Turkey blacklists European missile maker

Fri 30 October 2009 12:50 GMT | 12:50 Local Time

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Turkey's procurement office has effectively blacklisted European missile manufacturer MBDA over an international legal dispute about a now-defunct deal for nearly 19,000 Eryx anti-tank missiles worth 404 million euros.

"We told them we would not consider any new business with them before the dispute has been settled in a satisfactory way,” Murad Bayar, head of the Undersecretariat for Defense Industries, told the Hürriyet Daily News & Economic Review. As a result, "MBDA has failed to participate in the competition for our program for air defense systems,” Bayar said.

Turkey has two air defense programs. U.S., Russian and Chinese companies are competing for the long- and medium-range anti-missile air defense deal, worth billions of dollars. Several international companies are also eyeing the less expensive short-range program.

On the Eryx dispute, an international arbitration court ruling provided Turkey with some compensation, which Bayar described as fair. "At this stage of the dispute, we have been reimbursed for most of our financial damages,” he said. “I think that was a fair verdict.”

But Bayar said MBDA then appealed the ruling in a federal court in Switzerland on procedural grounds. A European official also confirmed that MBDA went to the Swiss federal court.

Court verdict

The dispute was initially taken to the Geneva-based International Court of Arbitration of the International Chamber of Commerce, where Turkey demanded reimbursement of 160 million euros.

Turkey said it had paid 280 million euros for 3,700 missiles delivered by MBDA, but that those missiles were worth only 120 million euros, according to Bayar. Turkey canceled the program in 2004, citing major delays in deliveries and subsequent operational losses.

The court ruled the annulment legally valid, Bayar said. MBDA also claimed its investment in a production plant in Turkey should be deducted from the reimbursement, he said.

The court partly agreed with the demand and finally ruled that MBDA must pay back 74 million euros for compensation and 35 million euros in interest accrued for the late payment, Bayar said.

The court’s verdict was not made public. Bayar said that his Undersecretariat for Defense Industries would like to have an amicable solution, but without a settlement, MBDA bids for Turkish procurement programs would not be welcomed.

Under the troubled anti-tank missiles program, the Turkish Defense Ministry and French Aerospatiale, the assets of which were folded into MBDA, signed a contract in 1998 now worth about 404 million euros to replace the Turkish Land Forces’ 3.5-inch rocket launchers. The deal aimed to allow Turkey to build nearly 20,000 Eryx missiles and 1,600 launchers under license from the company over 10 years.

An Eryx is a short-range portable anti-tank missile. The weapon can also be used against bunkers and can bring down low-flying helicopters.

Hurriyet Daily News

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