Westland triumphs in pounds 400m battle: Arab customers told to pay over lost deal

Click to follow
The Independent Online
WESTLAND Helicopters has won a pounds 400m legal battle with customers in the Middle East over breach of contract following the collapse of a helicopter deal over a decade ago.

If it receives the money, the victory could transform the fortunes of the Yeovil-based group, which is struggling through a continued depression in the civil aircraft market.

The Geneva-based Arbitration Tribunal has awarded Westland damages of pounds 385m - more than twice the company's market capitalisation of pounds 180m. The award was made against the Arab Organisation for Industrialisation, the Arab British Helicopter Company (ABH) - a company that is British in name only - and the three Arab states of Qatar, Saudi Arabia and the United Arab Emirates.

The tribunal also held that Westland was in debt to ABH because of pounds 30m made in advance payments, but did not order any payment.

A spokesman for Westland said that the final settlement could be affected by appeals or other legal proceedings. He added that there was still a question over interest payments, which could amount to pounds 30m.

Westland began legal action with the Arab customers in 1980 after the collapse of a joint venture to manufacture 250 Lynx helipcopters set up in 1979.

After the contract was agreed, Eqypt left the Arab Organisation for Industrialisation when it signed the Camp David agreement with Israel and appropriated the AOI's assets, which were in Egypt. This prompted the disintegration of any deal with Westland.

Two years ago, the Geneva tribunal said that the AOI was liable for damages over the breach of contract, that the three states were subsidiarily liable and that none of the responsibility lay with Westland. Westland declined to say how much the aborted deal was worth in 1988. Nevertheless, the large size of the award is likely to come as a surprise to the City. The hoped-for payment was announced too late to affect Westland's closing share price of 190p.

Westland has been through turbulent times in recent years. Although the company recently announced a trebling of its order book to over pounds 2bn, it did not deliver any helicopters in the first half of this year.

In spite of the problems in the industry and continued cuts in defence spending, the company managed to increase its pre-tax profits by 23 per cent in the six months to March to pounds 12.8m. The company cut 150 jobs during that time, taking the workforce to 8,500, about one-fifth less than its peak in the second half of the 1980s.