It’s a tedious job to look deep into the murky world of large-scale government arms dealings. It gets even notoriously harder separating the legitimate from illegitimate deals, in a world where lobbying, connections, and secrecy are part of the job.
WikiLeaks, a whistleblowing site published a UAE dealmaker: Al Yusef. The published document has once again revealed that those involved in arms dealings have a little to no concern about whether their operations are within the legal bounds.
The leaked document summarises all the proceedings of a shocking tribunal session overseen by the Internal Chamber of Commerce (ICC). According to WikiLeaks, a case was presented before the tribunal in 2009 and 2010. The case was to solve a dispute between the French arms contractor GIAT Systems SA – which rebranded to Nexter Systems and an Emirati businessman called Abbas Ibrahim Yousef Al Yousef.
The tribunal investigated which services Al Yousef offered to justify the excessive commission. And despite claims to the contrary, the tribunal discovered that Al Yousef didn’t play a significant role in the development of the Leclerc tanks. The tanks were built with German engines – creating a law obstacle. According to the law, German is forbidden from selling arms to the Middle East. Al Yousef claimed he had successfully agreed with the German government to obtain a waiver from the laws – he did this through lobbying. The process – according to WikiLeaks – required decision makers in the highest levels for both France and German. In his witness statement, Al Yousef couldn’t recall the names of any German officials and argued before the tribunal that he only used lobbyists to communicate with the authorities
Additionally, in 1993, GIAT (now Nexter) attempted to sell the UAE government 388 Leclerc combat tanks, 46 armored vehicles, 2 training tanks, spare parts, and ammunition. A deal was drawn, and the expected date for expiry was 2008. Part of this contract demanded Al Yousef to be paid a whopping $235 million – 6% of the value of the $3.6 billion deal. The money was then transferred in pro-rata payments (paid for consultation service delivery) from GIAT to Al Yousef’s company – Kenoza Consulting and Management Inc. His consulting company was registered in the British Virgin Islands.
Nonetheless, it would seem that later, GIAT systems stopped its payments arrangements with Al Yousef. That was after paying close to $195 million to his company Kenoza Consulting – shortly after France passed a piece of anti-corruption legislation in 2010. When Al Yousef made demands for his remaining payment of $39 million, GIAT’s legal argued that they no longer bound to pay him, because they will be committing corrupt acts. A move which made Al Yousef and his company Kenoza Consulting to file a complaint with the tribunal.
This story is hardly the first of its kind. Commission fees, Administrative fees – these are the brokerage languages in most ‘Gulf state’, where a complex state bureaucracy leaves foreign business dependent on the services of intermediaries.
Therefore, it always tough to differentiate outright corruption from typical business operations. However, what’s noteworthy about the case is how corruption is being used as a defense mechanism. According to the tribunals’ summary of proceeding, GIAT systems legal admitted that they were aware of the original deal they had with Al Yousef was corrupt. They further argue that they stopped the payments when it became hard to continue. According to GIAT’s legal position written in the Post-Hearing Reply Brief reports:
“…prior to the entry into force of Act no. 200-595 of June 30, 2000, corruption of foreign public officials was not a criminal offense under French law, but justified the annulment of any contracts whereby one party intended to commit such acts insofar as their cause was contrary to morality and public policy. In other words, prior to July 1, 2000, corruption of foreign public officials was only punished under French civil law, but not under French criminal law.”
In the quote, GIAT admits that the agreement they signed with Al Yousef was “contrary to morality and public policy.” And so long as they carried no criminal legal repercussions, it was no longer of concern to them.
Elsewhere, GIAT claimed that Kenoza Consulting Inc. had intentions to commit and indeed practice corrupt acts. In detail, GIAT’s legal team declared that Al Yousef planned to use his commissioning fee to issue bribes to government officials in efforts to secure all aspects of the deal.
It is therefore clear that a criminal legal barrier is essential to preventing corruption in arms dealings.