Will French Authorities indict Narendra Modi of Corruption in Rafale Deal?

According to a French news website Mediapart, a French judge has been appointed to lead a judicial investigation into alleged corruption in the 7.8 billion Euro (around 59,000 crore) deal with India for 36 fighter aircrafts.

This news is bound to create quite a splash in Indian political circles. Opposition parties will bait BJP and PM Narendra Modi for the alleged corruption in 59,000 Crore Rafale Deal, again. Most experts now feel there needs to be another probe ordered in the controversial fighter aircraft deal.

Earlier, Narendra Modi was a strong favourite and but after the mishandling of Covid-19, the loss in Bengal and the recent spat with Yogi has reduced his stature. This seems to be a particularly bad moment for Modi. Again, the experts point out that the Supreme Court is now under a stronger CJI and the outcome would not be as easy as before.

Mediapart’s investigative reporter Yann Philippin said that following a decision by PNF (the financial crimes branch of the French public prosecution services) the “highly sensitive probe” into the inter-governmental deal was formally opened on June 14.

The decision to initiate the probe has been partly due to a series of investigative reports by Mediapart in April 2021 about the deal. It included the role of a middleman about whom India’s Enforcement Directorate was aware but has did not bother to investigate. A French anti-corruption NGO Sherpa has filed a complaint with the tribunal of Paris, citing “corruption”, “influence peddling”, “money laundering”, “favouritism” and undue tax waivers in the deal.

PNF in a U-turn from its stand in 2019, has confirmed that the investigation will focus on all four of these alleged crimes. Earlier in 2019, Eliane Houlette, the then head of PNF (going against the advice of one of her staff and) without carrying out any investigations, dismissed an initial complaint filed by Sherpa, with a reasoning of “to preserve the interests of France”.

Now, Jean-François Bohnert, the new head of PNF, has decided on opening of the case, after the complaint has been updated with new details after the recent series of investigations. This investigation will be led by an independent magistrate, an investigating judge.

PNF’s criminal investigation will examine actions of François Hollande (former French president who was in office when the Rafale deal was signed), Emmanuel Macron (the current French president and was Economy and Finance minister at the time), as well as the then defence minister, Jean-Yves Le Drian, (currently the Minister for foreign affairs).

Sherpa’s lawyers William Bourdon (founder of the NGO) and Vincent Brengarth said they feel the launch of the probe “will necessarily favour the emergence of the truth and the identification of those responsible in what increasingly resembles a state scandal”.

Dassault Aviation (the manufacturer of the aircrafts) has consistently denied any wrongdoing and maintained it “acts in strict compliance with the OECD Anti-Bribery Convention and national laws”. Earlier Dassault had said, “Numerous controls are carried out by official organizations, including the French Anti-Corruption Agency. No violations were reported, notably in the frame of the contract with India for the acquisition of 36 Rafales.”

The probe in all likelihood will also examine the nature of the association between Dassault and its Indian partner Anil Ambani’s Reliance group since its involvement is vital in the deal.

Till PM Narendra Modi’s announcement on April 2015 that India is scrapping its earlier decision, Dassault had officially been negotiating terms for the purchase and manufacture of 126 Rafale jets. While India’s defence minister at the time, Manohar Parrikar, was unaware of Modi’s decision of buying 36 jets outright, it now appears Anil Ambani may have had an inkling of it.

Infact, Mediapart has revealed that the first MoU between Ambani’s company and Dassault was actually signed on March 26, 2015. This document had set the broad outlines of an agreement. Only around 15 days before the turnaround of the earlier deal, and the exclusion of HAL, it seems to suggest that the two companies had advance information on this.

This MoU between Ambani and Dassault was for a “possible joint venture” between the two companies to include “program and project management”, “research and development”, “design and engineering”, “assembly and manufacture”, “maintenance” and “training”.

It must be pointed here that at the time of this signing, Dassault was still in talks with Hindustan Aeronautics Ltd for execution of the original contract of 126 Rafales, even then the new MoU was completely silent about the association with the nationalised entity.

It has also come to light that the partnership contract signed later in 2017 between Dassault Aviation and Ambani’s company, which created a joint venture company called Dassault Reliance Aerospace Limited (DRAL), for the building of an industrial plant near Nagpur, needs further probe. The confidential documents reveal how Dassault had in fact no interest in forming a partnership with Reliance but for political reasons. And its primary expectation from Reliance was “marketing for programs and services with the GOI”.

Mediapart says, “According to documents, Dassault provided Reliance with hugely generous financial terms for the establishment of the joint venture. Usually, partners in a jointly owned subsidiary put-in equal funds for its capital. But the case was very different for DRAL which was to have a capital of 169 million euros – of which Dassault which was to hold 49% stake pledged to provide up to 159 million euros, representing 94% of the total, while Reliance would provide just the remaining 10 million euros and have the majority 51% stake in the joint venture.”

In a scenario where Reliance brought neither funds nor know-how of any significance to the joint venture, what is it that it brings is the question that needs to be asked. It can only be – “political influence”. In an extract from one of the documents Ambani’s group was handed the mission of “marketing for programs and services with the GOI”.

It seems that now, what Francois Hollande had said in a 2018 interview on Ambani’s selection as Dassault’s partner being prompted by Indian government and France “had no choice” in the matter, is more true than ever.

Earlier Modi, Ambani and Dassault had denied Hollande’s version of events but now in light of the new documents coming out may not let the players have a peaceful sleep.

Hollande’s himself had to cough out the statement after allegations of impropriety had surfaced against him. Reliance Entertainment, a company of the Reliance Group, had financed 1.6 million euros January 2016 for a feature film co-produced by Hollande’s partner and actress Julie Gayet.

Later, on November 9, 2015, Dassault through its CEO Trappier and Anil Ambani signed a “strategic partnership agreement”, a more detailed document than the previous March 26, 2015 MoU, for the establishment of a joint venture in India. This time the agreement set out that, in the case of “subsequent sales” to India which would include local manufacturing activity, it would be the joint venture company that would be in charge of the “aircraft final assembly line”.

Also Ambani and Dassault at this point were envisaging taking part in fighter jet development for which HAL was in charge. The two companies interestingly were planning to provide “design consultancy” for a “Light Combat Aircraft” (LCA) manufactured by HAL.

This document details how Dassault would provide “technology and know-how”, “technical assistance” and “international marketing” capabilities, Reliance was expected to provide only “production facilities”, presumably land, and “marketing for programs and services with the GOI and other authorities in compliance with applicable laws”.

Mediapart’s feels that this means that Ambani’s were to “to use its powers of influence.”

What makes it more interesting is that, the intergovernmental agreement finalising the sale of 36 Rafales was signed on September 2016 and within two months, Dassault and Reliance signed a “shareholders’ agreement”. This agreement is about their relationship in the future joint venture company.

But the financial details were so sensitive that they did not figure in the contract, but were instead contained in a confidential “side letter” which was signed that same day. This side letter says, each of the two companies pledged to provide up to 10 million euros for the capital of the joint venture.

But then it adds, Dassault promising a “share premium”, a supplementary sum on the price of the shares, of a maximum 43 million euros, plus loans detailed as “not exceeding 106 million euros”. This meant that Dassault had pledged to provide up to 159 million euros out of the total investment of 169 million euros, representing 94% of that total. Meanwhile, the contribution by Reliance, it was noted, “shall not exceed 10 million euros, all in equity”.”