Airbus considers legal action against Germany's ban on Saudi arms sales

In late March, Germany extended the ban on arms exports to Saudi Arabia until the end of September, with a few exceptions

Airbus A320neo

Airbus is considering suing the German government as its freeze on arms exports to Saudi Arabia means the company is unable to complete a border security system for the Gulf state, two people familiar with the matter said.

In October, Germany decided to reject future arms exports licences to Saudi Arabia over the killing of journalist Jamal Khashoggi, and to freeze deliveries of already approved equipment - a move that infuriated allies and defence companies.

Airbus is looking at taking legal action against Berlin over the security system for the border between Saudi Arabia and Yemen - a contract worth some 3 billion euros ($3.36 billion), of which around 1 billion euros remains open, the sources said.

"We are looking at an action for failure to act," said one source familiar with the matter, speaking on Sunday on condition of anonymity. "We want to force the federal government to decide now."

Airbus declined to comment.

The German government has said it could not comment on any potential corporate compensation claims as a result of the Saudi arms export ban until any materialise.

It was not immediately clear where in Germany or when any lawsuit would be filed.

In late March, Germany extended the ban on arms exports to Saudi Arabia until the end of September, with a few exceptions.

The border system for Saudi Arabia consists of radars, drones and command posts for guards.

"We are not talking about an offensive weapon here, but about a border security system," the source said.

Airbus, which had to make risk provisions of 300 million euros due to non-completion of the contract, feels an obligation to take legal action to show its customers, shareholders and suppliers that it is doing everything it can to complete the contract, the source said.

In February, company sources told Reuters that Airbus had decided to redesign the C295 military transport aircraft it builds in Spain to remove German components following Germany's freeze on arms exports to Saudi Arabia.