Bloomberg reports that the outlook for Damen Shipyards, the Netherlands’ largest shipbuilding group, appears bleak. Since completing the naming ceremony for the “Den Helder” combat support ship in February this year, the renowned shipyard has been plunged into crisis: accused by Dutch prosecutors of corruption and violating sanctions, and with project milestone payments frozen by the owner due to construction delays. Damen Shipyards is already facing a severe cash shortage.
Since the naming ceremony for the combat support ship De Heijde in February this year, the renowned shipyard has been plunged into crisis: facing corruption allegations and sanctions violations charges from Dutch prosecutors, while shipowner payments have been frozen due to construction delays. Damen Shipyards is now grappling with severe cash flow shortages.
Reports indicate that Damen Shipyards’ situation has unsettled its NATO clients, given considerations of international relations and geopolitics. Should Damen be convicted, it could face penalties including fines and bidding bans—a blow that would severely impact both the company and Dutch industry, thereby significantly disrupting Europe’s rearmament plans.
The relevant legal proceedings are expected to commence in November. Sebastiaan Bennink, partner at Amsterdam law firm Bennink Dunin-Wasowicz, stated: “A conviction against Damen Shipyards would deal a severe blow to the Dutch shipbuilding industry. Damen Shipyards plays a crucial role in Europe’s military capabilities.”
Accused of corruption and violations, Damen Shipyards faces mounting crises.
In April this year, Dutch prosecutors announced they would file related lawsuits against Damen Shipyards for corruption and sanctions violations. Previously, separate criminal investigations had been launched into Damen Shipyards’ alleged bribery, document forgery, and money laundering activities between 2006 and 2017, as well as its violations of European sanctions against Russia following the 2022 Russia-Ukraine conflict.
According to a statement from Dutch prosecutors, the prohibited allegations concern “goods and technologies that could potentially bolster Russia’s military-technical capabilities and defense sector development.” Authorities determined that Damen Shipyards supplied “a very small number of civilian cranes to Russia. The deliveries occurred within the framework of sanctions regulations in effect at the time.”
In response, Damen Shipyards emphasized that it “has always adhered to applicable sanctions regimes and maintained complete transparency in its commercial activities.” Damen Shipyards executives declined to comment beyond the statement.
Under Dutch law, deliberate violations of sanctions or export controls constitute criminal offenses. If a judge deems the standard fine of over €1 million insufficient, they may impose a penalty equivalent to 10% of the company’s annual revenue. According to financial reports submitted to the Dutch Chamber of Commerce, Damen Shipyards generated revenues exceeding €3 billion in 2023. A criminal conviction could also result in the company losing eligibility to bid on European contracts.
Regarding the corruption case that has plagued Damen Shipyards for years, Dutch prosecutors allege that between 2006 and January 2017, certain new ship orders at Damen Shipyards involved dishonest transactions. Specifically, the company may have concealed the true sources of funds through bribery, document forgery, or money laundering activities.
In 2016, the World Bank banned Damen Shipyards from participating in its projects for 18 months on the grounds that the company had concealed the agency and commission structure in the “West African Regional Fisheries Program” and engaged in fraud; in 2017, local media reported that the Dutch tax investigation department raided Damen Shipyards’ headquarters to investigate overseas corruption.
The trial for the Damen Shipyards corruption case is scheduled to commence on November 24 this year, with charges to be brought against the company’s former and current directors. The trial concerning sanctions violations will begin before year-end, though the exact date remains undetermined.
Construction progress stalled, Damen Shipyards faces cash flow crisis.
In addition to facing allegations of corruption and sanctions violations, Damen Shipyards is also experiencing cash flow problems.
Due to software issues, the construction of the German F126 frigate project undertaken by Damen Shipyards has been hindered, failing to meet the milestone dates set by the German Navy as required by the contract. Consequently, Germany has recently frozen the €671 million milestone payment for the frigate project that was due to Damen Shipyards. The total value of this German frigate order amounts to €9 billion.
Due to the inability to secure funding, Damen Shipyards immediately faced “temporary cash flow issues.” Considering the company’s significance to the Dutch shipbuilding industry and broader industrial sector, the Dutch parliament approved €270 million in state aid for the company at the end of July to prevent its financial crisis from worsening.
However, Damen Shipyards stated that it has no overall financial issues, and the German Ministry of Defense also indicated that the project will continue to move forward.
Currently, Damen Shipyards is constructing two anti-submarine frigates for the Netherlands, two frigates for Belgium, and the F126-class frigate for Germany—the largest vessel currently in service with the German Navy. The company is also responsible for designing the Royal Netherlands Navy’s new air defense command frigate and amphibious transport ship.
Nick Childs, Senior Research Fellow for Naval Power and Maritime Security at the International Institute for Strategic Studies, noted: “If Damen Shipyards fails to complete these projects, friendly nations will struggle to pick up the pieces during this critical period. Europe has a very limited number of shipyards capable of building high-end, complex warships.”
Mired in scandal, Damen Shipyards faces charges from the Romanian government.
In addition to the aforementioned crises, Damen Shipyards has been accused by the Romanian government of misappropriating €55 million from the Romanian Damen Mangalia Shipyard (“Mangalia Shipyard”). This “illegal transaction” led to the shipyard’s bankruptcy, leaving thousands of workers in dire straits and unemployed. Both Damen Shipyards and the Romanian government are shareholders in the Mangalia Shipyard.
According to allegations by the Romanian government, between 2021 and 2024, Damen Shipyards artificially inflated the shipyard’s debt by entering into contracts with its subsidiaries. Compared to previous years, the Mangalia shipyard carried out minimal actual shipbuilding work.
The Romanian government stated that Damen Shipyards failed to adequately explain the calculation method for the invoice amount. Romanian tax authorities claimed the company’s actions were suspected of violating the law.
Based on this substantial debt, which the Romanian government claims is “false,” Damen Shipyards became the largest creditor of the Mangalia Shipyard, enabling it to influence the shipyard’s bankruptcy proceedings. Despite repeated requests from the Romanian government, Damen Shipyards did not instruct the judicial administrator to investigate the “illegal transactions.”
Additionally, Damen Shipyards has blocked the establishment of an independent committee tasked with overseeing the administrator and bankruptcy proceedings, a move deemed unlawful by Romanian tax authorities.
Under Romanian law, cases involving numerous creditors require the establishment of such a supervisory committee. Although the law does not explicitly stipulate the number of creditors, the aforementioned case involves nearly 200 creditors, to whom the bankrupt shipyard still owes a combined total of €200 million.
According to its official website, Damen Shipyards was founded in 1927 and boasts nearly a century of history. It has delivered over 6,000 vessels worldwide, operates 55 subsidiaries globally, and employs approximately 12,000 people. For many years, Damen Shipyards has been a key player in the Dutch and European shipbuilding industry, particularly in Dutch naval vessel projects and initiatives for other nations.