MercoPress. South Atlantic News Agency

Sale of French Frigates to Taiwan Exposes 591 Million USD in “Commissions”

Taiwanese President Ma Ying-jeou

Taiwanese President Ma Ying-jeou and Premier Wu Den-yih praised the decision this week by an international court of arbitration to force French defence group Thales to pay Taiwan more than 591 million US dollars as a sanction for the payment of commissions in the purchase of Lafayette frigates from France.

The sale of the six frigates by Thales Group (EPA:HO) precursor Thomson-CSF for 2.8 billion USD exploded into the news with the mysterious murder of Navy Captain Yin Ching-feng in late 1993. The officer was believed to have been about to expose the payment of bribes in the frigate deal.

His death became one of Taiwan's most prominent unsolved murders of the 1990s. “Thales violated the contract by paying commissions,” Vice Defence Minister Chao Shih-chang told a news conference in Taipei about the verdict of the International Court of Arbitration under the International Chamber of Commerce.

Defence officials denied newspaper reports that Taiwan had considered allowing France to pay compensation with new weapons systems or other products.

Thales was expected to be forced to pay a total amount ranging around 861 million USD, including interest, litigation fees and other expenses, an attorney for the military said. The verdict was the result of a case filed by the Taiwanese Navy in 2001. The main reason for the company's defeat in the arbitration case was the fact that it violated the Lafayette contract's Article 18, which banned the payment of commissions, reports said.

Taiwan President Ma supported the earlier decision of the Ministry of National Defence not to accept a mediated solution, presidential spokesman Lo Chih-chiang said. Clean administration was extremely important to Ma, Lo said.

Premier Wu described the award as a shot in the arm for Taiwan's reputation. “If the compensation can be successfully paid, it will help the country's financial situation and even more important, restore the country's reputation,” he said.

Opposition Democratic Progressive Party lawmaker Lee Chun-yee said the government should immediately publish the list with the names of those who accepted payments from Thomson-CSF and pursue the case overseas and inside the country.

Government critics have accused top military officers of involvement in the Lafayette scandal. Former Premier Hau Pei-tsun, who has often been named because he apparently made the decision to buy frigates from France instead of South Korea as earlier planned, has denied any involvement.

Taiwan wants the repayment of 520 USD million in kickbacks, including 495 million paid to Andrew Wang, Thomson-CSF's agent in Taiwan at the time. Wang fled the country after Yin's death and has been wanted on a murder charge in Taiwan since 2000. He is widely believed to be staying in North America or Europe.

Taiwan State Prosecutor-General Huang Shih-ming said he would ask Switzerland to continue its freeze of an estimated 700 million USD held by Wang in bank accounts. The Swiss has reportedly promised it would block the funds until Taiwanese courts reached a final decision on whether Wang was guilty of corruption.

Thales, however, said it would appeal the arbitration verdict. The company said it was only responsible for 27.5% of the sum while the French government should pay the balance.

Taiwan prosecutors charged six former navy officers, including retired Vice Admiral Lei Hsueh-ming, with corruption in 2001. The Taipei District Court is expected to issue a verdict in their cases on June 25. Former Colonel Kuo Li-heng and a brother admitted accepting more than US$20 million in kickbacks and agreed to the return of the funds from Swiss bank accounts.