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Astrium Seeks 24.5 Million Euros from Conax

Satellite primecontractor Astrium of Europe is asking an international arbitration panel for24.5 million euros ($37.8 million) in damages from Conax of Florida, a builderof satellite propulsion components, in a legal battle that began following apropulsion failure on board a commercial telecommunications satellite,according to industry officials and court documents.

In a dispute that ConaxFlorida Corp. of St. Petersburg wanted to resolve in a U.S. District Court,Astrium is arguing that an on-site inspection of Conax following the satelliteproblem found cracks in numerous Conax-built pyrovalves.

The satellite inquestion, the Amazonasspacecraft owned by Hispasat of Spain and launched in August 2004, continues tooperate but its planned 15-year in-orbit life has been reduced by up to fiveyears, according to Hispasat estimates.

Industry officials saidinsurance underwriters already have paid a partial settlement to Hispasat butare withholding any remaining payment until they are more certain of how muchoperating life Amazonas has left.

Officials said thatfollowing standard industry practice, Hispasat prime contractor Astriumestablished a board of inquiry to determine the cause of the propulsion systemleak. Officials said that following a lengthy investigation, the inquiryconcluded that a defective pyrovalve is the most probable cause of the Amazonasleak.

It was during thisinvestigation that Astrium visited Conax to oversee delivery of the last offour batches of pyrovalves — 406 in all — to be delivered between 2001 and2005. Pyrovalves are used to isolate segments of a satellite's propulsionsystem until needed during operations. They are also used on rockets.

Conax, which is owned byCobham plc of Dorset, England, is a major producer of pyrovalves for satellitesand launch vehicles.

According to documents onfile at the U.S. District Court for Middle District of Florida, where Conaxsought to settle the Astriumdispute, Astrium discovered cracking in one or more Conax pyrovalves during avisit to Conax in June 2005.

Astrium then asked for are-inspection of pyrovalves already built and made ready for shipment. "[F]urtherexamination of earlier batches of pyrovalves also showed cracking,"according to a July 18, 2007, court filing before the case was transferred toan International Chamber of Commerce arbitration panel in London.

Astrium demanded 24.5million euros in damages from Conax. Conax officials said this amount wasexcessive given the value of the contract. According to the U.S. DistrictCourt, Conax "concedes that its pyrovalves failed, but it disputes thescope of its liability."

But Conax's attorney,Charles M. Harris of the St. Petersburg law firm Trenham, Kemker, Scharf,Barkin, Frye, O'Neill & Mullis, said the company has no knowledge of anyconnection between the defect that led to the Astrium dispute and the leak onboard Amazonas.

In an April 17 interview,Harris expressed surprise that Conax's name has been linked to the Amazonasfailure. He said that Conax no longer supplies pyrovalves to Astrium notbecause Astrium has refused delivery, but because Conax has refused to makeshipments. Astrium, he said, has insisted on an open-ended product-liabilityregime that Conax cannot accept.

Astrium spokesman Patricede Lanversin said the company would decline to comment on the Conax dispute,and also would decline to comment on the Amazonas failure review.

Elizabeth Bolint, directorof contracts and legal counsel at Conax, declined to discuss whether Conax hadparticipated in Astrium's Amazonas investigation. Industry officials saidfailure investigations normally would include the full participation of anycompany whose product was thought to be suspected in a failure. Companyofficials also would be asked to approve the inquiry's conclusions andrecommendations.

In addition to Astrium,insurance underwriters apprised of the conclusions of the board of inquirywould have made sure that no other insured satellites under constructioncarried the suspected gear without being re-examined in light of theinvestigation, according to insurance and satellite industry officials.

Bolint declined todiscuss the Astrium arbitration. Asked whether Conax has modified itsproduction or inspection processes in light of the Amazonas issues, Conaxresponded April 24 with the following statement: "Conax has been supplyingthe space industry with pyrovalves since the Mercury program and our mostrecent success was noted on April 14th with the launch of Atlas 421 using over10 Conax pyrovalves.

"As ageneral rule, our products are customized per customer requirements withreference to relevant flight history and qualification test procedures. Conaxhas continued to follow its standard practice of being very open with itscustomers and with the space community. However, it follows from customizationthat details affecting any one customer's pyrovalves are not valid for thevalves of another customer."

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