State Public Prosecutor-General Chen Tsung-ming made the remarks while fielding questions at a Legislative Yuan committee meeting after recent news reports said a Swiss federal court revoked earlier this month a 1996 court ruling that determined the French contractor paid kickbacks on the Lafayette deal in violation of its contract with Taiwan.

According to the news report, the Swiss court's about-face ruling might adversely affect Taiwan's chances of winning an international commercial arbitration that is still under way in Paris.

Taiwan has demanded the repayment of US$520 million in unlawful kickbacks from Thales -- the French company that sold six Lafayette frigates for US$2.5 billion to the country in 1991 under its previous name of Thomson-CSF.

Under Article 18 of the contract, the French contractor was prohibited from making any kind of commission payment.

In the arbitration petition, Taiwan is also demanding payment of 17 years' worth of interest on the money.

Over the ensuing years, the French contractor has insisted that it did not pay any commission to secure the deal, but the French government has refused to unveil any information about the money trail, citing the need to protect its defense security, which has made it difficult to resolve the case.

Local media reports said the latest Swiss court ruling seems to back the French claim and could eventually lead to Taiwan's loss in the arbitration process.

Responding to lawmakers' concerns about the prospects for the case, Chen said the Oct. 8 Swiss court ruling clearly states that all the Taiwan-related Lafayette slush fund will remain frozen in a Swiss bank account at Taiwan's request.

Chen was referring to US$495 million in unlawful kickbacks on the Lafayette deal paid to Andrew Wang, the middleman who was Thompson-CSF's agent in Taiwan.

Chen said the Swiss court writ will remain in place until after a Taiwanese court has made a final ruling on the Wang-related corruption case.

According to the Taiwanese investigation, Thompson-CSF paid the US$495 million to Wang and a further US$25 million to Alfred Sirven, a former vice chairman of the French oil firm Elf-Aquitaine. Sirven is alleged to have played the role of money launderer and allocator of the kickbacks.

Wang fled Taiwan in late 1993 following the death of Navy Captain Yin Ching-feng under suspicious circumstances. Yin is believed to have been poised to blow the whistle on colleagues who had allegedly received kickbacks from the Lafayette deal. Wang has been wanted by the Taiwanese authorities for Yin's murder since September 2000.

(By Sofia Wu)