French arms firms fined 227 mln euros in Taiwan dispute

PARIS – 26 October 2017: Dassault Aviation and two other French aerospace companies said on Wednesday they had been fined a combined 227 million euros ($268 million) in Taiwan, settling what sources familiar with the case have described as a 25-year-old dispute over an arms sale.

Warplane maker Dassault said it had been fined 134 million euros, while radar supplier Thales said it was due to pay 64 million and engine maker Safran said it accounted for 29 million.

"The industrial companies are considering the steps to be taken following this decision," the companies said in separate statements.

The total fine corresponds to the amount the Taiwan state had been seeking in arbitration over the allegedly wrongful use of commissions in the sale of 60 Mirage fighters to the island in 1992.

It follows a then-record bribes fine of 630 million euros imposed by a French court on the French government and Thales in 2011 over the use of commissions to sell frigates to Taiwan in 1991, a deal that led to a major kickbacks scandal in France.

Dassault said the new case dated back to 1992 and two people close to the matter said it concerned the sale of Mirage jets.

None of the three companies made provisions for the fines.

Taiwan pursued the three companies for $260 million in 2002 but dropped the case a year later, only to relaunch its claim for 226 million euros, claiming this represented the use of commissions that had been banned in the fighter contract.

The arms deals with Taiwan led to a chill for several years in relations between France and China, which has asserted sovereignty over Taiwan since 1949.

China warned Taiwan last month it would "reap the consequences" of promoting formal independence. Taiwan said it was a reality that the Republic of China, the island's formal name, was a sovereign country.

The scandal around French arms sales to Taiwan in the early 1990s was one of a series of cases that underpinned accusations of widespread corruption during the final years of the late French President Francois Mitterrand.

It engulfed senior executives at the former Elf oil company and lay at the heart of the tortuous "Clearstream" affair a decade ago in which a prime minister was accused of plotting to smear his rival Nicolas Sarkozy, who later became president.

The fog over France's deals with Taiwan is clearing just as the French aerospace industry faces new turmoil over the use of sales agents at planemaker Airbus, which says it could have to pay significant fines amid UK and French investigations.

Airbus says it shared its own findings on suspect paperwork with UK authorities, triggering the probes, but is said to be shaken internally by the affair, which has placed growing pressure on Chief Executive Tom Enders.

Legal experts estimate Airbus could eventually face fines of several billion euros, eclipsing the financial fallout from France's Taiwan arms deals or a bribery fine of 687 million pounds ($911 million) imposed on Rolls-Royce in Britain earlier this year.