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Taiwan happy with French court ruling on frigate deal penalty

ROC Central News Agency

2011/06/10 20:23:32

By Chen Yi-wei, Lo Yuan-shao and Sofia Wu

Taipei, June 10 (CNA) The Ministry of National Defense (MND) said Friday that it is pleased with a French court ruling that rejected an appeal by the French defense giant Thales against payment of damages to Taiwan for a scandal-plagued warship deal struck in 1991.

"We feel gratified and relieved by the result," the MND said in a statement, adding that it will continue to defend the country's interests by following the legal process to ensure that Thales fulfills the requirements of the court ruling.

The ministry issued the statement a day after the French government and Thales announced that they will pay a court-ordered fine of 630 million euros (US$913 million) after losing an appeal against the payment ruled by an international court of arbitration in May 2010.

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

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

The MND said in the statement that the dispute simply arose from the French contractor's violation of a contract provision that prohibited the payment of bribes or commissions in the deal.

To defend Taiwan's national interests, the MND went on, it authorized Navy Command Headquarters to file an application with the International Court of Arbitration under the International Chamber of Commerce (ICC) on Aug. 22, 2001 to demand damages from the French contractor.

On May 3, 2010, the ICC arbitration court ruled that Thales had to pay a penalty of US$591 million plus interest, litigation fees and other related expenses for violating Article 18 of the contract, known as "Bravo" in France, that requires that there should be no payment of commissions.

Because the French government guaranteed the contract, it was to pay 72.5 percent of the penalty, with Thales to pay the remaining portion.

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 that it did not expect the ruling to hurt the company's finances.

The French government also promised that same day to help Taiwan reclaim illegal commissions paid to intermediaries, but it remains to be seen what kind of assistance it will actually be able to provide.

The French authorities had previously classified documents relating to the Lafayette deal as national secrets, making it impossible for the judicial authorities to trace the destinations of the illegal payments, forcing the presiding judge to eventually close the case in 2008.

Millions of dollars in kickbacks 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 the money.

The funds in Wang's accounts have remained frozen, however, pending the 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 been receiving kickbacks from the frigate deal. Wang has been wanted by the Taiwanese authorities on a murder charge since September 2000.

On Friday, Lee Meng-jung, a member of the team of attorneys who represented the MND in the ICC arbitration court proceedings, said the team will now act to extract the payment.

Meanwhile, Huang Shih-ming, Taiwan's top prosecutor, who is currently visiting China, said in a telephone interview with CNA earlier in the day that in addition to claiming damages, Taiwan's judicial authorities will continue with efforts to retrieve the illegal commissions through legal assistance from various countries, including Switzerland and France.

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