Mumbai: India’s controversial Rs 59,000 crore (7.5 billion Euros) deal for 36 Rafale jets “gathered all systemic elements” of international corruption and the deal’s conditions were “to the detriment of renewal of obsolete Indian air defence”, the French NGO whose complaints in the matter have led to an independent judicial probe in France, told Article 14.
Sherpa, a Paris-based organisation, has been following the case since 2018 when it first filed a complaint with France’s National Financial Prosecutor against Dassault Aviation, suspecting “potential corruption” and “grant of undue advantages” by the French aviation company in selling the 36 jets to India and selecting as Indian partner Reliance Defence Limited, a company that began operation in 2015 and is controlled by Anil Ambani, the Indian tycoon who carried a debt of over Rs 93,000 crore, as per July 2019 data and told a London court in 2020 that his net worth was “zero”.
Sherpa lodged a fresh complaint with the French national prosecutor in April 2021, after which the prosecutor appointed a judge to carry out a judicial probe into the contract. In its complaint, Sherpa demanded a judicial investigation against alleged “corruption”, “favouritism” and “various financial offences” in the deal.
In an email interview conducted over two sessions, Sherpa’s advocacy and litigation officer tackling illicit financial flows Chanez Mensous told Article 14 “troubling facts”, from the “very last minute change of intermediary in the deal” to a “significant change in the content of the deal,” and allegations of favouritism and corruption in India, prompted the organisation to pursue the case.
“The historical operator in India (Hindustan Aeronautics Limited, a State-owned 80-year-old company) has been pushed aside and the sudden appointment by Dassault Aviation of the Indian group Reliance, which in addition to having no experience in the aeronautical sector was facing important financial troubles and was headed by a man notoriously close to the Indian Prime Minister in office,” said Mensous, a lawyer who specialises in banking and financial law.
In its two-decade long existence, Sherpa, an organisation of legal experts that tracks economic crimes and illicit financial flows globally, has pursued—and often, won—several high-profile cases. It is funded by private donations and a Swiss foundation, the Charles Léopold Mayer Foundation for the Progress of Humankind (FPH), which funds civil society movements across Europe, Latin America and Africa.
In 2020, former Syrian vice-president Rifaat al-Assad was sentenced to four years in prison by a Paris court on charges of money-laundering, on the back of a six-year-long campaign by Sherpa. In 2018, a Paris court indicted cement-major Lafarge, one of France’s largest companies, on charges of terror financing, two years after Sherpa filed a lawsuit against the group on behalf of Lafarge employees.
Now, the organisation has turned its attention to the deal between the Narendra Modi government and Dassault for the purchase of 36 Rafale jets signed in April 2015.
The deal was controversial since it was announced, when Dassault chose as its local manufacturing partner Reliance Defence instead of state-owned HAL. Mediapart, a French investigative website, reported in September 2018 that Ambani’s company was founded only 12 days before the announcement and had no experience in building aircraft.
In October 2018, Mediapart found an internal Dassault document that called the contract to Ambani’s firm “a compensation” which was “imperative and obligatory” if it wanted to bag the Rafale jet order.
India’s Opposition, in particular former Congress chief Rahul Gandhi, have alleged that the deal was “a clear-cut case of corruption” in the contract and demanded a joint parliamentary committee probe into the deal.
The government of Prime Minister Narendra Modi has denied corruption and refused the probe demand. In a speech during a 2018 Parliament session, Modi called the deal “an agreement between two countries and not with private companies,” which was carried out “with full transparency”.
Mensous said Modi’s response was “not quite understandable.”
“The intergovernmental agreement was the framework making the deal possible between the two private actors,” she said. “Pretending otherwise when proof of trade relations between Dassault and Reliance is all over, is not quite understandable.”
The deal was also controversial because of its departure from the original Rafale plans envisaged in 2012, when the government of India had invited bids for 126 fighter jets of which 108 were to be assembled in India by HAL. Modi’s government scrapped that tender and without floating a fresh one, gave the contract to manufacture 36 jets to Dassault: all were to be made in France, and at a price which was 300% more than from when “the very first negotiation began,” according to Mediapart.
Mensous, in her interview, said that the new deal did not augur well for Indian interests.
“In this case, this deal was to the detriment of the renewal of obsolete Indian air defense and the deal did not include as much (sic) transfers of technology as initially required initially,” she said.
Mensous said she hoped that the independent judicial probe in France would have a “knock-on effect in India”, arguing that corruption, allowed to go unpunished, can lead to “declining trust” of the public in the government.
“The population can’t invest itself in voting, being involved in civil society or participating in public debates,” said Mensous. “As the result (sic), the culture of democracy begins to crumble.”
What has been Sherpa’s role in the Rafale issue so far?
Back in 2018, we became aware that rumors of corruption and favouritism around the 2016 Rafale deal started to spread in India. We then decided to look closer at the debates around the deal in India, and learned about the procedure that was being brought before the Supreme Court in India. Considering this deal involves one of the largest France defence company and entailed an intergovernmental agreement between France and India, it was very important for us for follow a “parallel” track with the Indian civil society and focus our efforts on denouncing the troubling facts surrounding the deal, and having French authorities investigate those facts.
What did it take for Sherpa to be able to persist with the issue? For instance, did you have a team working on this issue specifically, did you use freedom-of -information laws to obtain govt documents and how long did this investigation take?
Sherpa is an NGO gathering a team of legal experts, specialized in different areas of law, ranking from civil law to criminal law and our mission is to fight economic crimes and defend victims of globalisation of the economy. Part of our team is dedicated to fight specifically financial crimes and corruption. It took several months to build a case gathering information made available by investigative journalists and Indian partners and corroborating to the extent possible by the few information made public by the actors involved in the deal. As a result of those sustained efforts we were able to file a complaint in 2018 before the French public prosecutor in which we identified intricated facts and suspicions surrounding the deal.
How were you first alerted to the issue, and why is this case important for Sherpa?
We have been alerted by the political scandal that happened in India following the deal. We were also alerted by members of Indian civil society warning us about the suspicions of corruption around the deal.
This case appeared particularly important to us as it gathered all the systemic elements we have relentlessly denouncing concerning international corruption. It is a defence deal, involving one of the largest French companies in the sector and required the direct interventions of the governments. Indeed, the field of defence public procurements is particularly exposed to corruption and financial crimes, because it involves state interests and is therefore covered by increased confidentiality and opacity. This case is a perfect illustration of the necessity to initiate a drastic change of practices and increase transparency in defence public procurements.
How significant is the decision to open a judicial investigation into the issue? What do you hope for it to achieve and what are the likely next steps?
This decision is a very important step because this case is now to be investigated by an independent judge. This case undoubtedly has the scale of a matter of state, therefore investigations and efforts towards seeking the truth need an increased degree of independence from political influence.
In the 20 years of its existence, what would Sherpa count as three of its most notable achievements?
Fighting international corruption, we have initiated the very first complaint targeting investment made in France by foreign officials with proceeds of corruption or money laundering. In addition to obtaining court decisions condemning foreign officials and seizing their assets, we have relentlessly advocated that this was not sufficient and that France should ensure the return of those assets to the deprived population. After a lengthy struggle, we obtained the vote of the first stolen assets restitution mechanism in France (the law was officially passed today- 13/07).
Sherpa has also for the past 20 years of existence continuously challenged corporate impunity rendered possible by corporate structure opacity and supply chain’s complexity. Moreover, we have especially focused on targeting the adverse effect of globalization and companies in weak governance countries and conflict zone. Doing so, we have put our efforts towards conceptualizing corporate liabilities and initiating legal cases such as suits against Vinci or Lafarge.
One of our main achievements is also the French law on the duty of vigilance adopted in 2017. It is a world first in the fight against economic actors’ impunity for human rights and environmental violations. This law is an innovative legal tool, at the heart of Sherpa’s work to strengthen corporate accountability through legal innovation, strategic litigation and advocacy. Since then, it has inspired other national legislators and prompted mobilization of European civil society. Today, the French law on the duty of vigilance is a legal tool in the fight against the impunity of economic actors. It is now used as one of the main legal bases in actions aimed at preventing human rights and environmental violations.
In this April 2021 release, you mentioned the “troubled” circumstances surrounding the negotiations. What were those circumstances?
It is first important to be precise on the fact that our role is not to establish the culpability nor the liability of actors involved in this case. It is up to the French authorities and French justice to investigate and ultimately to judge the case. Our mission being to fight corruption, we brought to the attention of the French financial public prosecutor and then to the judge troubling facts such as the very last minute change of intermediary in the deal. Indeed, the historical operator in India has been pushed aside and the sudden appointment by Dassault Aviation of the Indian group Reliance, which in addition to having no experience in the aeronautical sector was facing important financial troubles and was headed by a man notoriously close to the Indian Prime Minister in office.
Former President François Hollande’s defence was that the French government/Dassault had no choice in selecting the Indian partner.
We are not in a position to comment (on) the defence of French government nor Dassault, the facts that we shed light have triggered an independent investigation that will establish whether or not liabilities can be incurred.
From your investigations, could you tell us where you suspect “corruption, favouritism and various financial offences” in the deal, as you have mentioned in this April 2021 release?
Speaking broadly, when public procurements are involved, especially defence deals of a similar magnitude as the Rafale deal, any event such as a sudden change of intermediary, significative change in the content of the deal, intervention in the deal of people benefiting directly or indirectly from the deal knows to be close acquaintances of public officials benefiting directly or indirectly from the deal, should be seen as suspicious and trigger specific attention from the authorities.
How would you categorise responses from French authorities on the issue: satisfactory, less than satisfactory and why?
Honestly, the defence which consists of shying away from responsibilities by saying they did not have the choice is far from satisfactory. France likes to promote itself as one of the pioneer states in the fight against corruption, obviously it is important to reiterate that the fight against international corruption does not stop at our doorstep.
The Supreme Court of India, in its December 2018 judgement on a plea demanding a probe into the deal, said that “perception of individuals cannot be the basis of roving inquiry by the court," and that it had "no objection to any part of the deal". How do you respond?
It is delicate for us to hold an appreciation on Indian justice, however we are of the opinion that there is more in this case that “perception of individuals”…
The Modi government has quoted this judgement to defend itself against all allegations of illegality and impropriety in the deal. Prime Minister Narendra Modi described the allegations as “baseless” and said that the deal was “between two countries and not with companies”. How would you react?
The question of the intergovernmental agreement between France and India and the deal involving Dassault and Indian intermediary Reliance are closely intricated (sic), the intergovernmental agreement was the framework making the deal possible between the two private actors. Pretending otherwise when proof of trade relations between Dassault and Reliance is all over, is not quite understandable…
Have you found any links between Reliance’s decision to fund the film production of former President Hollande’s partner, Julie Gayet, and the offset deal between Dassault and Reliance? (Editor’s note: In 2018, the Indian Express reported that the Anil Ambani’s Reliance Entertainment signed a deal to produce then French President Hollande’s wife and actor-producer Julie Gayet’s film. Two days later, Hollande landed in India to sign a memorandum of understanding with Modi on delivering 36 Rafale jets)
We have highlighted facts that, by their concomitances or by potential conflicts of interests should be examined with particular attention by an independent judge. As a reminder, bribery of French public officials is regulated under the French Criminal Code  and refers to proffering, without any right, at any moment, directly or indirectly, offers, promises, gifts, presents or any advantages, to induce a public official to perform or not to perform (or to reward a public official for having performed or for not having performed) any act within his or her occupation, position or office, or facilitated by his or her occupation, position or office. The person receiving or requesting the bribe is liable for passive bribery, whereas the person offering the bribe is liable for active bribery.
In September 2018, the Indian government said, as did Dassault here in the same month, that offset partnerships were signed with a number of other partners, apart from Reliance. Why have you singled out the partnership with Reliance in your complaints?
Our complaint was filed “against X”, meaning that we did not restrict the full extent of liabilities that could arise from the investigations.
Do you believe that the Indian government is capable of investigating these allegations fairly? Now that a judicial probe will begin in France, what would you expect from Indian authorities?
Again, it is complicated to assess the actions of the justice system in India, and we do not believe this is our role. Of course, we hope that the procedure in France will have a knock-on effect in India as it is often the case in the fight against corruption.
This July 2020 interview with Éliane Houlette, the-then head of PNF, indicates that not probing the deal was a measure to “preserve the interests of France". How do you respond to those who allege that your actions could potentially damage France’s reputation as well as bilateral relations between the two countries?
The answer is as simple as it is obvious, corruption and corporate impunity have an even worst adverse effect on our countries. The cost of corruption was estimated by the World Economic Forum in 2018 to represent 5% of the world's gross domestic product – some $2,600 billion, slightly less than the GDP of France or of India. In addition to weakening the capacity of states to ensure good public services, corruption leads to a declining trust in elites and the state. With suspicion and even fears of elites, the population can’t invest itself in voting, being involved in civil society or participating in public debates. As the result, the culture of democracy begins to crumble.
The Indian government has often cited a secrecy pact with the French government as the reason for not disclosing pricing details, among others, of the Rafale deal. As an organisation campaigning for more transparency, what are your thoughts on this justification and such a pact?
This is the key issue for us in this particular case and the reason why it is so emblematic for us: the inadequacies and gaps in the legislative and regulatory framework concerning public defence or security procurements.
Indeed, the existing legal framework in France and the EU leaves too much room for lack of transparency and discretionary procedures. Indeed, the awarding of contracts to national firms and the use of industrial compensation are often a means for the State to develop or support the national defence industry, and should, therefore, meet increased requirements of transparency also given their political dimensions and the proliferation of corrupt practices, influence peddling and retro-commissions that taint these markets.
See our statement on public defence procurement here.
As you must be aware, Dassault was selected in 2012 on the basis of their bid in response to a tender floated by the Indian government to purchase 126 jets. Indian activists have pointed out how the original tender was scrapped in 2015 and Dassault was selected as a supplier to buy 36 jets without any fresh tendering process. Was this a prudent decision on the part of the Indian government?
This is the critical point of corruption and corruption practices: it allows private interests to override the general interest. In this case this deal was to the detriment of the renewal of obsolete Indian air defence and the deal did not include as much transfers of technology as initially required initially, however corruption is also most of the time to the detriment of basic public services such as health, education, access to water… so the adverse effect on the population is truly devastating and should not be ignored anymore.
Various Indian news reports (here and here) and court petitions have focussed on the fact that the Indian government paid a substantially higher amount, per jet, in the 2015 deal as against what the earlier negotiations envisioned. Apart from this, reports (in The Hindu) have alleged that key anti-corruption clauses were also dropped in the deal. Has your work focussed on the circumstances of how Dassault was selected as the supplier?
The case we filed focused on all the circumstances of the deal, from the intergovernmental agreement to the change in the substantial elements in the public offer that occurred short before the deal was passed. We believe that this case shows the complexity of corruption practices in public procurements where conflict of interests are very intertwined. This is why it is so important to have this case investigated by an independent judge to entangle the strings of every actor’s liability.
(Kunal Purohit is an independent journalist based in Mumbai.)