The lack of sovereign guarantee in the Rafale deal came to the fore in the Supreme Court on Wednesday, but the attorney general stressed the letter of comfort provided by France was as good as a governmental guarantee.
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Defence ministry officials also contended the inter-governmental agreement (IGA) inked between India and France was “by its very definition” a sovereign guarantee. “There are adequate assurances in the IGA and the associated commercial protocols inked with fighter manufacturer Dassault Aviation and weapons supplier MBDA, backed by the comfort letter, to make the acquisition legally safe. There are enough checks and balances in place if something goes wrong,” said an official.
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Added another, “There is no phrase called ‘sovereign guarantee’ in several government-to-government contracts India has signed with countries like Russia and the US over the years. There are instead quality, price and other assurances, including performance and warranty bonds, that are built into them.”
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But the sovereign guarantee provided by a country is legally considered to be on a much stronger footing than a comfort letter. Before the Rafale deal was inked on September 23, 2016, TOI had reported there were concerns about France’s refusal to give sovereign guarantee as well as the high prices involved in the acquisition.
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In its opinion, the law ministry had said the French government should take full responsibility for the performance of the entire contract, from the supply of the fighters and their performance to the discharge of the 50% offsets and other industrial services, through a direct sovereign guarantee.
But the French government was unwilling to take direct responsibility for execution of the entire contract, holding that India would have to enter arbitration proceedings with Dassault Aviation if any dispute arose at a later stage.
After much debate within the government, the Cabinet Committee on Security in August 2016 decided to accept the comfort letter offered by France instead of a direct sovereign guarantee, which then led to the deal being inked a month later.
from Times of India https://ift.tt/2B69Ytp
