Setback for Damen as German navy cancels €18bn frigate contract

Troubled Dutch shipbuilder Damen has suffered a fresh blow after the German government cancelled an €18 billion order to build six new frigates for its navy.

Damen, based in Gorinchem, was hired as lead contractor two years ago to build the ships in Kiel and Hamburg, but ran into difficulties and had to seek extra funding from the Dutch government.

The lead contractor role was passed to NVL, a subsidiary of German steel firm Rheinmetall, after construction was delayed because one of its subcontractors failed to deliver the drawings on time, but Damen retained its involvement in the project.

The government issued a bridging loan for €270 million to keep Damen afloat after the German navy withheld payments as a result of the delays.

The exact consequences of the decision to cancel the contract are not known. A spokesperson for Damen said the company was still studying the decision and would comment later.

The company is also currently on trial facing allegations of large-scale bribery and exporting ship components to Russia in breach of EU sanctions.

The hearings, which began in Zwolle in November, are expected to take years and centre on investigations into the activities of president-commissioner Kommer Damen, current chief executive Arnout Damen and former chief executive René Berkvens.

The charge sheet reportedly runs to 89 pages and includes alleged covert payments to officials at Brazilian oil group Petrobras and the port authority on Curaçao, as well as undisclosed commission arrangements in Sierra Leone, Togo, Ghana, the Bahamas, Trinidad and Tobago and Indonesia.

Prosecutors also claim that Damen used incorrect export codes in 2022 to conceal that ship hulls sent by it to Russia fell under sanctions.

It is the first time a major European defence contractor has faced prosecution for sanctions-busting.

Damen, which has annual revenues of €3 billion, is the Netherlands’ largest shipbuilder and the country’s only marine yard capable of producing naval vessels.