This article is from the source 'guardian' and was first published or seen on . It last changed over 40 days ago and won't be checked again for changes.

You can find the current article at its original source at http://www.theguardian.com/world/2014/jan/01/india-agustawestland-helicopter-deal

The article has changed 3 times. There is an RSS feed of changes available.

Version 0 Version 1
India pulls out of £466m AgustaWestland helicopter deal India pulls out of £466m AgustaWestland helicopter deal
(about 3 hours later)
India has terminated a £466m helicopter order with British-Italian company AgustaWestland following accusations that the firm bribed officials.India has terminated a £466m helicopter order with British-Italian company AgustaWestland following accusations that the firm bribed officials.
The move – part of a long-running saga that is expected to trigger a legal battle – finally destroys a deal that was described by the helicopter group as "significant" on winning the contract in 2010, when it said the agreement would help sustain the company's workforce in Yeovil, Somerset. The move – part of a long-running saga that looks certain to trigger a legal battle – appears to have finally destroyed a deal that was described by the helicopter group when it won the contract in 2010 as a significant order that would help sustain the company's nearly 3,300-strong workforce in Yeovil, Somerset.
It will also come as a severe blow to the UK's ambitions to develop into a centre for high-value manufacturing. It will also come as a severe blow to the UK's ambitions to develop into a centre for high-value manufacturing.
AgustaWestland, which trumpets that it is "engineering Britain's future", says it "directly employs 3,280 people, while supporting a further 10,000 jobs in the supply chain including 650 small and medium sized enterprises". In a statement on Wednesday, India's defence ministry said it was axing its order for 12 helicopters, a variant of the company's anti-submarine warfare model, the AW101 or Merlin, that has been designed to transport high-ranking officials.
But in a statement on Wednesday, India's defence ministry confirmed it was cancelling its order for 12 helicopters designed to transport high-ranking officials, a variant of the company's anti-submarine warfare model, Merlin.
It said: "The government of India has terminated with immediate effect the agreement that was signed with AgustaWestland International Ltd (AWIL) on 8 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".It said: "The government of India has terminated with immediate effect the agreement that was signed with AgustaWestland International Ltd (AWIL) on 8 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 Indian government has reportedly paid 45% of the contract price and taken delivery of three of the helicopters. Three more were completed before the contract was suspended but were not delivered, while the remaining six aircraft are thought to be close to completion in Yeovil. The move provoked a staunch defence of the company from David Laws, the education minister and MP for Yeovil, who questioned the Indian government's decision.
Giuseppe Orsi, former head of AgustaWestland's parent firm, Finmeccanica, is on trial in Italy on fraud and corruption charges for his alleged role in bribery to secure the contract. Bruno Spagnolini, the former chief executive of AgustaWestland, is also on trial, while former Indian air force chief, SP Tyagi, faces charges in India. All three have denied any wrongdoing. "In my view it would have been preferable to give time to establish the veracity of the allegations which have been made before taking any action," he said. "AgustaWestland has over many years demonstrated its resilience, based on the outstanding quality of the helicopters which it makes. I expect the company to go on selling its products all over the world and to show that this setback can be overcome".
Industry observers expect the matter to be fought out in the courts if cannot be settled by arbitration. Allegations that the company had used middlemen to bribe Indian officials to win the 2010 contract began to emerge 11 months ago, with suggestions that a defence ministry specification insisting its new helicopters should be capable of flying at altitudes of 6,000 metres was cut in order to benefit AgustaWestland.
India's defence ministry added: "Based on the opinion received earlier from the attorney general of India, it has been the view of the government that integrity-related issues are not subject to arbitration. However, AWIL has since pressed for arbitration and appointed an arbitrator from its side. In view of this, MoD sought afresh the opinion of the attorney general. With a view to safeguard the interests of the government, MoD has nominated Honourable Mr Justice BP Jeevan Reddy as its arbitrator." Giuseppe Orsi, former head of AgustaWestland's parent firm Finmeccanica, and boss of AgustaWestland in 2010, was arrested that month and is on trial in Italy on fraud and corruption charges. Bruno Spagnolini, the former chief executive of AgustaWestland, is also on trial, while former Indian air force chief, SP Tyagi, faces charges in India. All three have denied any wrongdoing.
A spokeswoman for AgustaWestland said: "The company notes the public press statement by the Indian government but is not in a position to comment further until it has received formal notification and been able to review the detail." The Indian government has already paid 45% of the contract price and has taken delivery of three of the 12 aircraft. Three more were completed before the contract was suspended in February but were not delivered, while the remaining six aircraft are thought to be close to completion in Yeovil.
Having refused to agree to AgustaWestland's requests for arbitration to settle the row, India's defence ministry yesterday conceded that point. Its statement added: "Based on the opinion received earlier from the attorney general of India, it has been the view of the government that integrity-related issues are not subject to arbitration. However, AWIL has since pressed for arbitration and appointed an arbitrator from its side. In view of this, MoD sought afresh the opinion of the attorney general. With a view to safeguard the interests of the government, MoD has nominated Honourable Mr Justice BP Jeevan Reddy as its arbitrator."
Industry sources suggested that the Indian air force will retain the three helicopters it has received, while seeking to gain a rebate on the additional monies paid. They added that this was the likely reason behind the use of the word "termination" in the statement, rather than "cancellation".
AgustaWestland trumpets how it is "engineering Britain's future" and says it "directly employs 3,280 people, while supporting a further 10,000 jobs in the supply chain including 650 small and medium sized enterprises". Last month it signed a deal to supply Norway with 16 of its AW101 helicopters.
But while the unravelling of the Indian contract has knocked the coalition's efforts to portray the UK as a country of increasing high-end manufacturing capability, it has also previously caused direct embarrassment to the prime minister.
India's prime minister Manmohan Singh said at a joint press conference with David Cameron in February that he had raised "very serious concerns" about the deal, to which the UK promised co-operation with the country's investigation.
A spokeswoman for UK Trade and Investment, the part of the Department of Business, Innovation and Skills that promotes UK exporters, declined to say on Wednesday how the UK had responded.
A spokeswoman for AgustaWestland added: "The company notes the public press statement by the Indian government but is not in a position to comment further until it has received formal notification and been able to review the detail."
Our editors' picks for the day's top news and commentary delivered to your inbox each morning.Our editors' picks for the day's top news and commentary delivered to your inbox each morning.