FAQs: Frequently Asked Questions Concerning the Eurofighter Procurement
FAQs Task Force Eurofighter:
Why was the Task Force Eurofighter created?
Following the continuing closing of criminal proceedings related to the procurement and purchase of the interceptor plane "Eurofighter", the Vienna Office of Public Prosecutions again initiated criminal investigation proceedings in 2011 (GZ 604 St 6/11f).
These new investigations led to the formation, in November 2012, of a Task Force Eurofighter within the Federal Ministry of Defence and Sports. Under the leadership of the head of internal audit, Major General Mag. Hans Hamberger, its job was to examine the procurement process at that time.
What is the mandate of the Task Force Eurofighter?
The Task Force Eurofighter is tasked with investigating the procurement of the Eurofighter interceptor plane as comprehensively as possible within the scope of the Federal Ministry of Defence and Sports. Where illegal actions to the detriment of the Republic of Austria are found to exist, the Task Force was instructed to determine whether such actions could result in claims which the Republic of Austria could enforce in civil or criminal proceedings.
Who is in the Task Force Eurofighter?
The Task Force Eurofighter is led by Major General Hans Hamberger, head of internal audit at the Federal Ministry of Defence and Sports (FMDS), and consists primarily of experts from the FMDS. The Finanzprokuratur (lawyer and legal advisor of the Republic of Austria), under the leadership of President Wolfgang Peschorn, supports the FMDS with comprehensive legal expertise. For questions about specific issues, external experts are consulted: Grant Thornton Unitreu Advisory GmbH as forensic experts; Held Berdnik Astner & Partner Rechtsanwälte GmbH as experts on Austrian criminal law; Skadden, Arps, Slate, Meagher & Flom as experts on corruption law in US and UK; as well as the civil law experts Univ.-Prof. Dr. Christian Rabl and Attorney and Univ.-Prof. Dr. Andreas Kletecka.
Why did you also use external advisors?
The Task Force Eurofighter relied not only on the expertise of Federal Ministry of Defence and Sports (FMDS) employees but also - as the investigations were stepped up and their scope extended to Anglo-Saxon and US jurisdiction - on external experts. Given the strong interest in keeping the investigations confidential, external experts were needed in order to be able to propel the investigations for Project "Minerva" forward. It was also important to keep the investigations clearly separated from the FMDS's ongoing business relationship with Airbus.
What are the main findings of the Task Force Eurofighter?
On the one hand, the Task Force Eurofighter investigation provides clear proof of acts of deception with relevance for criminal and civil law carried out by responsible decision-makers and bodies that can be attributed to the two Airbus companies. On the other hand, they have revealed that the Republic of Austria has suffered massive damage as a result of these actions of willful deception.
Furthermore, the investigations of the Task Force Eurofighter have produced clear evidence that the agreement and realization of the so-called offset transactions - in particular, the intermediary role of the Vector network for which the two Airbus companies are responsible - served as a basis for and source of dishonest conduct to the detriment of the Republic of Austria. In addition, they prove that key aspects of the military equipment procurement process were initiated and realized by a small number of people, who acted as advisors or authorized representatives of the suppliers of the military equipment, without the involvement of the Republic of Austria.
Which conclusions does the Federal Ministry of Defence and Sports draw from the Task Force Eurofighter report?
In addition to the evaluation of the Eurofighter procurement with regards to criminal and civil law which, for the time being, has resulted in criminal proceedings, joined by a private party, against two Airbus companies, the Federal Minister of Defence and Sports has issued two further mandates based on the findings of the Task Force Report:
1. He has tasked the Finanzprokuratur, under the leadership of its President Wolfgang Peschorn and together with further experts, to revise all compliance rules and contractual foundations of military procurement processes and make corresponding recommendations for clean procurement until the end of May 2017. This is to determine whether decisions regarding the procurement and purchase of military material can be made more transparent and, if so, by means of which organizational and structural measures, and to determine whether the decisions can be removed from the influence of proponents of a network of advisors and interested parties.
2. As a further consequence of the Task Force Eurofighter report, Federal Minister Doskozil has tasked Brigadier Karl Gruber to head a working group at the Federal Ministry of Defense and Sports to investigate and evaluate all military and economic options for safeguarding the air surveillance of the Republic of Austria. This is in light of the fact that the Saab 105OE, currently deployed to secure Austrian airspace, will not be available to the Austrian Armed Forces beyond 2020 and that the annual operating costs of the Eurofighters are very high. The aim is to ensure the continued effective safeguarding of our air space at today's levels, but on a more cost-effective basis. The working group is to present the analysis and corresponding recommendations by the end of June 2017.
What form will the continued cooperation with the Vienna Office of Public Prosecutions take?
Further points worthy of clarification have been identified during the investigations of the Eurofighter procurement process. These will now be evaluated further by the Task Force Eurofighter. The Task Force Eurofighter will support the Vienna Office of Public Prosecutions in further investigations in accordance with the applicable legal framework.
Does this report herald the end of the Task Force Eurofighter?
The Task Force Eurofighter's work has not been concluded with the report, which was published on February 16, 2017. Further points worthy of clarification were identified during the investigations into the Eurofighter procurement process. These will now be evaluated further by the Task Force Eurofighter. The Task Force Eurofighter will support the Vienna Office of Public Prosecutions in further investigations in accordance with the applicable legal framework.
FAQs Criminal proceedings, joined by the private party:
Why was a criminal complaint filed?
The investigations of the Task Force Eurofighter resulted in clear evidence of acts of deception with relevance for criminal and civil law carried out by responsible decision-makers and bodies that can be attributed to the two Airbus companies. Due to these findings the Federal Ministry of Defence and Sports was obliged to file a criminal complaint with the Vienna Office of Public Prosecution.
Who was indicted?
Airbus Defence and Space GmbH (formerly EADS Deutschland GmbH) and the Eurofighter Jagdflugzeug GmbH are named in the criminal complaint, because the actions relevant to criminal law of bodies and decision-makers are attributable to the two Airbus companies according to the Verbandsverantwortlichkeitsgesetz (VbVG - statute on responsibility of legal entities).
What are the Airbus companies accused of doing?
According to the investigations of the Task Force Eurofighter, the Federal Ministry of Defence and Sports assumes in the criminal complaint that bodies and decision-makers attributable to the two Airbus companies have for many years cunningly misled and unlawfully and intentionally deceived and defrauded the Republic of Austria. This was done both with regards to the true purchase price as well as to the true ability to deliver and equip the object of purchase. The Republic of Austria has suffered a substantial financial loss due to the acts of deception relevant to criminal law.
What exactly constitutes the alleged fraud with regards to the purchase price?
The purchase price of EUR 1.959 billion included almost 10 per cent (exactly EUR 183.4 million) of costs for offset transactions. This, despite the fact that the Republic of Austria clearly requested, in the first bidding documents from 2001, that costs for the realization of the requested offset transactions be shown separately. There is a strong suspicion that the deceitfully priced-in EUR 183.4 million ultimately served to cover own and external expenses for criminal and non-criminal transactions which, among other things, were related to the initiation and realization of the so-called offset transactions. Furthermore, there is the suspicion that the cunningly elicited amounts of money were channeled through a purposefully created network of brokers and sub-brokers around and in relation to Vector in order to finance criminal activities.
What exactly constitutes the alleged fraud with regards to the ability to deliver the object of purchase?
There is the strong suspicion that responsible decision-makers of Eurofighter Jagdflugzeug GmbH and Airbus Defence and Space GmbH were neither in a position to deliver, nor had any intention of delivering the agreed Eurofighters to the Republic of Austria. The Airbus companies had committed to delivering four interceptor planes between June 2007 and December 2007, eleven in 2008 and a further three in 2009. These interceptors were to be of Type Eurofighter with the specifications of Tranche 2 Block 8 or, alternatively, with specifications Tranche 1 Block 5 with the obligation to upgrade to tranche 2 specification at the agreed delivery times.
What do you want to achieve with the criminal complaint, joined by the private party?
The Federal Ministry for Defence and Sports has two aims with today's complaint: On the one hand, we want to initiate a targeted investigation by the Vienna Office of Public Prosecutions with regards to the indicated activities relevant to criminal law. The Task Force Eurofighter will support the Vienna Office of Public Prosecutions in these investigations.
The second aim is to receive compensation for the financial loss suffered by the Republic of Austria due to the indicated illegal and culpable acts of deception by the decision-makers and bodies attributable to the two Airbus companies.
Will there be further criminal complaints?
The Task Force Eurofighter has also found evidence of potential legal violations in connection with suspected corruption related to the Eurofighter procurement and, via the Finanzprokuratur, has provided corresponding documents to the Vienna Office of Public Prosecutions. These potential violations were not included in the complaint because they are already subject to ongoing investigations by the Vienna Office of Public Prosecutions. However, it cannot be ruled out that there will be further investigations by the Task Force leading to further criminal complaints. Based on current knowledge, it also cannot be ruled out that protective regu-lations of other countries have been violated, in particular British and US law via the involvement of the Vector network in the offset transactions. Should further suspicions be raised, additional investigations by the Task Force Eurofighter and further criminal complaints cannot be ruled out.
Are there indications that international law has also been violated?
From the perspective of compliance regulations in British and US laws, there are indications that the jurisdiction of British and/or US authorities could be established due to the numerous offset transactions involving US-based counterparties and the involvement of the Vector network. The investigations on these matters have not been concluded. It cannot be ruled out that a filing with British or US authorities will be considered following the conclusion of the investigations.
How is the criminal complaint related to the investigations in Germany?
It was reported in German media that dubious payments amounting to EUR 90 million were made in relation to the sale of Eurofighter fighter jets to Austria. The EUR 90 million, which the tax authorities in Munich have not recognized as business expenses, have disappeared into dark channels via suspicious off-shore shell companies. The recently-published allegations by the German tax authorities against Airbus support the criminal complaint filed by the Federal Ministry of Defence and Sports on February 16, 2017.
How high are the damages claimed by the Republic of Austria?
The unlawful and culpable conduct of EF and Airbus has caused the Republic of Austria to pay the purchase price of the Eurofighters which it would not have paid without the mentioned acts of deception. In addition, the conduct of EF and Airbus obliged the Republic of Austria to pay operating costs for the Eurofighter which would not have been incurred at the same level with the interceptor plane of the second-ranked bidder.
The damages, based on what is known at present, may be as high as EUR 1.1 billion, based on the sum of the two aforementioned amounts and accounting for the value of the erroneously purchased Eurofighters. They are definitely at least EUR 183.4 million, which is the amount that the accused Airbus companies deceptively included in the purchase price. Further damages arise from the additional future operating cost of the more expensive Eurofighter and cannot yet be quantified.
Are the claims of the Republic not already time-barred?
Due to the criminal proceedings, joined by the private party, the civil law claims of the Republic of Austria remain protected.
Will the offset transactions that have already taken place now be cancelled?
No, the offset transactions in connection with the purchase of 15 Eurofigher interceptor planes, which occurred honestly, and those to be realized by 2018, are unaffected by the criminal complaint filed by the Federal Ministry of Defence and Sports (FMDS) on February 16, 2017. From the FMDS's point of view, a cancellation of the already realized offset trans-actions is excluded.
Didn't the settlement in 2007 create a completely new legal situation?
The settlement in 2007 did not change the culpability of the fraudulent conduct of the two accused Airbus companies. The bodies and representatives representing the Republic of Austria in 2007 were neither aware that the purchase price was excessive nor were they made aware that ability to deliver the aircraft was lacking. Had these facts been known, the Republic of Austria would have signed neither the purchase agreement in 2003 nor the settlement in 2007 with the terms agreed at the time.
Why didn't you file a civil claim for the damages?
When there is a strong suspicion of criminal misconduct the normal procedure is to address civil claims by joining the criminal proceedings as a private party. By joining the criminal proceedings as a private party on February 16, 2017, the Republic of Austria suspended the statute of limitation of the claim which is now permanently secured.
Why did the Republic of Austria not just withdraw from the Eurofighter contract?
On the one hand, the Federal Minister of Defence and Sport (FMDS) and the Austrian Armed Forces have to guarantee the security of Austrian airspace. On the other hand, it has to make sure that the spending of taxpayers' funds for this purpose is managed diligently. The Austrian Air Force is highly professional and currently uses 15 Eurofighters and the Saab 105 OE to ensure the security of Austrian airspace. It would be irresponsible to endanger this security by withdrawing hastily and without thought from our contracts with the Eurofighter suppliers. At the same time, it is the duty of the FMDS to take all necessary steps to reclaim any determined damages for the Republic of Austria. With the criminal complaint, joined by the private party, filed with the Vienna Public Prosecutors Office on February 16, 2017 all the Republic of Austria's claims relating to this matter are secured.
Would a quick settlement not be better than lengthy criminal proceedings?
Based on the findings of the Task Force Eurofighter there is a strong suspicion that two Airbus companies have used acts of deceit that are relevant in criminal law over a number of years and inflicted significant financial damages on the Republic of Austria. According to these facts, the Ministry of Defence and Sports was obliged to file a criminal complaint. The damages for the Republic of Austria were determined by joining the proceedings as a private party. The further criminal investigation and assessment is now in the hands of the relevant investigation authorities. Any compensation of claims in a civil proceeding is not affected by this.
How is the ongoing cooperation with Airbus Group affected by the criminal complaint?
The ongoing cooperation between the Austrian Armed Forces and its Eurofighter suppliers is currently on a professional level in ongoing operations. The Federal Ministry of Defence and Sports is assuming this will remain so in future as well.
Why is the criminal complaint of the Federal Ministry of Defence and Sports not published?
The criminal complaint joined by the private party, filed with Vienna Office of Private Prosecutions by the Finanzprokuratur on behalf of the Federal Ministry of Defence and Sports on February 16, 2017, will not be published so as not to compromise the investigation activities and possible personal rights.
FAQs Austrian air surveillance:
Does Austria really need interceptors?
Interceptors are essential in order to ensure the sovereignty of the Republic of Austria's air space. In the strategic element Defence Policy of the current Austrian security strategy it is clearly stated that "sovereignty of Austrian air space and Austrian air surveillance must be ensured". Surveillance and security of air space is the responsibility of the Austrian Armed Forces. In order to fulfil this task, the Austrian Air Force needs fighter planes with guided missiles, which can be used irrespective of weather conditions or time of day and which are in a position to intercept so-called "very fast aircraft" that are capable of travelling at over 900 km/h.
How is Austria's airspace currently monitored and protected?
The Austrian Armed Forces operate two fleets of jet planes. There are 15 Eurofighter planes with guided missiles in active operation. In addition, there are the Saab 105OE planes, equipped with aircraft cannons, which will remain in operation until no later than 2020.
How many and which model of interceptors did the Republic of Austria buy in 2003?
On July 1, 2003, the Republic of Austria and EADS/Eurofighter Jagdflugzeug GmbH signed a contract for the delivery of 18 Eurofighters (Contract V1) as well as a contract for equipment, logistical services, training and simulation (Contract V2). Both contracts were legally effective as of August 22, 2003. This concluded the procurement of 18 Eurofighters in Tranche 2 at a cost of EUR 1.96 billion. It was agreed that in case of late availability of Tranche 2 planes, Eurofighter planes from Tranche 1 Block 5 could be delivered, with an obligation to convert the Tranche 1 Block 5 planes to Tranche 2 Block 8. EADS/Eurofighter Jagdflugzeug GmbH was contractually bound to deliver four Eurofighter type interceptors between June 2007 and December 2007, eleven in 2008 and three more in 2009.
What were the corner stones of the 2007 settlement?
At the end of June 2007, the terms and conditions of the V1 and V2 contracts were altered significantly in a contract amendment entitled as "settlement" agreed by the Republic of Austria and Eurofighter Jagdflugzeug GmbH/EADS. The signed contract includes a "Vergleichspunktation" and "side issues". Among other things, the obligation to deliver 18 Tranche 2 Eurofighters was reduced to delivering 9 "new" and 6 "used" Tranche 1 Eurofighters, and a repayment of EUR 250 million to the Republic of Austria was agreed.
At the end of the day, which Eurofighter Type and Tranches were delivered?
As a result of the settlement, a total 15 Eurofighters with Tranche 1 configuration were delivered, some of them used.
What are the ongoing operating cost of the 15 Eurofighter interceptors?
The 15 Eurofighters currently in operation in Austria are very cost-intensive interceptors to operate because of their capabilities and specific re-equipment needs. Once they started full operation (1,050 to 1,200 flight hours p.a.) the annual system-specific operating costs rose from EUR 30 million in 2010 to over EUR 70 million in 2016, and will be about EUR 80 million in 2017. We can expect the costs to increase to over EUR 100 million per annum over the coming years. Further cost increases, not yet calculable, are also to be expected because of the necessary re-equipping of the Tranche 1 Eurofighters with Tranche 2 assembly parts.
Will the 15 Austrian Eurofighters continue to be used?
The criminal proceedings joined by the private party, filed with the Vienna Public Prosecutions Office on February 16, 2017 by the Federal Ministry of Defence and Sports, has no impact on the availability of the Austrian Eurofighters to the Austrian Air Force. The deployment of the 15 Austrian interceptors remains at the sole disposal of the Austrian Army. However, the Task Force Eurofighter report indicates the risks of the increasing operational costs and the financial and technical difficulties related to the replacement and re-fitting of the 15 Tranche 1 Eurofighters with Tranche 2 parts.
By order of the Federal Minister of Defence and Sports, Hans Peter Doskozil, a special commission within the Federal Ministry of Defence and Sports will examine all military and economic options available for ensuring effective air surveillance of the Republic of Austria. Headed by the Commander of the Air Force, Brigadier Karl Gruber, the commission will submit its recommendations by the end of June. The aim is to guarantee equally effective but more cost-efficient safeguarding of Austrian airspace, compared to today's levels.
What does the 2014 KPMG report for the Germany Federal Defence Ministry say about the Tranche 1 Eurofighter?
We also know about the problem of the rising operational costs of the Tranche 1 Eurofighter interceptors in Germany. A report done by auditing company KPMG for the Germany Federal Defence Ministry states that the Tranche 1 Eurofighters carry the risk of higher costs and a shorter life span. The KPMG experts recommend that Germany comes to a swift and clear decision on the continued use of the Tranche 1 Eurofighter and that the decision should comprise the possibility of early withdrawal from the Tranche 1 Eurofighter.
Which recommendations does the Task Force Eurofighter give with regards to air surveillance?
Based on Task Force report findings, the Federal Minister for Defence and Sport has com-missioned a working group within the ministry to examine all military and economic options available for ensuring effective air surveillance of the Republic of Austria. Headed by the Commander of the Air Force, Brigadier Karl Gruber, the commission will submit its recom-mendations by the end of June 2017. The aim is to guarantee equally effective but more cost-efficient safeguarding of Austrian airspace, compared to today's levels.
When will there be a new tendering for the Saab 105?
The Saab 105OE remains in active service until 2020 at the latest. Based on Task Force report findings, the Federal Minister for Defence and Sport has commissioned a working group within the ministry to examine all military and economic options available for ensuring effective air surveillance of the Republic of Austria. Headed by the Commander of the Air Force, Brigadier Karl Gruber, the commission will submit its recommendations by the end of June. The aim is to guarantee equally effective but more cost-efficient safeguarding of Austrian airspace, compared to today's levels.