Taiwan’s renewed probe into Mirage deal could lead to action against France

Lawmakers demand action as kickbacks scandal continues to unfold

Lawrence Chung in Taipei
06 May 2010

Fresh from a victory in the Lafayette frigates compensation case, Taiwan will now launch an investigation into a deal to buy Mirage fighter jets.

The Taiwanese air force said yesterday that it would start to collect evidence for possible lawsuits against France, dropping another bombshell in an erupting arms deal scandal.

“We will do what we need to do in line with whatever evidence we have accumulated, and stand firm on our position,” said an air force spokesman.

Taipei has long suspected that it had been ripped off by French arms merchants and shady middlemen in the deal to buy Mirage 2000-5E jets – similar to what happened in the Lafayette scandal.

Taiwanese lawmakers lashed out at the military yesterday for its failure to investigate whether the 1993 Mirage deal – in which prices were 50 per cent higher than the market price – also involved kickbacks and bribery, as was the case in the Lafayette scandal.

The French government and French defence giant Thales were ordered to pay US$830 million to Taiwan’s navy in compensation over the 1991 sales of six Lafayette frigates worth more than US$2.8 billion.

In a ruling on Monday, the Paris-based International Court of Arbitration, under the International Chamber of Commerce, said the amount was to make up for unauthorised commissions paid to help Thomson-CSF, now known as Thales, win the controversial deal.

According to the arbitration court, Thomson-CSF, which teamed with French state-owned shipbuilder DCN to win the deal, had paid some US$500 million to the Taiwanese arms dealer, identified as Andrew Wang Chuan-pu, to broker the deal.

But an article in the contract specifically forbade the use of brokers or the paying of commissions.

Taiwan’s navy filed for arbitration in 2001, in line with a provision in the contract that covers such disputes. Both sides were required to seek a settlement at the International Court of Arbitration – a common practice in international trade deals.

In a news conference yesterday, Chang Hsien-yao, a legislator from the ruling Kuomintang, said the air force must follow the methods of the navy in pushing for compensation from France over the Mirage deal, which also listed the arbitration court as the sole agency to settle any trade disputes.

“In the purchase of the Mirage jetfighters, the price we paid was obviously much higher than what other countries had been paying,” Chang said.

Taiwan bought 60 planes along with a number of Mica and other missiles at a cost of NT$167.6 billion or US$5.2 billion – much higher than the US$2.8 billion Lafayette deal. Some of the Mirage fighters later reported engine problems. Last month, France had to give Taiwan more than US$3 million worth of parts and maintenance service to compensate for the problem.

KMT legislator Lee Ching-hua demanded that the air force and the judicial authorities swiftly start a probe to see if kickbacks and corruption were involved in the warplane deal.

Taiwan’s Control Yuan, the government watchdog, formed a task force in 2001 to investigate whether there were any irregularities in the air force deal, but though it concluded that both the price of the deal and its payment method were highly unreasonable, it could not hold any party to account.

KMT legislator Lin Yu-fang said the Control Yuan’s finding showed that the military had unreasonably agreed to pay 40 per cent of the total price to France when the deal was signed, and 20 per cent a year later, followed by 10 per cent two years later and the rest upon delivery. “No country in the world would be willing to accept such an unreasonable demand,” he said, alleging the deal was not entirely above board.

In the Lafayette deal, the arbitration court’s investigation showed that money other than commissions was transferred to the Swiss bank accounts of Wang, the middleman.

Swiss authorities have frozen millions of dollars in a number of Wang’s accounts since Taiwan filed for arbitration in 2001.

Taipei sent prosecutors to Geneva last year to try to recover the money. They found there was US$900 million in Wang’s account, more than the US$500 million in commission sent by the French side.

Chang said the French media, quoting French investigators, suspected that part of the US$900 million fund was commission for Wang, who was also involved in the Mirage deal.

Meanwhile, Thales has vowed to initiate all available actions against the ruling, but the Taiwanese military said it would continue to pursue legal action to make France pay the compensation.

Legal experts in Taiwan said Thales could seek the French Supreme Court action to overturn the ruling, but the possibility of nullification is not high, given that the contract clearly stated that no commission or middlemen could be involved in the deal.

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