Cairn said India has sought to challenge the basis of the arbitration award that came last December but the company was confident of its position
British oil major Cairn Energy Plc. said on Tuesday that it was engaging with the Indian government regarding an arbitration award of over $1.2 billion it won in a tax case and that steps to realise it were being taken.
Cairn said in a statement to shareholders attributed to chief executive Simon Thomson that India has sought to challenge the basis of the arbitration award that came last December but the company was confident of its position.
The statement said that the arbitration award of $1.2bn plus interest and costs favouring the company’s claim against the Indian government was binding and enforceable under international treaty law.
“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," the statement said.
The Indian government has in the meanwhile asked state-run banks to report back any notification they receive on seizure of assets, Mint reported on Tuesday. It is also fighting back the steps Cairn has taken in enforcing the arbitration award in foreign courts. The government wants to prevent the enforcement of the award as it could set a bad precedent in cases where claims have been raised by investors under the bilateral investment protection deals India has signed with other countries. New Delhi maintains reparations cannot be sought under these treaties in the case of tax disputes.
India’s dispute with Cairn is over an internal re-organization of the company’s India business in 2006-07 prior to its initial public offering. The tax demand was raised invoking a 2012 change in the Income Tax Act that was retroactive.
According to Cairn, the Indian government seized residual shares in Cairn India Ltd. (acquired by Vedanta Resources) as well as a tax refund due to the British company, together amounting to approximately $1.4 billion.
The government alleges that Cairn did not pay taxes anywhere in the world on the gains that it made in India from the re-organization.