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Eurotrain fights back in Taiwan tussle

01 Mar 2000

ON FEBRUARY 10 Eurotrain lodged an appeal with the High Court in Taipei in a further round in its battle to obtain the contract to supply electrical and mechanical equipment for Taiwan's high speed line from Taipei to Kaohsiung. On December 28 Taiwan High Speed Rail Corp had announced that the Japanese-backed Taiwan Shinkansen Consortium had been chosen as the 'priority party for negotiation' for the NT$95bn E&M package, which includes rolling stock. This prompted Eurotrain to apply on January 12 for a provisional injunction with the Taipei District Court to try and halt negotiations between THSRC and TSC (RG 2.00 p63). On February 1 the court dismissed Eurotrain's complaint.

The European group, formed of Siemens and Alstom, is not backing down quietly. On January 30 a letter signed by EU Commissioner for External Relations Chris Patten was sent to the Executive Yuan and the Presidential Office in Taiwan. It suggested that the process of E&M procurement did not meet the principles of fairness, transparency and objectivity, and hinted that this could affect the EU's view on Taiwan's ambition to enter the World Trade Organisation. In addition, government representatives from Britain, France and Germany were dispatched to Taiwan for discussions on January 28, where they met THSRC boss Nita Ing, but to no effect.

On February 2 THSRC signed an agreement with a consortium of 25 banks for syndicated loans worth NT$323·3bn. Agreement was also reached for the Ministry of Transport and the Ministry of Finance to guarantee the loan. The agreements should pave the way for major works on the 345 km line to begin later this year, following the award on January 10 of four civil engineering contracts.

Whether Eurotrain has any chance of winning back its lost deal is unclear. In mid-February further delays in signature of the main contract were reported, apparently because of negotiations between Taiwanese and Japanese banks over loans and export credits.

The official reasons for THSRC's choice of TSC were pricing and finance. But Eurotrain claims that it has been given no details, and is basing its claim against THSRC on agreements dating back to 1997 when it was a partner in the THSRC consortium. When the consortium's legal status changed to a company in June 1998, Eurotrain became a 'promoter'. According to Eurotrain, it had an exclusive agreement with the consortium to be the E&M supplier, and with the consortium's change in status it still had right of first refusal.

By May 1999 it had become clear that the Japanese were again a possible E&M supplier, but Eurotrain says it treated this move by THSRC as 'a benchmarking exercise'. THSRC then went through a detailed rebidding process, requiring resubmission of E&M offers on June 15. A second resubmission was required by mid-August, at which point THSRC's evaluation team was apparently reshuffled. A 'best and final offer' was requested in mid-November for submission by December 3, and, as on the two previous occasions, both Eurotrain and TSC responded. This led to the December 28 announcement.

Meanwhile, a new Taiwanese president is due to be elected on March 18, and there seems little doubt that before then THSRC wants the ink dry on contracts to ensure the line is built and equipped for revenue service by 2005. But in mid-February Eurotrain was still lobbying heavily against what it sees as a decision based on politics rather than finance and pricing.

CAPTION: THSRC Chairman Nita Ing addresses the finance signing ceremony on February 2