French train maker Alstom SA ALSMY is locked in a dispute with Montreal-based Bombardier Inc. BBD-B-T over its purchase of the Canadian company’s train business and wants the International Chamber of Commerce’s International Court of Arbitration to settle the matter.
Officials with both companies confirmed late Monday that Alstom had filed a request for arbitration before the ICC concerning Alstom’s purchase of Bombardier’s rail unit last year for about €5.5-billion (about US$6-billion at the time). The court administers the chamber’s dispute settlement process.
Alstom is alleging that Bombardier is in breach of certain contractual provisions of the sale and purchase agreement. The French company declined to specify the nature of the breach, saying the proceedings are confidential. Michelle Stein, a spokesperson for the company, declined to comment further.
Bombardier said in a statement it has “good grounds” to defend itself against the claim and would do so. It said it also intends to challenge certain purchase price adjustments, which resulted in proceeds from the sale being lower than initially expected.
The arbitration proceedings could last several years, the statement said. Mark Masluch, a Bombardier spokesperson, declined to comment further.
Crushed by a debt load that made it impossible to support both an aircraft manufacturing operation and a train-making business, Bombardier sold the rail unit in January 2021, marking the end of a 50-year push into trains that started in 1970 with the acquisition of Austrian tram maker Lohnerwerke. The company is now staking its future on business jets, betting that billionaires and executives who want to travel privately will supply a steady stream of new jet orders and keep maintenance and service centres busy.
Bombardier and Alstom have been at odds over the transaction terms virtually since the agreement was finalized. When Bombardier explained last January why its net proceeds from the sale were about US$400-million less than the US$4-billion previously communicated, the company said lower-than-expected cash generation at the rail business during one quarter, as well as “disagreements between the parties” about adjustments, accounted for the lower price.
Alstom chief executive Henri Poupart-Lafarge said in an interview when the deal closed that it would take several years for the French train maker to fix Bombardier’s rail business. “There is no miracle,” to getting the unit back to making steady profits, he said. “[But] the potential is there. And that is extremely important.”
Norway’s sovereign wealth fund – the world’s largest, with US$1.3-trillion in assets – is weighing whether to pull its investment in Bombardier over ethical concerns. Norges Bank, the country’s central bank, which manages the fund, said earlier this year that the Canadian multinational will be put under observation for two years because of an “unacceptable risk that the company contributes to, or is responsible for, gross corruption.”
The World Bank alleged in a preliminary audit that Bombardier used corruption and collusion to win a rail-signalling systems contract in 2013 in the former Soviet state of Azerbaijan, then obstructed an investigation of the deal. The company has disputed the findings and has filed a response to the audit process.
The World Bank, which financed the bulk of the project, has yet to release its final conclusions.
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