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Exclusive: AgustaWestland invokes arbitration over India chopper deal

By Anurag Kotoky

NEW DELHI (Reuters) - AgustaWestland has invoked arbitration over a scandal-tainted deal to sell helicopters to the Indian government, according to a statement on Friday from the unit of Italy's Finmeccanica .

In February, India froze payments on the 560 million euro ($762.91 million) contract to supply 12 helicopters after the deal became mired in allegations of bribery and the then-CEO of Finmeccanica was arrested by Italian police for allegedly paying bribes to secure the deal.

Italy and India are separately investigating allegations that AgustaWestland paid bribes to win the 2010 deal for the helicopters to be used by senior politicians.

AgustaWestland denies the allegations.

The company said in the statement that suspension of payment was not provided for under the terms of the contract and that Indian authorities had not responded to its requests for bilateral discussions since April.

An Indian defense ministry spokesman did not immediately respond to a request for comment.

"The need to resolve this issue has left AgustaWestland with no other option but to invoke arbitration; the next step prescribed by the contract. This is not a step we take lightly," it said.

Arbitration would be conducted in India under the Indian Arbitration and Conciliation Act of 1996, according to the company. Of the three arbitrators, one each would be chosen by the buyer and seller and the third would be nominated under the agreement of both sides, the company said.

India had taken delivery of three helicopters before the deal was stalled. Three more have been ready for delivery to India since April, three are close to completion and work has begun on the final three at the company's plant in Somerset In Britain, said Guy Douglas, an AgustaWestland spokesman in New Delhi.

In August, India's federal auditor found what it said was wrongdoing in the deal.

In its report, the Comptroller and Auditor General said India's defense ministry had initially set a condition that the helicopters be able to fly to an altitude of 6,000 meters (1,970 feet), which meant AgustaWestland could not compete since the AW101 was certified to fly only to 4,572 meters.

Later, India's defense ministry lowered the minimum altitude requirement to 4,500 meters, even though the helicopters were expected to be used in northern and northeastern parts, where terrain is mountainous and altitudes are high, the auditor said.

Jackie Callcut, chief executive of AgustaWestland's India unit, said the altitude requirement was changed to avoid a single-bidder situation.

"The altitude requirement was an irrelevance to AgustaWestland anyway; it was well known the AW101 would have been re-certified to 6,000 meters if needed," she said in a separate statement. ($1 = 0.7340 euros)

(Reporting by Anurag Kotoky; Editing by Tony Munroe)

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