Categories  Contracts Policy

Thales To Pay Record Bribes Fine

The French state and defense electronics group Thales will have to pay a record fine of 630 million euros ($920.2 million) for bribes in the 1991 sale of frigates to Taiwan, a court ruled on Thursday. Defense Minister Gerard Longuet said that the government had agreed to a request from Thales that the decision, which upholds a lower court’s ruling, not be appealed to keep the long-running legal battle from tarnishing the defense contractor’s image. The case has centered on allegations that bribes were paid to win a deal to sell the Taiwanese navy six Lafayette-class frigates built by French industrial group Thomson-CSF, which has since become Thales, and the state-owned naval shipyard DCN. The Paris Appeals Court confirmed the 2010 decision of a arbitration court imposing a fine of more than $600 million, which must be paid to the Taiwanese state. The cost of interest raised the total to $819 million, or 630 million euros—making it the biggest ever in a French corruption case.

The dollar-to-euro conversion rate is based on exchange rates in 2010, when the arbitration was decided. The French state’s share of the fine is 460 million euros and Thale will have to pay 170 million, which the company said would have a negligible impact on its financial results as the litigation had already been fully provisioned for in previous years. Defense Minister Longuet told a news conference: “There won’t be an appeal at the request of Thales which considers that it would not be good publicity for it.”

The ruling brings to a close a corruption case which has entangled numerous politicians and corporate chiefs over the years, although many questions still remain unanswered. France’s conservative Prime Minister Francois Fillon pinned blame for the case on the Socialist government in power at the time of the sale under former President Francois Mitterand.

“The public finances must bear the heavy consequences today of a decision in 1991 to pay commissions going against the terms of the contract,” he said in a statement. Fillon said that an amendment would be made in a budget update under discussion in the parliament to cover the fine.

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