France told to pay Taiwan over arms deal

International court orders Paris and arms firm to compensate island for frigate sale

Lawrence Chung in Taipei
05 May 2010

An international court has ordered the French government and defence electronics group Thales to pay US$830 million in compensation to Taiwan over the sale of six Lafayette frigates in 1991.

The scandal, linked to the multiple deaths in Taiwan and France, reads like a detective thriller spiced up with a complex maze of bribery, kickbacks and horse-trading and implicating high-ranking officials from Taiwan, France and the mainland.

The ruling, issued by the International Chamber of Commerce’s International Court of Arbitration on Monday, could help draw a line under one of the most scandalous arms deals in modern history.

Under the ruling, Thales, formerly known as Thomson-CSF, will have to pay 27 per cent of the compensation and the French government the rest. This includes interest and arbitration and lawyers’ fees.

The court said that when Taiwan signed the warship deal with Thomson-CSF, which worked with French state-owned shipbuilder DCN to win the US$2.8 billion contract from Taipei, an article in the deal forbade the use of brokers or the paying of commissions. The court later found proof of the involvement of a Taiwanese middleman, identified as Andrew Wang Chuan-pu, who served as an agent for Thomson-CSF to facilitate the deal.

“We welcome such a ruling as the case affects our national interests and the military’s reputation,” Taiwan’s vice-defence minister, Chao Shih-chang, said at a news conference in Taipei yesterday.

Thales said that it would fight the ruling because it “disputes the very grounds of this decision”, prompting Chao to say that Taiwan would continue to hire lawyers and pursue legal proceedings to make Thales comply with the arbitration ruling.

Lo Chih-chiang, spokesman for Taiwanese President Ma Ying-jeou, said Ma was pleased by the ruling. “The president also expressed his support for the defence ministry over its persistent stand in refusing to reach a compromise with the French company out of court,” Lo said.

Taiwanese media said the French authorities, worried that they might lose the case, filed by the Taiwanese navy in 2001, had tried to seek a compromise with Taiwan.

The reports said that in 2007, while Chen Shui-bian was Taiwan’s president, France even offered to sell arms to Taiwan in lieu of any compensation.

The reports said the premature exposure of the plan led the Kuomintang to insist that the defence ministry not accept the bargain.

However, Chao said yesterday that he had never heard of such a proposal.

Prosecutor-general Huang Shih-ming said yesterday he would ask Swiss authorities to continue to freeze hundreds of millions of US dollars in an alleged slush fund held in Swiss bank accounts by Wang, the middleman.

Wang fled Taiwan shortly after navy captain Yin Ching-feng, who was about to blow the whistle on kickbacks and bribery in the deal, was found dead in December 1993. Taiwanese prosecutors officially charged Wang with murder and bribery in 2000, in his absence.

Swiss authorities have frozen about US$900 million in Wang’s bank accounts since 2001, when the Taiwanese navy filed for arbitration. The amount was said to have been reduced to US$700 million in March last year due to depreciation and the financial crisis, according to Taiwanese investigators sent to discuss the possible return of the funds with Swiss authorities.

Taiwanese prosecutors said it would be difficult for the Swiss authorities to return the funds before Wang was sentenced.

Under Taiwanese law, a court cannot order the confiscation of suspected illicit gains until the person charged has been convicted and sentenced.

Prosecutor Chiu Chih-hung said that Ministry of Justice was considering whether to revise the law to allow the courts to issue such rulings after a defendant or suspect had been on the run for six months.

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