Elbit sues government over cancelled contract

When two countries with very close defence relations find themselves at odds, strange things can happen.

The damage to relations between Turkey and Israel was a direct result of Israel’s decision to stop any attempt to break the blockade of Gaza. In 2010 Israeli navy commandoes boarded a ship sailing from Turkey and used firearms when they were attacked. Nine Turks were killed in the raid.

Negotiations about big defence contracts were halted. Contracts in the performance stage were disrupted and Israeli companies were ordered to stop any further negotiations with the Turkish defence establishment.

The latest potential victim of this situation is the Israeli government.

Last week Elbit Systems filed a $74 million compensation suit against the Israeli government for cancelling a contract to supply advanced aerial reconnaissance systems to Turkey.

In late 2011, the Ministry of Defense ordered Elop, an Elbit subsidiary, to cancel the sale of a long-range oblique photography optical system to the Turkish air force.

The podded system creates a precise image even at ranges of more than a 100km in problematic weather and in low visibility.

Elbit Systems said on November 8 that it was compelled to file a lawsuit against the Israeli government for damages and expenses caused in connection with the cancellation of export licences for a project of a foreign customer.

It said: “This followed the unsuccessful efforts to reach an appropriate compensatory settlement with the government. The approximately $74 million lawsuit was filed with the District Court of the Central Region.”

It would not be the first time that the Israeli government has had to compensate a domestic defence company because of politics. 

In 2000, when Israel Aerospace Industries (IAI) was about to deliver an airborne early warning system to China, Washington complained and the aircraft did not go. IAI had to compensate China and the company was compensated by the Israeli government.

The Israeli defence and aerospace industries are in a very volatile position. Some potential clients are prohibited, due to decisions by the Israeli and US governments. 

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