Govt recovers euro 228 million from chopper deal

The deal was scrapped following allegations of corruption

India has cashed euro 228 million ($310 million) in bank guarantees backing a scrapped helicopter deal with Finmeccanica, people familiar with the matter said, in a move that might prompt the Italian state-controlled defence group to cut its 2014 targets. India terminated the high-profile contract in January, citing a breach of integrity after allegations of bribery emerged in Italy against executives at Finmeccanica’s helicopter unit AgustaWestland, a year earlier. The overall value of the multi-currency guarantee scheme with German lender Deutsche Bank, Italy’s Intesa Sanpaolo and the State Bank of India was around euro 300 million.

India was able to cash in two small bank guarantees but an Italian judge later blocked efforts to recover the remaining euro 278 million. In May, an Italian court revoked the freeze on euro 228 million of that amount and India said it would take steps to recover the sum.

 

"The payment of the guarantees for 228 million euros has been executed," one of the sources told Reuters, noting that India was cleared to cash in only part of the money because three helicopters had already been delivered.

 

The government was advised by Hogan Lovells lawyers in the case. "It was done about a week ago," a government official said, asking not be identified because of the sensitivity of the situation.

 

AgustaWestland, which was aided by Cleary Gottlieb Steen & Hamilton, and the banks declined to comment.

 

AgustaWestland had won the contested order in 2010 to supply twelve AW101 helicopters partly produced in Britain to Indian defence ministry, winning over rival Sikorsky, a unit of US defence group United Technologies.

 

However, the corruption scandal that emerged from an Italian investigation into the deal has raised the spectre of a possible blacklisting of AgustaWestland.

 

Finmeccanica has always denied wrongdoing and expressed confidence it will not be blacklisted from India.

 

The probe into allegations of bribery led to the arrest of former Finmeccanica Chairman and CEO Giuseppe Orsi and former AgustaWestland CEO Bruno Spagnolini in February 2013. The two are now being tried in the northern Italian town of Busto Arsizio on charges of international corruption they both deny.

 

While the criminal case could come to an end in the autumn, according to sources familiar with the matter, the dispute over the 560 million euro contract may end up in arbitration in India.

 

However, one of the people familiar with the matter said there was no assurance the arbitration would go ahead following the recent election victory by Narendra Modi.

 

($1 = 0.7345 Euros)