Antony: Blacklisting by association

So the Indian Defense Minister AK Antony has confirmed to Parliament that his ministry has blacklisted companies that were either ‘allied’ with, or subsidiaries of, companies that have been debarred.

In an answer to the Lok Sabha on Monday, Antony said, “In 2013, the debarring order was extended to all the allied/subsidiary firms of each of the 06 debarred firms,” in the context of six companies that were blacklisted in 2012.

In theory, if this action is due to a formalized policy or sets a precedent in anyway, it could have an impact on all firms that are blacklisted. There has been speculation that companies associated with, for instance, AgustaWestland, could be affected if it were to be debarred because of the allegations of corruption raised in the procurement of 12 AgustaWestland AW101 VVIP helicopters.

This could mean that companies like Finmeccanica, Oto Mellara, NHIndustries, Selex and others could conceivably be affected by a possible blacklisting of AgustaWestland, should it be debarred. All of these, and other associated companies, are competing to supply equipment to the Indian armed forces.

This eventuality is aggravated, especially, with European companies because of the somewhat incestuous ownership and associated connections they have with each other.

It remains to be seen how much ‘blacklisting by association’ could impact companies that have a specific parent, child or sibling relationship with a debarred company.

This scenario also raises the question whether this concept will also operate for companies which are connected to a debarred company in terms of investment or have a stakeholder relationship with them.