Commercial disputes likely to follow US indictment of Adani
29 November 2024
Dan Hudson, specialist partner and head of white-collar crime at Seladore Legal, explains how US bribery charges against Gautam Adani are set to trigger global commercial disputes, with the government of Kenya already cancelling major contracts with his business empire.
The recent indictment by the US Department of Justice (DoJ) of Indian billionaire Gautam Adani and other senior executives of an Indian renewable-energy company (Indian Energy Company) has had an immediate impact beyond India and the US. The fallout seems highly likely to generate commercial litigation around the globe, with the Kenyan President having recently cancelled key infrastructure contracts with the Adani Group and amidst reports that other states are reviewing similar contracts).
The New York indictment alleges (amongst other things) that Adani and others paid over $250 million in bribes to Indian government officials to finance lucrative solar energy supply contracts designed to benefit their businesses. It also charges the defendants with defrauding investors by raising $3 billion in loans and bonds on the US markets on the basis of false and misleading statements designed to conceal bribery and corruption. The Adani Group denies all allegations.
The Adani Group, which has contracts with governments and corporations worldwide, was set to invest $1.85 billion in Kenya’s main airport in exchange for a 30-year operational concession. It had also secured a $736 million deal with the Kenyan energy ministry to construct power lines. As a direct result of the US charges, President Ruto of Kenya announced the cancellation of the deals – a decision that came just one day after the charges were made public. These contracts had already been the subject of domestic controversy in Kenya.
As the power line construction agreement is believed to have already been signed at the time of the President’s announcement, Adani is reportedly considering an arbitration claim for wrongful termination. It appears likely any dispute would focus on the question of whether the anti-bribery provisions in the agreement provided a sufficiently clear basis for termination based solely on an indictment, in the absence of proven bribery. Infrastructure contracts of this nature commonly include a warranty that there are no ongoing investigations into bribery matters. If breached, that warranty would usually give rise to rights of immediate termination. It is not known whether the Kenyan government was aware of the investigations which led to the indictment at the time the power lines agreement was signed.
President Ruto’s announcement is certain to lead to other states and counterparties reconsidering their relationships with the Adani Group. If infrastructure contracts are terminated, this will inevitably lead to sub-contractors and service providers seeking redress for any direct and consequential losses. Given that infrastructure agreements between international Commonwealth parties are often governed by English law (as, reportedly, was the Adani Kenya airport concession), parties who have suffered losses under any such connected contracts may well need recourse to English law and the English courts to obtain redress.