Rafale fighter jets deal: Why sovereign guarantee was sought by India

The Ministry of Defence’s (MoD’s) negotiators for the purchase of 36 Rafale fighter jets from French vendor Dassault during September 2-16 were unable to obtain “sovereign guarantees” from Paris that would have bound the French government to always support the deal.

Instead, as Attorney General K K Venugopal admitted before the Supreme Court on November 14, New Delhi contented itself with a letter of comfort from the French Prime Minister (PM). 

A letter of comfort amounts to a non-binding intention to support the contract. It is not a legally enforceable contract, like a sovereign guarantee.

This shortcoming was also flagged by the Ministry of Law and Justice (MoL&J), in its pre-review of the contract documents. 

Government officials tell Business Standard that a key reason New Delhi sought sovereign guarantees was to prevent Paris from ever citing international instruments, such as the Arms Trade Treaty of 2013 (ATT), to interrupt, modify or cease delivery of the Rafale fighter at any stage.

Contacted via email for comments, the MoD did not respond.

The ATT is a multilateral treaty that regulates international trade in conventional arms. France has signed the ATT, but India has consistently rejected it as discriminatory.

The ATT allows weapons-exporting countries to deny or cancel export permissions at any stage. In such an event, the treaty’s provisions relieve the exporting country and its defence manufacturers from any contractual liability.

On the other hand, a sovereign guarantee is a pledge that supersedes the ATT. Had Paris provided a sovereign guarantee in the Rafale contract, it would not have been able to cite the ATT to explain any lapse in its execution. 

An MoD file noting dated August 22, 2016, which Business Standard has reviewed, explains how India climbed down from its demand for a sovereign guarantee. Despite resistance from French negotiators the law ministry insisted on sovereign guarantees. Eventually, the decision was left to the Cabinet Committee on Security (CCS).

“MoL&J had brought out that government/sovereign guarantees should be requested for, in view of the contract involving huge payouts value… The French side responded by stating that the letter to be signed by the French Prime Minister (the letter of comfort) along with the guarantees being provided through the intergovernmental agreement (IGA) constitute a unique and unprecedented level of involvement of the French government… and therefore, the French side does not accept inclusion of additional wording regarding guarantees,” says the MoD noting.

The noting continues: “This aspect was discussed in Defence Acquisition Council (DAC) on January 11, 2016. The DAC directed that the decision on the final acceptance of the ‘Letter from French PM along with the outstanding guarantees provided through (the IGA)’ in lieu of government/sovereign guarantees shall be that of the CCS.” 

 Just days before the Rafale contract was signed on September 22, the CCS – chaired by Prime Minister Narendra Modi – chose to proceed without a sovereign guarantee from France.

The ATT was adopted by the UN General Assembly on April 2, 2013, and it entered into force on December 24, 2014. Currently, 190 countries have signed, and 89 of them have ratified the treaty.