|
 India froze payments for the 12 AW101 helicopters after
Finmeccanica's then chief executive was arrested in February for
allegedly paying bribes to secure the deal, embarrassing the New
Delhi government before parliamentary elections due by May 2014.
The scrapping of the deal, which will now go through a probably
lengthy legal process, would be a fresh setback for Finmeccanica.
Delays in selling some of its money-losing assets have prompted
credit rating agencies to downgrade the company to junk.
But it would offer an opportunity for rivals such as United
Technologies Corp's <UTX.N> Sikorsky Aircraft, EADS <EAD.PA> unit
Eurocopter and Lockheed Martin <LMT.N> to get a share of India's
burgeoning defense market.
India's defense minister, A.K. Anthony, has said he did not believe
AgustaWestland's denial that it paid bribes to swing the deal.
Anthony had a meeting with Indian Prime Minister Manmohan Singh
hours before the latest decisions were announced.
"The Government of India has terminated with immediate effect the
agreement that was signed with M/S. AugustaWestland International
Ltd (AWIL) on 08 February, 2010 for the supply of 12 VVIP/VIP
helicopters on grounds of breach of the Pre-contract Integrity Pact
and the agreement by AWIL," the Defense Ministry said in a statement
on Wednesday.
Finmeccanica spokesman Roberto Alatri, commenting on India's
decision, said the company would defend its position. It invoked the
arbitration, which would be conducted in India under the Indian
Arbitration and Conciliation Act of 1996.
"We'll do everything that would be necessary to defend the
correctness of our position," Alatri told Reuters. "We're sure our
behavior was ethically correct."
He said India's agreement to arbitration was a positive step.
India's Defense Ministry said it believed "integrity-related issues
are not subject to arbitration" but nominated an arbitrator, it
said, to safeguard its interests.
Uday Bhaskar, a defense analyst at the Society for Policy Studies in
New Delhi, said India's participation in the arbitration did not
represent a climb-down.
[to top of second column] |
"Canceling deals and saying that we will not acquire
critically-needed equipment, to my mind, is not the answer," Bhaskar
said.
"But there's no climb-down on this arbitration and as a matter of
fact it might be the most viable via media (middle road)."
India in October had issued a final "show cause" notice to
AgustaWestland seeking to terminate the contract. Sources told
Reuters in November the deal would be scrapped.
ALLEGATIONS
Indian defense deals have been hit by a number of corruption
allegations over the past two decades but a Defense Ministry
spokesman said this was the first cancellation of a major deal.
Paying or accepting bribes is prohibited by India's defense
procurement rules. The government can cancel a contract if an
integrity pact in the rules is violated, and the seller has to
forfeit any security money it deposited as a bidder.
India's federal auditor said in August the ministry had initially
stipulated that the helicopters should be able to fly to an altitude
of 6,000 meters (19,685 feet), which meant that AgustaWestland could
not compete since the AW101 was certified to fly only to 4,572
meters (15,000 feet).
India took delivery of three of the helicopters before the deal
stalled but the Defense Ministry spokesman said the fate of those
aircraft was "uncertain".
(Additional reporting by Sankalp
Phartiyal in Delhi and Steve Scherer in Rome; editing by Louise
Ireland and Anthony Barker)
[© 2014 Thomson Reuters. All rights
reserved.] Copyright 2014 Reuters. All rights reserved. This material may not be published,
broadcast, rewritten or redistributed.
 |
