Russia considering Court action against France if Ship order is Delayed over Ukraine Crisis

The French government’s threat to halt the sale of two military warships to Russia because of the conflict in Ukraine may cost the French contractor DCNS billions of dollars for breach of contract, IHS Jane’s Defence Weekly reported. Although recent sanctions imposed on Russia did not include the sale of the two ships, French President Francois Hollande made the decision to postpone delivery of the first one after coming under sustained pressure from fellow NATO members, the Moscow Times said.

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While the two companies involved in the deal are continuing as normal, Rosoboronexport, the Russian state agency responsible for exports and imports of defense-related goods, is considering taking the issue further by exploring options to sue the shipbuilder DCNS, should the deadline for delivery pass. Hollande will make a final decision on the fate of the ships this month, RIA Novosti reported.

“This is a very unusual development,” said Allen Green, an international arbitration expert and partner at the Washington-based law firm McKenna, Long & Aldridge LLP. “There may or may not be guarantees by France in that agreement that should the deal not go ahead that France would reimburse Russia the money it paid plus a penalty.”

The contract between the French ship-building company and Rosoboronexport was signed in June 2011. The first of the two helicopter-landing ships, the Vladivostok, is currently undergoing sea trials with a Russian crew and scheduled for delivery in November, RIA Novosti reported. The second ship, the Sevastopol, is set for delivery next year.

Hollande said the delivery can go ahead if Russia adheres to a cease-fire agreement and signs a political settlement that would halt hostilities in the region, the Washington Post reported. But even the cease-fire is a contentious issue. Russia is not officially at war with Ukraine, but it is widely believed by Western powers and NATO that Russia is continuing to provide weapons to separatist rebels in eastern Ukraine. That will be a primary consideration before any decision is made by France.

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