HANS J OHFF. A Future Submarine bonanza for France

Seen through the eyes of an engineering contractor and shipbuilder I suggest that the French have hit the jackpot. They will be falling over themselves to sign the proposed Framework Agreement between the Government of Australia and the Government of the French Republic concerning cooperation on the future Submarine Program.  

(The Treaty is here.) This Treaty between Australia and France seeks to establish the high-level governance and intellectual property framework for the FSP – unfortunately the document is vague, one-sided and does not serve Australia’s strategic interests.

Rather than stipulating Intellectual Property Rights (IPR), which can be clearly categorised and identified, Article 2 of the Agreement avoids ‘IPR’ in favour of ‘Background Information’. This rather imprecise term is defined as ‘Information owned by a Party that is in existence prior to the entry into force of this Agreement or is subsequently brought into existence other than as a result of the performance of the FSP’.

Article 6, ‘Ownership and use of Information’, the kernel of the Treaty, is silent on IPR, leaving open to interpretation whether Background Information on the nuclear powered (SSN) BARRACUDA class will be available to Australia. In any event, under this Framework Agreement Australia will only be entitled to French technical know-how on a need-to-know basis. It should be noted that because the Shortfin Barracuda Block 1 A will be a developmental, an ab initio design, with only the hull diameter, steel specifications and some ‘hotel support’ systems having commonality with the future French Navy nuclear attack submarine, very little Background Information and/or IP will be required for the FSP.

Further, the Treaty provides that France and Australia shall mutually determine – in writing – the categories of Background Information that Australia may wish to share with third parties, and that such transfer can only be effected by Australia after France has given written consent. And, save for jointly generated IP, Article 6. 9 of the Agreement stipulates that ownership of all SEA 1000 ‘Foreground Information’ shall vest on its creation in Australia. The Agreement is mute, however, as to which entity the IP will be conferred and in what format. The Australian Defence Science and Technology (DST) Group, DCNSA and other Australian organisations with overseas shareholders and interests could, for instance, be the owners/custodians of the Foreground Information and IP.

In the unlikely event that Australia becomes interested in acquiring a nuclear powered submarine class in the future, this Agreement fails to ensure that Background Information on current and future French SSN classes will be made available to the Australian Government and its designated agencies. Clearly, the premise of sharing any submarine technology with Australia will not materialise if it poses a security risk to the Grand Nation. France incorporated is not in the business of passing on submarine technologies and related IP with Australia as an act of altruism.

It would be instructive to compare the Treaty with the IPR agreement the Australian Govt entered into with the FMV of Sweden regarding the COLLINS class

Article 6.8 identifies the costs to be borne by each party. Not surprisingly France has agreed not charge for licence, royalties or other fees in respect to French Background Information. Of course DCNS – France – are in the enviable position of being able to negotiate the design and build contracts inclusive of all fees – transparent, opaque or hidden. Notwithstanding that the Government of France – the majority stakeholder in DCNS and DCNSA – determines the outcome of the FSP – whether as a prime contractor or via a minority interest in an Australian shareholder company – there will be no cost or risk-sharing for the French on this open-ended 30-year contract. The contract risks are borne entirely with the Commonwealth.

The relationship between the Australian and French governments will determine the terms and conditions Canberra will enter into with DCNS, Thales and other major French suppliers for the life of the SEA 1000 design and build contract, and beyond. But the entire Agreement ignores the fact that the French interest in the SEA 1000 program is overwhelmingly commercial. Under this Agreement the French write the cheques that the Australian taxpayers will blindly sign.

Article 23.4, 5 and 6 stipulate that the Agreement (Treaty) can only be terminated by mutual agreement. But, if the ability of a Party to implement this Agreement is fundamentally impacted by exceptional events, circumstances or matters, either Party may give written notice of its intention to terminate this Agreement. For instance, if DCNS on behalf of the French government, cannot deliver the specified submarine class to an agreed timeline the CoA may terminate the contract by giving 12 month notice in writing. If after 12 months of unsuccessful negotiations the notice is not withdrawn the termination shall take effect 24 months after the notice was first lodged. But the bills will keep rolling in during this period.

Under this Agreement neither France nor DCNS and its sub-vendors will be held financially responsible for cost-effective and timely completion of the program; nor will Australia be able to recover costs or damages from France for failures in performance, design or program.

It appears that the drafting of the Framework Agreement was left to Canberra’s bureaucrats and their lawyers. While this Treaty is not a commercial agreement or contract, a little more commercial nous would have gone a long way to better preserving Australia’s national and industrial interest than the aspirations outlined under ‘Industrial Cooperation’, particularly 13.2 (b), and elsewhere in the Treaty.

If indeed this Treaty is signed in its current form the beneficiaries, DCNS and its agencies can buy the House of Moët & Chandon and provide its Australian client – the Government and Navy – with the entire Dom Pérignon vintage for the duration of the contract.

Hans J Ohff is Visiting Research Fellow The University of Adelaide and former Managing Director and CEO of the Australian Submarine Corporation  

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One Response to HANS J OHFF. A Future Submarine bonanza for France

  1. Grahame Elviin says:

    This very instructive article by Hans J Orf, a seemingly knowledgeable and believable source, provides some troubling insights into what appears to be a totally unacceptable outcome for Australia and all Australian taxpayers, caused by what seems to have been lack of appropriate commercial knowledge and proven high level negotiating skills.

    And above all, the necessary in-depth, insightful knowledge and full appreciation of what the implied lack of day-to-day ongoing control by Australians, may have during the execution, delivery and ongoing maintenance of what is undoubtedly, Australia’s most expensive ever, purchase of defence materiels.

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