The commission of enquiry looking into the purchase of military equipment, including two submarines from a German consortium led by Ferrostaal, is formally to question 40 people including military chiefs and former ministers of defence including the current deputy prime minister, Paulo Portas.

The chairman of the inquiry, Telmo Correia, will schedule the first batch of hearings for July and will call the military chiefs first.

Portugal’s Attorney General, Joana Marques Vidal, confirmed to parliament that the Justice Department continues to investigate the government's purchase of submarines, torpedoes and of Pandur military vehicles, three deals done when Paulo Portas was Minister of Defense between 2004 and 2005.

This was in response to suggestions that the Parliamentary Committee of Inquiry, which is looking into the matter, was to be stood down.

South Africa purchased four frigates, three submarines, helicopters, jet training aircraft and Gripen fighter jets in a Strategic Defence Procurement Process that, in 1999, came with an estimated price tag of R30-billion. That figure has since ballooned to an estimated R70-billion, taking financing costs into account.

President Jacob Zuma established a commission of inquiry into the arms deal in September last year to probe allegations of fraud, corruption and impropriety.

There was a systematic attempt by the German company Ferrostaal to deceive the Portuguese State, today admitted Ambassador Pedro Catarino, the last president of the Comissão Permanente de Contrapartidas (CPC)

The committee oversaw the various contra deals agreed between the Portuguese state and commercial suppliers of military equipment and was disbanded in 2011 as the true extent of the waste, corruption and German companies' cynical treatement of its customers started to become clear.

The company which advised the German consortium on the sale of submarines to Portugal transferred over €20 million to ‘unknown bank accounts.’

In the space of six months Escom UK, which was owned by Banco Espirito Santo Group, and was advisor to the consortium that sold the German submarines to Portugal, transferred €20.2 million to two mysterious bank accounts.

Judge Judith Fonseca, one of the panel of judges presiding over Criminal Court number 6 in Lisbon, has announced the decision to acquit all 10 suspects in the Ferrostaal submarine case due to lack of evidence.

The decision has dealt a severe blow to Portugal’s Central Bureau of Investigation and Prosecution (DCIAP) as the defendants - three German managers of the GSC consortium and 7 Portuguese businessmen – were expected at least to receive convictions, fines and suspended sentences in a tough display of Portugal’s alleged new attitude towards corruption.

The €20.2 million paid covertly to an account of a company that advised the German consortium, money that later was distributed to unknown accounts, was for reasons other than passing on 'commission payments'  to those involved in this corrupt affair.

Officials of the German company Ferrostaal admitted today that the Falesia Hotel project in the Algarve, destined to receive investment as part of the submarines contra-deal, was not viable and had been dropped. Instead the Germans said they were looking at investing in a project at the shipyards at Viana do Castelo.

At the end of today's court session, the questioning of the Ferrostaal former vice-president Horst Weretecki in the bribery and corruption trial over the Submarines affair, led to his lawyer's acknowledgment that difficulties had arisen in the implementation of the Falesia project, and the German company was studying alternatives.

The lawyer in the long running German submarine saga has asked for the Portuguese defendants to receive a suspended sentence of less than five years on charges of fraud and forgery.

In the closing arguments of the trial, Vitor Pinto justified the request for a suspended sentence on the fact that the Portuguese defendants in the case had no previous criminal records and that as the German defendants had profited to a greater degree their sentences should be harsher than any given out in Portugal.