The 5.3-billion-euro ($5.9-billion) deal to build at least four multi-purpose MKS 180 combat ships is the biggest contract in German naval history.

"We have serious doubts about the legality of the decision and will therefore exhaust all legal possibilities at our disposal," the Kiel-based shipbuilder German Naval Yards (GNYK) said in a statement.

The defence ministry announced last week that it had selected a consortium led by Dutch shipbuilder Damen as the winner, rejecting the joint bid proposed by German Naval Yards and German giant Thyssenkrupp.

The Damen consortium also includes French firm Thales and the Hamburg-based Blohm and Voss shipyard.

Elevator-to-submarine conglomerate Thyssenkrupp, which is in the midst of a painful restructuring and has long partnered with the German Bundeswehr on military projects, reacted to the decision with outrage.

"More than 1,000 jobs" were now at stake, Thyssenkrupp's personnel chief Oliver Burkhard tweeted, recalling that the group had taken over German shipyards in 2004 "at the request of the federal government".

"Now it's up to politicians to tell us what kind of future they see for the shipyards."

The government's contract decision is not yet final as it still needs to be approved by the German parliament.

The MKS 180 is expected to become the backbone of the German navy, capable of anti-submarine, anti-air warfare, as well as land attacks. It can also be used to evacuate civilians in crisis situations.

Years of chronic underinvestment in the German military have left the navy in bad shape, with many of its frigates and submarines currently obsolete or out of service.

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THYSSENKRUPP

THALES