The agreement with France in 2015 did not take into account bank guarantees that were part of negotiations in 2007. So, the safety net was not there. The offer of Dassault to UPA government had included 15 per cent bank guarantee against advance payments and five per cent each for performance guarantee and warranty.
“A bank guarantee gets directly and automatically invoked in case of breach of contract by the seller. In the 2015 offer, the French vendor did not furnish any financial and performance bank guarantees,” the CAG report has noted.
Law Ministry insisted
Since about 60 per cent of the advance payments were to be made to the French vendors, the Ministry of Law advised that a sovereign guarantee should be sought. However, the government of France and the vendor did not agree. The French government only provided a ‘Letter of Comfort’ signed by the French prime minister. The Cabinet committee on security headed had overruled the Ministry of Law on the subject.