Australia reaches US$584m settlement with France’s Naval Group for axing submarine deal

PM Anthony Albanese said the French firm had agreed to a ‘fair and an equitable settlement’ for ending the multibillion-dollar contract

Former leader Scott Morrison scrapped the deal in favour of a pact to buy US or British nuclear-powered submarines, amid China’s increasing activities in the region

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The HMAS Waller, a Collins-class submarine operated by the Royal Australian Navy. File photo: AFP

Published: 11:30am, 11 Jun 2022Updated: 2:28pm, 11 Jun 2022

Australia on Saturday announced a massive compensation deal with France’s Naval Group for scrapping a landmark contract to build a fleet of diesel submarines.

Prime Minister Anthony Albanese said the French firm had agreed to a “fair and an equitable settlement” of €555 million (US$584 million) for ending the multibillion-dollar contract.

The deal draws a line under a spat that derailed relations between both countries and threatened to torpedo talks on an EU-Australia trade agreement.

Naval Group has agreed to a US$584 million compensation deal with Australia. Photo: AFP

In September 2021, then-Australian prime minister Scott Morrison abruptly ripped up the French contract to build a dozen diesel-powered submarines.

He also stunned Paris by announcing a secret deal to buy US or British nuclear-powered submarines, a major shift for a country with little domestic nuclear capability.

The decision drew fury from French President Emmanuel Macron, who publicly accused Morrison of lying and recalled his ambassador from Australia in protest.

Relations were on ice until this May when Australia elected centre-left leader Albanese.