks, including the US$495 million paid to Wang and US$25 million paid to Alfred Sirven, a former vice chairman of the French oil firm Elf-Aquitaine. Sirven was known to play the role of money laundering and allocation of the kickbacks.

Moreover, Taiwan has also demanded payment of 17 year's-worth of interest on the money, bringing the total amount to around US$2 billion.

The French paper said that if the arbitration court rules fully in compliance with Taiwan's request, the French government and Thales will have to pay the full amount in accordance with a 72 percent: 28 percent ratio stipulated in the original contract.

However, the paper also reported that the French government and the defense contractor expect the fines set by the arbitration judges to be lower than the figure demanded by Taiwan.

Andrew Wang, the French arms supplier Thompson-CSF's agent in Taiwan, fled the country following the death of Navy Capt. 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 Taiwan authorities on a murder charge since September 2000.

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