Somalia defaults on coast guard vessels

The delivery of six offshore patrol vessels to Somalia has been thrown into doubt after the country defaulted on its payments, claimed a local news report. The supplier has begun arbitration.

Somalia’s Financial Governance Committee (FGC) was said to have defaulted on the payments after expressing concerns over the €132m contract that was signed with the Atlantic Marine and Offshore Group (AMO) in July 2013.

The contract was to supply six vessels to the expanding 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 AMO 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.

Earlier this month AMO said its subsidiary AMO Shipping Company (AMOSC) was filing legal proceedings against Somalia after it had defaulted. In March this year AMO gave the Somali government two weeks to pay, sending a formal Letter of Default. AMOSC was reported to be demanding €66m from the Somali federal government, plus €24.6m in interest. The case will be heard in Dutch courts.

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 appear to have arrived.

In 2015, Somalia’s FGC 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 Ministry said.

In 2016 the FGC in 2016 said that there had been no provision in the 2014 or 2015 budgets for the expenditure, and that there was “no realistic prospect” that the contract could 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.

AMO has told IHS Jane’s Defence Weekly that it was 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” AMO’s Willem van der Kooi said.