Cairn says taking motion to entry worth of $1.2 bn arbitration award in opposition to India

UK’s Cairn Energy Plc on Tuesday stated it’s taking all obligatory actions to entry the USD 1.7 billion it was awarded by a global arbitration tribunal after overturning a retroactive tax demand slapped by the Indian authorities.
The Scottish agency invested within the oil and fuel sector in India in 1994 and a decade later it made an enormous oil discovery in Rajasthan. In 2006 it listed its Indian belongings on the BSE.
Five years after that the federal government handed retroactive tax legislation and billed Cairn Rs 10,247 crore plus curiosity and penalty for the reorganisation tied to the flotation.
The state then expropriated and liquidated Cairn’s remaining shares within the Indian entity, seized dividends and withheld tax refunds to get better part of the demand.
Cairn challenged the transfer earlier than an arbitration tribunal in The Hague, which in December awarded it USD 1.2 billion (over Rs 8,800 crore) plus prices and curiosity, which totals USD 1.725 billion (Rs 12,600 crore) as of December 2020.
“In December last year the tribunal established to rule on our claim against the Government of India found in Cairn’s favour and awarded us damages of USD 1.2 billion plus interest and costs,” Cairn Energy CEO stated at firm annual shareholders assembly.
This ruling, he stated, is binding and enforceable beneath worldwide treaty legislation.
“Whilst India has sought to challenge the basis of the award through set-aside proceedings in the Dutch courts, we remain confident of our position and continue constructive engagement with the Government of India whilst at the same time taking all necessary actions to protect our rights to the award and access the value of it as early as possible,” he added.
While he didn’t elaborate, Cairn had beforehand threatened to grab abroad belongings of state-controlled Indian corporations to get better the cash as a result of it.
Finance Minister Nirmala Sitharaman had final month reiterated that worldwide arbitration ruling on India’s sovereign proper to taxation units the mistaken precedent, however had stated that the federal government is taking a look at how finest it might type out the difficulty.
The authorities, which participated in a global arbitration introduced by the Scottish agency in opposition to being taxed retrospectively, has appealed in opposition to The Hague based mostly tribunal’s ruling asking the federal government to return the worth of shares expropriated and liquidated, tax refunds withheld and dividend seized to get better a wrongly levied retroactive tax demand.
The Indian authorities argues that tax levied by a sovereign energy shouldn’t be topic to personal arbitration, Cairn had beforehand stated the award is binding and it might implement it by seizing abroad Indian belongings.
Cairn has been engaged with the finance ministry to get the federal government to pay the award. Its officers held three nose to nose conferences with the then Revenue Secretary Ajay Bhushan Pandey in February and at the very least one video name together with his successor Tarun Bajaj.
PTI had beforehand reported that the corporate had within the conferences supplied to forego USD 500 million out of the USD 1.7 billion award and make investments that quantity in any oil and fuel or renewable power mission recognized by the Indian authorities after rejecting a authorities supply to receives a commission simply one-fourth of the award.
It needs the principal of USD 1.2 billion as a result of it’s paid and the curiosity and price will be re-invested in India.
The Indian authorities, which appointed one of many three arbitrators on The Hague panel and absolutely participated within the arbitration proceedings since 2015, needed Cairn to settle the difficulty via its now-closed tax dispute decision scheme Vivad se Vishwas.
Vivad se Vishwas scheme, which closed on March 31, offered for dropping of tax case if 50 per cent of the demand was paid, which the corporate rejected, sources within the know of the event stated.
Even if it had been to have agreed to the scheme, the Indian authorities needed to refund about Rs 2,500 crore to the British agency, they stated, including the worth of shares seized and offered, dividend confiscated and tax refund withheld totalled to over Rs 7,600 crore, which was greater than 50 per cent of the Rs 10,247 crore principal tax demand raised.
Cairn, which is of the opinion that the unanimous ruling of the tribunal was enforceable in opposition to Indian-owned belongings in additional than 160 international locations which have signed and ratified the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, has employed asset-tracing corporations to research the abroad belongings that may very well be seized to get better the quantity due.
Cairn has already taken steps to have the arbitration award recognised in 9 main jurisdictions such because the US, UK, France, the Netherlands, Singapore and Canada’s Quebec province, the place Indian sovereign belongings have been recognized.
It hasn’t stated what it’d go after however belongings may embrace Air India’s planes, vessels belonging to the Shipping Corporation of India and property owned by state banks.