Under the ruling, Thales, formerly known as Thomson-CSF, will have to pay 27 per cent of the compensation and the French government the rest. This includes interest and arbitration and lawyers' fees.

The court said that when Taiwan signed the warship deal with Thomson-CSF, which worked with French state-owned shipbuilder DCN to win the US$2.8 billion contract from Taipei, an article in the deal forbade the use of brokers or the paying of commissions. The court later found proof of the involvement of a Taiwanese middleman, identified as Andrew Wang Chuan-pu, who served as an agent for Thomson-CSF to facilitate the deal.

'We welcome such a ruling as the case affects our national interests and the military's reputation,' Taiwan's vice-defence minister, Chao Shih-chang, said at a news conference in Taipei yesterday.

Thales said that it would fight the ruling because it 'disputes the very grounds of this decision', prompting Chao to say that Taiwan would continue to hire lawyers and pursue legal proceedings to make Thales comply with the arbitration ruling.

Lo Chih-chiang, spokesman for Taiwanese President Ma Ying-jeou, said Ma was pleased by the ruling. 'The president also expressed his support for the defence ministry over its persistent stand in refusing to reach a compromise with the French company out of court,' Lo said.

Taiwanese media said the French authorities, worried that they might lose the case, filed by the Taiwanese navy in 2001, had tried to seek a compromise with Taiwan.

The reports said that in 2007, while Chen Shui-bian was Taiwan's president, France even offered to sell arms to Taiwan in lieu of any compensation.

The reports said the premature exposure of the plan led the Kuomintang to insist that the defence ministry not accept the bargain.

However, Chao said yesterday that he had never heard of such a proposal.

Prosecutor-general Huang Shih-ming said yesterday he would ask Swiss authorities to continue to freeze hundreds of millions of US dollars in an alleged slush fund held in Swiss bank accounts by Wang, the middleman.

Wang fled Taiwan shortly after navy captain Yin Ching-feng, who was about to blow the whistle on kickbacks and bribery in the deal, was found dead in December 1993. Taiwanese prosecutors officially charged Wang with murder and bribery in 2000, in his absence.

Swiss authorities have frozen about US$900 million in Wang's bank accounts since 2001, when the Taiwanese navy filed for arbitration. The amount was said to have been reduced to US$700 million in March last year due to depreciation and the financial crisis, according to Taiwanese investigators sent to discuss the possible return of the funds with Swiss authorities.

Taiwanese prosecutors said it would be difficult for the Swiss authorities to return the funds before Wang was sentenced.

Under Taiwanese law, a court cannot order the confiscation of suspected illicit gains until the person charged has been convicted and sentenced.

Prosecutor Chiu Chih-hung said that Ministry of Justice was considering whether to revise the law to allow the courts to issue such rulings after a defendant or suspect had been on the run for six months.

Key dates in the scandal

May 17, 1988 Teng-hui approves navy plan to buy 16 Ulsan-class frigates from South Korea

May 17, 1988 Taiwanese president Lee Teng-hui approves navy plan to buy 16 Ulsan-class frigates from South Korea

Oct 5, 1989 plan changed to buy six Lafayette frigates after premier Hau Pei-tsun and five top navy officials visit France Jan 9, 1990 French president Francois Mitterrand declares moratorium on sale of Lafayette frigates under pressure from Beijing

July 19, 1990 French arms supplier Thomson-CSF signs contract with Paris-based company with mainland background to persuade Beijing to compromise.

June 14, 1991 Mitterrand approves French prime minister Edith Cresson?s proposal to resume Lafayette sale

Aug 31, 1991 Taiwan and Thomson-CSF sign Lafayette sale contract, which prohibits payment of commissions

Sep 9, 1993 Taiwanese naval captain Yin Ching-feng poisoned three months after paying inspection trip to France

Dec 19, 1993 Thomson-CSF representative Andrew Wang flees Taiwan after being asked to assist investigation into Yin?s death

March 9, 1998 former French foreign minister Roland Dumas says Lafayette deal involved payment of US$500 million in commissions

July 31, 2000 Taiwanese president Chen Shui-bian announces creation of team

June 13, 2007 Swiss authorities return to Taiwan US$34 million in frozen bank deposits believed to be kickbacks paid to Wang

May 3, 2010 international court rules Thomson-CSF violated provision in contract and told to pay a penalty of US$591 million plus interest, litigation fees and other expenses to probe Lafayette scandal