Tuesday, September 25, 2018
Subscription Centre
Receive our free e-newsletter.
Click here for more information

Somalia defaults on coast guard vessels

Damen Guardian vessels.The delivery of six offshore patrol vessels to Somalia has been thrown into doubt as Somalia has defaulted on its payments and the supplier has begun arbitration.

Somalia’s Goobjoog News last week reported that Somalia’s Financial Governance Committee (FGS) has defaulted on payments after expressing concerns over the 132 million euro contract that was signed in July 2013.

The contract was signed with the Atlantic Marine and Offshore Group (AMO) to supply the six vessels and build up the Somali Coast Guard. AMO was to build, maintain and operate the coast guard fleet and develop a coast guard training centre to train coast guard personnel, security officers and shore based support personnel. In Mogadishu the Atlantic Marine and Offshore Group was to establish an operational base, including a ship repair facility.

The six vessels ordered under the contract are Damen 5009 long-range patrol boats that were to be built by Damen’s Galati shipyard in Romania. The Stan Patrol 5009 vessels are 50 metres long, have maximum speed of 30 knots and 18-26 crewmembers. They feature the innovative axe bow concept which cuts through waves rather than slamming over them for superior seakeeping performance.

Last week AMO said its subsidiary AMO Shipping Company (AMOSC) was filing legal proceedings against Somalia after it had defaulted. AMO in March this year gave the Somali government two weeks to pay, and failing this it started arbitration proceedings.

According to the Letter of Default seen by Goobjoog News dated 13 March 2018, AMOSC is demanding 66 million euros from the Somali federal government in addition to 24.6 million euros interest accrued over the last six year. Based on the terms of the contract, the case will be heard in Dutch courts, Goobjoog noted.

The 2013 contract stated that Somalia was to pay a quarter of the contract value upon signing, and the rest in four other instalments. The first vessel was to be delivered 18 months after contract signature and the last 33 months after contract signature. However, no payments were forthcoming and a line of credit was not issued.

In 2015, Somalia’s Financial Governance Committee said it was told the contract with AMO did not exist. “The Ministry of Finance has on several occasions requested a copy of the agreement for FGC review, but the Ministry of Defence has not produced it.” The FGC in 2016 subsequently noted “there was no provision in the 2014 or 2015 budgets for these outlays [132 million euros], and there is no realistic prospect that the contract can be financed from Treasury resources.” The Ministry of Defence in 2016 told the FGC that the contract was “in effect defunct”, but Somalia tried to find funds for it.

The Atlantic Marine and Offshore Group this week told IHS Jane's Defence Weekly that it is still prepared to complete the contract in spite of the arbitration case.

“We reached keel-lay for all six [vessels]. We completed all detailed design, prepared a location in Mogadishu for building the Operations and Training Centre, and made all preparations for commencing the training, education, maintenance support, and building of the Somali Coast Guard,” the AMO’s Willem van der Kooi told IHS Jane’s.