Norway and Airbus-led NHIndustries settle NH90 helicopter dispute, avoiding rare trial

By Terje Solsvik, Gwladys Fouche and Tim Hepher

OSLO/PARIS (Reuters) -Norway and a trio of European aerospace manufacturers agreed on Monday to settle mutual claims for damages after the NATO nation axed an order for delayed NH90 submarine-hunting helicopters, heading off a potentially awkward defence industry trial.

NHIndustries and owners Airbus, Leonardo and GKN Fokker agreed to pay 305 million euros ($355.7 million) on top of 70 million already paid and take back the mothballed helicopters and parts, the two sides said in a joint statement.

That is a fraction of the 2.86 billion euros Norway had claimed, part of which was meant to cover the cost of buying U.S.-made replacements, but the companies agreed as part of the deal to drop their own damages claim for 730 million euros.

SETTLEMENT AVOIDS TRIAL OVER NH90 SUB-HUNTING HELICOPTERS

The settlement, confirming a deal reported earlier by Reuters, came one week before the scheduled start of five months of Oslo hearings in what was seen as an unusually sensitive case as NATO rearms to counter submarine threats in Europe's north.

Norway is NATO's monitor for a 2 million square kilometre (772,000 square miles) area of the North Atlantic. Russia's Northern Fleet has its base on the Kola Peninsula, an area in the Arctic bordering Norway.

The NH90 army and navy helicopter first flew almost 30 years ago and is one of Europe's flagship arms projects. It boasts the first fully computerised controls for a military helicopter but has been plagued by criticism over delays and maintenance.

The settlement ends a procurement saga which has dragged on for almost a quarter of a century since Norway ordered 14 NH90s in 2001 to provide a unified coastguard and naval frigate fleet.

In 2022, Norway said it would cancel the NH90 over delays and maintenance problems and seek a refund from the consortium, which called the move "legally groundless". In 2023, Sweden threatened to follow suit and Australia sped up the retirement of its own fleet.

The Norwegian defence ministry has said deliveries should have been completed by the end of 2008 but that it faced more than a decade of delays and missing parts, hampering operations.

NORWAY CLAIMS NH90 PROBLEMS WERE "ALMOST UNPARALLELED"

Preparations for a much-anticipated public trial starting on November 10, including arrangements for handling classified material, had pushed ahead after attempts at mediation failed.

Although some hearings were expected to be held behind closed doors, the case was set to expose significant shortfalls after a state filing called NH90 problems "almost unparalleled in any other contract for the manufacturing of military equipment".

The first partially completed helicopter was delivered six years late and it was not until 16 years after the contract was signed that the first fully operational aircraft was deployed - 12 years behind schedule, the government said in its complaint.

By the time the contract was cancelled in 2022, Norway was on average getting 100 flight hours per year out of its NH90 helicopters, compared with a target of 400 per year, it added.

Norway's claim had included 2.1 billion euros to cover the purchase of replacement Seahawks from Lockheed Martin's Sikorsky, according to the filings reviewed by Reuters.

In its counterclaim, NHIndustries acknowledged that the project had faced difficulties and partially blamed delays in agreeing specifications. Norway's requirements include operating reliably in harsh weather along Europe's longest coastline.

But it called the size of the claim "shockingly inflated" and noted that some of the helicopters had been used for years.

NHIndustries has said it has turned the corner on the availability of NH90 support and is preparing upgraded versions.

($1 = 0.8575 euros)

(Reporting by Tim Hepher, Gwladys Fouche and Terje Solsvik, Editing by Anna Ringstrom, Kirsten Donovan)