Australia to pay French company $830 million over scrapped submarine deal

The Australian government will pay a huge compensation sum to French company Naval Group over the scrapped submarines deal.

The Albanese government has reached an $830 million settlement with French shipbuilder Naval Group after last year’s decision to scrap a $90 billion contract to build 12 submarines.

Prime Minister Anthony Albanese said on Saturday his government had agreed on the deal after the Morrison government’s decision to scrap the contract.

The contract was scrapped by the Morrison Government following advice on the capability requirements of the Australian Defence Force.

Australia will settle the dispute for $830 million, but since the deal has been scrapped, it will essentially receive nothing in return.

Labor supported this advice while in opposition but Mr Albanese said the way the government handled the decision caused “enormous tension” in the relationship between Australia and its “important ally” France.

While some details would remain confidential, Mr Albanese said Australia would pay the Naval Group $555 million euros ($AUD 830 million), bringing the total cost of the dumped policy to $3.4 billion.

The government will pay $830m over the scrapped deal. Picture: NewsWire / Monique Harmer

“This is a fair and an equitable settlement that has been reached,” Mr Albanese said.

“It follows as well as discussions that I’ve had with President Macron and I thank him for those discussions and the cordial way in which we are establishing a better relationship between Australia and France.

“It brings the total cost of the former government’s failed policy to $3.4 billion. This is a savings from the $5.5 billion that Senate estimates was told would result from that program.

“But it still represents an extraordinary waste from a government that was always big on announcement but not good on delivery and from a government that will be remembered as the most wasteful government in Australia’s history since Federation.

“Tens of billions of dollars wasted across a range of programs that have resulted, of course in, have contributed to, the trillion dollars of debt that the incoming Labor Government has inherited.”

Mr Albanese, pictured on Saturday, making the announcement. Photo: NewsWire/Monique Harmer

Mr Albanese said France was an important ally for Australia.

“(An ally that) we have a history of fighting alongside in two world wars and an ally that has a significant presence in the Pacific at a time when tension in the Indo-Pacific means that we need to work with our partners,” he said.

The French submarine program was abandoned last year when the Morrison government announced it would pursue nuclear-powered submarines under the AUKUS partnership with the United Kingdom and United States.

Scott Morrison defended tearing up the contract for French submarines as “exactly the right decision to make for Australia”.

Mr Morrison in April said Australia’s strategic environment had changed since the French deal was inked in 2016 to the extent that its submarines wouldn’t have been suitable.