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

From Left: Cees van Tongerlo (Director AMO Shipping Company, a reporter, Somalia ambassador to EU Ali Faqi and Director of Damen Shipyards during a site vist by Faqi July 19, 2018. Photo: courtesy

The coastguard contract between the Ministry of Defense and a Cyprus incorporated company that is now at the epicentre of an imminent court battle details a long running tussle between the Financial Governance Committee (FGC) and the Defense headquarters which at some point forced the Cypriot company to hand deliver Default Letters to Mogadishu.

According to the Confidential Assessments (CAs) by the FGC and correspondence between the Federal Government of Somalia (FGS) and the contractor AMOSC obtained by Goobjoog News, the FGC severally sought answers from the Defense Ministry with little or no avail.

The contract in question which the Ministry of Finance website indicates did not proceed became a push and pull matter between the FGC and the Defense Ministry culminating in what seemed like a death note by the governance oversight body. Under the terms of the contract signed July 29, 2013, AMOSC was to build and supply six patrol vessels for Somali coastguard valued at €132 million. The first installment of € 33 million (25%) was to be paid upon signing contract but the government defaulted and also ran into default for the second phase coasting another € 33 million. With interest of € 24.6 million since 2013, AMOSC is now demanding an estimated € 90.6 million.

A former senior government who did not want to be named confirmed to Goobjoog News the existence of the contract adding it was a prudent idea towards building the capacity of the coastguard. “I am not aware what happened after we signed the contract. I hoped the government would finance it.”

CONFIDENTIAL ASSESSMENTS (CAs)

The FGC was formed 2014 by mutual agreement between the Federal Government of Somalia (FGS), donors, and international financial institutions (IFIs) to provide a forum for dialogue on strategic financial governance issues. It draws membership from among others the Office of the President, Prime Minister and Central Bank. The IMF, World Bank and the African Development Bank delegates sit in the Committee which is chaired by the Finance Minister.

In its first review of the AMOSC contract in 2014, the FGC raised questions about the contract notably the cost of the project. The cost, FGC said would run to 95% of the 2014 annual budget absent the logistics and transport costs. The FGC also noted there was no competitive bidding for the contract and that it appeared not to have met the pre-defined FGS specifications. Further, the watchdog warned against having AMOSC’s parent company as guarantor noting this function should be undertaken by an independent party and ought to be a bank.

Two options were on the cards for the deal, FGC recommended. If to proceed, it should be determined ‘how FGS’s apparent contractual default should be handled. Further, certain clauses of the contract should be renegotiated. The second option, which would resurface in subsequent assessments was to formally terminate the contract.

CONTRACT TERMINATION

But as it would appear later, that term ‘formal’ became a contentious subject of debate. According to the FGC in the 2015/16 CAs, the Defense Ministry sought of wished away the contract; flatly refusing to seek formal termination of the contract.

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, the FGC said in its October 31, 2015 CA. The FGC further expressed its frustrations in the August 30, 2016 Confidential Assessment (CA) but noted that despite recommending the cancellation of the contract on grounds ‘there was no realistic prospect that the contract could be financed through treasury resources’, no action was taken.

In unclear circumstances, the FGC concluded after meeting then Defense Minister in June 13, 2016 that it had received assurance, ‘AMOSC hold no expectations concerning this contract and that in effect it is defunct’. According to the August 301, 2016 CA, the FGC did not however indicate under what circumstances the contract became defunct yet there was no indication the Defense Minister had pursued any settlement with AMOSC.

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 Sunday. “We were surprised to read it as it is complete and utter nonsense.”

Despite ‘declaration’ by the FGC that the contract was defunct following assurance to that effect by Defense Ministry in June 13, 2016, Somalia’s ambassador to the EU Ali Faqi made a visit to the Damen Shipyard Head Office in Gorichem the Netherlands July 19, 2016 to inspect the project in which he assured AMOSC of the government’s commitment to the project. “I understand your frustration but I think this project is moving forward; it’s just a matter of time,” Faqi said in a joint media briefing with AMOSC’s Van der Kooi. “We are looking for funds..loans.”

Under the terms of the contract, AMOSC sub contracted the building of the vessels to Damen Shipyards a Dutch company.

LEGAL REDRESS

In its only response following numerous follow-ups according to AMOSC, the Defense Ministry sent an invitation to the contractor for talks in Mogadishu. The meeting did not however happen.

“The Ministry of Defense would like to invite you and your company to its Head Quarter (sic) (HQ) in Mogadishu for further consultations and meetings; we would like to note that we need time and discussions with all the relevant parties before the execution,” Abdalla Hussein Ali, then Deputy Defense Minister told AMOSC in a letter dated June 9, 2016.

Before delivering its intend for arbitration March 13 this year, AMOSC wrote its final plea to immediate former Defense Minister Mohamed Mursal December 17, 2017.

“Although we, on numerous occasions and locations, had meeting with previous Presidents, Prime Ministers and Ministers of Defence, on outstanding payments, progress and perceived execution of Contracts, nothing was delivered from the side of the Somali Government.”

It is against this backdrop that the Cypriot company, AMOSC which is a subsidiary of the Atlantic Marine and Offshore (AMO) based in Netherlands in proceeding for arbitration in Dutch courts.

BASE Advocaten B.V actin for AMOSC gave the government a two week’s in March to pay €66 million in addition to €24.6 million interest. That deadline lapsed March 29, 2018.

“In the absence of FGS’s 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.”