EXCLUSIVE: Cypriot company to sue Somalia over coastguard deal default, claims €90.6m

The Financial Governance Committee (FGC) variously expressed concern over the manner in which the Defense Ministry was handling the contract. It (FGC) affirmed FGS had defaulted 

By T. Roble

THE FEDERAL GOVERNMENT entered into an ambitious €132m contract in 2013 with a Cyprus incorporated maritime company to build and supply six long range patrol vessels but the deal would shortly come a cropper as the Government failed to meet its side of the bargain and went ahead to unilaterally declare the contract a nullity.

Atlantic Marine and Offshore Group (AMO) the parent company said Thursday its subsidiary, Amo Shipping Company (AMOSC) is filing legal proceedings against Somalia upon expiry of the March 28, 2018 deadline set in a hand-delivered default letter to Mogadishu last month. AMO is incorporated in the Netherlands.

The Default Note seen by Goobjoog News was hand delivered March 13 to immediate former Defense Minister Mohamed Mursal who was recently elected Speaker of the Lower House. The same, hand-delivered by courier to Somalia ambassador to EU Ali Faqi and the Financial Governance Committee (FGC).

READ ALSO: EXCLUSIVE: Somalia dragged to court over €157m coastguard deal default

BASE Advocaten B.V for AMOSC gave the government a two week’s ultimatum to pay the amounts failure to which it would proceed for arbitration.

“In the absence of FGS’ timely performance hereof, AMOSC will have no other choice than to initiate arbitration proceedings against FGS in Rotterdam, the Netherlands under article 20.3 of the Building Contract,” the law firm said. “No doubt FGS is well aware that the laws of the Netherlands are applicable under article 201.1 of the Building Contract.”

The Dutch based company said in a media statement Thursday it was pursuing legal recourse after what it said was default on the part of the Federal Government of Somalia (FGS) ‘despite numerous and various attempts at rapprochement and eventually admonishment by AMO.’ According to the Letter of Default seen by Goobjoog News dated March 13, 2018, AMOSC is demanding €66 million from FGS in addition to €24.6 million interest accrued over the six year period. Based on the terms of the contract, the case will be heard in Dutch courts.

THE CONTRACT

Under the terms of the contract between the Ministry of Defense and AMOSC, the latter was to design, build and supply six long range patrol vessels under the Somali Coast Guard project by the defense ministry.

The second part of contract which appears redacted in the contract appearing in the Ministry of Finance website includes the provision of support services and training of Somali coast guard. According to the contract, “the agreement shall continue for a minimum period of 7 years or if AMOSC personnel are on board State vessels or are stationed at other state facilities in Somalia at the time of termination of this Agreement.”

The contract which was highly publicized and even endorsed by Amisom was signed in July 29, 2013. The government expressed confidence in the contract and even the Foreign Affairs Ministry in a note verbale dated October 27, 2013 sought the invitation of the Dutch government for then-President Hassan Sheikh Mohamud to visit the Netherlands ‘to discuss matters of interest’.

According to the contract, FGS was to pay 25% (€ 33 million) of the total amount upon signing the contract (July 29, 2013). The subsequent amounts were to be paid in four other instalments. The contract also obliged AMOSC to deliver the first vessel in 18 months’ time after signing of the agreement while the last one would be delivered 33 months after the signing date.

DEFAULT

After the signatures, appended to by then defense Minister Abdulhakim Faqi for FGS, things went south. Somalia did not authorize the letter of credit which was to be issued by Credit Suisse Bank of Geneva, Switzerland. In August 2013, the Surveyor, Bureau Veritas of Romania attested the builder completed the keel (steel structure along the base of a ship) lay for all the six vessels. With this, AMOSC sent six other invoices amounting to €33 million to Mogadishu but just like the previous ones, Mogadishu went mute.

In its Confidential Assessment (CA) of the contract 2014, the Financial Governance Committee which is chaired by Finance Minister admitted Somalia had defaulted by not remitting the requisite 25% as stipulated by clause 4.1 of the contract. It however raised serious questions about the cost effectiveness, viability of the contract and pocked holes on some of the clauses warning it was not in the best interest of the FGS.

Of significant attention to the FGC was the macro-fiscal concerns of the project. It noted the cost of the project almost surpassed the 2014 budget, only 5% shy.

NO CONTRACT

But what followed next is perhaps what angered AMOSC and in its series of correspondence to the FGS seen by Goobjoog News, the Cyprus incorporated company expressed frustrations and at one point chided the Government for ‘not acting as a reasonably prudent and diligent party’.

Willem van der Kooi who signed the contract on behalf of AMOSC in 2013 told Goobjoog News the government failed to respond to several of its requests starting with the first six invoices issued at the time of signing the contract.

The Ministry of Defense would thereafter present contradicting information and at one point told the FGC in 2015 the contract ‘did not exist. “The FGC was informed that no such contract existed. The company’s (AMOSC) website, however, describes and shows a photograph of a July 29, 2013 signing ceremony with FGS officials, and claims that the ceremony relates to this specific contract,” FGC said in its October 2015 Confidential Assessment.

The Ministry of Defense should answer the FGC’s request for a copy of the contract and for information about whether or not the contract is still valid, FGC added. Though it advised the contract be terminated on grounds of affordability, the FGC directed the Ministry of Defence to hold discussions with AMOSC on the status on the project upon which FGC would assist in terminating the contract. However, no such follow ever happened as later attested by FGC in subsequent reviews and the AMOSC.

Curiously, the FGC would later in its 2016 Confidential Assessment say it had got an assurance from the ministry of defence that AMOSC had foregone the contract. “The Minister of Defence has assured the FGC that AMOSC hold no expectations concerning this contract, and that it is in effect defunct. Van der Kooi dismissed the FGC statement as ‘utter nonsense’. “The contract (s) became ‘effective’ through the signing of the document. Nothing has changed such position ever,” Van der Kooi told Goobjoog News. “We were surprised to read it as it is complete and utter nonsense.”

A former senior government official who sought anonymity and was closely involved in the contract confirmed the existence of the contract to Goobjoog News but noted he was not privy to what happened later. “I thought the government would go ahead to finance the project.”

UAE SUPPORT

But even as the Defense Ministry sought to sweep the contract under the carpet, the government was sourcing for external funding to finance the project. A correspondence obtained by Goobjoog News signed by then Prime Minister Omar Sharmarke to UAE’s Chief of National Security Agency, His Highness Hamad Al Shamsi proved the government’s commitment to continue with the project.

“..For such reasons, the Somali government has developed a comprehensive maritime plan to establish a Somali Coastguard. The Project Plan based on delivery of assets, equipment training, maintenance and operational support services,” the letter dated April 13, 2015 read in part.

To ensure the continuation of the project and not to lose momentum, now is the time to act. I emphasise that there is an urgent need for funding of this project, the PM said calling on the UAE government to fund the building of the six long range vessels and 12 high speed offshore interceptors.

 

 

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