Naval Group, Australia start submarine compensation talks

Naval Group has confirmed that it has started talks with the government of Australia over compensation related to the cancellation of Canberra's programme to procure 12 Attack-class submarines from the French shipbuilder.

“The consequences of the termination of the contract are addressed in the Strategic Partnering Agreement (SPA) we signed in 2019 with the Commonwealth of Australia (CoA). We are currently discussing with the CoA with a constructive mindset and cannot comment further at this point in time,” a spokesperson for Naval Group told Janes on 20 September.

The Australian Department of Defence (DoD) had not responded to Janes questions on the matter at the time of publication.

Termination clauses in the SPA have not been disclosed by Naval Group or the DoD. However, the state-funded ABC News reported in 2019 that, according to leaked SPA details, the government could be liable to pay penalties of up to EUR250 million (USD293 million).

ABC News reported that under “break payment” clauses within the SPA, Naval Group would receive a EUR90 million compensation fee if the company completed the submarine's basic design and the DoD then decided not to proceed further.

Citing the leaked SPA details, the ABC News report said a break payment of EUR250 million would apply if the company delivered a detailed submarine design and the DoD then decided not to go ahead.

On 15 September the leaders of Australia, the UK, and the US announced that Australia would procure nuclear-powered submarines through a new trilateral security partnership known as AUKUS.

The announcement confirmed that Canberra would scrap its contracts with Naval Group for the design and construction of 12 conventionally powered Attack-class submarines at an estimated acquisition cost of AUD90 billion (USD68 billion).