Much awaited Rafale fighter deal delayed again. Here’s what’s holding it back now

By: |
New Delhi | Updated: May 6, 2016 8:00:33 AM

The law ministry has also opposed accepting Geneva as the arbitration destination in the event of any dispute, wanting it to be replaced by Delhi, something that the French side has opposed.

Rafale dealUnlike in the US, there is no concept of foreign military sales in France, and the negotiations between the two countries has been going on and are expected to be concluded under an IGA, which is yet to be inked. (Reuters)

The much-awaited deal for 36 Rafale aircraft has run into legal and contractual hurdles because French company Dassault Aviation offered a ‘diluted’ liability clause, which has been rejected as India’s ministry of law & justice felt that it “adversely compromised” India’s interests.

The law ministry has also opposed accepting Geneva as the arbitration destination in the event of any dispute, wanting it to be replaced by Delhi, something that the French side has opposed.

Defence minister Manohar Parrikar, earlier this week, had said in a written reply in the Rajya Sabha, “The ministry of law & justice has made certain observations and the same will be adequately taken into account while finalising the IGA (inter-governmental agreement), which is still under negotiations”.

Because of the concerns raised by the law ministry, the negotiations between the two countries over the fighter jets has slowed down.

Unlike in the US, there is no concept of foreign military sales in France, and the negotiations between the two countries has been going on and are expected to be concluded under an IGA, which is yet to be inked. Thus, India has been negotiating for stringent financial liability agreements from the French company for the combat planes — which the French have not accepted yet.

Talking about the stringent agreements that India is seeking, Rahul Bedi of UK-based Jane’s Defense Weekly says, “The defence ministry insists that such an agreement — backed by bank guarantees — form part of the Rafale contract, as that would enable India to encash these in the event of delays in equipment delivery or platform performance, or both.”

“The ministry of law & justice has also objected to the ‘diluted’ liability clause, under negotiation for eventual inking by the French government, Dassault and possibly MBDA, the principal weapons provider, on grounds that it ‘adversely compromised’ India’s interests,” Bedi pointed out.

Sources in the ministry of defence (MoD) told FE, “We are still in the process of deciding whether there is a need to order all spare parts that the aircraft will need for a period of either five or 10 years. And negotiations are still on regarding what kind of financial penalties can be imposed on Dassault Aviation Company, which is making the combat plane, if the performance is unsatisfactory.”

According to sources, there has also been opposition to accepting Geneva as the arbitration destination in the event of any dispute, with a push for it to be replaced by New Delhi, something that the French side has opposed.

This is not the first time that the liability clause has come up. Even when discussions were going on for the 126 MMRCA, the liability clause was opposed by the French side, said sources.

Disagreement
A deal for 36 Rafale aircraft has run into legal and contractual hurdles because French company Dassault Aviation offered a ‘diluted’ liability clause, which has been rejected as India’s ministry of law & justice felt that it ‘adversely compromised’ India’s interests

The law ministry has also opposed accepting Geneva as the arbitration destination in the event of any dispute, wanting it to be replaced by Delhi, something that the French side has opposed

Get live Stock Prices from BSE and NSE and latest NAV, portfolio of Mutual Funds, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

FinancialExpress_1x1_Imp_Desktop