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

By T. Roble

A Cypriot company which entered into a contract with the government of Somalia to build and supply six long range patrol vessels is moving to court in the Netherlands following Somalia’s failure to honor its side of the bargain.

In a letter dated August 22, 2018 addressed to Defence Minister Hassan Mohamed and Somali ambassador to the EU, Ali Faqi, Amo Shipping Company (AMOSC) notified the Government of its intention to proceed for arbitration at the Transport and Maritime Arbitration Rotterdam-Amsterdam (TAMARA) in line with the contract signed in July 29, 2013.

“Having noted that your Government has not remedied or even responded to the breach, we advise herewith that we will commence arbitration proceedings as per Article 20.3 of the Building Contract with ‘Transport and Maritime Arbitration Rotterdam-Amsterdam (TAMARA arbitration),” the letter reads in part.

PRAYERS

In proceeding to the Rotterdam based arbiter, the Cypriot company is demanding € 132 million in addition to € 24.6 million in interest accrued on the overdue instalments since July 29, 2013 to March 2018.

AMOSC is seeking the arbiter compels Somalia to pay € 66 million on account of instalments due in the first instance and secondly issue an ‘irrevocable Letter of Credit in the initial amount of €132 million or if a Letter of Credit is issued after payment of the €66 million to AMOSC, issue an irrevocable Letter of Credit as referred to in article 4.3 of the Building Contract in the remaining amount of €66 million’.

PART II: Tussle between oversight body, Defense HQs and imminent court battle

According to the contract, the Letter of Credit would be cashed at Credit Suisse Bank of Geneva, Switzerland.

The contractor also wants Somalia to be compelled to ‘acknowledge and affirm the obligations of the FGS under both contracts and the FGS’s future abidance thereto’. Besides the contract to build and supply the six vessels, the two parties also signed a second contract which involved training of Somali coastguard on the use of the vessels.

FGS DEFAULTS

The cost of each vessel was billed at € 33 million and Somalia 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 three 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.

Somalia did not, however, pay a dime before it unilaterally declared the contract ‘void’. The Financial Governance Committee said the cost of the contract was beyond Somalia’s means and asked the Ministry of Defence to pursue the termination of the contract.

AMOSC hand-delivered a Notice of Default to Mogadishu October 6, 2016 and subsequently a demand letter through its lawyers Base Advocaten March 13, 2018 both seen by Goobjoog News seeking Somalia pays €66 million for two completed vessels and interest of € 24.6 million.

But AMOSC notes in its August 2018 letter than Mogadishu has, just like in all other instances since appending its signature on the contract in 2013, gone silent.

Efforts by Goobjoog News to reach Defence Headquarters in Mogadishu for rebuttal did not bear much fruit safe for, “Leave me alone,’ from the State Minister for Defence Mohamed Ali Hagaa.

Senior government officials who did not want to be named and who co-signed the Contract affirmed its existence.

WISH AWAY

The story of this contract between Defence HQs and AMOSC reads like a tragedy in which Somalia entangled itself in a no return journey but kept wishing it could mysteriously come to a close on its own.

In its 2018 assessment, the Financial Governance Committee which has representations from the World Bank, IMF and the African Development and chaired by Finance Minister said the AMOSC contract ‘did not proceed’. In its earlier Confidential Assessment (CA), 2015 in particular FGC directed the Ministry of Defence to hold discussions with AMOSC on the status of the project upon which FGC would assist in terminating the contract. However, no such follow up ever happened as later attested by FGC in subsequent reviews and the AMOSC.

But in its 2016 CA, FGC said 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 holds no expectations concerning this contract and that it is in effect defunct. But in May 2018, Van der Kooi who signed the contract on behalf of AMOSC 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.”