Kockums blocks Australian propeller transfer

Swedish submarine builder Kockums, the designer of Australia's Collins-class submarines, is waiting for a High Court Judge to say whether or not the Commonwealth has the right to send propellers manufactured by Kockums to the US for repair and re-profiling. The Judge's decision could have a significant effect on the value of the government-owned Australian Submarine Corporation Pty Ltd (ASC), which the Commonwealth intends to sell in the near future.

The company sought an injunction in the High Court in Sydney on February 16 to prevent the Australian government transferring a Collins-class submarine propeller to the US until appropriate confidentiality and licensing agreements had been put in place.

The injunction was designed originally to halt the shipment of a single propeller which left Australia bound for Norfolk, Virginia, in February. Justice Murray Wilcox was expected to hand down his judgement on April 11, shortly before the propeller is due to arrive in the US. Meanwhile, the Australian government signed an undertaking February 16 that it would not release the propeller to the US Navy until April 30, pending Wilcox's judgement.

But the Australian government also admitted on the opening day of the hearing that it had already sent two other propellers, along with design drawings, to the US back in 1998 and 1999.

If Wilcox finds in Kockums's favour, it's uncertain whether this would constitute grounds for Kockums to seek damages against the Australian government for the earlier, unauthorised transfer of the propellers. A Sydney-based spokesman for Kockums, Jacquelynne Bailey of Abbott Consulting, told ADM that Kockums would not comment further until the judgement is handed down.

However, a judgement against the Australian government could have significant repercussions for Australia's relationship with Kockums and its German parent, HDW, as well as for the value of ASC.

Kockums designed the hull and main machinery, including the propellers, of the Royal Australian Navy's six Collins-class submarines which have been built by ASC at Port Adelaide. However, the RAN complained following sea trials during the mid-1990s that the submarines were too noisy and sought the help of the US Navy's Sea Systems Command (NAVSEA) to silence them.

NAVSEA designed a minor change to the propeller design which was subsequently carried out on the two earlier propellers by US propeller manufacturer John Crane Lips Inc. But this process would have exposed Kockums' technology and design secrets, the company says, and could result in the company's intellectual property leaking out to competitors.

"[The design of] A submarine's propeller is highly commercially sensitive information and must be protected. This is why propellers are covered up when they are not in the water," Gunnar Öhlund, Kockum's Executive Vice President, Submarine Division, said in a statement February 16. "The Kockums-designed propeller is one of the many reasons we make the most advanced conventional submarines in the world. Clearly it is vital that our hard-earned intellectual property be safeguarded."

As well, Öhlund said Kockums has an obligation to shield the interests of the Swedish Department of Defence, which was closely involved in developing the platform and machinery design and technology used in the Collins-class submarines.

However, senior RAN sources maintain that the Australian government's contract with Kockums allows it free access to the intellectual property in the platform and propeller design for designated purposes; also that the Commonwealth owns much of the intellectual property embodied in the propellers - a point on which Kockums disagrees and on which the contract is not specific.

Furthermore, Navy sources said, the contract allows a third party to fix any problems with the submarine hull and propeller if Kockums proved unable to resolve these to the RAN's satisfaction - and Kockums had been unable to quieten the propellers to the satisfaction of the RAN, according to a senior submariner.

An observer from Kockums's parent company, German submarine manufacturer HDW, Hans Saeger, Director of Strategic Development for the company's Naval Division, monitored the court proceedings in Sydney on behalf of the HDW main board. He returned to Germany unhappy, reliable sources said, over Australia's release of both the propellers and the design drawings to the US Navy and John Crane Lips Inc and uncertain whether to recommend that HDW maintain its business relationship with the Australian government.

The Australian government bought Kockums' 49 per cent share of ASC last October for $43.49 million in order to restructure the company and use its privatisation as a vehicle for the further rationalisation of Australia's naval construction industry. But Kockums, which was acquired by HDW in late-1999, still owns the intellectual property vested in its design work on the Collins-class submarines' hull and propeller and remains design authority for these items, responsible for ensuring the integrity of the design when modifications and enhancements are implemented on the submarines.

Australian-based advisers to HDW were unable to comment on the company's intentions regarding the forthcoming privatisation of ASC. No plan or schedule has been announced as yet by the Commonwealth for the privatisation of ASC.

By Gregor Ferguson, Adelaide