Malaysia refers NSM dispute to AGC over possible legal action

KUALA LUMPUR: The government has referred to the Attorney-General's Chambers (A-GC) regarding possible legal action against a Norwegian defence company over its failure to deliver Naval Strike Missile (NSM) anti-ship missile systems for the Royal Malaysian Navy's (RMN) Littoral Combat Ships (LCS).

Deputy Defence Minister Adly Zahari said this included pursuing a claim of more than RM1 billion against the firm for direct and indirect costs following Norway's unilateral decision to revoke the export licence for the defence system.

He said the Defence Ministry (Mindef) will finalise a decision on the replacement for the missile system requirement this year.

Apart from international legal proceedings, the government is also exploring other avenues to resolve the claims issue, he said.

"We will pursue legal action, but dealing with international law requires policy decisions. When navigating domestic and international legal processes, we must consult and refer to the A-GC before submitting proposals to the cabinet.

"Therefore, we have forwarded the matter to the A-GC. At the same time, the ministry is looking at other available options," he said when commenting on the status of Malaysia's claim notice of more than RM1 billion submitted to the Norwegian defence company.

Malaysia had paid €126 million (RM583 million), or 95 per cent of the contract value, before the export licence was revoked.

Adly said the government must ensure that any action taken protects national interests and allows the claim to be resolved according to the law.

Mindef is reviewing several procurement methods to replace the missile system, including government-to-government (G2G) cooperation.

He said Turkiye is among the countries identified as potential options, alongside several others, though the replacement system has yet to be finalised.

"We have several settlement models, whether through open tender or G2G cooperation. If we have identified the technology we want to use, G2G is usually among the preferred options.

"We will finalise the replacement system soon," he said.

Norway permanently revoked the export licence for the NSM system to Malaysia on April 20, with the decision communicated to Mindef by Norway's deputy foreign minister.

In a related development, Adly said Mindef will not compromise on the technical specifications of the LCS, despite a delivery delay for the first RMN vessel to April next year.

He said ongoing sea trials must ensure that all systems and ship capabilities meet the required specifications before the vessel is accepted for operations.

Mindef has also stationed officers at Lumut Naval Shipyard (Lunas) to monitor construction and testing, ensuring any deficiencies are identified and rectified prior to handover.

"We were supposed to receive the LCS by the end of this year, but there were several technical factors. Our role is to ensure construction meets specifications. Matters regarding construction, payment, and LCS development have been handed over to the Finance Ministry and Lunas.

"We do not compromise on technical aspects, and when it is handed over to us, it must meet specifications," he said, adding that following sea trials, the ship will return to dock for rectification work if any deficiencies arise.