France ordered to repay Taiwan banned commissions

AP News
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Posted: Jun 09, 2011 4:47 PM
France ordered to repay Taiwan banned commissions

A Paris appeals court has ordered France and French defense company Thales SA to pay back euro630 million (about $913 million) to Taiwan in a long-standing dispute over bribes in a 1991 frigate sale, the French prime minister's office said Thursday.

The ruling brings to a close a two-decade-old dispute over enormous bribes that were specifically forbidden in the contract but became an integral part of the transaction to sell Taiwan six Lafayette frigates.

The Taiwanese navy bought the frigates from French firm Thomson-CSF _ which has since changed its name to Thales SA _ as well as state-owned shipbuilders. The French government guaranteed the contract.

The contract said that if any commissions to intermediaries were uncovered that sum would have to be turned over to Taiwan. Taiwan's government has said that the military paid $460 million _ nearly double the original budget _ for each of the six frigates.

The case has bedeviled a series of French governments, but Prime Minister Francois Fillon placed the blame on the Socialist government of President Francois Mitterrand, in power when the contract was signed.

The public coffers "must therefore support today the heavy consequences of the decision taken in 1991 to pay commission contrary to the letter of the contract," a statement from Fillon's office said.

"This episode ... weighs heavily on the image of our naval arms exporting industry," the Defense Ministry said.

Fillon's office said the state's part in the payback amounts to some euro460 million. Thales said in a statement it will pay the remaining 27.46 percent, or about euro170 million. Provisions have already been made for the fine so won't reflect on the company's financial results, Thales said.

However, the French government hopes to recover at least some of the funds, according to the prime minister's statement. It said France hopes to obtain "at least a partial reimbursement" should Taiwanese authorities manage to get "all or part of the commissions paid out" from the intermediaries.