Long-standing Eryx missile dispute comes to an end

September 06, 2009, Sunday/ 13:31:00
The Geneva-based International Court of Arbitration of the International Chamber of Commerce (ICC) issued its ruling in late July over a French complaint concerning Turkey's cancellation of a 404 million euro missile contract in 2004. The court verdict is not yet available to the public, but the Defense Ministry said in a statement on Wednesday that the court ruling was in Turkey's favor. Sunday's Zaman learned that the French company MBDA, part of the EADS European consortium of defense companies, was not unhappy about the court ruling.

The court is believed to have ruled that MBDA will pay Turkey around 75 million euros in compensation.

Turkey's Undersecretariat for the Defense Industry (SSM) demanded that MBDA pay it 500 million euros, citing operational losses incurred following the non-usage of missiles as well as 282.6 million euros paid in advance to MBDA during the manufacturing process of the Eryx short-range anti-tank missiles as compensation from the French company.

MBDA claimed 25 million euros from Turkey in return for its loss of credibility due to the SSM's decision to cancel the Eryx missile contract. MBDA also sought 450 million euros from Turkey. This amount is higher than the original contract amount of about FF 2.7 billion (around 404 million euros), the SSM sources said. Although Sunday's Zaman has learned that MBDA is not unhappy about the court ruling, it is unclear how much the court ruled Turkey must pay the French firm in compensation. The ICC, in an interim decision it made in February of last year, urged both sides to be realistic about their compensation claims.

 Meanwhile, the Defense Ministry, in its Sept. 2 statement, denied press reports that the Geneva court ruled against Turkey. But the statement did not give details about the court ruling.

 It recalled that the SSM cancelled the contract with MBDA in 2004 when the French company failed to meet the terms of its contract in a timely manner.

 MBDA in return took Turkey to the arbitration court, challenging the Turkish argument.

 The Defense Ministry and Aerospatiale, which later became part of MBDA, signed a contract in 1998 worth about FF 2.7 billion (403 million euros) to replace the Turkish Land Forces Command's outdated 3.5-inch (89 millimeter) rocket launchers as well as RPG-7s seized from outlawed Kurdistan Workers' Party (PKK) terrorists. The deal aimed to allow Turkey to build a total of 19,200 missiles and 1,600 launchers under license over the course of 10 years. At the center of the dispute have been Turkish complaints over failures observed during the test trials of Eryx missiles by the Land Forces Command.

 The missiles passed tests carried out by the French defense procurement agency La délégation générale pour l'armement (DGA), with Turkish observers. However, during training exercises conducted by the Land Forces Command with the roughly 3,900 delivered systems, the missiles reportedly failed to meet accuracy targets of 72 percent. Though the technical problems on the missiles were reportedly later removed by the MBDA, it was believed that in reality that the Land Forces Command did not want to continue with the project because it no longer met operational requirements.

 The Turkish Armed Forces (TSK) decided in 2004 to abolish four brigades across Turkey. Military sources said that with the realization of a plan to make units smaller, the need for short-range missiles has diminished. “Otherwise the SSM could have been more flexible with MBDA and could have found common ground on which to resolve the dispute peacefully as it has done in other projects,” said a local industrialist.

 MBDA has allegedly used the Turkish Land Forces Command's argument that Eryx missiles were not needed any more at the ICC, citing some evidence that has confirmed that the Turkish army did not want the production of Eryx missiles to continue.

 The Ministry of Defense, which was accused at the time of signing the contract with the French company as a sole source instead of opening a tender, handed over the execution of the project to the SSM in 2002.

 The deal was also signed secretly in July 2008 by a group of senior Turkish generals visiting Paris in the midst of a Turkish decision to freeze military ties with France. This was in reaction to the French parliament's debate over Armenian genocide allegations that Turkey denies. Meanwhile, Turkish defense industry sources also criticized the Turkish signatories of the Eryx project for already paying 75 percent of the fee to the company though there had already been delays in the project at the time.

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