05/02/2012 06:02 EDT | Updated 07/02/2012 05:12 EDT

Canada Submarine Deal: Compensation Was Demanded After U.K. Subs Proved Glitch-Prone


Canada demanded compensation for its glitch-prone, second-hand submarines just four years after they were bought from the British, CBC News has learned.

The four used Victoria-class Royal Navy submarines were bought from the U.K. in 1998 for a price of $750 million.

In a letter obtained by CBC News, the British junior minister of defence wrote the Canadian government first asked for compensation for the submarines in 2002.

"I can confirm that in 2002 and 2004, the Canadian government asked for compensation to be paid for the submarines due to concerns about their condition and ability to meet the Canadian requirements," wrote Peter Luff.

"The Ministry of Defence did not pay any compensation; however, an amendment to the contract was agreed where the cost of the final submarine was reduced by £2 million as an act of good faith and without liability."

After that compensation demand, the final price of the submarines was about $746 million. Since then, the Department of National Defence has pumped more than $1 billion into repairing and converting them for Canadian use.

The Royal Canadian Navy declined to comment and referred all questions to Public Works, which has not responded.

The submarines have been beset with problems, including a fatal fire aboard one boat and another that was damaged when it ran aground.

Successive governments and Royal Canadian Navy officials have staunchly defended the purchase of the subs, but one British MP said the fact that Canada asked for compensation tells a different story.

'Canada was shafted'

"It just shows you how badly Canada was shafted," said Mike Hancock, the Liberal Democrat MP for Portsmouth South.

Hancock, a member of Britain's coalition government, has been vocally questioning the submarine sale. The vessels had been based in his Portsmouth riding before they were decommissioned in 1993 when the U.K. decided to focus solely on nuclear subs.

Hancock said the letter he received from Luff in mid-April confirmed his worst suspicions.

"They flog you some dead ducks of submarines and won't give you compensation and then give you £2 million to go away and be quiet," he told CBC News.

Canada renamed the submarines after four of its cities: HMCS Chicoutimi, HMCS Corner Brook, HMCS Windsor and HMCS Victoria.

HMCS Windsor was lowered into Halifax harbour last month after spending five years on a dry dock for an extensive refit that cost $45 million in 2010 alone.

HMCS Chicoutimi saw just two days of active service. The sub caught fire during its maiden Canadian voyage in October 2004, killing one sailor. It's not expected back in service for another two years.

HMCS Corner Brook hit the ocean floor off B.C. in June 2011, damaging its hull. It's not expected back in service until 2016.

Only HMCS Victoria is currently operating at sea, but a dent in the hull kept it from deep diving for several years. The submarine successfully fired a test torpedo in March, marking the first time any of the subs had come close to firing a real weapon.