Aquatic costings: Divorce and the Franco-Australian submarine agreement

By Binoy Kampmark

June 14, 2022

Naval Group
Ah, good times. Former French president Francois Hollande (2nd r), Pierre Eric Pommellet (l), Thales Australia CEO Chris Jenkins (2nd l), and Thales employee Bernard Boucher (r), in 2014. (AP Photo/Dan Himbrechts)

Divorce settlements are rarely light affairs, and the creation of AUKUS was always going to come at a price for Australia. The scuppering of the diesel submarine deal between the Naval Group and Canberra in favour of nuclear-powered submarines and technology furnished by the US and the UK flayed Franco-Australian relations. But it also raised the thorny issue of what quantum of compensation would follow.

The Naval Group, of which the French government has a majority share, was unreserved in what it hoped to achieve in the settlement. In September, chief executive Pierre-Eric Pommellet, told the Financial Times that the company would “defend our rights and all our costs … every cost that we incurred and every cost related to the demobilisation.” His anger was understandable: that same month, he had received a letter from the Australian government confirming that the contract was moving smoothly. That same day, he received a call that the contract had been cancelled.

The perception on the part of the French contractors is that the termination arose from no fault of their own. The value of the order for twelve Attack class submarines — worth A$90 billion — had seen investment, design and engineering efforts made in the ultimately doomed project. According to Pommellet, Naval Group had paid €840 million for investments in the project prior to cancellation. Costs were also incurred with other contractors, including Lockheed Martin, which was tasked with developing the submarines’ combat systems.

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